0001021408-01-506879.txt : 20011008 0001021408-01-506879.hdr.sgml : 20011008 ACCESSION NUMBER: 0001021408-01-506879 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20010917 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: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-69520 FILM NUMBER: 1739203 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 LION INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOD TOWN STORES INC DATE OF NAME CHANGE: 19830510 S-4 1 ds4.txt FORM S-4 As filed with the Securities and Exchange Commission on September 17, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ______________________ DELHAIZE AMERICA, INC.* (Exact name of registrant as specified in its charter) North Carolina 5411 56-0660192 (State or other jurisdiction of (primary standard industrial classification code) (I.R.S. Employer incorporation or organization) Identification No.)
2110 Executive Drive P.O. Box 1330 Salisbury, North Carolina 28145-1330 (704) 633-8250 (Address, including zip code, and telephone number, Including area code, of registrant's principal executive offices) R. William McCanless Delhaize America, Inc. 2110 Executive Drive P.O. Box 1330 Salisbury, North Carolina 28145-1330 (704) 633-8250 (Name, address, including zip code, and telephone number Including area code, of agent for service) ______________________ Copy to: Stephen E. Older, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue New York, New York 10022 (212) 872-1000 ______________________ Approximate date of commencement of proposed sale of securities to the public: As promptly as practicable after expiration of the exchange offer described herein. ______________________ If the securities being registered on this Form are offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] __________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] ________________ ______________________
CALCULATION OF REGISTRATION FEE ==================================================================================================================================== Proposed Proposed Maximum Maximum Offering Aggregate Amount of Amount to Be Price per Offering Registration Title of Each Class of Securities to Be Registered Registered Security Price Fee (1) ------------------------------------------------------------------------------------------------------------------------------------ 7.375% Notes due 2006................................................. $ 600,000,000 100% $ 600,000,000 $150,000 8.125% Notes due 2011................................................. $1,100,000,000 100% $1,100,000,000 $275,000 9.000% Debentures due 2031............................................ $ 900,000,000 100% $ 900,000,000 $225,000 Guarantees of the 7.375% Notes due 2006, 8.125% Notes due 2011 and 9.000% Debentures due 2031 (2) ....................................... --- --- --- --- Total................................................................. $2,600,000,000 100% $2,600,000,000 $650,000 ====================================================================================================================================
(1) Determined pursuant to Rule 457(f) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee. (2) No separate consideration will be received for the Guarantees. Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable for the Guarantees. * Includes certain subsidiaries of Delhaize America, Inc. identified on the following page. ______________________ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may+ +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and it is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS SUBJECT TO COMPLETION DATED SEPTEMBER 17, 2001 [LOGO] DELHAIZE AMERICA Delhaize America, Inc. _______________ OFFER TO EXCHANGE ALL OF OUR OUTSTANDING $600,000,000 7.375% Notes Due 2006 and $1,100,000,000 8.125% Notes Due 2011 and $900,000,000 9.000% Debentures Due 2031 for $600,000,000 7.375% Notes Due 2006 and $1,100,000,000 8.125% Notes Due 2011 and $900,000,000 9.000% Debentures Due 2031 all of which have been registered under the Securities Act of 1933 _________________________ Payment of principal, premium, if any, and interest on the exchange securities will be fully and unconditionally and jointly and severally guaranteed by our wholly-owned subsidiaries, Food Lion, LLC, Hannaford Bros. Co. and Kash n' Karry Food Stores, Inc. The terms of the exchange securities are identical in all material respect to the old securities, except for the absence of transfer restrictions and registration rights applicable to the old securities. The exchange offer will expire at 5:00 p.m., New York City time, on ________, 2001, unless extended. We will not receive any proceeds from the exchange offer. The exchange securities are new securities and there is currently no established market for them. See "Risk Factors" beginning on page 15 for a discussion of factors that you should consider before tending your old securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange securities or determined if this document is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is _____, 2001. FOOD LION, LLC (Exact name of registrant as specified in its charter) North Carolina 5411 (State or other jurisdiction of (primary standard industrial classification (I.R.S. Employer incorporation or organization) code) Identification No.)
HANNAFORD BROS. CO. (Exact name of registrant as specified in its charter) Maine 5411 01-0345166 and (State or other jurisdiction of (primary standard industrial classification 01-0345516 incorporation or organization) code) (I.R.S. Employer Identification No.)
KASH N' KARRY FOOD STORES, INC. (Exact name of registrant as specified in its charter) Delaware 5411 95-4161591 (State or other jurisdiction of (primary standard industrial classification (I.R.S. Employer incorporation or organization) code) Identification No.)
TABLE OF CONTENTS
Page ---- Summary...................................................................... 3 Risk Factors................................................................. 15 Cautionary Statement Regarding Forward-Looking Statements................................................... 21 Use of Proceeds.............................................................. 22 Capitalization............................................................... 23 Delhaize America Selected Financial Data..................................... 24 Unaudited Pro Forma Income Statements........................................ 26 The Exchange Offer........................................................... 28 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 39 Our Company.................................................................. 53 The Guarantees............................................................... 62 Management................................................................... 63 Certain Relationships and Related Transactions............................... 77 Description of the Exchange Securities....................................... 78 Material United States Tax Considerations.................................... 93 Plan of Distribution......................................................... 99 Experts...................................................................... 100 Legal Matters................................................................ 100 Where You Can Find More Information.......................................... 100 Index to Financial Statements................................................ F-1
References to "Delhaize America," "our company," "we," "us" and "our" in this prospectus are references to Delhaize America, Inc. and its consolidated subsidiaries, unless the context otherwise requires. References to "Delhaize Le Lion" in this prospectus are references to Etablissements Delhaize Freres et Cie "Le Lion" S.A. References to "Delhaize Group" in this prospectus are references to Etablissements Delhaize Freres et Cie "Le Lion" S.A. and its consolidated subsidiaries, which includes Delhaize America. References to EBITDA in this prospectus are references to earnings before interest, taxes, depreciation, amortization, LIFO income/expense, merger expense, store closing provision and asset impairment provision. We do not represent EBITDA as an alternative measure to net income or cash flow from operations, which is determined in accordance with U.S. GAAP. Investors should note that our calculation of EBITDA might differ from similarly titled measures for other companies. 2 SUMMARY The following summary contains basic information about our company and the exchange offer. It may not contain all the information that is important to you in making your decision to exchange old securities for exchange securities. More detailed information appears elsewhere in this prospectus and in our consolidated financial statements and accompanying notes that we incorporate by reference. "The Exchange Offer" and the "Description of the Exchange Securities" sections of this prospectus contain more detailed information regarding the terms and conditions of the exchange offer and the exchange securities. Our Company Overview We are a leading supermarket operator in the United States with over 1,400 stores in 16 states in the eastern United States and operate primarily under the banners Food Lion, Hannaford and Kash n' Karry. We believe that our banners have the largest or second largest market shares among supermarket operators in terms of annual sales in North Carolina, South Carolina, Virginia, Maine, New Hampshire and Vermont. For fiscal 2000, we reported pro forma sales of approximately $14.3 billion and pro forma EBITDA of approximately $1.1 billion. Actual EBITDA has increased from $603.4 million in fiscal 1996 to $956.5 million in fiscal 2000, and EBITDA as a percentage of our net sales and other revenues has increased from 6.7% in fiscal 1996 to 7.5% in fiscal 2000. At June 30, 2001, we operated 1,194 supermarkets under the Food Lion banner in 11 states in the mid-Atlantic and southeastern regions of the United States. Our Food Lion stores average approximately 34,500 square feet. The current Food Lion store prototype is approximately 38,000 square feet. Our Food Lion stores are distinguished for being low price leaders in their markets and convenient choices for value and time-conscious consumers. Food Lion stores are typically located in well-trafficked areas and close to our customers' neighborhoods. We believe that Food Lion's low price and convenience strategy, which it has followed for over 30 years, increases the shopping frequency of customers, builds customer loyalty and increases customer traffic. At June 30, 2001, we operated 112 Hannaford Bros. supermarkets, 72 of which are combination stores. Hannaford Bros. operates under the Hannaford and Shop 'n Save banners in Maine, New Hampshire, Vermont, upstate New York and Massachusetts. Combination stores consist of traditional all-department supermarkets, together with pharmacies, other services and expanded general merchandise under one roof. Our Hannaford Bros. stores average approximately 49,000 square feet. Hannaford Bros.' current store prototypes are approximately 35,000 square feet and 55,000 square feet. Our Hannaford Bros. stores are distinguished by their comprehensive product variety and outstanding freshness and quality in perishables at competitive prices. As a result of our acquisition of Hannaford Bros. on July 31, 2000, we have realized approximately $34.0 million in pre-tax synergies through June 30, 2001. Annual pre-tax synergies are expected to reach $75 million by 2003. We also plan to benefit from our enhanced geographic presence, the advantages of Hannaford Bros.' merchandising expertise and access to Hannaford Bros.' advanced store information systems. At June 30, 2001, we operated 137 full service neighborhood supermarkets under the Kash n' Karry banner in Central Florida. Our Kash n' Karry stores average approximately 40,500 square feet. Kash n' Karry's current store prototype is approximately 46,000 square feet. We believe that Kash n' Karry has the second largest market share in Tampa/St. Petersburg, Florida, its principal market. Kash n' Karry's "Fresh, Fast n' Friendly" service emphasizes fresh, high-quality produce, an extensive selection of groceries and prepared foods and pharmacies and liquor stores in select locations. 3 Competitive Strengths We believe that we are well positioned to capitalize on opportunities that currently exist in the U.S. supermarket industry. We seek to differentiate ourselves from our competitors through our competitive strengths, which include: . Leading market shares and strong brand recognition. Our strategy is to be among the top two supermarket operators in terms of annual sales in all of the principal markets in which we operate. We believe that we are the second largest supermarket operator in terms of annual sales in the eastern United States. We believe that our leading market shares help us create distribution and advertising synergies and allow us to maintain customer loyalty and strong brand recognition. . Strong operating margins and cost control. Our operating margins are among the highest in the U.S. supermarket industry. We have focused on controlling and reducing elements of our cost of sales through centralized buying practices, lower advertising expenses, distribution efficiencies, improved category management and an increased mix of private label products. Our ability to control operating and administrative expenses has allowed us to achieve one of the lowest operating cost structures in the U.S. supermarket industry. Effective use of information technology, store labor scheduling and attention to cost controls have allowed us to control our expense structure. . Track record of reducing leverage. We have historically been able to generate cash flow and reduce leverage in our balance sheet. For example, at the end of fiscal 1995 and prior to our acquisition of Kash n' Karry in 1996, our debt to total capital ratio was 40.3%. At the end of fiscal 1996 and following the Kash n' Karry acquisition, this ratio increased to 50.2%. By the end of fiscal 1999, we had reduced our debt to total capital ratio to 42.4%. We intend to continue this practice and reduce leverage levels to those existing prior to the Hannaford Bros. acquisition. . Diversification through multiple banners and multiple markets. We operate under multiple banners, each of which has a distinct strategy and a well established and consistent brand image. Through our multiple banners, we are able to target the needs and requirements of specific markets, customize our product and service offerings and maintain strong brand recognition with our local customers. . Experienced management team. Our executive officers have an average of 17 years of experience in the food retailing industry. In addition, many of our company's senior operating managers have spent much of their careers in their respective local markets. . Attractive store base. Our store locations include many sites in developed urban and suburban locations that would be difficult to replicate. We have invested significant capital in our store base over the years through the addition of new stores and the renovation of existing stores in order to improve the overall quality of our customers' shopping experience. As a result, the average age of our stores is five years, compared to the industry average of seven years. We have continued to invest in our store base and expect to incur approximately $450 million of capital expenditures during fiscal 2001, including renovations of existing stores and store support functions, particularly information technology, logistics and distribution. In 2001, we have been balancing our capital expenditures between strengthening our existing infrastructure and new store growth. At June 30, 2001, we had incurred approximately $190.9 million of capital expenditures. 4 . Distribution efficiencies. We currently operate 11 distribution centers that total approximately 9.4 million square feet. Our warehousing and distribution systems are conveniently located within the areas served by us. Our distribution centers are capable of serving our existing store base and each can handle servicing additional stores. We plan to continue to develop and invest in our warehousing and distribution systems in the future. . High penetration of customer loyalty card programs. We have two successful customer loyalty card programs that are critical elements of our marketing strategy. Customers utilize our loyalty cards for buying incentives and discounts on select purchases at our Food Lion and Kash n' Karry stores. Food Lion's MVP customer loyalty card program, which was introduced in 1995, accounted for 73% of Food Lion's sales (53% of all transactions) during the six month period ended June 30, 2001. Kash n' Karry's Preferred Customer Club, or PCC, card, which was introduced in 1998, accounted for approximately 58% of Kash n' Karry's sales (42% of all transactions) during the six month period ended June 30, 2001. . Significant investment in management information systems. All of our stores utilize computer systems located in Portland, Maine and Salisbury, North Carolina, which allow us to monitor store operating performance, manage merchandise categories and procure and distribute merchandise on a centralized basis. We regularly update our information technology so that we can continue to efficiently operate our stores and logistics network. . Operate as an integrated global group. Following the consummation of the Delhaize Group share exchange discussed below, we began participating in the global integration efforts initiated by Delhaize Group. Delhaize Group is organized into three geographic regions that exercise global purchasing, share retail knowledge and implement best practices. As part of its commitment to integration, Delhaize Group has created transnational coordination groups focusing on procurement, equipment purchasing, information technology, food safety, management development, communication and risk management. We believe that we will benefit from the 11 synergy projects that were initiated in September 2000 in these key areas to achieve cost reductions and productivity improvements. We also believe that efficiencies created through the Delhaize Group share exchange will enable Delhaize Group to achieve $20 million in annual pre-tax cost savings during the first year following the Delhaize Group share exchange. Our History We were incorporated in 1957 and Delhaize Le Lion first invested in our company in 1974. We reorganized as a holding company in 1999 to promote flexibility in the daily management of our different businesses, with each banner maintaining a product offering tailored to local market demand while taking advantage of economies of scale and the sharing of best practices. We acquired Kash n' Karry in December 1996 and Hannaford Bros. in July 2000. At the end of fiscal 2000, we had approximately 120,000 full and part-time employees. Our principal executive offices are located at 2100 Executive Drive, P.O. Box 1330, Salisbury, North Carolina 28145-1330. Our telephone number at that location is (704) 633-8250. Our Internet address is http://www.delhaizeamerica.com. Delhaize Group Delhaize Group is a food retailer headquartered in Belgium that as of June 30, 2001 operated in 10 countries and on 3 continents-North America, Europe and Asia. Delhaize Le Lion is the parent entity of the Delhaize Group and, together with its wholly-owned subsidiary Delhaize The Lion America, owns all of our capital stock. As of June 30, 2001, Delhaize Group's sales network, which includes directly operated, franchised and affiliated stores, consisted of 2,440 stores. Our company operates 1,443 of Delhaize Group's network of stores. Delhaize Group's sales network also includes store formats other 5 than supermarkets, such as convenience stores, discount stores and specialty stores. As of June 30, 2001, Delhaize Group employed approximately 148,810 people. Delhaize Group's net sales for the six months ended June 30, 2001 were approximately (Euro)10.5 billion, an increase of 40.2% over net sales of approximately (Euro)7.5 billion for the six months ended June 30, 2000. Our company represented approximately 80% of Delhaize Group's net sales during the six months ended June 30, 2001. During the six months ended June 30, 2001, approximately (Euro)8.3 billion of Delhaize Group's net sales were from operations in the United States, approximately (Euro)1.6 billion were from operations in Belgium, approximately (Euro)0.5 billion were from other European operations and approximately (Euro)0.1 billion were from Asia. Delhaize Group's increase in net sales during the six months ended June 30, 2001 compared to the six months ended June 30, 2000 was primarily due to our acquisition of Hannaford Bros. and organic growth of both U.S. and Belgian retail operations. We and Delhaize Le Lion have explored the advisability of cross- guaranteeing each other's indebtedness for borrowed money and other financial indebtedness and believe that there may be operational and financial benefits to such an arrangement. While we would not implement any cross-guarantees until at least October 2001, which is six months after the completion of the Delhaize Group share exchange described below, we may implement the cross-guarantees thereafter, although we can not assure you that we will implement the cross- guarantees or if we do, when. The indenture governing the securities limits our ability to implement the cross-guarantees if the cross-guarantees would adversely affect our credit ratings. See "Description of the Exchange Securities--Certain Covenants of Our Company--Limitation on Guarantees." The Delhaize Le Lion Share Exchange As of September 1, 2001, Delhaize Le Lion and Delhaize The Lion America, a wholly-owned subsidiary of Delhaize Le Lion, owned all of our company's voting stock. On April 25, 2001, our company and Delhaize Le Lion consummated a share exchange transaction in which Delhaize Le Lion acquired all of the shares of our company which it did not already own. Our shareholders exchanged their shares of common stock for either American Depositary Receipts, or ADRs, of Delhaize Le Lion, which are listed on The New York Stock Exchange, or ordinary shares of Delhaize Le Lion, which are listed on Euronext Brussels. For a more detailed description of the Delhaize Le Lion share exchange, see the section of this prospectus entitled "Certain Relationships and Related Transactions." The Subsidiary Guarantors Food Lion, LLC, Hannaford Bros. and Kash n' Karry, our wholly-owned subsidiaries, are fully and unconditionally and jointly and severally guaranteeing each series of the exchange securities and any old securities not tendered. 6 The Exchange Offer On April 19, 2001, we completed the private offering of $600,000,000 7.375% notes due 2006, $1,100,000,000 8.125% notes due 2011 and $900,000,000 9.000% debentures due 2031, which we refer to in this prospectus as the old securities. We used the proceeds of this offering to repay in full the $2.4 billion outstanding under our $2.5 billion term loan facility. In the exchange offer, we are offering to exchange for your old securities, exchange securities that are identical in all material respects to your old securities except that the exchange securities have been registered under the Securities Act, are not subject to the transfer restrictions applicable to the old securities and will be issued free of any covenants regarding exchange or registration rights. The old securities that you do not tender or that we do not accept will, following the exchange offer, continue to be old securities. Therefore, you may only transfer or resell them in a transaction registered under or exempt from the Securities Act and applicable state securities laws. We will issue the exchange securities in exchange for the old securities under the exchange offer only following the satisfaction of the procedures and conditions described in the section of this prospectus entitled "The Exchange Offer." Because we anticipate that most holders of the old securities will elect to exchange their old securities for exchange securities, we expect that the liquidity of the markets, if any, for any old securities remaining after the completion of the exchange offer will be substantially limited. Any old securities tendered and exchanged in the exchange offer will reduce the aggregate principal amount outstanding of the old securities. Initial Offering of the Old Securities.... We sold the old securities on April 19, 2001 to the initial purchasers, which were represented by Salomon Smith Barney Inc., Chase Securities Inc. and Deutsche Banc Alex. Brown. The initial purchasers subsequently resold the old securities to qualified institutional buyers pursuant to Rule 144A under the Securities Act and outside the United States in accordance with Regulation S under the Securities Act. Registration Rights Agreement............. Simultaneously with the initial sale of the old securities, we entered into a registration rights agreement for the exchange offer. In the registration rights agreement, we agreed, among other things, to use our reasonable best efforts to file a registration statement with the Securities and Exchange Commission and to complete this exchange offer by December 17, 2001 or within 240 days of issuing the old securities. The exchange offer is intended to satisfy your rights under the registration rights agreement. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your outstanding securities. The Exchange Offer........................ We are offering to exchange: 7 . Up to $600,000,000 aggregate principal amount of our 7.375% old notes due 2006 for up to $600,000,000 aggregate principal amount of our 7.375% exchange notes due 2006; . Up to $1,100,000,000 aggregate principal amount of our 8.125% old notes due 2011 for up to $1,100,000,000 aggregate principal amount of our 8.125% exchange notes due 2011; and . Up to $900,000,000 aggregate principal amount of our 9.000% old debentures due 2031 for up to $900,000,000 aggregate principal amount of our 9.000% exchange debentures due 2031. You may exchange old securities in integral multiples of $1,000 principal amount only. Purpose................................... The purpose of the exchange offer is to give you the opportunity to exchange your old securities for exchange securities that have been registered under the Securities Act. Resale.................................... We believe that the exchange securities issued pursuant to the exchange offer in exchange for old securities may be offered for resale, resold and otherwise transferred by you (unless you are an "affiliate" of our company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, so long as you are acquiring the exchange securities in the ordinary course of your business and you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange securities. Each participating broker-dealer that receives exchange securities for its own account under the exchange offer in exchange for old securities that were acquired by the broker-dealer as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the exchange securities. See the section of this prospectus entitled "Plan of Distribution." Any holder of old securities who: . is an affiliate or our company; . does not acquire exchange securities in the ordinary course of its business; or . exchanges old securities in the exchange offer with the intention to participate or for the purpose of 8 participating, or has an arrangement or understanding with any person to participate, in a distribution of exchange securities, must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the exchange securities. Expiration of the Exchange Offer; Withdrawal of Tender...................... The exchange offer will expire at 5:00 p.m., New York City time, on [_________], 2001, or a later date and time to which we may extend it. We do not currently intend to extend the expiration of the exchange offer. You may withdraw your tender of old securities under the exchange offer at any time before expiration of the exchange offer. Any old securities not accepted for exchange for any reason will be returned without expense to you promptly after the expiration or termination of the exchange offer. Conditions to the Exchange Offer........... The exchange offer is not conditioned upon any minimum principal amount of old securities being tendered for exchange. However, the exchange offer is subject to customary conditions, which we may waive. Please read the section of this prospectus entitled "The Exchange Offer--Conditions to the Exchange Offer" for more information regarding the conditions to the exchange offer. Procedures for Tendering Old Securities.... To tender book-entry interests in old securities in the exchange offer, you must transfer your old securities into the exchange agent's account in accordance with The Depository Trust Company's, or DTC's, Automated Tender Offer Program, which is commonly referred to as ATOP. In lieu of delivering a manually-executed letter of transmittal to the exchange agent, a computer-generated message, in which the holder of the old securities acknowledges and agrees to be bound by the terms of the letter of transmittal, must be transmitted by DTC on behalf of a holder and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date of the exchange offer. In all other cases, a letter of transmittal must be manually executed and received by the exchange agent before 5:00 p.m., New York City time, on the expiration date of the exchange offer. See the section of this prospectus entitled "The Exchange Offer--Procedures for Tendering" for more information. By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: . any exchange securities that you receive will be acquired in the ordinary course of your business; 9 . you have no arrangement or understanding with any person or entity to participate in a distribution of the exchange securities; . if you are not a broker-dealer, that you are not engaged in and do not intend to engage in the distribution of the exchange securities; . if you are a broker-dealer that will receive exchange securities for your own account in exchange for old securities that were acquired as a result of market- making or other trading activities, that you will deliver a prospectus, as required by law, in connection with any resale of those exchange securities; and . you are not an "affiliate," as defined in Rule 405 of the Securities Act, of us or, if you are an affiliate, that you will comply with any applicable registration and prospectus delivery requirements of the Securities Act. Special Procedures for Beneficial Owners..................................... If you are a beneficial owner of old securities that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you want to tender old securities in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, before completing and executing the letter of transmittal and delivering your old securities, either make appropriate arrangements to register ownership of the old securities in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed before the expiration of the exchange offer. Guaranteed Delivery Procedures............. If you wish to tender your old securities and time will not permit your required documents to reach the exchange agent by the expiration date of the exchange offer or certificates for registered securities cannot be delivered on time, you may tender your old securities under the procedures described in the section of this prospectus entitled "The Exchange Offer--Guaranteed Delivery Procedures." Effect on Holder of Old Securities......... If you are a holder of old securities and you do not tender your old securities in the exchange offer, you will continue to hold your old securities and will be entitled to all the rights and subject to all the limitations applicable to the old securities in the indenture and the supplemental indentures related to the indenture. The trading market for old securities could be adversely affected if some but not all of the old securities are tendered 10 and accepted in the exchange offer. Consequences of Failure to Exchange........ All untendered old securities will remain subject to the restrictions on transfer provided for in the old securities and in the indenture and the supplemental indentures related to the indenture. Generally, the old securities that are not exchanged for exchange securities pursuant to the exchange offer will remain restricted securities and may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the old securities under the Securities Act. If you fail to tender your old securities in the exchange offer, you will not have any further rights under the registration rights agreement, including any right to require us to register your old securities or to pay liquidated damages. Important Federal Income Tax Considerations............................. The exchange of old securities for exchange securities in the exchange offer will not be a taxable event for U.S. federal income tax purposes. See the section of this prospectus entitled "Material United States Tax Considerations" for a more detailed description of the tax consequences of the exchange. Use of Proceeds............................ We will not receive any proceeds from the issuance of exchange securities pursuant to the exchange offer. 11 The Exchange Securities The terms of the exchange securities and the old securities are identical in all material respects, except that the terms of the exchange securities do not include the transfer restrictions and registration rights relating to the old securities. The exchange securities will bear interest from October 15, 2001, which will be the most recent date that interest has been paid on the old securities prior to the exchange offer. Old securities accepted for exchange will accrue interest from and after the date of completion of the exchange offer. Issuer Delhaize America, Inc., a North Carolina corporation Subsidiary Guarantors Our wholly-owned subsidiaries, Food Lion, LLC Hannaford Bros. and Kash n' Karry will fully and unconditionally and jointly and severally guarantee all amounts payable under the exchange securities, including principal and interest. Securities Offered $600,000,000 7.375% notes due 2006 $1,100,000,000 8.125% notes due 2011 $900,000,000 9.000% debentures due 2031 Interest Payment Dates April 15 and October 15 of each year, commencing April 15, 2002 Ranking The exchange securities will be senior unsecured general obligations of our company. The guarantees of our subsidiaries will be senior unsecured general obligations of each subsidiary. Optional Redemption The exchange securities will be redeemable in whole or in part, at our option, at any time, at a redemption price equal to the greater of: . the principal amount being redeemed; or . the sum of the present values of the remaining scheduled payments of principal and interest on the securities being redeemed, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined herein) plus 30 basis points in the case of the exchange notes due 2006 , 40 basis points in the case of the exchange notes due 2011 and 50 basis points in the case of the exchange debentures due 2031, plus in each case accrued interest to the redemption date. Restrictive Covenants The indenture contains covenants that limit our ability and the ability of our subsidiaries to, among other things: . incur liens; . consummate specified sale or leaseback transactions; or . enter into guarantees. For more details on these restrictions, see the section of this prospectus entitled "Description of the Exchange Securities--Covenants." 12 DELHAIZE AMERICA SUMMARY FINANCIAL DATA The following summary historical consolidated financial information has been derived from our historical financial statements and should be read in conjunction with the consolidated financial statements and notes thereto that are included elsewhere in this prospectus. On April 25, 2001, we became a wholly-owned subsidiary of Delhaize Le Lion as a result of the Delhaize Le Lion share exchange. In connection with the recording of the accounting basis of Delhaize Le Lion in our financial statements, a new entity has been deemed created for financial reporting purposes. Accordingly, in this prospectus, the periods prior to the date of the Delhaize Le Lion share exchange relate to the "predecessor company" and the periods subsequent to the date of the Delhaize Le Lion share exchange relate to the "successor company". The results of operations for the six months ended June 30, 2001 may not be indicative of the results to be expected for the year ending December 29, 2001.
Successor Company (1) Predecessor Company(1) ----------- ---------------------- Fiscal Year Ended ----------------- Period From Period From December 31, Six Months April 29, 2001 to 2000 to April Ended December 30, January 1, January 2, June 30, 2001 28, 2001 June 17, 2000(2) 2000 2000 1999 ------------- -------- --------------- ---- ---- ---- (unaudited) (unaudited) (unaudited) Operating Data: Net sales and other revenues........ $2,594,781 $4,735,066 $5,131,225 $12,669,932 $10,891,231 $10,230,840 Cost of goods sold.................. 1,924,028 3,556,165 3,864,966 9,562,855 8,209,491 7,794,754 Operating expenses.................. 535,123 978,518 998,879 2,522,094 2,077,781 1,894,989 Merger expense (3).................. 2,021 25,984 2,944 38,546 1,465 -- Store closing provision (4)......... 1,212 2,288 7,997 42,834 12,605 14,321 Asset impairment provision (5)...... -- -- -- 26,961 1,495 3,460 Operating income.................... 132,397 172,111 256,439 476,642 588,394 523,316 Interest expense.................... 63,636 108,362 55,374 213,057 103,820 95,334 Income before income taxes.......... 68,761 63,749 201,065 263,585 484,574 427,982 Net income.......................... 36,829 34,198 124,657 155,486 300,435 272,585 Other Data: EBITDA (6).......................... $ 228,479 $ 363,415 $ 401,580 $ 956,495 $ 866,295 $ 801,770 EBITDA as a percentage of net sales. 8.8% 7.7% 7.8% 7.5% 8.0% 7.8% Ratio of EBITDA to interest expense. 3.6x 3.4x 7.3x 4.5x 8.3x 8.4x Depreciation and amortization....... $ 92,440 $ 162,259 $ 130,315 $ 372,541 $ 258,512 $ 236,021 Ratio of earnings to fixed charges.. 1.9x 1.5x 3.2x 1.9x 4.0x 3.7x (7) Store count......................... 1,443 1,436 1,300 1,420 1,276 1,207 Total gross retail square footage (in thousands)..................... 52,531 52,156 44,932 51,366 43,020 38,887 Capital expenditures................ $ 68,338 $ 122,577 $ 156,343 $ 392,968 $ 410,888 $ 356,058 Balance Sheet Data: Cash and cash equivalents........... $ 125,742 - $ 100,099 $ 135,636 $ 193,721 $ 123,592 Total assets........................ 8,712,113 - 4,002,525 7,926,796 3,977,015 3,696,303 Long-term debt (8).................. 3,043,749 - 426,654 455,240 426,930 429,763 Total debt (9)...................... 3,241,826 - 663,641 3,321,436 731,764 533,281 Total capital lease obligations..... 631,400 - 530,459 631,094 502,819 514,600 (10) Shareholders' equity................ 3,123,082 - 1,759,817 2,441,159 1,678,866 1,598,922
__________ (1) The Delhaize Le Lion share exchange was accounted for using the purchase method of accounting. Although the Delhaize Le Lion share exchange was consummated on April 25, 2001, we have accounted for the Delhaize Le Lion share exchange beginning on April 29, 2001. Accordingly, effective as of the close of our April 28, 2001 fiscal period, we recorded adjustments to reflect the accounting basis of Delhaize Le Lion in our financial statements. These adjustments principally included changes to the valuation of certain of our tangible and intangible assets, net of deferred tax liabilities, with a corresponding increase in stockholders' equity in the amount of approximately $772 million. The preliminary allocation of the Delhaize Le Lion share exchange purchase price to our assets and liabilities was based on estimates of our management, and our management does not expect the final allocation to have a material effect on our consolidated financial position or results of operations. This preliminary allocation resulted in additional intangible asset and goodwill amortization 13 expense for the period from April 29, 2001 to June 30, 2001 in the amount of approximately $4.9 million, net of tax. The amortization periods used were approximately 10 years for identifiable intangible assets and 40 years for goodwill. (2) 24-week period in 2000 compared to a 26-week period in 2001. In fiscal 2001, we adjusted our calender year to four 13-week quarters to align our calendar year with Delhaize Group's calendar year. (3) Merger expense includes the amortization of costs incurred in connection with obtaining the approximately $2.5 billion term loan facility for our acquisition of Hannaford Bros. and costs incurred in connection with our share exchange with Delhaize Le Lion. (4) Store closing provision includes costs incurred in connection with the decisions to close 6 stores and 5 stores in the six months ended June 30, 2001 and June 17, 2000, respectively, and the decisions to close 36 stores, 16 stores and 33 stores in fiscal 2000, 1999 and 1998, respectively. (5) Asset impairment provision includes the write-down of a portion of the recorded asset values of certain of our stores to estimated realizable values. (6) EBITDA is defined by our company as earnings before interest, taxes, depreciation, amortization, LIFO income/expense, merger expense, store closing provision and asset impairment provision. We do not represent EBITDA as an alternative measure to net income or cash flow from operations, which is determined in accordance with U.S. GAAP. Investors should note that our calculation of EBITDA might differ from similarly titled measures for other companies. (7) For the purpose of computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges and less capitalized interest. Fixed charges are defined as the sum of interest on all indebtedness, including capitalized interest, amortization of debt issuance cost and one-third of annual rental expense, which we believe to be representative of an interest factor. A statement setting forth the computation of the ratio of earnings to fixed charges is filed as an exhibit to the registration statement of which this prospectus is a part. (8) Long-term debt consists of the portion of total long-term debt that matures subsequent to fiscal 2001. (9) Total debt consists of short-term borrowings and total long-term debt, but does not include total capital lease obligations. (10) Total capital lease obligations consist of the current and long-term portion of present value of net minimum lease payments on capital leases. 14 RISK FACTORS You should carefully consider the following factors and the other information in this prospectus before deciding to exchange your old securities for exchange securities. Risks Related to the Exchange Offer There are no established trading markets for the exchange securities and any markets for the exchange securities may be illiquid. The exchange securities are new issues of securities with no active trading markets. We cannot assure you that markets for the exchange securities will develop in the future, that you will be able to sell your exchange securities or the price that you will receive when you sell your exchange securities. In addition, the liquidity of, and trading market for the exchange securities could be adversely affected by many factors, including changes in interest rates and declines and volatility in the market for similar securities, as well as by changes in our financial condition or results of operations. We do not intend to apply for a listing or quotation of the exchange securities on any securities exchange or automated quotation system. Some people who participate in the exchange offer must deliver a prospectus in connection with resales of exchange securities. Based on no-action letters issued by the staff of the Securities and Exchange Commission, we believe that unless you are an affiliate of our company within the meaning of Rule 405 under the Securities Act, you may offer for resale, resell or otherwise transfer exchange securities without compliance with the registration and prospectus delivery requirements of the Securities Act, so long as you acquired the exchange securities in the ordinary course of business and have no arrangement or understanding with respect to the distribution of the exchange securities to be acquired in the exchange offer. However, if you tender old securities for the purpose of participating in a distribution of the exchange securities, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In these cases, if you transfer exchange securities without delivering a prospectus or without an exemption from registration, you may incur liabilities under the Securities Act. We do not and will not assume or indemnify you against this liability. If you do not exchange your old securities for exchange securities, they may be difficult to resell. It may be difficult for you to sell old securities that are not exchanged in the exchange offer, since any old securities not exchanged will remain subject to the restrictions on transfer provided for in Rule 144 under the Securities Act. These restrictions on transfer of your old securities exist because we issued the old securities under an exemption from the registration requirements of the Securities Act and applicable state securities laws. Generally, old securities that are not exchanged for exchange securities in the exchange offer will remain restricted securities and may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in this exchange offer, we do not intend to register the exchange securities under the Securities Act. To the extent any old securities are tendered and accepted in the exchange offer, the trading market, if any, for the old securities that remain outstanding after the exchange offer would be adversely affected due to a reduction in market liquidity. 15 You must follow the exchange offer procedures carefully in order to receive the exchange securities. If you do not follow the procedures described in this prospectus for tendering your old securities, you will not receive the exchange securities. Further, if you want to tender your old securities in exchange for exchange securities, you should allow sufficient time to ensure timely delivery. No one is under any duty to give you notification of any defects or irregularities with respect to tenders of old securities for exchange securities. For additional information, please refer to the section of this prospectus entitled "The Exchange Offer--Procedures for Tendering." Risks Related to the Exchange Securities Each of the risks described in this section with respect to the exchange securities are equally applicable to the old securities. We have substantial debt outstanding that could negatively impact our business and prevent us from fulfilling our obligations under the securities. We have substantial debt outstanding. As of June 30, 2001, we had total consolidated debt outstanding of approximately $3.2 billion and total capital lease obligations of approximately $631.4 million, resulting in total debt of approximately $3.9 billion. In addition, we had $975 million of unused commitments available under our revolving credit facilities. Our high level of debt could: . make it difficult for us to satisfy our obligations, including making interest payments under the securities and our other debt obligations; . limit our ability to obtain additional financing to operate or grow our business; . limit our financial flexibility in planning for and reacting to industry changes; . place us at a competitive disadvantage as compared to less leveraged companies; . increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates; and . require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing the availability of our cash flow for other purposes. We may incur additional debt to fund our capital expenditures and working capital needs and to finance future acquisitions. If we incur additional debt, it is more likely that we will experience some or all of the risks described above. In addition, the indenture governing the terms of the exchange securities does not restrict our ability to incur additional debt. If we do not generate positive cash flows, we may be unable to service our debt. Our ability to pay principal and interest on the exchange securities and on our other debt depends on our future operating performance. Future operating performance is subject to market conditions and business factors that are often beyond our control. Consequently, we cannot assure you that we will have sufficient cash flows to pay the principal, premium, if any, and interest on our debt. If our cash flows and capital resources are insufficient to allow us to make scheduled payments on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our debt. We cannot assure you that the terms of our debt will allow these alternative measures or that such measures would satisfy our scheduled debt service obligations. If we cannot make scheduled payments on our debt, we will be in default and, as a result: 16 . our debt holders could declare all outstanding principal and interest to be due and payable; . our lenders could terminate their commitments and commence foreclosure proceedings against our assets; and . we could be forced into bankruptcy or liquidation. Our debt requires us to maintain specified financial ratios and meet specific financial tests. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we were unable to make this repayment or otherwise refinance these borrowings, our lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our business could be adversely impacted. We currently pay and expect to continue paying significant dividends on the shares of our common stock. We currently pay significant dividends on the shares of our common stock and expect to continue to do so. In fiscal 2000, we paid dividends of approximately $92.9 million, representing approximately 60% of our net income during this period. During the six month period ended June 30, 2001, we paid dividends of approximately $28.6 million, representing approximately 40% of our net income during this period. Future dividends that we declare will be payable to Delhaize Le Lion and Delhaize The Lion America, our sole shareholders. As a result, the amount of funds available to holders of the securities in the event of our default on the exchange securities would be reduced. Fraudulent conveyance laws may result in the subordination or avoidance of the subsidiary guarantees of the exchange securities. Our obligations under the exchange securities will be fully and unconditionally and jointly and severally guaranteed to the extent described in this prospectus by our wholly-owned subsidiaries, Food Lion, LLC, Hannaford Bros. and Kash n' Karry Food Stores. Various federal and state fraudulent conveyance laws have been enacted for the protection of creditors and may be utilized by a court of competent jurisdiction to subordinate or avoid all or part of the guarantees issued by our subsidiaries. To the extent that a court of competent jurisdiction were to find that any of the subsidiary guarantors incurred a guarantee with the intent to hinder, delay or defraud any present or future creditor or did not receive fair consideration or reasonably equivalent value for issuing its guarantee and: . was insolvent or rendered insolvent because of the issuance of its guarantee; . was engaged or about to engage in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business; or . intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, then the court could subordinate or avoid all or part of its guarantee in favor of its other creditors. To the extent that a subsidiary guarantee is voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of exchange securities guaranteed by that subsidiary may no longer have a claim against the subsidiary and would only be creditors of our company and any other subsidiary guarantors. We and our subsidiaries that guaranteed the exchange securities believe that the issuance of the guarantees will not be a fraudulent conveyance. We cannot assure you, however, that a court passing on this question would reach the same conclusion. 17 Risks Related to Operations Delhaize Le Lion exercises significant control over our operations and board of directors. Delhaize Le Lion and its wholly-owned subsidiary, Delhaize The Lion America, currently own all of our company's voting stock and exercise significant control over our operations and board of directors. As a result, Delhaize Le Lion has the ability to direct the actions of our company with respect to matters such as the payment of dividends, material acquisitions and dispositions and other extraordinary corporate transactions. Our results are subject to risks relating to competition and narrow profit margins in the supermarket industry that could adversely affect our net income and cash generated from operations. The supermarket industry is highly competitive and generally characterized by narrow profit margins. Our competitors include international, national, regional and local: . supermarket chains; . supercenters that sell products typically sold by supermarkets and discount chains; . independent grocery stores; . specialty food stores; . warehouse club stores; . retail drug chains; . convenience stores; . membership clubs; . general merchandisers; and . discount retailers. We compete on a local level and our competition is different in each of our markets. Each of our banners competes against Wal-Mart. Food Lion's principal supermarket chain competitors are Winn-Dixie, Kroger, Ahold and Harris Teeter. Hannaford's principal supermarket chain competitors are Shaw's, Price Chopper and DeMoulas. Kash n' Karry's principal supermarket chain competitors are Publix, Winn-Dixie and Albertson's. Supermarket chains generally compete on the basis of location, quality of products, service, price, product variety and store condition. To the extent that we reduce prices to maintain or grow our market share in the face of competition, net income and cash generated from operations could be adversely affected. In addition, there are a number of supercenters in our markets that sell products typically sold by supermarkets and discount stores. Some of our competitors have greater financial, distribution, purchasing and marketing resources than we do. Our profitability could be impacted by the pricing, purchasing, financing, advertising or promotional decisions made by competitors. 18 We are dependent upon and may be unable to retain our executive officers, and if we lose any one of them, our business may suffer. We depend upon the continued contributions of our executive officers. Our management team is important because of its extensive experience in and knowledge of the food retailing industry. The loss or unavailability to us of any member of our senior management team could significantly harm us. We may not be able to attract, train and retain a sufficient number of qualified personnel to maintain and grow our business. Our success depends in part on our ability to attract, train and retain qualified personnel in all areas of our business. We compete with other businesses in our markets to attract, train and retain employees. Tight labor markets, increased overtime, government mandated increases in the minimum wage and a higher proportion of full-time employees could result in an increase in labor costs that could materially impact our results of operations. A shortage of qualified employees may require us to increase our wage and benefits offerings in order to effectively compete in the hiring and retention of qualified employees or to hire more expensive temporary employees. Increased labor costs could increase our cost of sales, with the result of decreasing our profits or increasing our losses. We cannot assure you that we can fully absorb any increased labor costs through our efforts to increase efficiencies in other areas of our operations. Any significant failure to attract, train and retain qualified personnel or to control labor costs could cause our results of operations to suffer. If we are unable to locate appropriate real estate or enter into real estate leases on commercially acceptable terms, we may be unable to open new stores. Our ability to open new supermarkets is dependent upon identifying appropriate real estate and entering into leases on commercially acceptable terms for properties that are suitable for our needs. If we fail to identify appropriate real estate and enter into leases on a timely basis for any reason, including our inability due to competition from other companies seeking similar sites, our growth may be impaired because we may be unable to open new stores as anticipated. Similarly, our business may be harmed if we are unable to renew the leases on our existing stores on commercially acceptable terms. We may not be able to achieve the anticipated benefits of our acquisition of Hannaford Bros. We acquired Hannaford Bros. with the expectation that the acquisition would result in opportunities for economies of scale and operating efficiencies. We will not be able to achieve the benefits of the acquisition unless we are able to successfully and efficiently integrate the operations of our company and Hannaford Bros. We cannot assure you that this will occur. In addition, the consolidation of operations requires substantial attention from management. Any diversion of management's attention and any difficulties encountered in the transition and integration process could prevent us from achieving the cost savings and other benefits anticipated to result from our acquisition of Hannaford Bros. 19 Because of the number of properties owned and leased by our company, we have a potential risk of environmental liability. We are subject to federal, regional, state and local laws, regulations and ordinances that govern activities and operations that may have adverse environmental effects and impose liability for the costs of cleaning up, and certain damages arising from, sites of past spills, disposals or other releases of hazardous materials. Under applicable environmental laws, we may be responsible for the remediation of environmental conditions and may be subject to associated liabilities relating to our stores, warehouses and offices and the land on which our stores, warehouses and offices are situated, regardless of whether we lease, sublease or own the stores, warehouses or offices in question, and regardless of whether such environmental conditions were created by our company or by a prior owner or tenant. We cannot assure you that environmental conditions relating to prior, existing or future store sites will not harm our company. Risks Related to the Delhaize Le Lion Share Exchange If Delhaize Le Lion guarantees the exchange securities, we will not be required to file separate periodic reports under the Securities Exchange Act of 1934, as amended. If Delhaize Le Lion guarantees the exchange securities, we will not be required to file separate periodic reports under the Exchange Act. Consequently, the only financial information reported about our company will be limited to condensed, consolidating financial information that is contained in a footnote to Delhaize Group's semi-annual and annual consolidated financial statements. Although Delhaize Le Lion is subject to the periodic reporting requirements of the Exchange Act, the periodic disclosure required of foreign private issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Consequently, there may be less publicly available information about Delhaize Group than is regularly published by or about other public companies in the United States. In addition, as a Belgian company subject to the rules and regulations of the Securities and Exchange Commission, Delhaize Group may publicly file its consolidated annual earnings later than U.S. issuers. Delhaize Group is required to file annual reports on Form 20-F and current reports on Form 6-K. We may not be able to achieve the anticipated benefits of the Delhaize Le Lion share exchange. Delhaize Le Lion and our company expect that the share exchange consummated between our companies on April 25, 2001 will create operating synergies. Delhaize Le Lion and our company will not be able to achieve these synergies unless we are able to efficiently integrate the operations of our two companies. Additionally, the integration of our two companies requires significant management attention. Any difficulties encountered in the integration of our companies could result in Delhaize Le Lion and our company not achieving the anticipated synergies and benefits of the share exchange. 20 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This prospectus and the documents incorporated by reference into this prospectus contain both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as ''believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. You should carefully review all information, including the financial statements and the notes to the financial statements, included or incorporated by reference into this prospectus. In addition to the risk factors described in the "Risk Factors" section beginning on page 15 of this prospectus, the following important factors could affect future results, causing these results to differ materially from those expressed in our forward-looking statements: . changes in the general economy or in the primary markets of our company; . changes in consumer spending; . competitive factors; . the nature and extent of continued consolidation in the supermarket industry; . an adverse determination with respect to litigation or other claims; . inability to develop new stores or to remodel stores as rapidly as planned; . stability of product costs; and . supply or quality control problems with vendors. These factors and the other risk factors described in this prospectus or incorporated by reference are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our future results. The forward-looking statements included in this prospectus are made only as of the date of this prospectus and we cannot assure you that projected results or events will be achieved. 21 USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the exchange securities under the exchange offer. In consideration for issuing the exchange securities as contemplated by this prospectus, we will receive the old securities in like principal amount, the terms of which are identical in all material respects to the exchange securities. The old securities surrendered in exchange for the exchange securities will be retired and canceled and cannot be reissued. Accordingly, the issuance of the exchange securities will not result in any increase of our indebtedness or capital stock. 22 CAPITALIZATION The following table sets forth our debt and capitalization at June 30, 2001.
At June 30, 2001 ---------------------- (unaudited) (dollars in thousands) Short-term debt: Notes payable............................................................... $ 71,000 Current portion of long-term debt........................................... 127,077 ---------- Total short-term debt.................................................... $ 198,077 ---------- Long-term debt: 7.375% notes due 2006....................................................... $ 600,000 8.125% notes due 2011....................................................... 1,100,000 9.000% debentures due 2031.................................................. 900,000 Other long-term debt........................................................ 443,749 ---------- Total long-term debt..................................................... $3,043,749 ---------- Shareholder's equity: Class A non-voting common stock, 90,718,904,458 shares issued and outstanding................................................................. 53,149 Class B voting common stock, 75,290,542 shares issued and outstanding....... 37,645 Additional paid-in capital.................................................. 2,373,509 Other comprehensive income/(loss), net of tax............................... (57,615) Retained earnings........................................................... 716,394 ---------- Total shareholder's equity............................................... 3,123,082 ---------- Total capitalization..................................................... $6,364,908 ==========
23 DELHAIZE AMERICA SELECTED FINANCIAL DATA The following selected historical consolidated financial information has been derived from our historical financial statements and should be read in conjunction with the consolidated financial statements and notes thereto that are included elsewhere in this prospectus. On April 25, 2001, we became a wholly-owned subsidiary of Delhaize Le Lion as a result of the Delhaize Le Lion share exchange. In connection with the recording of the accounting basis of Delhaize Le Lion in our financial statements, a new entity has been deemed created for financial reporting purposes. Accordingly, in this prospectus, the periods prior to the date of the Delhaize Le Lion share exchange relate to the "predecessor company" and the periods subsequent to the date of the Delhaize Le Lion share exchange relate to the "successor company". The selected data for the six months ended June 17, 2000, the period from December 31, 2000 to April 28, 2001 and the period from April 29, 2001 to June 30, 2001 have been derived from our unaudited consolidated financial statements which, in our opinion, contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial condition and results of operations for these periods. The results of operations for the six months ended June 30, 2001 may not be indicative of the results to be expected for the year ending December 29, 2001.
Successor Company (1) Predecessor Company (1) ----------- --------------------------------- Period From Six Months Fiscal Year Ended Period From December 31, Ended ----------------- April 29, 2001 to 2000 to April June 17, December 30, January 1, January 2, June 30, 2001 28, 2001 2000(2) 2000 2000 1999 ------------- -------- -------- ---- ---- ---- (unaudited) (unaudited) (unaudited) (dollars in thousands) Operating data: Net sales and other revenues.......... $2,594,781 $4,735,066 $5,131,225 $12,669,932 $10,891,231 $10,230,840 Cost of goods sold.................... 1,924,028 3,556,165 3,864,966 9,562,855 8,209,491 7,794,754 Operating expenses.................... 535,123 978,518 998,879 2,522,094 2,077,781 1,894,989 Merger expense (3).................... 2,021 25,984 2,944 38,546 1,465 -- Store closing provision (4)........... 1,212 2,288 7,997 42,834 12,605 14,321 Asset impairment provision (5)........ -- -- -- 26,961 1,495 3,460 Operating income...................... 132,397 172,111 256,439 476,642 588,394 523,316 Interest expense...................... 63,636 108,362 55,374 213,057 103,820 95,334 Income before income taxes............ 68,761 63,749 201,065 263,585 484,574 427,982 Net income............................ 36,829 34,198 124,657 155,486 300,435 272,585 Other data: EBITDA (6)............................ $ 228,479 $ 363,415 $ 401,580 $ 956,495 $ 866,295 $ 801,770 EBITDA as a percentage of net sales... 8.8% 7.7% 7.8% 7.5% 8.0% 7.8% Ratio of EBITDA to interest expense... 3.6x 3.4x 7.3x 4.5x 8.3x 8.4x Depreciation and amortization......... $ 92,440 $ 162,259 $ 130,315 $ 372,541 $ 258,512 $ 236,021 Ratio of earnings to fixed charges (7)........................... 1.9x 1.5x 3.2x 1.9x 4.0x 3.7x Store count........................... 1,443 1,436 1,300 1,420 1,276 1,207 Total gross retail square footage (in thousands)....................... 52,531 52,156 44,932 51,366 43,020 38,887 Capital expenditures.................. $ 68,338 $ 122,577 $ 156,343 $ 392,968 $ 410,888 $ 356,058 Balance Sheet Data: Cash and cash equivalents............. $ 125,742 $ 100,099 $ 135,636 $ 193,721 $ 123,592 Total assets.......................... 8,712,113 4,002,525 7,926,796 3,977,015 3,696,303 Long-term debt (8).................... 3,043,749 426,654 455,240 426,930 429,763 Total debt (9)........................ 3,241,826 663,641 3,321,436 731,764 533,281 Total capital lease obligations (10).. 631,400 530,459 631,094 502,819 514,600 Shareholders' equity.................. 3,123,082 1,759,817 2,441,159 1,678,866 1,598,922 January 3, December 28, 1998 1996 ---- ---- Operating data: Net sales and other revenues............ $10,205,802 $9,015,502 Cost of goods sold...................... 7,857,106 6,972,239 Operating expenses...................... 1,866,529 1,615,386 Merger expense (3)...................... -- -- Store closing provision (4)............. 84,402 (27,600) Asset impairment provision (5).......... -- 22,187 Operating income........................ 397,765 433,290 Interest expense........................ 115,389 80,520 Income before income taxes.............. 282,376 352,770 Net income.............................. 172,250 215,220 Other data: EBITDA (6).............................. $ 711,974 $ 603,414 EBITDA as a percentage of net sales..... 7.0% 6.7% Ratio of EBITDA to interest expense..... 6.2x 7.5x Depreciation and amortization........... $ 219,833 $ 165,286 Ratio of earnings to fixed charges (7).. 2.7x 3.7x Store count............................. 1,157 1,112 Total gross retail square footage (in thousands)......................... 36,107 32,615 Capital expenditures.................... $ 346,134 $ 283,564 Balance Sheet Data: Cash and cash equivalents............... $ 93,340 $ 215,435 Total assets............................ 3,515,406 3,593,099 Long-term debt (8)...................... 586,355 495,111 Total debt (9).......................... 668,880 746,094 Total capital lease obligations (10).... 510,355 491,005 Shareholders' equity.................... 1,333,185 1,225,088
________ (1) The Delhaize Le Lion share exchange was accounted for using the purchase method of accounting. Although the Delhaize Le Lion share exchange was consummated on April 25, 2001, we have accounted for the Delhaize Le Lion share exchange beginning on April 29, 2001. Accordingly, effective as of the close of our April 28, 2001 fiscal period, we recorded adjustments to reflect the accounting basis of 24 Delhaize Le Lion in our financial statements. These adjustments principally included changes to the valuation of certain of our tangible and intangible assets, net of deferred tax liabilities, with a corresponding increase in stockholders' equity in the amount of approximately $772 million. The preliminary allocation of the Delhaize Le Lion share exchange purchase price to our assets and liabilities was based on estimates of our management, and our management does not expect the final allocation to have a material effect on our consolidated financial position or results of operations. This preliminary allocation resulted in additional intangible asset and goodwill amortization expense for the period from April 29, 2001 to June 30, 2001 in the amount of approximately $4.9 million, net of tax. The amortization periods used were approximately 10 years for identifiable intangible assets and 40 years for goodwill. (2) 24 week period in 2000 compared to a 26-week period in 2001. In fiscal 2001, we adjusted our calendar year to four 13-week quarters to align our calendar year with Delhaize Group's calendar year. (3) Merger expense includes the amortization of costs incurred in connection with obtaining the approximately $2.5 billion term loan facility for our acquisition of Hannaford Bros. and costs incurred in connection with our share exchange with Delhaize Le Lion. (4) Store closing provision includes costs incurred in connection with the decisions to close 6 stores and 5 stores in the six months ended June 30, 2001 and June 17, 2000, respectively and the decisions to close 36 stores, 16 stores and 33 stores in fiscal 2000, 1999 and 1998, respectively. (5) Asset impairment provision includes the write-down of a portion of the recorded asset values of certain of our stores to estimated realizable values. (6) EBITDA is defined by our company as earnings before interest, taxes, depreciation, amortization, LIFO income/expense, merger expense, store closing provision and asset impairment provision. We do not represent EBITDA as an alternative measure to net income or cash flow from operations, which is determined in accordance with U.S. GAAP. Investors should note that our calculation of EBITDA might differ from similarly titled measures for other companies. (7) For the purpose of computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes, plus fixed charges and less capitalized interest. Fixed charges are defined as the sum of interest on all indebtedness, including capitalized interest, amortization of debt issuance cost and one-third of annual rental expense, which we believe to be representative of an interest factor. A statement setting forth the computation of the ratio of earnings to fixed charges is filed as an exhibit to the registration statement of which this prospectus is a part. (8) Long-term debt consists of the portion of total long-term debt that matures subsequent to fiscal 2001. (9) Total debt consists of short-term borrowings and total long-term debt, but does not include total capital lease obligations. (10) Total capital lease obligations consist of the current and long-term portion of present value of net minimum lease payments on capital leases. 25 UNAUDITED PRO FORMA INCOME STATEMENTS The following unaudited pro forma income statements are presented based on the historical financial statements of our company with adjustment for the effects of our acquisition of Hannaford Bros. on July 31, 2000, based on the assumptions and adjustments explained in the notes below. The unaudited pro forma condensed consolidated statements of income assume that our acquisition of Hannaford Bros. was consummated at the beginning of fiscal 2000, and reflect adjustments to give effect to the disposition of Hannaford Bros. stores in the southeastern United States in connection with the acquisition and Hannaford Bros.' sale of a majority interest in an Internet-based grocery retail business. The unaudited pro forma condensed consolidated statements of income are presented for illustrative purposes only and are not necessarily indicative of the results of operations that would have been realized had the Hannaford Bros. acquisition been consummated at the beginning of fiscal 2000, nor are they necessarily indicative of our future consolidated results of operations. These unaudited pro forma condensed consolidated statements of income should be read in conjunction with and are qualified by our historical consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.
Delhaize America for the Hannaford Bros. 52 weeks ended for the 30 weeks ended Pro forma Pro forma December 30, 2000 July 31, 2000 Adjustments (1) Consolidated ----------------- ------------- --------------- ------------ (dollars in thousands) Net sales and other revenues.............. $ 12,669,932 $ 1,992,449 $ (359,315) $ 14,303,066 Cost of goods sold........................ 9,562,855 1,496,579 (283,623) 10,775,811 Selling and administrative expense........ 2,522,094 393,171 (10,376)(2) 2,904,889 Asset impairment provision................ 26,961 -- -- 26,961 Store closing charge...................... 42,834 107,473 (107,473) 42,834 Merger expense............................ 38,546 12,968 (352) 51,162 ---------------- --------------- ----------- -------------- Operating income.......................... 476,642 (17,742) 42,509 501,409 Interest expense.......................... 213,057 10,572 112,288 (3) 335,917 ---------------- --------------- ----------- -------------- Income before income taxes................ 263,585 (28,314) (69,779) 165,492 Provision for income taxes................ 108,099 (10,759) (12,201)(4) 85,139 ---------------- --------------- ----------- -------------- Net income................................ $ 155,486 $ (17,555) $ (57,578) $ 80,353 ================ =============== =========== ==============
Delhaize America for the Hannaford Bros. 24 weeks ended for the 26 weeks Pro forma Pro forma --------- --------- June 17, 2000 ended July 31, 2000 Adjustments (5)(6) Consolidated ----------------- ------------------- ------------------ ------------ (dollars in thousands) Net sales and other revenues.............. $ 5,131,225 $ 1,718,357 $ 128,422 $ 6,978,004 Cost of goods sold........................ 3,864,966 1,283,228 101,222 5,249,416 Selling and administrative expense........ 998,879 345,075 69,807 (7) 1,413,761 Asset impairment provision................ -- -- -- -- Store closing charge...................... 7,997 103,939 (103,439) 8,497 Merger expense............................ 2,944 -- 2,390 5,334 -------------- ------------- -------------- ------------ Operating income.......................... 256,439 (13,885) 58,442 300,996 Interest expense.......................... 55,374 9,258 100,672 (3) 165,304 -------------- ------------- -------------- ------------ Income before income taxes................ 201,065 (23,143) (42,230) 135,692 Provision for income taxes................ 76,408 (8,404) (3,725) (4) 64,279 -------------- ------------- -------------- ------------ Net income................................ $ 124,657 $ (14,739) $ (38,505) $ 71,413 ============== ============= ============== ============
_____________ (1) Includes adjustments related to Hannaford Bros.' sale or closure of its 51 southeastern U.S. retail locations and its sale of a majority interest in HomeRuns.com, an Internet-based grocery retail business. The pro forma adjustments related to the southeastern U.S. market divestiture include the elimination of net sales and other revenues of $356,014, cost of goods sold of $281,378, selling and administrative expense of $85,156 and store closing charges of $107,473, all of which specifically related to the divested southeastern U.S. market for the period from the beginning of fiscal 2000 to the acquisition date. The pro forma adjustments related to Hannaford Bros.' sale of a majority interest in HomeRuns.com include the elimination of net sales and other revenues of $3,301, cost of goods sold of $2,245 and selling and administrative expense of $3,847 for the period prior to Hannaford Bros.' sale of a majority interest in HomeRuns.com. (2) Represents the amortization, on a straight line basis, of the acquired identifiable intangible assets and goodwill resulting from the Hannaford Bros. acquisition over the estimated useful lives of these assets which range from two to 40 years and the effect on property and 26 equipment depreciation resulting from the adjustment to fair market value in the application of purchase accounting. The pro forma adjustment to increase amortization and depreciation expense was approximately $78.6 million, which, combined with the elimination of selling and administrative expenses as described in Note 1 above totaling $89.0 million, result in the pro forma adjustment of $10.4 million shown in the table above. The following table summarizes the useful lives used for goodwill and the identified intangible assets:
Useful Valuation life --------- ---- (dollars in millions) Goodwill......................... $ 2,594 40 years Trademarks....................... $ 229 40 years Distribution network............. $ 123 40 years Workforce........................ $ 61 2-13 years Favorable lease rights........... $ 39 Lease term Prescription files............... $ 28 15 years
(3) Includes the interest expense effect of approximately $2.6 billion of additional debt as a result of the Hannaford Bros. acquisition. In connection with the initial financing of the cash consideration of our acquisition of Hannaford Bros., management has assumed an average interest rate (based on 30-day London Interbank Offered Rate, or LIBOR, plus a margin) of approximately 7.4%. The effect of an interest rate change of 1/8 of 1% would increase/decrease interest expense approximately $3.2 million per year. (4) Includes the anticipated tax effect of the pro forma adjustments listed in notes 1-3 and notes 5-7 (excluding goodwill amortization). The principal difference in the effective tax rate for the consolidated pro forma statements of income relates to the non-deductible amortization of goodwill. We assumed a 38% (combined for federal and state tax) statutory tax rate in the tax calculation. (5) Includes adjustments related to Hannaford Bros.' sale or closure of its 51 southeastern U.S. retail locations and its sale of a majority interest in HomeRuns.com, an Internet-based grocery retail business. The pro forma adjustments related to the southeastern U.S. market divestiture include the elimination of net sales and other revenues of $319,627, cost of goods sold of $247,153, selling and administrative expense of $80,034 and store closing charges of $103,939, all of which specifically related to the divested southeastern U.S. market for the period from the beginning of fiscal 2000 to the end of the 26-week period ended July 1, 2000. The pro forma adjustments related to Hannaford Bros.' sale of a majority interest in HomeRuns.com include the elimination of net sales and other revenues of $3,301, cost of goods sold of $2,245 and selling and administrative expense of $3,847 for the period prior to Hannaford Bros.' sale of a majority interest in HomeRuns.com. (6) In 2001, we adjusted our calendar year to four 13 week quarters to align our calendar year with Delhaize Group's calendar year. As a result, pro forma adjustments have been made to adjust the 24 weeks ended June 17, 2000 to the new calendar for comparability. These adjustments included an increase in net sales and other revenues of $451,350, an increase in cost of goods sold of $350,620, an increase in selling and administrative costs of $86,660, an increase in merger expense of $2,390 and an increase in store closing expense of $500. (7) Represents the amortization, on a straight line basis, of the acquired identifiable intangible assets and goodwill resulting from the Hannaford Bros. acquisition over the estimated useful lives of these assets which range from two to 40 years and the effect on property and equipment depreciation resulting from the adjustment to fair market value in the application of purchase accounting. The pro forma adjustment to increase amortization and depreciation expense was approximately $67.0 million, which, combined with the adjustment to selling and administrative expenses as described in Notes 2 and 5 above totaling $2.8 million and calendar adjustments included in Note 6 above, result in the pro forma adjustment of $69.8 million shown in the table above. See Note 2 for the useful lives used for goodwill and the identified intangible assets. 27 THE EXCHANGE OFFER Purpose of the Exchange Offer The exchange offer will give holders of old securities the opportunity to exchange the old securities, which we issued on April 19, 2001, for exchange securities that have been registered under the Securities Act. The exchange securities will be identical in all material respects to the old securities, except that the exchange securities have been registered under the Securities Act, are not subject to the transfer restrictions applicable to the old securities and will not have exchange or registration rights. The exchange offer is not being made to, nor will we accept tenders for exchange from, holders of old securities in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the securities or blue sky laws of that jurisdiction. The registration rights agreement provides that, promptly after the registration statement has been declared effective, we will offer to holders of old securities the opportunity to exchange their old securities for exchange securities having a principal amount, interest rate, maturity date and other terms substantially identical to the principal amount, interest rate, maturity date and other terms of their old securities. We will keep the exchange offer open for at least 20 business days (or longer if we are required to by applicable law) after the date notice of the exchange offer is mailed to the holders of outstanding securities and use our reasonable best efforts to complete the exchange offer no later than 30 days after the effective date of the registration statement. The exchange securities will be accepted for clearance through DTC, and each series of exchange securities will have new CUSIP numbers. We will promptly notify you if we are not permitted to conduct the exchange offer because of a change in the rules of the Securities and Exchange Commission, if the exchange offer is not completed by December 17, 2001 or within 240 days of the issuance of the old securities or if the exchange securities issued in the exchange offer are not freely tradeable (other than because the holder is an affiliate of our company or is a person that must deliver a prospectus in connection with the resale). In any of these cases, we will file a shelf registration covering resales of the affected securities on or prior to the later of November 16, 2001, or the 210th day after the issuance of the old securities or the 30th day after such filing obligation arises, use our reasonable best efforts to cause the shelf registration statement to be declared effective on or prior to December 17, 2001, or the 240th day after the issuance of the old securities or within 60 days of a request of an initial purchaser of the old securities and use our reasonable best efforts to keep effective the shelf registration statement until the earlier of two years from issuance of the old securities (or, if Rule 144(k) under the Securities Act is amended to provide a shorter restrictive period, the shorter period) or the time when all of the old securities have been sold thereunder or are already freely tradeable. In the event that a shelf registration statement is filed, we will provide to each affected holder copies of the prospectus that is a part of the shelf registration statement, notify each affected holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the old securities. A holder that sells old securities pursuant to the shelf registration statement will be required to be named as a selling security holder in the prospectus and to deliver a prospectus to purchasers. A selling holder will also be subject to certain of the civil liability provisions under the Securities Act in connection with sales and will be bound by the provisions of the registration rights agreement that are applicable to it, including certain indemnification rights and obligations. 28 If we are permitted under the rules of the Securities and Exchange Commission to conduct the exchange offer and the exchange offer registration statement is not declared effective on or prior to November 16, 2001, or the 210th day following our issuance of the old securities or the exchange offer is not consummated on or prior to December 17, 2001, or the 240th day following our issuance of the old securities or the shelf registration statement is not declared effective on or prior to the required dates (any of such dates being referred to as a registration default), additional interest amounts will accrue on the affected securities from and including the day immediately following the date of such registration default until it is cured, in each case at a rate equal to 0.25% per year. However, the aggregate additional interest amounts payable will in no event be more than 0.25% per year. Additional interest amounts will accrue only for those days that a registration default occurs and is continuing. Any additional interest amounts will be payable to holders in the same manner as interest payments on the old securities, with payment being made on the interest payment dates of April 15 and October 15. You will not be entitled to receive any additional interest if you were, at any time while the exchange offer was pending, eligible to exchange and did not validly tender your old securities for exchange securities in the exchange offer. Transferability of the Exchange Securities We believe that exchange securities issued under the exchange offer in exchange for old securities may be offered for resale, resold or otherwise transferred by a holder of exchange securities without further registration under the Securities Act and without delivery of a prospectus that satisfies the requirements of the Securities Act if: . the holder is not an "affiliate" of our company, as defined in Rule 405 under the Securities Act; . the exchange securities are acquired in the ordinary course of the holder's business; and . the holder does not participate, intend to participate or have an arrangement or understanding with any person to participate, in a distribution of the exchange securities. Any holder who exchanges old securities for exchange securities with the intention of participating in any manner in a distribution of the exchange securities must comply with the registration and prospectus delivery requirements of the Securities Act, or have an exemption available, in connection with any offer for resale, resale or other transfer of the exchange securities. This prospectus may be used for an offer to resell, resale or other retransfer of the exchange securities. With regard to broker-dealers, only broker-dealers that acquired the old securities as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange securities for its own account in exchange for old securities, where the old securities were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange securities. Please read the section of this prospectus entitled "Plan of Distribution" for more information regarding the transfer of exchange securities. Terms of the Exchange Offer Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange any old securities properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on [___________], 2001, the date that the exchange offer expires. We may extend this date and time in our sole discretion. After authentication of the exchange securities by the trustee under the indenture governing the securities or an authenticating agent, we will issue and deliver $1,000 principal amount of exchange securities in exchange for each $1,000 principal amount of outstanding old securities accepted in the exchange offer. Holders may tender some or all of 29 their old securities pursuant to the exchange offer in denominations of $1,000 and integral multiples thereof. The exchange securities will be delivered on the earliest practicable date following the date that the exchange offer expires. The form and terms of the exchange securities will be identical in all material respects to the form and terms of the old securities, except that the exchange securities: . will be registered under the Securities Act; . will not be subject to transfer restrictions; and . will be issued free of any covenants regarding exchange and registration rights. The exchange securities will evidence the same debt as the old securities. The exchange securities will be issued under and be entitled to the benefits of the same indenture and supplemental indentures that authorized the issuance of the old securities and reflect the subsidiary guarantees. The exchange offer is not conditioned upon any minimum aggregate principal amount of the old securities being tendered for exchange. As of the date of this prospectus, there was outstanding $600,000,000 aggregate principal amount of the 7.375% notes, $1,100,000,000 aggregate principal amount of the 8.125% notes and $900,000,000 aggregate principal amount of the 9.000% debentures. This prospectus and the letter of transmittal are being sent to all registered holders of old securities. There will be no fixed record date for determining registered holders of old securities entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the applicable requirements of the Securities Act, the Exchange Act, the rules and regulations of the Securities and Exchange Commission and applicable state securities laws. Old securities that are not exchanged in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits that their holders have under the indenture and the supplemental indentures relating to the old securities and the exchange securities. We will be deemed to have accepted for exchange properly tendered old securities when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent is The Bank of New York, which also serves as trustee under the indenture and the supplemental indentures that govern the securities. The exchange agent will act as agent of the tendering holders of old securities who surrender them in the exchange offer for the purposes of receiving the exchange securities from us and delivering the exchange securities to their holders. The exchange agent will make the exchange promptly on the date of acceptance for exchange of the old securities. We expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any old securities not previously accepted, upon the occurrence of any of the conditions specified below in the section entitled "--Conditions to the Exchange Offer." Holders who tender old securities in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old securities. We will pay all charges and expenses, other than applicable taxes described below, in connection with the exchange offer. It is important that you read the section "--Solicitation of Tenders, Fees and Expenses" for more details regarding fees and expenses incurred in the exchange offer. 30 Expiration of the Exchange Offer; Extensions; Amendments The exchange offer will expire at 5:00 p.m., New York City time, on [______], 2001 unless, in our sole discretion, we extend the date and time of the exchange offer. We may extend the exchange offer at any time and from time to time by giving oral or written notice to the exchange agent and by timely public announcement. We have no obligation to publish, advise or otherwise communicate any delay in acceptance, extension, termination or amendment of the exchange offer other than by making a timely press release to a financial news service. We may also publicly communicate these matters in any other appropriate manner of our choosing. We reserve the right, in our sole discretion, to amend the terms of the exchange offer in any manner. If any of the conditions set forth below under "-- Conditions to the Exchange Offer" has occurred and has not been waived by us, we expressly reserve the right, in our sole discretion, by giving oral or written notice to the exchange agent, to: . delay acceptance of, or refuse to accept, any old securities not previously accepted; . extend the exchange offer; or . terminate the exchange offer. We will, as promptly as practicable, give the registered holders of the old securities oral or written notice of any delay in acceptance, extension, termination or amendment of the exchange offer. If the exchange offer is amended in a manner that we determine constitutes a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of the amendment and we will extend the exchange offer to the extent required by law. If the exchange offer is terminated, federal law requires that we promptly either exchange or return all old securities that have been tendered. Interest on the Exchange Securities Interest on the exchange securities will accrue from October 15, 2001, which will be the most recent date that interest will have been paid on the old securities prior to the exchange offer. The exchange notes due 2006 will bear interest at a rate of 7.375% per annum, the exchange notes due 2011 will bear interest at a rate of 8.125% per annum and the exchange debentures due 2031 will bear interest at a rate of 9.000% per annum. Interest on the exchange securities will be payable semi-annually, on April 15 and October 15 of each year. Assuming that the exchange offer is consummated after October 15, 2001 as anticipated, interest on the exchange securities will first become payable beginning on April 15, 2002. Conditions to the Exchange Offer Despite any other terms of the exchange offer, we will not be required to accept for exchange, or to exchange securities for, any old securities, and may terminate or amend the exchange offer as provided in this prospectus before accepting any old securities for exchange if, in our judgment: . the exchange offer, or the making of any exchange by a holder of old securities, would violate applicable law or any applicable interpretations of the staff of the Securities and Exchange Commission; . any action or proceeding has been instituted or threatened in any court or by or before any governmental agency or body with respect to the exchange offer; or 31 . the exchange securities to be received will not be tradable by the holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States. We will not be obligated to accept for exchange the old securities of any holder that has not made to us: . the representations described under the sections of this prospectus "--Procedures for Tendering" and "Plan of Distribution"; and . any other representations that may be reasonably necessary under applicable Securities and Exchange Commission rules, regulations or interpretations to make available to us an appropriate form for registration of the exchange securities under the Securities Act. You should refer to the section below entitled "--Expiration of the Exchange Offer; Extensions; Amendments" for a discussion of possible actions by our company if any of the foregoing conditions occur. These conditions are solely for our benefit and we may assert them regardless of the circumstances giving rise to them or waive them in whole or in part at any time and from time to time in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of that right. Each of these rights will be deemed an ongoing right that we may assert at any time and from time to time. We will not accept for exchange any old securities tendered and will not issue exchange securities in exchange for old securities if at that time a stop order is threatened or in effect regarding the registration statement which this prospectus constitutes a part of or the qualification of the indentures under the Trust Indenture Act of 1939, as amended. Procedures for Tendering We have forwarded to you, along with this prospectus, a letter of transmittal relating to the exchange offer. Because all of the old securities are held in book-entry accounts maintained by the exchange agent at DTC, a holder need not submit a manually-executed letter of transmittal if the holder tenders old securities in accordance with the procedures mandated by DTC's ATOP system. To tender old securities without submitting a letter of transmittal, the electronic instructions sent to DTC, and transmitted to the exchange agent must contain your acknowledgment of receipt of and your agreement to be bound by and to make all of the representations contained in the letter of transmittal. In all other cases, a letter of transmittal must be manually executed and delivered as described in this prospectus. Only a holder of record of old securities may tender old securities in the exchange offer. To tender in the exchange offer, a holder must comply with the procedures of DTC and either: . if a letter of transmittal is to be delivered: . complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; . have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and . deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date; or . in lieu of delivering a letter of transmittal, instruct DTC to transmit on behalf of the holder of the old securities a computer- generated message to the exchange agent in which the holder 32 acknowledges and agrees to be bound by the terms of the letter of transmittal, which computer-generated message shall be received by the exchange agent prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. In addition, either: . the exchange agent must receive old securities along with the letter of transmittal; . the exchange agent must receive, before expiration of the exchange offer, timely confirmation of book-entry transfer of old securities into the exchange agent's account at DTC, according to the procedure for book-entry transfer described below; or . the holder must comply with the guaranteed delivery procedures described below. To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below in the section "--Exchange Agent" before expiration of the exchange offer. To receive confirmation of valid tender of old securities, a holder should contact the exchange agent at the telephone number listed below in the section entitled "--Exchange Agent." The tender by a holder that is not withdrawn before expiration of the exchange offer will constitute an agreement between that holder and our company in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. Only a registered holder of old securities may tender the old securities in the exchange offer. If a holder completing a letter of transmittal tenders less than all of the old securities held by this holder, this tendering holder should fill in the applicable box of the letter of transmittal. The amount of old securities delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated. If old securities, the letter of transmittal or any other required documents are physically delivered to the exchange agent, the method of delivery is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent before expiration of the exchange offer. Holders should not send the letter of transmittal or old securities to our company. Holders may request that their respective brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for them. Any beneficial owner whose old securities are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owner's behalf. If the beneficial owner wishes to tender on its own behalf, it must, prior to completing and executing the letter of transmittal and delivering its old securities, either: . make appropriate arrangements to register ownership of the old securities in the owner's name; or . obtain a properly completed bond power from the registered holder of old securities. The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. If the applicable letter of transmittal is signed by the record holder(s) of the old securities tendered, the signature must correspond with the name(s) written on the face of the old security without alteration, enlargement or any change whatsoever. If the applicable letter of transmittal is signed by a participant in DTC, the signature must correspond with the name as it appears on the security position listing as the holder of the old securities. 33 A signature on a letter of transmittal or a notice of withdrawal must be guaranteed by an eligible guarantor institution. Eligible guarantor institutions include banks, brokers, dealers, municipal securities dealers, municipal securities brokers, government securities dealers, government securities brokers, credit unions, national securities exchanges, registered securities associations, clearing agencies and a savings association that is a participant in a Securities Transfer Association. The signature need not be guaranteed by an eligible guarantor institution if the old securities are tendered by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal or for the account of an eligible guarantor institution. If the letter of transmittal is signed by a person other than the registered owner(s) of the old securities listed, then the old securities must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the face of the old securities, and also must be accompanied by such opinions of counsel, certifications and other information as we may require in accordance with the restrictions on transfer applicable to the old securities. Signatures on the old securities or bond powers must be guaranteed by an eligible guarantor institution. If the letter of transmittal or any old securities or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless we waive this requirement, they should also submit evidence satisfactory to us, in our sole discretion, of their authority to deliver the letter of transmittal. We will determine, in our sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of old securities, which determination shall be final and binding on all parties. We reserve the absolute right to reject any and all tenders that we determine not to be in proper form or the acceptance of which, or exchange for which, may, in the view of our counsel, be unlawful. We also reserve the absolute right, subject to applicable law, to waive any of the conditions of the exchange offer set forth above in the section entitled "-- Conditions to the Exchange Offer" or any conditions or irregularities in any tender of old securities of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. Our interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and the instructions thereto) will be final and binding. Unless waived, any defects or irregularities in connection with tenders of old securities must be cured within the time that we determine. No tender of old securities will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Any old securities received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. Our company, any of our affiliates or assigns, the exchange agent, or any other person shall not be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. In all cases, we will issue exchange securities for old securities that we have accepted for exchange under the exchange offer only after the exchange agent timely receives: . old securities or a timely book-entry confirmation that old securities have been transferred into the exchange agent's account at DTC; and . a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message (as defined below). Holders of old securities should receive copies of the applicable letter of transmittal with the prospectus. A holder may obtain additional copies of the applicable letter of transmittal for the old 34 securities from the exchange agent at its offices listed below in the section entitled "--Exchange Agent." By signing the letter of transmittal, or causing DTC to transmit an agent's message to the exchange agent, each tendering holder of old securities will represent to us that, among other things: . any exchange securities that the holder receives will be acquired in the ordinary course of its business; . the holder has no arrangement or understanding with any person or entity to participate in the distribution of the exchange securities; . if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the exchange securities; . if the holder is a broker-dealer, that it will receive exchange securities for its own account in exchange for old securities that were acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus, as required by law, in connection with any resale of those exchange securities (see the section of this prospectus entitled "Plan of Distribution"); and . the holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of our company or, if the holder is an affiliate, that it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. Book-entry Transfer We understand that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the old securities at DTC for the purpose of facilitating the exchange offer. Any financial institution that is a participant in DTC's system may make book-entry delivery of old securities by causing DTC to transfer such old securities into the exchange agent's DTC account in accordance with DTC's ATOP procedures for such transfer. The exchange for tendered old securities will only be made after a timely confirmation of a book-entry transfer of the old securities into the exchange agent's account, and timely receipt by the exchange agent of an agent's message. The term "agent's message" means a message, transmitted by DTC and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that DTC has received an express acknowledgment from a participant tendering old securities and that such participant has received an appropriate letter of transmittal and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against the participant. Delivery of an agent's message will also constitute an acknowledgment from the tendering DTC participant that the representations contained in the appropriate letter of transmittal and described above under the section entitled "--Procedures for Tendering" are true and correct. Guaranteed Delivery Procedures Holders who wish to tender their old securities and: . whose old securities are not immediately available; or . who cannot deliver their old securities, the letter of transmittal or any other required documents to the exchange agent prior to the expiration of the exchange offer; may effect a tender if: . the tender is made through an eligible guarantor institution; 35 . before the expiration of the exchange offer, the exchange agent receives from the eligible guarantor institution a properly completed and duly executed notice of guaranteed delivery by facsimile transmittal, mail or hand delivery or a properly transmitted agent's message and notice of guaranteed delivery; and . the exchange agent receives the properly completed and executed letter of transmittal, or a facsimile thereof, as well as all tendered old securities in proper form for transfer or a book-entry transfer confirmation, and all other documents required by the letter of transmittal, within three business days after the expiration date of the exchange offer. A notice of guaranteed delivery must state: . the name and address of the holder and the registered number(s) and the principal amount of old securities tendered; . that the tender is being made by guaranteed delivery; and . that the holder guarantees, within three business days after the expiration of the exchange offer, a letter of transmittal or facsimile thereof, together with the certificate(s) representing the old securities to be tendered in proper form for transfer or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent. Upon request to the exchange agent, a form of notice of guaranteed delivery will be sent to holders who wish to tender their old securities according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided in this prospectus, holders of old securities may withdraw their tenders at any time prior to the expiration of the exchange offer, unless previously accepted for exchange. For a withdrawal to be effective, the exchange agent must receive a computer-generated notice of withdrawal transmitted by DTC on behalf of the holder in accordance with DTC's standard operating procedures, or a written notice of withdrawal, which may be by facsimile transmission or letter, at one of the addresses set forth below under the section entitled "--Exchange Agent." Any notice of withdrawal must: . specify the name of the person who tendered the old securities to be withdrawn; . identify the old securities to be withdrawn, including the certificate number(s) and principal amount of the old securities to be withdrawn; . be signed by the withdrawing holder in the same manner as the original signature on the letter of transmittal by which the withdrawing holder's old securities were tendered (including any required signature guarantees), or be accompanied by documents of transfer sufficient to permit the trustee to register the transfer of the old securities into the name of the withdrawing holder; and . where certificates for old securities have been transmitted, specify the names in which the old securities were registered, if different from that of the withdrawing holder. 36 If old securities have been tendered pursuant to the procedure for book- entry transfer described above, any notice of withdrawal must specify the name and number of the DTC account to be credited with the withdrawn old securities and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form and eligibility, including time of receipt, of notices of withdrawal, and our determination shall be final and binding on all parties. We will deem any old securities so withdrawn not to have been validly tendered for exchange for purposes of the exchange offer and no exchange securities will be issued with respect thereto unless the old securities withdrawn are validly retendered. We will return any old securities that have been tendered for exchange, but are not exchanged for any reason to their holder without cost to the holder. You may retender properly withdrawn old securities by following one of the procedures described above in the section entitled "--Procedures for Tendering" above at any time prior to the expiration of the exchange offer. Exchange Agent The Bank of New York has been appointed as exchange agent for the exchange offer. You should direct requests for additional copies of this prospectus or of the letter of transmittal to the exchange agent addressed as follows: For DTC Portion: --------------- By Registered Mail or Certified Mail: By Hand Delivery or Overnight Carrier: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street New York, New York 10286 Corporate Trust Services Window Attention: Diane Amoroso Ground Level Reorganization Section, 7 East New York, New York 10286 Attention: Diane Amoroso Reorganization Section, 7 East
Facsimile Transmission (for eligible guarantor institutions only): (212) 815-6339 To confirm by telephone or for information call: (212) 815-3738 Delivery of the letter of transmittal to an address other than as shown above or transmission by facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal. Solicitation of Tenders; Fees and Expenses We are making the principal solicitation pursuant to the exchange offer by mail and through DTC's facilities. However, our officers, regular employees and affiliates may make additional solicitations in person or by telegraph, telephone, facsimile transmission, electronic communication or similar methods. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket costs and expenses incurred in connection with the exchange offer and will indemnify the exchange agent for any losses and claims incurred by it as a result of the exchange offer. We may also pay brokerage houses and other custodians, nominees and fiduciaries 37 the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, the letter of transmittal and related documents to the beneficial owners of the old securities and in handling or forwarding tenders for exchange. We will pay all expenses incurred in connection with the exchange offer, including fees and expenses of the trustee, accounting and legal fees, including the expense of one counsel for the holders of the old securities, and printing costs. We will pay any transfer taxes applicable to the exchange of old securities under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person if: . certificates representing old securities for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of old securities tendered; . exchange securities are to be delivered to, or issued in the name of, any person other than the registered holder of the old securities; . tendered old securities are registered in the name of any person other than the person signing the letter of transmittal; or . a transfer tax is imposed for any reason other than the exchange of old securities under the exchange offer. If satisfactory evidence of payment of transfer taxes is not submitted with the letter of transmittal, the amount of any transfer taxes will be billed to the tendering holder. Accounting Treatment We will record the exchange securities at the same carrying value as the old securities, which is the aggregate principal amount, as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will amortize the expense of the exchange offer over the term of the exchange securities. Other Participation in the exchange offer is voluntary and you should carefully consider whether to accept. We urge you to consult your financial and tax advisors in making your own decision on what action to take. We may in the future seek to acquire untendered old securities in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. However, we have no present plans to acquire any old securities that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered old securities. 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes that appear elsewhere in this prospectus. All pro forma information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operation section reflects our acquisition of Hannaford Bros. and the results of operations for the six months ended July 1, 2000, and should be read in conjunction with the unaudited pro forma income statements included elsewhere in this prospectus. In 2001, we adjusted our calendar year to four 13 week quarters to align our calendar year with Delhaize Group's calendar year. As a result, in this Management's Discussion and Analysis of Financial Condition and Results of Operation section, we compare the 26-week period ended June 30, 2001 against the 24-week period ended June 17, 2000, unless otherwise indicated. Overview On April 25, 2001, we became a wholly-owned subsidiary of Delhaize Le Lion as a result of the Delhaize Le Lion share exchange. The Delhaize Le Lion share exchange was accounted for using the purchase method of accounting. Effective as of the end of our April 28, 2001 fiscal period, we recorded adjustments to reflect the accounting basis of Delhaize Le Lion in our financial statements. These adjustments principally included changes to the valuation of certain of our tangible and intangible assets, net of deferred tax liabilities, with a corresponding increase in stockholders' equity in the amount of $772 million. The preliminary allocation of the Delhaize Le Lion share exchange purchase price to our assets and liabilities acquired was based on estimates of our management, and our management does not expect the final allocation to have a material effect on our consolidated financial position or results of operations. This preliminary allocation resulted in additional intangible asset and goodwill amortization expense for the period from April 29, 2001 to June 30, 2001 in the amount of approximately $4.9 million, net of tax. The amortization periods used were approximately 10 years for identifiable intangible assets and 40 years for goodwill. In connection with the recording of Delhaize Le Lion's accounting basis, a new entity has been deemed to be created for financial reporting purposes. Accordingly, in this prospectus, the periods prior to the date of the Delhaize Le Lion share exchange relate to the "predecessor company" and the periods subsequent to the date of the Delhaize Le Lion share exchange relate to the "successor company". The results of the predecessor company and the successor company have been combined for the six months ended June 30, 2001, since separate discussions of the 17 weeks ended April 28, 2001 and the nine week period between April 29, 2001 and June 30, 2001 are not meaningful in terms of their operating results or comparisons to the prior period. The following table sets forth unaudited consolidated statements of income for the six months ended June 30, 2001:
Pro forma 26 Weeks Ended 26 Weeks Ended 24 Weeks Ended June 30,2001 July 1,2000 June 17,2000 ------------ ----------- ------------ (unaudited) (unaudited) (unaudited) (dollars in thousands) --------------------------------------------------------- Net sales and other revenues.............. $ 7,329,847 $ 6,978,004 $ 5,131,225 Cost of goods sold........................ 5,480,193 5,249,416 3,864,966 Selling and administrative expenses....... 1,513,641 1,413,761 998,879 Store closing provision................... 3,500 8,497 7,997 Merger expense............................ 28,005 5,334 2,944 ---------------------------------------------------------
39 Operating income.......................... 304,508 300,996 256,439 Interest expense.......................... 171,998 165,304 55,374 --------------------------------------------------------- Income before income taxes................ 132,510 135,692 201,065 Provision for income taxes................ 61,483 64,279 76,408 --------------------------------------------------------- Net income................................ $ 71,027 $ 71,413 $ 124,657 ========================================================= EBITDA (FIFO)............................. $ 591,894 $ 543,524 $ 401,580
We reported net sales and other revenues of $7.3 billion for the six months ended June 30, 2001 compared to $5.1 billion for the six months ended June 17, 2000 (or $7.0 billion on a pro forma basis). Net income was $71.0 million for the six months ended June 30, 2001 compared to $124.7 million for the six months ended June 17, 2000 (or $71.4 million on a pro forma basis). Earnings before costs associated with the Hannaford Bros. acquisition and store closing provisions were $90.6 million for the six months ended June 30, 2001 compared to $131.4 million for the six months ended June 17, 2000. We reported net sales and other revenues of $12.7 billion in fiscal 2000, compared to $10.9 billion in fiscal 1999 and $10.2 billion in fiscal 1998. Net income was $155.5 million in fiscal 2000 compared to $300.4 million in fiscal 1999 and $272.6 million in fiscal 1998. Earnings before costs associated with the Hannaford Bros. acquisition and store closing and asset impairment provisions were $222.7 million in fiscal 2000 compared to $310.1 million and $283.6 million in fiscal 1999 and fiscal 1998, respectively. On July 31, 2000, we completed our acquisition of Hannaford Bros. The financial information discussed in this management's discussion and analysis includes the results of Hannaford Bros.' operations for the 22 weeks beginning July 31, 2000 and ending December 30, 2000 and for the six months ended June 30, 2001. During the six months ended June 30, 2001, we opened 29 new stores and closed six existing stores (including four relocations), a net increase of 23 stores. At June 30, 2001, we operated 1,443 stores, compared to 1,300 stores at June 17, 2000. We remodeled 85 stores during the six months ended June 30, 2001 compared to 56 during the six months ended June 17, 2000. During fiscal 2000, we opened 66 new stores, closed 28 existing stores (including 10 relocations) and acquired 106 stores in the Hannaford Bros. acquisition, resulting in a net increase of 144 stores. At the end of fiscal 2000, we operated 1,420 stores, compared to 1,276 stores at the end of fiscal 1999 and 1,207 stores at the end of fiscal 1998. We remodeled 173 stores in fiscal 2000, compared to 145 stores in fiscal 1999 and 141 stores in fiscal 1998. EBITDA was $591.9 million for the six months ended June 30, 2001 compared to $401.6 million for the six months ended June 17, 2000 (or $543.5 million on a pro forma basis), representing an increase of 47.4% (or 8.9% on a pro forma basis). EBITDA was $956.5 million in fiscal 2000, compared to $866.3 million in fiscal 1999 and $801.8 million in fiscal 1998, representing annual increases of 10.4% and 8.0%, respectively. Our management and industry analysts generally consider EBITDA to be a measurement of the financial performance of our company that provides a relevant basis for comparison among companies. 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 EBITDA might differ from similarly titled measures for other companies. The following table sets forth, for the periods indicated, a calculation of our EBITDA: 40
Six Months Ended Fiscal Year Ended ---------------- ----------------- June 30, June 17, December 30, January 1, January 2, 2001 2000 2000 2000 1999 ------- ------ -------- -------- ------- (unaudited) (unaudited) (dollars in millions) Net income............................. $ 71.0 $124.7 $ 155.5 $ 300.4 $ 272.6 Add: LIFO (income)/expense............... 1.2 3.9 (1.0) 3.8 24.7 Depreciation........................ 201.6 126.0 327.6 248.9 226.0 Amortization of intangible assets... 53.1 4.3 44.9 9.7 10.0 Store closing provision............. 3.5 8.0 42.8 12.6 14.3 Asset impairment provision.......... -- -- 27.0 1.5 3.5 Merger expense...................... 28.0 2.9 38.5 1.5 -- Interest expense.................... 172.0 55.4 213.1 103.8 95.3 Income taxes ....................... 61.5 76.4 108.1 184.1 155.4 ------ ------ -------- -------- --------- EBITDA................................. $591.9 $401.6 $ 956.5 $ 866.3 $ 801.8 ====== ====== ======== ======== ========= EBITDA as a percent of sales and other revenues......................... 8.1% 7.8% 7.5% 8.0% 7.8%
Results of Operations The following table sets forth, for the periods indicated, the percentage which the listed amounts bear to net sales and other revenues:
Six Months Ended Fiscal Year Ended ---------------- ----------------- June 30, June 17, December 30, January 1, January 2, 2001 2000 2000 2000 1999 ------- ------ -------- -------- ------- (unaudited) (unaudited) Net sales and other revenues............. 100.00% 100.00% 100.00% 100.00% 100.00% Cost of goods sold....................... 74.77 75.32 75.48 75.38 76.19 Selling and administrative expenses...... 20.65 19.47 19.91 19.08 18.52 Store closing provision.................. 0.05 0.15 0.34 0.12 0.14 Asset impairment provision............... -- -- 0.21 0.01 0.03 Merger expense........................... 0.38 0.06 0.30 0.01 -- ------ ------- ---------- -------- --------- Operating income......................... 4.15 5.00 3.76 5.40 5.12 Interest expense......................... 2.34 1.08 1.68 0.95 0.93 ------ ------- ---------- -------- --------- Income before income taxes............... 1.81 3.92 2.08 4.45 4.19 Provision for income taxes............... 0.84 1.49 0.85 1.69 1.52 ------ ------- ---------- -------- --------- Net income............................... 0.97% 2.43% 1.23% 2.76% 2.67% ====== ======= ========== ======== =========
Sales We derive revenues primarily from the sales of products in our stores. Net sales and other revenues were $7.3 billion for the six months ended June 30, 2001 compared to $5.1 billion for the six months ended June 17, 2000 (or $7.0 billion on a pro forma basis), an increase of 42.8% (or 5.0% on a pro forma basis). Our increase in sales during the six month period ended June 30, 2001 primarily resulted from the 106 stores that we acquired in connection with the Hannaford Bros. acquisition. During the six months ended June 30, 2001 we had a net increase of 23 new store openings and we remodeled 85 stores. Comparable store sales increased 1.9% during the six months ended June 30, 2001 over the six month period ended July 1, 2000. 41 Net sales and other revenues were $12.7 billion in fiscal 2000, compared to $10.9 billion in fiscal 1999 and $10.2 billion in fiscal 1998, resulting in annual increases of 16.3%, 6.5% and 0.2%, respectively. Our increase in sales in fiscal 2000 primarily resulted from 106 stores acquired in our acquisition of Hannaford Bros., the opening of 66 new stores and the remodeling of 173 existing stores. Comparable store sales, which include results from expanded and relocated stores, increased 0.8% during fiscal 2000, compared to increases of 1.8% and 2.6% in fiscal 1999 and fiscal 1998, respectively. At June 30, 2001, we operated 1,443 stores, which consisted of 1,194 stores operating under the Food Lion banner, 112 stores operating under the Hannaford and Shop n' Save banners and 137 stores operating under the Kash n' Karry banner. During the six months ended June 30, 2001, we opened 23 Food Lion stores, four Hannaford Bros. stores and two Kash n' Karry stores and remodeled 78 Food Lion stores, one Hannaford Bros. store and six Kash n' Karry stores. At June 30, 2001, we had 52.5 million square feet of space in our stores, representing an increase of 2.3% from the square footage amount at the end of fiscal 2000. During the six months ended June 30, 2001, we relocated four Food Lion stores and closed one Food Lion and one Kash n' Karry store. At the end of fiscal 2000, we operated 1,420 stores, which consisted of 1,176 stores operating under the Food Lion banner, 108 stores operating under the Hannaford and Shop 'n Save banners and 136 Kash n' Karry stores. In fiscal 2000, we opened 55 Food Lion stores, two Hannaford Bros. stores and nine Kash n' Karry stores. In fiscal 2000, we remodeled 134 Food Lion stores, five Hannaford Bros. stores and 34 Kash n' Karry stores. Our remodeling efforts included the updating of equipment and properties, as well as increasing the square footage and adding deli/bakeries to select stores. At the end of fiscal 2000, we had 51.4 million square feet of space in our stores, representing an increase of 19.4% compared to 43.0 million square feet of space at the end of fiscal 1999. During fiscal 2000, we also relocated 10 Food Lion stores and closed five Food Lion stores and 13 Save 'n Pack stores. We have discontinued the Save 'n Pack banner in Florida and, as of June 30, 2001, converted three of the remaining five Save 'n Pack stores to the Kash n' Karry banner. We continue to benefit from our MVP and PCC customer loyalty card programs. These programs, which are primarily vendor-supported, provide our customers with additional discounts on a selection of featured items. During the six months ended June 30, 2001, the MVP customer loyalty card program at our Food Lion stores accounted for approximately 73% of sales and 53% of all transactions at Food Lion. More than 7 million households used an MVP card within the last 12 weeks of the six month period ended June 30, 2001, and their purchases were more than two times the size of non-MVP transactions. During the six months ended June 30, 2001, the PCC loyalty card program at our Kash n' Karry stores accounted for approximately 58% of sales and 42% of all transactions at Kash n' Karry. Kash n' Karry has currently issued more than one million PCC cards, and PCC card transactions were almost twice the size of non-PCC card transactions in fiscal 2000. Working with our vendors, we have increased targeted promotions and direct mail programs to our MVP and PCC card customers. We expect both the MVP and PCC loyalty card programs to continue to grow. In fiscal 2000, the MVP customer loyalty card program at our Food Lion stores accounted for approximately 70% of Food Lion's sales and 50% of all transactions at Food Lion stores. In fiscal 2000, the PCC loyalty card program at our Kash n' Karry stores accounted for approximately 50% of Kash n' Karry's sales and 40% of all transactions at Kash n' Karry stores. In fiscal 2001, we intend to open 47 new stores, including 37 Food Lion stores, six Hannaford Bros. stores and four Kash n' Karry stores. During fiscal 2001, we also intend to relocate five stores and close three additional stores, resulting in a net increase of 39 stores. Our fiscal 2001 plans also include remodeling 150 stores, including 131 Food Lion stores, eight Hannaford Bros. stores and 11 Kash n' Karry stores. We believe that our growth plan for 2001 will enable us to maintain our competitive edge in a number of our current markets. Store remodeling, on average, adds approximately 10% to a store's 42 sales. In addition, we will continue to evaluate our store base and may close stores to take advantage of relocation opportunities or eliminate operating losses in under-performing stores. However, our growth strategy is flexible and we intend to revise our strategy accordingly in order to meet current and future customer needs. Gross Profit Gross profit as a percentage of sales was 25.23% for the six months ended June 30, 2001 compared to 24.68% for the six months ended June 17, 2000. Gross profit improvements in the first half of 2001 were primarily attributable to Food Lion as we continued programs began in the second half of 2000 that are designed to strengthen gross margin through merchandise assortment, retail pricing management and reducing inventory shrinkage. Gross profit as a percentage of sales was 24.52% in fiscal 2000, compared to 24.62% and 23.81% in fiscal 1999 and fiscal 1998, respectively. Gross profit in fiscal 2000 was adversely affected by the cost of markdowns, changes in the mix of products sold at our Food Lion stores as we responded to an intense competitive environment in the southeastern United States and inventory shrinkage. Private label sales, which varied by banner from 15% to 20% of total sales in fiscal 2000, positively impacted our gross profit percentage. The increase in gross profit in fiscal 1999 compared to fiscal 1998 was primarily due to category management initiatives and promotional activity through our MVP and PCC customer loyalty card programs. Selling and Administrative Expense Selling and administrative expenses (which include depreciation and amortization) were 20.65% of sales for the six months ended June 30, 2001 compared to 19.47% for the six months ended June 17, 2000. Excluding depreciation and amortization, selling and administrative expenses as a percentage of sales were 17.18% for the six months ended June 30, 2001 compared to 16.93% for the six months ended June 17, 2000. During the six months ended June 30, 2001, selling and administrative expenses were negatively impacted by continued increasing labor costs, rising health care costs and increases in utility costs. Although higher labor-related costs, including rising health care costs, continue to be a major factor in our expense structure, expenses were well controlled throughout our banners even after the absorption of Hannaford Bros.' historically higher cost structure. Hannaford Bros. was not consolidated until the third quarter of fiscal 2000. Selling and administrative expenses (which include depreciation and amortization) as a percentage of sales were 19.91% in fiscal 2000, 19.08% in fiscal 1999 and 18.52% in fiscal 1998. Excluding depreciation and amortization, selling and administrative expenses as a percentage of sales were 16.97%, 16.70% and 16.22% for fiscal 2000, fiscal 1999 and fiscal 1998, respectively. During fiscal 2000, selling and administrative expenses were negatively impacted as we continued to experience increasing labor costs due to the low unemployment rates in our operating markets, which, in turn, has created higher turnover as well as wage and benefit increases. Other increases in selling and administrative expenses in fiscal 2000 were store rent, utilities and store operating expenses incurred primarily as a result of 64 new leased stores and expansions of existing stores. Depreciation and amortization as a percentage of sales was 3.47% for the six months ended June 30, 2001 compared to 2.54% for the six months ended June 17, 2000 due to $42.6 million (0.58% of sales) in goodwill and intangible asset amortization recorded for the Hannaford Bros. acquisition. During the six months ended June 30, 2001, we constructed and equipped 29 leased stores and five owned stores and remodeled 85 stores. Depreciation and amortization as a percentage of sales was 2.94% in fiscal 2000 compared to 2.37% in fiscal 1999 and 2.31% in fiscal 1998. In fiscal 2000, we recorded $35.6 million (0.28% of fiscal 2000 sales) in goodwill and intangible asset amortization due to the Hannaford Bros. 43 acquisition. We constructed and equipped 64 leased stores and two owned stores and remodeled 173 stores during fiscal 2000. In fiscal 1999, we constructed and equipped 92 leased stores and eight owned stores and remodeled 145 stores and in fiscal 1998, we constructed and equipped 72 leased stores and seven owned stores and remodeled 141 stores. Store Closings The following table shows the number of stores closed and planned to be closed at the end of fiscal years 1998, 1999 and 2000 and at June 30, 2001, along with the number of stores committed for closure during the year, the number of stores closed, the number of closed stores acquired and the number of stores sold or for which the lease was terminated.
Planned ------- Closed Closings Total ------ -------- ------- As of January 3, 1998.................. 179 24 203 Stores added........................... -- 33 33 Stores acquired........................ 6 -- 6 Planned closings completed............. 28 (28) -- Stores sold/lease terminated........... (82) -- (82) Stores not closed (Kash n' Karry)...... -- (3) (3) ------ ------ ----- As of January 2, 1999.................. 131 26 157 Stores added........................... -- 16 16 Stores acquired........................ 14 -- 14 Planned closings completed............. 35 (35) -- Stores sold/lease terminated........... (24) -- (24) ------ ------ ----- As of January 1, 2000.................. 156 7 163 Stores added........................... -- 36 36 Stores acquired........................ 25 1 26 Planned closings completed............. 30 (30) -- Stores sold/lease terminated........... (24) -- (24) ------ ------ ----- As of December 30, 2000................ 187 14 201 Stores added........................... -- 6 6 Stores acquired........................ -- -- -- Planned closings completed............. 6 (6) -- Stores sold/lease terminated........... (7) -- (7) ------ ------ ----- As of June 30, 2001.................... 186 14 200
The following table reflects closed store liabilities at June 30, 2001 and the end of fiscal years 2000, 1999 and 1998, and activity during the year including additions to closed store liabilities charged to operations, additions for closed stores acquired in purchase transactions, adjustments to liabilities based on changes in facts and circumstances and payments made.
Six Months Ended June 30, 2001 2000 1999 1998 ------------- -------- -------- --------- Balance beginning of year........................ $ 185.2 $ 106.8 $ 113.5 $ 130.5 Additions charged to earnings: Store closings--lease obligations.............. 1.2 33.5 13.7 12.2 Store closings--other exit costs............... -- 4.6 1.7 2.8
44 Adjustments to prior year estimates--lease obligations................................... 1.8 0.8 (1.0) 1.1 Adjustments to prior year estimates--other exit costs.................................... 1.1 3.9 -- (1.0) Reserves reversed to income.................... (0.6) -- (1.8) (0.8) ------ ------- ------- -------- Total charge to earnings.................... 3.5 42.8 12.6 14.3 ------ ------- ------- -------- Reductions: Lease payments made............................ (7.5) (11.0) (8.2) (7.2) Lease termination payments..................... (0.4) (3.4) (10.5) (15.5) Payments for other exit costs.................. (1.4) (6.0) (3.8) (4.8) ------ ------- ------- -------- Total reductions............................ (9.3) (20.4) (22.5) (27.5) ------ ------- ------- -------- Closed store liabilities associated with purchase transactions: Lease obligations.............................. -- 39.8 2.4 2.8 Other exit costs............................... -- 19.9 0.8 0.6 Adjustment to goodwill......................... (11.4) (3.7) -- (7.2) ------ ------- ------- -------- Total acquired liabilities.................. (11.4) 56.0 3.2 (3.8) ------ ------- ------- -------- Balance at end of year........................... $168.0 $ 185.2 $ 106.8 $ 113.5 ====== ======= ======= ========
The June 30, 2001 balance of approximately $168.0 million consisted of lease liabilities and exit cost liabilities of $138.6 million and $29.4 million, respectively. The fiscal 2000 end of year balance of $185.2 million consisted of lease liabilities and exit cost liabilities of $152.3 million and $32.9 million, respectively. The fiscal 1999 balance of $106.8 million consisted of $96.9 million of lease liabilities and $9.9 million of exit cost liabilities, the fiscal 1998 balance of $113.5 million consisted of $102.3 million of lease liabilities and $11.2 million of exit cost liabilities and the fiscal 1998 opening balance consisted of $116.9 million of lease liabilities and $13.6 million of exit cost liabilities. We provided for closed store liabilities in each of the periods presented above relating to the estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments reflected in the above table. These other exit costs include estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes. Adjustments to closed store liabilities and other exit costs primarily relate to changes in subtenants and actual exit costs differing 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. During the six months ended June 30, 2001, we recorded additions to closed store liabilities of $3.5 million primarily related to 6 store closings made in the ordinary course of our business and adjustments to prior year estimates for stores previously closed. During the same period, we recorded reductions to our reserves for closed stores of approximately $9.3 million. These reductions were a result of cash payments of approximately $7.5 million for ongoing rent payments on closed stores' remaining lease obligations, net of sublease income, and non-cash reductions of $11.4 million. The non-cash adjustments related primarily to closed stores acquired in the Hannaford acquisition, based on final purchase accounting allocation. During fiscal 2000, we recorded additions to closed store liabilities of $59.7 million related to 26 store properties acquired, or for which the lease was assumed, in the Hannaford Bros. acquisition. All but one of the 26 stores included in the reserve had been closed prior to the acquisition date. The remaining activities associated with exiting these stores are to maintain the store under the leasehold requirements, to dispose of any owned property and equipment and to settle the 45 remaining lease obligations. The acquired Hannaford Bros. liabilities for closed stores included $39.8 million related to the present value of future unrecoverable lease liabilities with remaining non-cancelable terms ranging from three to 22 years. Another accrued exit cost was approximately $19.9 million for activities that were directly related to the remaining lease obligations, comprised of $10.3 million for real estate taxes, $7.9 million for property maintenance and utilities and $1.7 million for property insurance. Accrued exit costs are paid over the remaining lease term. A non-cash reduction in the amount of approximately $3.7 million was made prior to December 30, 2000, with a corresponding reduction in goodwill principally related to a lease liability that was canceled. In fiscal 1999 and 1998, we acquired 14 closed stores and six closed stores, respectively. The related lease obligations and other exit costs of $3.2 million and $3.4 million for 1999 and 1998, respectively, were recorded as an addition to goodwill. In conjunction with the Kash n' Karry acquisition in late fiscal 1996, we identified 23 Kash n' Karry and Save 'n Pack locations for closing based on either unacceptable performance or an anticipated relocation of the store. We closed 13 of these stores in 1998 and four additional stores in 1999. Based on improved operating performance in 1998, a decision was made to not close three of the 23 identified Kash n' Karry and Save 'n Pack locations. The original estimated store-closing costs of $7.2 million related to these three stores were recognized as a reduction of goodwill in 1998. It has taken us an unusually longer than anticipated time to execute our Kash n' Karry and Save 'n Pack store closing plan due to real estate constraints in relocating the stores. The revenues and operating results for stores closed are not material to our total revenues and operating results for any of the fiscal years presented above. Future cash obligations for closed store liabilities are tied principally to the remaining non-cancelable lease payments less sublease payments to be received. Impairment of Long-Lived Assets 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 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, reduced by estimated direct costs of disposal. The carrying value of assets to be disposed amounted to approximately $17.1 million, $36.6 million, $18.6 million and $21.0 million at June 30, 2001, December 30, 2000, January 1, 2000 and January 2, 1999, respectively. The Company recorded no charge related to asset impairment during the six months ended June 30, 2001. The pre-tax charge included in our income statement for asset impairment amounts to $27.0 million, $1.5 million, and $3.5 million for the fiscal years 2000, 1999, and 1998, respectively. The fiscal 2000 impairment loss included $15.7 million attributable to certain under-performing store assets as reported in our third quarter based on discounted future cash flows associated with those store assets. The other impairment charges in each of the three fiscal years related principally to write-down of leasehold improvements and idle equipment from closed stores. 46 Merger Expenses Merger expenses for the six months ended June 30, 2001 and for fiscal 2000 consisted principally of the amortization of costs incurred in connection with the borrowings related to the Hannaford Bros. acquisition. Merger expenses for the six months ended June 30, 2001 and for fiscal 2000 also included costs incurred in connection with the Delhaize Le Lion share exchange. Interest Expense We incurred $172.0 million of interest expense during the six months ended June 30, 2001 compared to $55.4 million incurred during the six months ended June 17, 2000. Interest was 2.34% and 1.08% of sales in these periods, respectively. Interest expense increased in the first half of 2001 compared to the first half of 2000 primarily as a result of borrowings related to the Hannaford Bros. acquisition. Interest in the first half of 2001 included interest expense related to the short-term financing of the Hannaford Bros. acquisition until April 19, 2001, at which point long-term financing was raised through our issuance of the old securities. During fiscal 2000, we incurred interest expense of $213.1 million, compared to $103.8 million in fiscal 1999 and $95.3 million in fiscal 1998. As a percentage of sales, interest expense was 1.68% in fiscal 2000, 0.95% in fiscal 1999 and 0.93% in fiscal 1998. Interest expense increased in fiscal 2000 primarily as a result of short term borrowings related to the Hannaford Bros. acquisition. In fiscal 1998, we reached an agreement with the U.S. Internal Revenue Service, or IRS, regarding its examination of our tax years 1991 through 1994. As a result of this agreement, we received a refund related to taxes paid in previous years. The refund included interest income of $7.6 million, which was recorded during fiscal 1998 as a reduction to interest expense. In addition, interest expense was reduced by the conversion in fiscal 1998 of our convertible subordinated debentures to common stock. LIFO Our inventories are stated at the lower of cost or market and we value approximately 82% of our inventory using the last-in, first-out, or LIFO, method. Our LIFO reserve increased $1.2 million during the six months ended June 30, 2001 compared to an increase of $3.9 million during the six months ended June 17, 2000. Our LIFO reserve decreased $1.0 million in fiscal 2000 compared to increases of $3.8 million in fiscal 1999 and $24.7 million in fiscal 1998. We experienced a slight deflationary impact in fiscal 2000 in categories such as grocery, pet food and alcoholic beverages, which were partially offset by inflation in categories such as paper products and cigarettes. In fiscal 1999 and fiscal 1998, LIFO increases were primarily due to an increase in cigarette costs. Income Taxes Our provision for income taxes was $61.5 million during the six months ended June 30, 2001 compared to $76.4 million during the six months ended June 17, 2000. Our effective tax rate was approximately 46.3% and 38% during these periods, respectively. The increase in the provision for income taxes during the first half of 2001 over the same period of 2000 was primarily the result of non-deductible goodwill. Our provision for income taxes was $108.1 million in fiscal 2000, $184.1 million in fiscal 1999 and $155.4 million in fiscal 1998. Our effective tax rate was 41.0% in fiscal 2000, 38.0% in fiscal 1999 47 and 36.3% in fiscal 1998. Our effective tax rate increased in fiscal 2000 over fiscal 1999 primarily as a result of non-deductible goodwill related to the Hannaford Bros. acquisition. Our effective tax rate for fiscal 1998 was reduced by the effect of a $7.2 million tax refund that we received from the IRS. We expect that our underlying effective tax rate for fiscal 2001 will be 38%, adjusted for the effect of non-deductible amortization of goodwill. Liquidity and Capital Resources We have funded our operations and acquisitions from cash generated from our operations and borrowings. At June 30, 2001, we had cash and cash equivalents of $125.7 million. We have historically generated positive cash flow from operations. Cash provided by operating activities was $540.3 million for the six months ended June 30, 2001, compared to $218.6 million for the six months ended June 17, 2000. The increase in cash flows from operating activities in the first half of 2001 over the first half of 2000 was primarily due to an increase in net income before non-cash charges, along with a decrease in the income tax receivable. In addition, during the first half of 2001 we were able to reduce our receivables and inventory, net of trade payables, by $105.2 million due to strategies initiated in fiscal 2000. At the end of fiscal 2000, we had cash and cash equivalents of $135.6 million. Cash provided by operating activities was $646.2 million in fiscal 2000, compared to $505.9 million in fiscal 1999 and $441.1 million in fiscal 1998. Cash flows from operating activities increased in fiscal 2000 and fiscal 1999 primarily as a result of our net income before non-cash charges. In addition, in fiscal 2000, we were able to reduce our receivables and inventory, net of trade payables, by $100.7 million. Offsetting this cash inflow was an increase in fiscal 2000 in income tax receivable of $53.4 million. We initiated strategies in fiscal 2000 to decrease our receivables and inventory and expect to continue these strategies to generate additional cash flow in the remainder of fiscal 2001. In both fiscal 1999 and fiscal 1998, we experienced an increase in inventory levels, net of trade payables, of $47.2 million and $72.0 million, respectively. Cash flows used in investing activities increased to $185.8 million for the six months ended June 30, 2001 compared to $167.8 million for the six months ended June 17, 2000. The increase in investing activities for the six months ended June 30, 2001 compared to the six months ended June 17, 2000 was primarily the result of an increase in capital expenditures. Cash flows used in investing activities increased to $2.96 billion in fiscal 2000 compared to $391.3 million in fiscal 1999 and $246.2 million in fiscal 1998. The increase in investing activities in fiscal 2000 was primarily due to approximately $2.6 billion of cash used in the Hannaford Bros. acquisition, partially offset by increased proceeds from the sale of assets, which was attributable to the disposition of divested store properties related to the Hannaford Bros. acquisition. The increase in investing activities in fiscal 1999 compared to fiscal 1998 was primarily the result of an increase in capital expenditures. In addition, the decrease in investing activities in fiscal 1998 included proceeds from the sale of properties associated with the divestiture of our stores in the southwestern United States. Capital expenditures were $190.9 million for the six months ended June 30, 2001 compared to $156.3 million for the comparable period of 2000. For the six months ended June 30, 2001, we opened 29 new stores and renovated 85 existing stores. Capital expenditures were $393.0 million in fiscal 2000 compared to $410.9 million in fiscal 1999 and $356.1 million in fiscal 1998. During fiscal 2000, we opened 66 new stores and renovated 173 existing stores and continued to expand square footage and add deli/bakeries in some of these stores as we did in fiscal 1999. During fiscal 1999, we opened 100 new stores and renovated 145 existing stores. During fiscal 1998, we opened 79 new stores and renovated 141 existing stores. In fiscal 2001, we plan to incur approximately $450 million of capital expenditures, including approximately $174 million to renovate over 200 stores, approximately $125 million for new stores and approximately $151 million primarily for information technology, logistics and distribution. 48 Specifically, we expect to open a total of 47 new stores and remodel and/or expand approximately 150 existing stores, increasing square footage by 4.0% to 53.4 million square feet. We plan to finance capital expenditures during fiscal 2001 through funds generated from operations and existing bank facilities. Total store square footage increased 2.1% from 51.4 million square feet at the end of fiscal 2000 to 52.5 million square feet at June 30, 2001, due to the opening of 29 stores. Total store square footage increased 19.4% from 43.0 million square feet at the end of fiscal 1999 to 51.4 million square feet at the end of fiscal 2000, primarily due to the acquisition of 106 Hannaford Bros. stores and the opening of 66 new stores. Total store square footage increased 10.6% from 38.9 million square feet in fiscal 1998 to 43.0 million square feet at the end of fiscal 1999. Our total distribution space was 9.4 million square feet at June 30, 2001, 10.3 million square feet at the end of fiscal 2000 and 8.7 million square feet at the end of each of fiscal 1999 and fiscal 1998. The increase in distribution space in fiscal 2000 was primarily due to our acquisition of Hannaford Bros. and its related distribution centers. The decrease in distribution space during the first half of 2001 was due to the closing of our Green Cove Springs, Florida distribution center. Cash used in financing activities was $364.5 million for the six months ended June 30, 2001 compared to $144.4 million for the six months ended June 17, 2000, primarily due to cash paid to settle hedge contracts related to the $2.6 billion offering of the old securities. Cash provided by financing activities was $2.3 billion in fiscal 2000 compared to cash provided by financing activities of $44.5 million in fiscal 1999 and $164.6 million in fiscal 1998. Cash provided by financing activities increased in fiscal 2000 primarily as a result of $2.4 billion in short-term borrowings for the Hannaford Bros. acquisition. In fiscal 2000, we paid merger- related financing costs of $46.0 million, which primarily includes fees paid in connection with the financing for the Hannaford Bros. acquisition. The decrease in cash flows provided by financing activities in fiscal 1999 was primarily the result of proceeds received under short-term borrowings offset partially by funds used under our share repurchase plan, as described below, and principal payments on long-term debt. During the third quarter of fiscal 1999, we suspended our share repurchase program as a result of our announced plan to acquire Hannaford Bros. We expended $142.7 million for the purchase of Class A and Class B shares during fiscal 1999 compared to $50.2 million in 1998. The table below sets forth information regarding our share repurchases during fiscal 1999 and fiscal 1998. Fiscal Class A Class B ------ -------- ------- 1999 Shares purchased ............. 2,759,700 1,636,100 Average purchase price ....... $ 32.37 $ 32.61 Total purchased .......... $89,331,489 $53,353,221 1998 Shares purchased ............. 1,028,567 632,333 Average purchase price ....... $ 31.11 $ 28.80 Total purchased .......... $31,998,719 $18,211,190 Debt On April 19, 2001, we completed the private offering of the old securities. We used the proceeds of the offering to repay in full the $2.4 billion outstanding at the end of fiscal 2000 under our $2.5 billion term loan facility. 49 At the end of fiscal 2000, we had approximately $2.4 billion outstanding under a $2.5 billion 364-day term loan facility that matured in July 2001. The borrowings under this facility were used to fund the cash portion of the purchase price of the Hannaford Bros. acquisition. Our outstanding debt under this facility had an interest rate of 8.1875% at the end of fiscal 2000. We used the net proceeds of the offering of old securities to repay this indebtedness in full. We maintain two revolving credit facilities with a syndicate of commercial banks that provides us with $1.0 billion in committed lines of credit, of which $500.0 million will expire in November 2001 and the remaining $500.0 million will expire in July 2005. At June 30, 2001, we had $25.0 million in outstanding borrowings under our credit facilities compared to $180.0 million in outstanding borrowings at June 17, 2000. During the six months ended June 30, 2001, we had average borrowings of $1.6 billion at a daily weighted average interest rate of 7.35%. At the end of fiscal 2000, we had $285.0 million in outstanding borrowings under our credit facilities, compared to $205.0 million at the end of fiscal 1999. During fiscal 2000, we had average borrowings of $190.7 million at a daily weighted average interest rate of 7.95%. During fiscal 1999, we had average borrowings of $81.2 million at a daily weighted average interest rate of 7.53%. At June 30, 2001, we had outstanding medium-term notes of $122.3 million due from 2001 to 2006 at interest rates of 8.40% to 8.73% and outstanding medium-term notes of $96.2 million due from 2001 to 2017 at interest rates of 6.16% to 14.15%. At June 30, 2001, we also had long-term debt securities outstanding of $300.0 million of which $150.0 million matures in 2007 at an interest rate of 7.55% and $ 150.0 million matures in 2027 at an interest rate of 8.05%. At June 30, 2001, we also had mortgage notes payable of $43.9 million due from 2001 to 2011 at interest rates of 7.55% to 10.35%. At the end of fiscal 2000, our company also had outstanding medium-term notes of $122.3 million due from 2001 to 2006 at interest rates of 8.40% to 8.73% and outstanding medium-term notes of $106.7 million due from 2001 to 2017 at interest rates of 6.16% to 14.15%. At the end of fiscal 2000, we also had long-term debt securities outstanding of $300.0 million, of which $150.0 million matures in 2007 at an interest rate of 7.55% and $150.0 million matures in 2027 at an interest rate of 8.05%. We also had mortgage notes payable of $42.9 million due from 2001 to 2011 at interest rates of 7.55% to 10.35% at the end of fiscal 2000. We also enter into significant leasing obligations related to our store properties. Capital lease obligations at June 30, 2001 were $631.4 million compared to $530.5 million at June 17, 2000. Capital lease obligations outstanding at the end of fiscal 2000 were $631.1 million compared to $502.8 million at the end of fiscal 1999. These leases generally have terms of up to 20 years. We also had significant operating lease commitments at the end of fiscal 2000. Total annual minimum operating lease commitments are approximately $225.0 million in fiscal 2001, including approximately $29.0 million related to closed store properties, decreasing gradually to approximately $209.6 million in 2005, including approximately $23.8 million related to closed store properties. As set forth in the tables below, we also have periodic short-term borrowings under informal credit arrangements that are available to us at the lenders' discretion. June 30, 2001 June 17, 2000 ------------- ------------- (dollars in millions) Outstanding borrowings at period end $46.0 $ 55.0 Average borrowings 34.8 58.0 Maximum amount outstanding 95.0 125.0 Daily weighted average interest rate 6.10% 7.04% 50 December 30, January 1, January 2, 2000 2000 1999 ---- ---- ---- (dollars in millions) Outstanding borrowings at year end. $ 40.0 $ 77.0 $ 41.0 Average borrowings. 64.4 20.7 12.2 Maximum amount outstanding. 125.0 105.0 100.0 Daily weighted average interest rate. 7.36% 5.60% 5.47% Market Risk Our company is 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 fixed-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. Prior to the offering of the old securities, 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 old 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 Statement of Accounting Standards No. 133 at the beginning of fiscal 2001, the unrealized loss 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 unrealized loss was reduced as of the date of the Delhaize Le Lion share exchange to reflect the accounting basis of Delhaize Le Lion, resulting in an unrealized loss at June 30, 2001 of approximately $57 million, net of deferred taxes. The table set forth below provides the expected principal payments and related interest rates of our long-term debt by fiscal year of maturity.
2001 2002 2003 2004 2005 Thereafter Fair Value ---- ---- ---- ---- ---- ---------- ---------- (dollars in millions) Medium-Term Notes ............ $119.5 $ 10.9 $ 20.5 $ 8.0 $11.2 $ 58.9 $230.1 Average interest rate......... 8.28% 7.13% 7.82% 7.06% 7.42% 7.15% Debt securities............... -- -- -- -- -- $300.0 $272.4 Average interest rate......... -- -- -- -- -- 7.80% Mortgage payables............. $ 5.4 $ 6.0 $ 6.1 $ 5.4 $ 3.2 $ 21.5 $ 47.6 Average interest rate......... 9.29% 9.22% 9.12% 8.98% 8.94% 8.94% Other note payable............ $ 1.3 $ 1.6 $ 2.0 -- -- -- $ 4.9 Fixed interest rate........... 11.25% 11.25% 11.25% -- -- -- --
Self Insurance We are self-insured for our workers' compensation, general liability and vehicle accident claims. We establish reserves based on an actuarial valuation of open claims reported and an estimate of claims incurred but not yet reported. Maximum self-insured retention, including defense costs per occurrence, is $500,000 per individual claim for workers' compensation, automobile liability and general liability. We are insured to cover costs, including defense costs, in excess of these limits. It is possible that the final resolution of some of these claims may require us to make significant expenditures in excess of our existing reserves over an extended period of time, and in a range of amounts that cannot be reasonably estimated. 51 Impact of Inflation During the six months ended June 30, 2001 and during fiscal 2000, we experienced slight deflation on merchandise purchases. As in prior years, we experienced an increase in our labor costs during these periods, which was partially offset by increased productivity. Recently Issued Accounting Standards In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or 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. We do not expect this standard to have a significant effect on our financial statements. In June 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after they have initially been recognized in financial statements, eliminates goodwill amortization and requires annual impairment testing of goodwill. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001. Although we have not yet completed our evaluation of the impact of the adoption of SFAS No. 142 on our financial statements, we currently believe that the discontinuance of goodwill amortization will be the most significant change affecting our results of operations. Goodwill amortization for fiscal 2001 will be approximately $89 million. 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. We are continuing to evaluate the potential effect of SFAS No. 143 on our financial statements. 52 OUR COMPANY We are a leading supermarket operator in the United States with over 1,400 stores in 16 states in the eastern United States and operate primarily under the banners Food Lion, Hannaford and Kash n' Karry. We believe that our banners have the largest or second largest market shares among supermarket operators in terms of annual sales in North Carolina, South Carolina, Virginia, Maine, New Hampshire and Vermont. For fiscal 2000, we reported pro forma sales of approximately $14.3 billion and pro forma EBITDA of approximately $1.1 billion. Actual EBITDA has increased from $603.4 million in fiscal 1996 to $956.5 million in fiscal 2000, and EBITDA as a percentage of our sales and other revenues has increased from 6.7% in fiscal 1996 to 7.5% in fiscal 2000. At June 30, 2001, we operated 1,194 supermarkets under the Food Lion banner in 11 states in the mid-Atlantic and southeastern regions of the United States. Our Food Lion stores average approximately 34,500 square feet. The current Food Lion store prototype is approximately 38,000 square feet. Our Food Lion stores are distinguished for being low price leaders in their markets and convenient choices for value and time-conscious consumers. Food Lion stores are typically located in well-trafficked areas and close to our customers' neighborhoods. We believe that Food Lion's low price and convenience strategy, which it has followed for over 30 years, increases the shopping frequency of customers, builds customer loyalty and increases customer traffic. At June 30, 2001, we operated 112 Hannaford Bros. supermarkets, 72 of which are combination stores. Hannaford Bros. operates under the Hannaford and Shop 'n Save banners in Maine, New Hampshire, Vermont, upstate New York and Massachusetts. Combination stores consist of traditional all-department supermarkets, together with pharmacies, other services and expanded general merchandise under one roof. Our Hannaford Bros. stores average approximately 49,000 square feet. Hannaford Bros.' current store prototypes are approximately 35,000 square feet and 55,000 square feet. Our Hannaford Bros. stores are distinguished by their comprehensive product variety and outstanding freshness and quality in perishables at competitive prices. As a result of our acquisition of Hannaford Bros. on July 31, 2000, we have realized approximately $34.0 million in pre-tax synergies through June 30, 2001. Annual pre-tax synergies are expected to reach $75 million by 2003. We also plan to benefit from our enhanced geographic presence, the advantages of Hannaford Bros.' merchandising expertise and access to Hannaford Bros.' advanced store information systems. At June 30, 2001, we operated 137 full service neighborhood supermarkets under the Kash n' Karry banner in Central Florida. Our Kash n' Karry stores average approximately 40,500 square feet. Kash n' Karry's current store prototype is approximately 46,000 square feet. We believe that Kash n' Karry has the second largest market share in Tampa/St. Petersburg, Florida, its principal market. Kash n' Karry's "Fresh, Fast n' Friendly" service emphasizes fresh, high-quality produce, an extensive selection of groceries and prepared foods and pharmacies and liquor stores in select locations. Competitive Strengths We believe that we are well positioned to capitalize on opportunities that currently exist in the U.S. supermarket industry. We seek to differentiate ourselves from our competitors through our competitive strengths, which include: . Leading market shares and strong brand recognition. Our strategy is to be among the top two supermarket operators in terms of annual sales in all of the principal markets in which we operate. We believe that we are the second largest supermarket operator in terms of annual sales in the eastern United States. We believe that our leading market shares help us create distribution and advertising synergies and allow us to maintain customer loyalty and strong brand recognition. 53 . Strong operating margins and cost control. Our operating margins are among the highest in the U.S. supermarket industry. We have focused on controlling and reducing elements of our cost of sales through centralized buying practices, lower advertising expenses, distribution efficiencies, improved category management and an increased mix of private label products. Our ability to control operating and administrative expenses has allowed us to achieve one of the lowest operating cost structures in the U.S. supermarket industry. Effective use of information technology, store labor scheduling and attention to cost controls have allowed us to control our expense structure. . Track record of reducing leverage. We have historically been able to generate cash flow and reduce leverage in our balance sheet. For example, at the end of fiscal 1995 and prior to our acquisition of Kash n' Karry in 1996, our debt to total capital ratio was 40.3%. At the end of fiscal 1996 and following the Kash n' Karry acquisition, this ratio increased to 50.2%. By the end of fiscal 1999, we had reduced our debt to total capital ratio to 42.4%. We intend to continue this practice and reduce leverage levels to those existing prior to the Hannaford Bros. acquisition. . Diversification through multiple banners and multiple markets. We operate under multiple banners, each of which has a distinct strategy and a well-established and consistent brand image. Through our multiple banners, we are able to target the needs and requirements of specific markets, customize our product and service offerings and maintain strong brand recognition with our local customers. . Experienced management team. Our executive officers have an average of 17 years of experience in the food retailing industry. In addition, many of our company's senior operating managers have spent much of their careers in their respective local markets. . Attractive store base. Our store locations include many sites in developed urban and suburban locations that would be difficult to replicate. We have invested significant capital in our store base over the years through the addition of new stores and the renovation of existing stores in order to improve the overall quality of our customers' shopping experience. As a result, the average age of our stores is five years, compared to the industry average of seven years. We have continued to invest in our store base and expect to incur approximately $450 million of capital expenditures during fiscal 2001, including renovations of existing stores and store support functions, particularly information technology, logistics and distribution. In 2001, we have been balancing our capital expenditures between strengthening our existing infrastructure and new store growth. At June 30, 2001, we had incurred capital expenditures of $190.9 million. . Distribution efficiencies. We currently operate 11 distribution centers that total approximately 9.4 million square feet. Our warehousing and distribution systems are conveniently located within the areas served by us. Our distribution centers are capable of serving our existing store base and each can handle servicing additional stores. We plan to continue to develop and invest in our warehousing and distribution systems in the future. . High penetration of customer loyalty card programs. We have two successful customer loyalty card programs that are critical elements of our marketing strategy. Customers utilize our loyalty cards for buying incentives and discounts on select purchases at our Food Lion and Kash n' Karry stores. Food Lion's MVP customer loyalty card program, which was introduced in 1995, accounted for 73% of Food Lion's sales (53% of all transactions) during the six month period ended June 30, 2001. Kash n' Karry's Preferred Customer Club, or 54 PCC, card, which was introduced in 1998, accounted for approximately 58% of Kash n' Karry's sales (42% of all transactions) during the six month period ended June 30, 2001. . Significant investment in management information systems. All of our stores utilize computer systems located in Portland, Maine and Salisbury, North Carolina, which allow us to monitor store operating performance, manage merchandise categories and procure and distribute merchandise on a centralized basis. We regularly update our information technology so that we can continue to efficiently operate our stores and logistics network. . Operate as an integrated global group. Following the consummation of the Delhaize Group share exchange, we began participating in the global integration efforts initiated by Delhaize Group. Delhaize Group is organized into three geographic regions that exercise global purchasing, share retail knowledge and implement best practices. As part of its commitment to integration, Delhaize Group has created transnational coordination groups focusing on procurement, equipment purchasing, information technology, food safety, management development, communication and risk management. We believe that we will benefit from the 11 synergy projects that were initiated in September 2000 in these key areas to achieve cost reductions and productivity improvements. We also believe that efficiencies created through the Delhaize Group share exchange will enable Delhaize Group to achieve $20 million in annual pre-tax cost savings during the first year following the Delhaize Group share exchange. Benefits of the Hannaford Bros. Acquisition We believe that the Hannaford Bros. acquisition will contribute to positioning our company as a premier multi-regional food retailer and provide significant other financial benefits. Opportunities to create synergies have been identified in three areas. First, the adoption of the best practices from among the company's three banners, Food Lion, Hannaford and Kash n' Karry. This area includes, but is not limited to, price management systems, store technology and training curriculum for store employees. The second area in which our company will create synergies is procurement through reductions in the cost of private label and brand merchandise, services and equipment. The third area for the creation of synergies is the divestiture of Hannaford Bros.' store locations in the southeastern United States that incurred operating losses and overlapped with Food Lion's market area. This divestiture was completed prior to the acquisition date and resulted in the elimination of the operating losses that Hannaford Bros. incurred in the southeastern United States. Hannaford Bros.' distribution center in the southeastern United States is being retrofitted as a break pack distribution facility to service Food Lion stores. In addition to the creation of synergies, Hannaford Bros., with its retail operations in the northeastern United States, provides a natural geographic fit with our southeastern and mid-Atlantic retail markets. 55 Stores Overview Our growth has historically been based on a strong store opening program. At June 30, 2001, we operated 1,443 supermarkets in 16 states in the eastern United States, as reflected in the following table. Food Hannaford Kash n' Lion Bros. Karry Total ---- ----- ----- ------- Delaware .................. 14 14 Florida ................... 45 137 182 Georgia ................... 61 61 Kentucky .................. 13 13 Maine ..................... 46 46 Maryland .................. 68 68 Massachusetts ............. 6 6 New Hampshire ............. 22 22 New York .................. 28 28 North Carolina ............ 448 448 Pennsylvania .............. 10 10 South Carolina ............ 123 123 Tennessee ................. 89 89 Vermont ................... 10 10 Virginia .................. 305 305 West Virginia ............. 18 18 ----- --- --- ----- Total .................. 1,194 112 137 1,443 ===== === === ===== Number of states ....... 11 5 1 16 New Stores, Remodelings and Recent Acquisitions During fiscal 1998 and fiscal 1999, we added an average of 60 stores annually at a compounded annual growth rate of 5.0%. Our net selling area increased on average by 9.0% in fiscal 1998 and fiscal 1999. In fiscal 2000, we added 66 new stores, including 55 Food Lion stores, two Hannaford Bros. stores and nine Kash n' Karry stores. Square footage increased approximately 19.4% in fiscal 2000 to approximately 43.2 million square feet. In fiscal 2001, we expect to open 47 new stores, including 37 Food Lion stores, six Hannaford Bros. stores and four Kash n' Karry stores, increasing our retail square footage by approximately 4%. During the six month period ended June 30, 2001, we added 29 new stores, including 23 Food Lion stores, four Hannaford Bros. stores and two Kash n' Karry stores, increasing our retail square footage by approximately 17% over the six month period ended June 17, 2000. During fiscal 2001, we also expect to relocate five stores, including four Food Lion stores and one Kash n' Karry store. In fiscal 2000, we closed 28 existing stores, which included 10 store relocations. During the six month period ended June 30, 2001, we closed six existing stores, which included four store relocations. Store remodeling and enlargements continue to be efficient ways for our company to continue to grow in mature markets. Remodeling keeps the look of our stores fresh and helps to make shopping a pleasant experience for our customers. In fiscal 2000, we remodeled 173 stores, including 134 Food Lion stores, 34 Kash n' Karry stores and five Hannaford stores. In fiscal 1998 and fiscal 1999, we renovated an average of 143 stores annually. In fiscal 2001, we plan to remodel 150 stores, including 131 Food Lion stores, eight Hannaford stores and 11 Kash n' Karry stores. During the six month period ended June 30, 2001, we remodeled 85 stores, including 78 Food Lion Stores, six Kash n' Karry Stores and one Hannaford Bros. store. 56 Selective acquisitions in the food retailing sector have also been a growth vehicle for our company, allowing us to reinforce our existing market positions and enter new markets. In fiscal 2000, we completed our acquisition of Hannaford Bros. Hannaford Bros. has entered into a transaction to acquire four former Grand Union store sites in upstate New York and Vermont in the second quarter of 2001. As part of our acquisition of Hannaford Bros., we retained a minority interest in HomeRuns.com, an Internet-based home-delivery shopping service in the Boston area. In addition, Hannaford Bros. has a wholesale supply agreement with HomeRuns.com. Store Specifications Food Lion stores average approximately 34,500 square feet in size and the current Food Lion store prototype is approximately 38,000 square feet. Hannaford Bros. stores average approximately 49,000 square feet and the current Hannaford Bros. store prototypes are approximately 35,000 square feet and 55,000 square feet. Kash n' Karry stores average approximately 40,500 square feet and the current Kash n' Karry store prototype is approximately 46,000 square feet. Pharmacies and Banks In fiscal 1999, we reached an agreement with The Medicine Shoppe, a U.S. specialist in franchised pharmacies, to franchise pharmacies in Food Lion and Kash n' Karry stores. At June 30, 2001, there were Medicine Shoppe pharmacies in 13 Food Lion stores and 67 Kash n' Karry stores. At June 30, 2001, we also operated our own pharmacies in one Food Lion store, 83 Hannaford Bros. stores and three Kash n' Karry stores. We also lease space to third parties to operate banks in a number of our stores. At June 30, 2001, there were banks in 36 Hannaford Bros. stores. Distribution Centers We own and operate our 11 warehousing and distribution facilities, which total approximately 9.4 million square feet. Our stores are served by our distribution centers, which are strategically located across our markets, including two in Maine, one in Florida, three in North Carolina and one in each of South Carolina, Virginia, Tennessee, Pennsylvania and New York. We also own and operate our transportation fleet that we use for all deliveries from our warehouses to our stores. We believe that the close proximity of our warehouses to our stores allows us to supply our stores frequently, thereby minimizing inventory and maximizing distribution economies. Our distribution capabilities have allowed us to significantly decrease our distribution costs. While we currently process a high volume of products in our distribution channel, we can support a significant increase in sales volume without significant additional investment. As we add more volume to our distribution channel, we will be able to further take advantage of our cost efficiencies. Products Assortment We sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen food, deli/bakery and nonfood items such as health and beauty care and other household and personal products. We offer nationally and regionally advertised brand name merchandise as well as products manufactured and packaged under private labels. 57 Pricing Each of our banners utilizes a different pricing strategy. Food Lion is a low price operator, Hannaford Bros. is an ''every day low price'' operator and Kash n' Karry is a "hi/lo" operator. To better manage our pricing strategy and gross margins, we utilize zone pricing, which means that we divide our geographic market into multiple zones and then price some of the products sold in our stores at different prices in different regions based on the competitive factors in each market. Private label products Each of our principal banners offers its own line of private label products. The Food Lion, Hannaford Bros. and Kash n' Karry private label programs were consolidated in 2000 into a single procurement program, enhancing the sales and marketing of the various private label brands and reducing the cost of goods sold for private label brands. Sales of private label products represented 16%, 20% and 15% of Food Lion's, Hannaford Bros.' and Kash n' Karry's respective sales in fiscal 2000. Most private label brands are equal to national brands in terms of quality and offer increased value to our customers, as the cost of private label brands are generally lower than national brands. Private label products generally provide higher gross margins for our company. Food Lion currently offers approximately 2,400 private label stock keeping units, or SKUs. In the third quarter of 2000, Food Lion developed new in-store displays featuring private label products and focused on sending more direct- mail coupons to promote private label sales. Hannaford Bros. currently offers approximately 3,600 SKUs in its private label program and its broader private label assortment offers opportunities to reinforce Food Lion's and Kash n' Karry's private label assortment. Kash n' Karry's private label program currently has more than 2,300 SKUs and its private label program has grown significantly since we acquired Kash n' Karry in December 1996. The Kash n' Karry private label program underwent a packaging change in 2000 in favor of a more attractive design. In 2000, we also introduced produce under the Farmer's Garden Produce and Kash n' Karry Fresh Produce labels in Food Lion and Kash n' Karry stores, respectively. Advertising and Promotion Customer Loyalty Cards We have two customer loyalty card programs: the MVP card introduced in 1995 at Food Lion and the Preferred Customer Club, or PCC, card introduced in 1998 at Kash n' Karry. During the six month period ended June 30, 2001, the MVP customer loyalty card program accounted for approximately 73% of Food Lion's sales (53% of all transactions). During fiscal 2000, more than seven million households used the MVP card and their purchases were two and one half to three times the size of non-MVP transactions. During the six month period ended June 30, 2001, approximately 58% of Kash n' Karry's sales (42% of all transactions) were PCC card-related. In fiscal 2000, more than one million households used the PCC card and PCC card transactions were almost twice the size of non-PCC card transactions. Items promoted on the PCC card averaged more than 2,000 per week in fiscal 2000. Other We advertise through newspaper inserts in the markets where we operate our stores. We also offer coupons on the Food Lion, Hannaford and Kash n' Karry web sites and are exploring the introduction of personalized shopping lists on our web sites. We are also utilizing direct mail programs to target promotions to various customers. Our mailing promotions include coupons that are redeemable at specified stores. In addition, we use television and radio broadcasting advertising selectively in our markets. 58 Competition Our business is highly competitive and characterized by low profit margins. Our competitors include international, national, regional and local: . supermarket chains; . supercenters that sell products typically sold by supermarkets and discount chains; . independent grocery stores; . specialty food stores; . warehouse club stores; . retail drug chains; . convenience stores; . membership clubs; . general merchandisers; and . discount retailers. We compete on a local level and our competition is different in each of our markets. The only common competitor among our three banners is Wal-Mart. We estimate that approximately 700 of our stores, or approximately 50% of our total store base, competes with a supercenter like Wal-Mart. Food Lion's principal supermarket chain competitors are Winn-Dixie, Kroger, Ahold and Harris Teeter. Hannaford Bros.' principal supermarket chain competitors are Shaw's, Price Chopper and DeMoulas. Kash n' Karry's principal supermarket chain competitors are Publix, Winn-Dixie and Albertson's. Competition is based primarily on location, price, consumer loyalty, product quality, variety and service. From time to time, we and our competitors engage in price competition which has adversely affected operating margins in some of our markets. Purchasing We supply our stores with merchandise from our distribution centers, outside suppliers and directly from manufacturers in order to obtain merchandise at the lowest possible cost. Products sold by our company are purchased through buying departments in Salisbury, North Carolina and Portland, Maine. Centralization of buying allows our management to establish long-term relationships with many vendors, providing various alternatives for sources of product supply. We believe that we are not dependent on any one supplier and consider our relations with our suppliers to be good. As a result of the Hannaford Bros. acquisition, we believe that we have improved our purchasing power with a number of our suppliers. Management Information Systems We leverage technology to effectively support tactical and strategic business requirements. All of our stores employ sophisticated point-of-sale and scanning technology for the execution of retail pricing, efficient consumer checkout and data collection. We consolidate point-of-sale data at our corporate headquarters in Salisbury, North Carolina and Portland, Maine on a weekly basis and have implemented various tools to support data mining for analysis, evaluation and decision support. We focus on developing and maintaining fully integrated supply chain solutions that streamline product flow from purchase order creation to retail sale to our customers. We consistently evaluate the appropriate balance 59 between the high cost/risk associated with emerging technologies, and the strength of technology as a competitive advantage. This approach eliminates the ineffectiveness of unproven technology investments and allows us to implement technology solutions that are timely and supportive of our strategic business plan, which provides competitive strength. We are actively pursuing e-commerce development in our relationships with vendors, employees and customers. We use the Electronic Data Interchange, or EDI, extensively in communication with our suppliers and are pursuing a migration to business-to-business Internet communication utilizing the World Wide Retail Exchange, a new global marketplace for food retailers and their suppliers that was co-founded by Delhaize Le Lion. The strengths of the current systems at Food Lion, Hannaford Bros. and Kash n' Karry are complementary, not competing, and provide significant opportunities for the implementation of best practices at each banner. Training We provide enhanced training programs to our employees to make our operations more efficient and more attractive for customers as well as our staff. For example, we provide specialized training to our cashiers to help speed the checkout process. In addition, we provide diversity training to store management trainees, supervisors and office employees. We also train new store managers and employees preparing for store management positions. As part of this training, department managers enhance their capabilities, supervisors take part in leadership training and store employees learn new skills to help them grow in their present positions. Hannaford Bros. provides some of the most comprehensive computer-based training in the supermarket industry, which provides critical solutions and support for its principal business goals and initiatives. We anticipate using Hannaford Bros.' computer-based training at Food Lion and Kash n' Karry commencing in late 2001. Employees As of June 30, 2001, we had 115,424 employees, of which 42,007 were full- time and 73,417 were part-time. At the end of fiscal 2000, we had approximately 120,000 employees, of which approximately 44,000 were full time and approximately 76,000 were part time. During fiscal 2000, the number of our employees increased approximately 29%, primarily as a result of our acquisition of Hannaford Bros. As of the end of fiscal 1999 and fiscal 1998, we had approximately 94,000 and approximately 92,000 employees, respectively. Less than 1% of our employees are unionized and all of our unionized employees work at one distribution center in Maine. We have not experienced any strikes or work stoppages and consider our relationship with our employees to be good. Trademarks We currently own 73 trademarks registered or pending in the United States Patent and Trademark Office, including the Hannaford and Kash n' Karry names. We license the Food Lion name from Delhaize Le Lion. We believe that each of our principal banners has strong name recognition and customer loyalty. Each trademark registration is for an initial period of 10 or 20 years and is renewable for as long as our use of the trademark continues. Properties At June 30, 2001, we operated a total of 1,443 stores, 102 of which were owned by us and 1,341 of which were leased. 60 With the exception of 102 owned stores, as of June 30, 2001, Food Lion, Kash n' Karry and Hannaford Bros. occupied various store premises under lease agreements providing for initial terms of up to 30 years, with renewal options generally ranging from five to 20 years. The table below sets forth the location and square footage of our 11 warehousing and facilities centers, which total approximately 9.4 million square feet. Square Feet ----------- (in thousands) Location -------- Salisbury, North Carolina.............................. 1,630 Greencastle, Pennsylvania.............................. 1,236 Dunn, North Carolina................................... 1,225 Disputanta, Virginia................................... 1,124 Elloree, South Carolina................................ 1,099 Clinton, Tennessee..................................... 833 Plant City, Florida.................................... 760 South Portland, Maine.................................. 520 Schodack, New York..................................... 425 Butner, North Carolina................................. 370 Winthrop, Maine........................................ 198 ------ Total.................................................. 9,420 ====== Legal Proceedings We are from time to time involved in legal actions in the ordinary course of our business. We are not aware of any pending or threatened litigation, arbitration or administrative proceedings involving claims or amounts that, individually or in the aggregate, we believe are likely to materially harm our business, financial condition or future results of operations. Any litigation, however, involves risk and potentially significant litigation costs, and therefore we cannot give any assurance that any litigation which may arise in the future will not materially harm our business, financial condition or future results of operations. The Share Exchange On April 25, 2001, a share exchange between our company and Delhaize Le Lion was consummated. As a result, Delhaize Le Lion and its wholly-owned subsidiary, Delhaize The Lion America, now own all of our shares. As a result of the share exchange, our shareholders became shareholders of Delhaize Le Lion. Under the terms of the share exchange, each share of our common stock not already directly or indirectly owned by Delhaize Le Lion was exchanged for 0.4 Delhaize Le Lion American Depositary Shares, or ADSs, or, at the option of our shareholders, 0.4 Delhaize Le Lion ordinary shares. Each Delhaize Le Lion ADS represents one ordinary share of Delhaize Le Lion. The Delhaize Le Lion ADSs are listed on the New York Stock Exchange under the symbol "DEG" and Delhaize Le Lion ordinary shares are traded on Euronext Brussels under the symbol "DELB." Following the consummation of the share exchange, approximately 43.3% of Delhaize Le Lion's ordinary shares were held by our former shareholders. 61 THE GUARANTEES Our wholly-owned subsidiaries, Food Lion, LLC Hannaford Bros. Co. and Kash n' Karry Food Stores, Inc. will fully and unconditionally and jointly and severally guarantee each series of exchange securities and any old securities not tendered in the exchange offer. Food Lion, LLC is a North Carolina limited liability company that operates substantially all of our Food Lion stores. Food Lion's executive offices are located at 2110 Executive Drive, Salisbury, North Carolina 28145-1330. Hannaford Bros. Co. is a Maine corporation that operates all of our Hannaford stores. Hannaford Bros.' executive offices are located at 145 Pleasant Hill Road, Scarborough, Maine 04074. Kash n' Karry Food Stores, Inc. is a Delaware corporation that operates all of our Kash n' Karry stores. Kash n' Karry's executive offices are located at 2110 Executive Drive, Salisbury, North Carolina 28145-1330. 62 MANAGEMENT The following table sets forth the name, age and positions of each of the directors and executive officers of our Company, Food Lion, Hannaford Bros. and Kash n' Karry as of September 7, 2001: Executive Officers and Directors of Delhaize America, Inc.
Name Age Position ---- --- -------- Pierre-Olivier Beckers............. 41 Chairman of the Board of Directors Hugh G. Farrington................. 56 Vice Chairman of the Board of Directors R. William McCanless............... 42 President, Chief Executive Officer and Director Laura C. Kendall................... 49 Chief Financial Officer and Vice President of Finance Michael R. Waller.................. 47 Executive Vice President, General Counsel and Secretary Richard A. James................... 41 Treasurer
Executive Officers and Managers of Food Lion, LLC
Name Age Position ---- --- -------- Pierre-Olivier Beckers............. 41 Manager Hugh G. Farrington................. 56 Manager R. William McCanless............... 42 Chief Executive Officer and Manager Richard A. Anicetti................ 43 President and Chief Operating Officer Laura C. Kendall................... 49 Executive Vice President and Chief Financial Officer Keith M. Gehl...................... 42 Executive Vice President, Business Strategy and Store Development C. David Morgan.................... 50 Senior Vice President, Retail Operations Margaret H. Ham.................... 34 Senior Vice President, Dry Merchandising Elwyn G. Murray III................ 34 Senior Vice President, Procurement, Distribution and Quality Assurance Robert J. Brunory.................. 46 Senior Vice President, Fresh Merchandising
Executive Officers and Directors of Hannaford Bros.
Name Age Position ---- --- -------- Hugh G. Farrington............. 56 Director R. William McCanless........... 43 Director Ronald C. Hodge................ 53 President, Chief Executive Officer and Director Paul A. Fritzson............... 47 Executive Vice President and Chief Financial Officer Michael J. Strout.............. 46 Executive Vice President--Human Resources and Information Technology
Executive Officers and Directors of Kash n' Karry Food Stores, Inc. Name Age Position ---- --- -------- R. William McCanless........ 43 Director Pierre-Olivier Beckers...... 41 Director Michael R. Waller........... 47 Director 63 Michael D. Byars ............. 42 Chief Operating Officer Biographical Information The following is biographical information for each of the executive officers and directors of our company, Food Lion, Hannaford and Kash n' Karry. Executive Officers and Directors of Delhaize America Pierre-Olivier Beckers has been Chairman of our board since April 7, 1999. Mr. Beckers is also a director of Delhaize Le Lion and has been a member of the Executive Committee of Delhaize Le Lion for more than six years. Since January 1, 1999, Mr. Beckers has served as Chief Executive Officer and President of the Executive Committee of Delhaize Le Lion. Mr. Beckers also serves as Chairman, Chief Executive Officer and President of Delhaize The Lion America, a wholly- owned subsidiary of Delhaize Le Lion and as a Manager of Food Lion. From January 1, 1998 to December 31, 1998, Mr. Beckers served as Executive Vice President of the Executive Committee of Delhaize Le Lion. He has been a manager of Delhaize Le Lion since 1986. Mr. Beckers was first elected as a director of our company in 1992. Hugh G. Farrington is the Vice-Chairman of our company's board of directors, and has held that position since July 31, 2000, the effective date of our acquisition of Hannaford Bros. Mr. Farrington was elected President of Hannaford Bros. in 1984 and designated Chief Executive Officer of Hannaford Bros. in 1992, positions which he held until September 2001. He held the position of Chief Operating Officer of Hannaford Bros. from 1984 to 1992. He was Executive Vice President of Hannaford Bros. from 1981 until his election as President of Hannaford Bros. He has been employed with Hannaford Bros. in various operating, supervisory and executive capacities since 1968 and is currently a member of Hannaford Bros.' board of directors. Mr. Farrington is also a Manager of Food Lion and a member of Kash n' Karry's board of directors. R. William McCanless has served as the President and Chief Executive Officer of our company since April 7, 1999. On January 1, 2000, Mr. McCanless was appointed to the Executive Committee of Delhaize Le Lion. Mr. McCanless joined our company in 1989 and served as Senior Vice President of Administration and Chief Administrative Officer from 1995 to April 7, 1999, and Vice President of Legal Affairs from 1993 to 1995. Mr. McCanless also served as Secretary from 1994 to April 7, 1999. Mr. McCanless was appointed to our board of directors on April 7, 1999. Mr. McCanless is also Chief Executive Officer and a Manager of Food Lion and a member of the board of directors of Hannaford and Kash n' Karry. Laura C. Kendall joined our company in 1997 as Chief Financial Officer and Vice President of Finance and was named Executive Vice President of Finance and Chief Financial Officer of Food Lion in 2000. In these positions, Ms. Kendall is responsible for the administration of our company's finance, accounting, audit and information technology departments. Before coming to our company, she served as chief financial officer at F & M Distributors, a discount health and beauty aids retailer in Michigan. Ms. Kendall is a certified public accountant. Michael R. Waller was named Executive Vice President, General Counsel and Secretary of our company in July 2000. Mr. Waller is also a member of Kash n' Karry's board of directors. Prior to joining our company, Mr. Waller served as Managing Partner in the Moscow and London offices of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 64 Richard A. James was named Treasurer of our company in September 1999 and has served as Director of Finance and Treasurer of Food Lion since 1997. Mr. James joined our company as a financial analyst in 1993. Executive Officers and Managers of Food Lion, LLC Pierre-Olivier Beckers - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Hugh G. Farrington - see biography above under "Executive Officers and Directors of Delhaize America, Inc." R. William McCanless - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Richard A. Anicetti was named President of Food Lion in September 2001, and Chief Operating Officer of Food Lion in August 2000. From August 2000 through September 2001, Mr. Anicetti also served as Executive Vice President of Food Lion. Prior to joining Food Lion, Mr. Anicetti served as Executive Vice President of Hannaford Bros. for seven years. Laura C. Kendall - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Keith M. Gehl has served as Executive Vice President, Business Strategy and Store Development of Food Lion since January 2000. Mr. Gehl joined our company as Director of Internal Audit in 1989. He became Director of Store Operations for Food Lion's Northern Division in 1996, and was named Vice-President of Real Estate before assuming his current position. C. David Morgan became Senior Vice President, Retail Operations of Food Lion in January 2000. He joined our company in 1990 as an area supervisor and served most recently as Vice President of Operations for Food Lion's Southern Division, a position he held from December 1997 to December 1999. Margaret M. Ham is Senior Vice President, Dry Merchandising of Food Lion. Prior to joining Food Lion, Ms. Ham was employed by Hannaford Bros. in various retail management capacities since 1988. Elwyn G. Murray, III has served as Senior Vice President, Procurement, Distribution and Quality Assurance of Food Lion, since January 21, 2001. Mr. Murray is responsible for overseeing all of the buying functions for Food Lion and Kash n' Karry stores. Mr. Murray joined our company in 1989 and served as Vice President of Marketing and Director of Category Management from 1995 to 1999 and Vice President of Procurement from 1999 to 2001 Robert J. Brunory has served as is a Senior Vice President, Fresh Merchandising of Food Lion since December 19, 1999. He previously served as Vice President of Category Management, a position he held since 1994. 65 Executive Officers and Directors of Hannaford Bros. Hugh G. Farrington - see biography above under "Executive Officers and Directors of Delhaize America, Inc." R. William McCanless - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Ronald C. Hodge was elected Chief Executive Officer of Hannaford Bros. in September 2001 and President of Hannaford Bros. in December 2000. From December 2000 through September 2001, Mr. Hodge also served as Chief Operating Officer of Hannaford Bros. Mr. Hodge has been employed by Hannaford Bros. in various retail management capacities since 1980. Mr. Hodge is also a director of Hannaford Bros. Paul A. Fritzson was elected Executive Vice President and Chief Financial Officer of Hannaford Bros. in June 1999. Mr. Fritzson had previously served in various staff, merchandising and retail operations capacities for Hannaford Bros. since 1978. Michael J. Strout was elected Executive Vice President-Human Resources and Information Technology of Hannaford Bros. in June 1999. From 1985 to 1990, Mr. Strout was employed by Hannaford Bros. in various human resources management positions. Executive Officers and Directors of Kash n' Karry Food Stores Hugh G. Farrington - see biography above under "Executive Officers and Directors of Delhaize America, Inc." R. William McCanless - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Michael R. Waller - see biography above under "Executive Officers and Directors of Delhaize America, Inc." Michael D. Byars has served as Chief Operating Officer of Kash n' Karry since September 1997. Previously, Mr. Byars served as Director of Merchandising of Food Lion's Central Division for meat operations from 1995 to 1997. Our Board of Directors Article 3, Section 2 of our bylaws provides that the number of directors comprising our board of directors will be established from time to time by our shareholders or board of directors. Our board of directors reduced the number of directors from 10 to three following the consummation of the Delhaize Le Lion share exchange. Committees Our bylaws provide that our board of directors may create, by the affirmative vote of at least a majority of the directors then in office, one or more committees of the board of directors. Our board of directors currently does not have any committees. 66 Compensation Our directors currently do not receive any compensation. Executive Compensation The following table sets forth information concerning the annual and long- term compensation earned by our President and Chief Executive Officer, each of the four other most highly compensated executive officers of our company and our wholly-owned subsidiaries Food Lion, Hannaford and Kash n' Karry during fiscal 2000 and one additional individual who was among our most highly compensated executive officers, but was not serving as an executive officer of our company at the end of fiscal 2000, for services rendered to our company in all capacities for fiscal 2000, 1999 and 1998. We refer to these six individuals collectively in this prospectus as the named executive officers. SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards Payouts Securities Other Annual Restricted Underlying Name and Principal Fiscal Compensation Stock Options / LTIP All Other Position Year Salary Bonus (1) (2) Awards (3) SARs(#)(4) Payouts Compensation (5) ------------------------------------------------------------------------------------------------------------------------------------ R. William McCanless 2000 $694,186 $300,814 $12,202 $429,250 99,650/0 -- $ 94,195 President, Chief 1999 616,324 237,260 9,888 417,308 267,745/0 -- 119,507 Executive Officer and 1998 425,132 166,845 7,239 151,195 24,710/0 -- 85,586 Director of Delhaize America, Inc. Laura C. Kendall 2000 349,138 100,862 14,214 160,395 37,230/0 -- 42,675 Chief Financial Officer 1999 322,388 77,612 8,003 136,684 22,187/0 -- 57,963 and Vice President of 1998 261,045 50,649 7,734 78,913 12,897/0 -- -- Finance of Delhaize America, Inc. Hugh G. Farrington 2000 285,817 127,268 4,700 -- 464,358/0 -- 54,364 Vice-Chairman of Board of 1999 -- -- -- -- -- -- -- Directors of Delhaize 1998 -- -- -- -- -- -- -- America, Inc. Keith M. Gehl 2000 260,676 70,442 7,244 79,730 18,510/0 -- 30,505 Executive Vice President, 1999 193,433 45,567 5,220 51,260 8,320/0 -- 34,836 Business Strategy and 1998 158,209 38,806 4,821 22,529 3,678/0 -- 27,424 Store Development of Food Lion Robert J. Brunory 2000 247,888 71,612 7,570 87,550 20,335/0 -- 30,377 Senior Vice President, 1999 232,120 55,880 6,171 82,011 13,312/0 -- 42,967 Fresh Merchandising of 1998 221,494 48,508 5,739 51,206 8,368/0 -- 6,175 Food Lion -- Joseph C. Hall, Jr. (6) 2000 370,990 134,357 10,485 286,960 66,620/0 -- 171,603 Former President of 1999 494,519 190,481 9,035 262,052 42,541/0 -- 102,617 Food Lion 1998 446,389 175,187 7,705 158,765 25,945/0 -- 94,063 ------------------------------------------------------------------------------------------------------------------------------------
________ (1) These amounts were awarded under the Key Executive Annual Incentive Bonus Plan or the Incentive Bonus Plan, and are shown for the year earned. (2) Includes amounts reimbursed for medical expenses, amounts deemed compensation under our Low Interest Loan Plan, amounts deemed compensation in connection with an automobile that we furnish to each of the 67 named executive officers, amounts deemed compensation in connection with life insurance policies for the named executive officers, and the value of certain other personal benefits. (3) The dollar values of the restricted stock awards shown in this column are based on the closing market price of our Class A Common Stock on the date of grant multiplied by the number of shares awarded. The number and value of the aggregate restricted stock holdings for each of the named executive officers at the end of the last completed fiscal year (December 30, 2000), representing shares of restricted stock that had been granted under our 1996 Stock Option Plan and our 2000 Stock Option Plan, are as follows: for Mr. McCanless, 46,090 shares valued at $797,052; for Ms. Kendall, 17,464 shares valued at $308,895; Mr. Farrington, 0 shares; for Mr. Gehl, 7,085 shares valued at $124,210; for Mr. Brunory, 10,213 shares valued at $175,332;and for Mr. Hall, 0 shares. The value of these shares, which were granted in 1996, 1997, 1998, 1999 and 2000 is based on the closing stock price of our Class A Common Stock on December 29, 2000, the last trading day in fiscal 2000. The shares of restricted stock were granted on May 7, 1998, April 30, 1999 and May 3, 2000 in the following amounts: to Mr. McCanless, 4,993 shares in 1998, 13,571 shares in 1999 and 25,250 shares in 2000; to Ms. Kendall, 2,606 shares in 1998, 4,445 shares in 1999 and 9,435 shares in 2000; to Mr. Farrington, 0 shares; to Mr. Gehl, 744 shares in 1998, 1,667 shares in 1999 and 4,690 shares in 2000; to Mr. Brunory, 1,691 shares in 1998, 2,667 shares in 1999 and 5,150 shares in 2000; and to Mr. Hall, 5,243 shares in 1998, 8,522 shares in 1999 and 16,880 shares in 2000. One-fourth of the shares of restricted stock granted in 1998 vested on May 7, 2000, and one-fourth will vest on each of on May 7, 2001, May 7, 2002 and May 7, 2003. One-fourth of the shares of restricted stock granted in 1999 vested on April 30, 2001 and one-fourth will vest on each of April 30, 2002, April 30, 2003, and April 30, 2004. The shares of restricted stock granted in 2000 will vest one-fourth on each of May 3, 2002, May 3, 2003, May 3, 2004 and May 3, 2005. No dividends will be paid on the restricted stock during the period in which the shares are subject to restrictions under our 1996 Stock Option Plan and our 2000 Stock Option Plan. (4) Upon completion of the Delhaize Le Lion share exchange, each option outstanding immediately prior to the Delhaize Le Lion share exchange, whether vested or unvested, was converted into an option to purchase the number of Delhaize Group ADSs, rounded up to the nearest whole share, equal to the number of our shares of Class A common stock subject to the option, multiplied by 0.40. With some exceptions, the converted options will be subject to substantially the same terms and conditions as were applicable to the converted option prior to the effective time of the share exchange. (5) Includes $17,000 that we contributed on behalf of Mr. McCanless, Ms. Kendall, Mr. Gehl and Mr. Brunory under our non-contributory qualified Profit Sharing Plan during 2000. Amounts set forth in this column also include payments pursuant to our Profit Sharing Restoration Plan on behalf of the named executive officers in lieu of additional contributions that would have been made under the Profit Sharing Plan but for certain limitations on such contributions in the Internal Revenue Code. These payments were, for Mr. McCanless, $60,625 in 1998, $93,475 in 1999 and $76,150 in 2000; for Ms. Kendall, $0 in 1998, $33,963 in 1999 and $25,675 in 2000; for Mr. Gehl, $3,423 in 1998, $10,836 in 1999 and $13,505 in 2000; for Mr. Brunory, $14,989 in 1998, $18,968 in 1999 and $13,377 in 2000; and for Mr. Hall, $67,985 in 1998, $76,456 in 1999 and $0 in 2000. On May 4, 1995, our board adopted our Profit Sharing Restoration Plan, pursuant to which excess profit sharing payments are credited to an account on behalf of each participant. Amounts set forth in this column also include, for Messrs. McCanless and Hall, the economic value of premiums directly paid by our company to maintain split dollar life insurance policies on behalf of these executives. We have secured split dollar life insurance policies for Messrs. McCanless and Hall in the face amount of three and one-half times such executive's base salary, if death occurs prior to retirement, and two times base salary if death occurs after retirement. The life insurance policies are assigned to us as security for the premiums paid by us and, upon the death of the executive (or earlier termination of the policies), we are entitled to receive directly from the insurance carrier an amount equal to the sums advanced. The amount set forth in this column for Mr. Hall also includes $170,455 that Mr. Hall received in 2000 pursuant to his retirement agreement. For Mr. Farrington, amounts set forth in this column include $14,135 contributed to the Hannaford Cash Balance Plan, $25,689 contributed to the Hannaford Bros. Co. Supplemental Executive Retirement Plan, and $14,540 contributed to the Hannaford Nonqualified Savings and Investment Plan (including $3,347 of interest credited to such plan). (6) Effective August 31, 2000, Joseph C. Hall, Jr. retired as President of Food Lion. Aggregated Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End Option/SAR Values The following table shows information for the named executive officers, concerning: (i) exercises of stock options during fiscal 2000 and (ii) the amount and value of unexercised "in-the-money" options to purchase our Class A Common Stock, as of December 30, 2000. The value of stock options at the end 68 of fiscal 2000 was determined by calculating the spread between the exercise price of these options and the closing price of shares of our Class A Common Stock, as reported by The New York Stock Exchange on December 29, 2000, the last trading day in fiscal 2000.
Value of Unexercised In- Number of Securities the-Money Underlying Unexercised Options/SARs at Fiscal Shares Options/SARs at Fiscal Year End ($) Acquired on Value Realized Year-End (#) Exercisable/ Name Exercise (#) ($) Exercisable/Unexercisable Unexercisable ---------------------------- -------------- --------------- --------------------------- ------------------------- R. William McCanless........ 1,167 438 0/99,650 0/68,509 Laura C. Kendall............ -- -- 0/37,230 0/25,596 Hugh G. Farrington.......... -- -- 471,748/0 1,434,634/0 Keith M. Gehl............... -- -- 0/18,510 0/12,726 Robert J. Brunory........... -- -- 0/20,335 0/13,980 Joseph C. Hall, Jr.......... 1,667 208 0/0 0/0 ------------------------------------------------------------------------------------------------------------------------------
Option/SAR Grants In Last Fiscal Year The following table sets forth the number of shares of our Class A Common Stock for which stock options were granted to each of the named executive officers who received options during fiscal 2000.
Potential Realizable Value at Assumed Annual Rates of Individual Grants Stock Price Appreciation for Option Term (4) ------------------------------------------------------------------------------------------------------------------------------------ (A) (B) (C) (D) (E) (F) (G) Number of Percent of Total Securities Options/ SARs Underlying Granted to Exercise Options/ SARs Employees in Price Expiration Name Granted (#) Fiscal Year ($/share) Date 5% 10% ----------------------------------------------------------------------------------------------- ----------------------------------- R. William McCanless 99,650 4.33 (1) $17.00 5/3/10 $1,065,748 $2,701,027 Laura C. Kendall 37,230 1.62 (1) 17.00 5/3/10 398,172 1,009,127 Hugh G. Farrington 10,075 .44 (2) 14.65 5/14/02 46,682 65,517 23,746 1.03 (2) 14.65 5/19/03 133,242 205,369 6,821 .30 (2) 14.65 5/14/02 31,605 44,356 50,759 2.21 (2) 14.65 5/24/05 390,989 689,212 47,775 2.08 (2) 14.65 5/14/06 419,901 779,686 57,669 2.51 (2) 14.65 5/12/07 574,067 1,118,730 6,821 .30 (2) 14.65 5/20/08 76,480 156,081 10,144 .44 (2) 14.65 5/13/01 37,662 46,408 87,363 3.80 (2) 14.65 5/19/09 1,092,201 2,326,028 6,821 .30 (2) 14.65 5/19/09 85,275 181,608 67,743 2.95 (2) 14.65 5/20/08 759,560 1,550,122 6,821 .30 (2) 14.65 5/12/07 67,900 132,322 13,647 .59 (2) 14.65 5/14/06 119,945 222,718
69 6,821 .30 (2) 14.65 5/24/05 52,541 92,616 6,821 .30 (2) 14.65 5/13/01 25,324 31,205 47,690 2.07 (2) 14.65 5/19/04 315,908 523,562 6,821 .30 (2) 14.65 5/19/04 45,184 74,884 Keith M. Gehl 18,510 .81 (1) 17.00 5/3/10 197,962 501,716 Robert J. Brunory 20,335 .88 (2) 17.00 5/3/10 217,481 551,183 Joseph C. Hall, Jr. 66,620 2.90 (1) 17.00 5/3/10 712,495 1,805,744
_____ (1) Options for the named executive officers have been awarded pursuant to plans approved by our stockholders of either: (i) our company or (ii) Hannaford Bros., and assumed by our company as of the date we acquired Hannaford Bros. The terms of these options are governed by the respective plans and the recipient's option agreement. Upon completion of the Delhaize Le Lion share exchange, each of these options, whether vested or unvested, was converted into an option to purchase the number of Delhaize Group ADSs, rounded up to the nearest whole share, equal to the number of our shares of Class A common stock subject to the option, multiplied by 0.40. With some exceptions, the converted options are subject to substantially the same terms and conditions as were applicable to the converted option prior to the effective time of the Delhaize Le Lion share exchange. (2) One third of these options vested and became exercisable on May 3, 2001. The remaining one third of the options will vest on May 3, 2002 and May 3, 2003. (3) Options were granted by Hannaford Bros. as reload options prior to our acquisition of Hannaford Bros. on July 31, 2000. All shares were exercisable as of the date of grant. (4) As required by the rules of the Securities and Exchange Commission, potential net gain from the exercise of stock options and SARs is based on the assumed annual rates of stock appreciation of 5% and 10% over the 10 year term of each option and SAR. Any actual net gains will be dependent on the future performance of our common stock and general market conditions. There is no assurance that the assumed rates of stock price appreciation utilized in these calculations will be achieved. In order for these options and SARs to have value for the named executive officers, the stock price must increase above the exercise price. Increases in the stock price will benefit all of our shareholders commensurately. Employment Plans And Agreements Employment Agreement with R. William McCanless Effective May 1, 2001, R. William McCanless entered into an employment agreement with us providing for his employment as President and Chief Executive Officer of our company. The agreement also provides that Mr. McCanless will be a member of our board of directors and a member of the Officer of Chief Executive of Delhaize Le Lion. This agreement currently expires on May 1, 2006, but extends for additional one year terms on May 1 of each year that the agreement is in effect, unless we or Mr. McCanless gives notice not less than 180 days prior to May 1. Under the agreement, we are to pay Mr. McCanless a base salary of not less than $753,323 per year and the agreement authorizes our board of directors to increase this amount from time to time. Mr. McCanless is also eligible to receive a bonus of no less than 45% of his base salary in any year at the discretion of our board of directors. Mr. McCanless' employment agreement also entitles him to participate in other compensation and benefit plans of our company and requires us to maintain split dollar life insurance for Mr. McCanless in the face amount of three and one-half times his base salary if his death occurs prior to retirement (subject to certain conditions), and two times his last base salary if death occurs after retirement. Mr. McCanless may elect to defer some or all of his bonus compensation and up to 50% of his base salary. Mr. McCanless' employment agreement also grants him options to purchase 80,000 ADRs of Delhaize Le Lion, which we refer to as jump start options. The jump start options expire on April 7, 2009. If the closing price per ADR of Delhaize Le Lion on The New York Stock Exchange is $114.48 or greater 70 for 45 consecutive trading days ending on or prior to April 7, 2002 and Mr. McCanless is still our President and Chief Executive Officer on such date, then the jump start options will vest on such date and remain exercisable until April 7, 2009. Otherwise, the jump start options will automatically vest on April 7, 2006, provided that Mr. McCanless is our President and Chief Executive Officer on that date. The exercise price of the jump start options is $50.88 per ADR. We may terminate Mr. McCanless' employment for cause. If we terminate Mr. McCanless' employment for cause, or Mr. McCanless' employment terminates due to death, we will no longer be required to make payments to Mr. McCanless or his estate under his employment agreement, except for compensation earned prior to termination and pursuant to plans, arrangements or agreements providing for payments after termination of employment, including, in the case of death, payments pursuant to a salary continuation agreement with us. See the section below entitled "--Salary Continuation Agreements." We or Mr. McCanless may terminate his employment upon Mr. McCanless' disability (as specified in his employment agreement), in which case, we are required to pay Mr. McCanless a lump sum payment equal to 50% of the present value of his future base salary 8payable during the longer of the remainder of the term of employment under his employment agreement and a period of two years. Mr. McCanless may terminate his employment without liability to us for good reason. If Mr. McCanless terminates his employment for good reason or if we terminate his employment without cause or by reason other than death or disability, we are required to pay Mr. McCanless the full amount of his base salary and other compensation earned prior to the Date of Termination (as defined in his employment agreement), including any pro rata bonus amounts owed to him. In addition, we would be required to pay Mr. McCanless an amount equal to the product of his current annual base salary and his highest annual bonus in the three years prior to the Date of Termination, multiplied by five. Mr. McCanless would also entitled to receive benefits under certain of our benefit plans for five years following the Date of Termination, and to receive the greater of the benefits to which he would be entitled under our Supplemental Executive Plan, or SERP, and a lifetime annual benefit beginning at age 65 equal to 60% of his final average base salary and bonus compensation, net of offsets under the SERP. Finally, for five years after the Date of Termination, Mr. McCanless would be entitled to an annual amount equal to amounts payable to him under certain of our benefit plans. Upon a change in control, or if Mr. McCanless' employment terminates other than for cause, all of the rights that we granted to Mr. McCanless to own or acquire our stock (including stock options and restricted stock granted under our 1996 Stock Option Plan or other plans) will automatically vest upon the date of such change in control or Date of Termination, as the case may be. If the jump start options have not vested by April 7, 2002, they will not vest for any reason, including a change in control, until April 7, 2006. Under the terms of Mr. McCanless' employment agreement, a change of control includes: . an acquisition by a third-party of 25% or more of the common stock or voting securities of Delhaize Le Lion; . a change in the majority of directors of Delhaize Le Lion from the composition of Delhaize Le Lion's board of directors on May 1, 2001; . a liquidation, dissolution, merger or sale of all or substantially all of Delhaize Le Lion's assets, other than a business combination in which all or substantially all of Delhaize Le Lion's stockholders receive 60% or more of the voting securities of the successor entity, where at least a majority of the successor's board of directors are incumbent directors of Delhaize Le Lion and where no person beneficially owns 25% or more of the voting 71 securities of the successor who did not beneficially own such stock immediately prior to the business combination; . shareholder approval of a complete liquidation or dissolution of Delhaize Group; . a direct or indirect sale or transfer of the voting securities of our company following which one or more persons (other than Delhaize Group) beneficially owns 50% or more of the voting power of our company; or . a sale or transfer of all or substantially all of our company's assets or the liquidation or dissolution of our company. Mr. McCanless' employment agreement prohibits him, without the written consent of our board of directors, from engaging in any retail or wholesale grocery business which is directly competitive with our business or the business of any of our affiliates in any geographic area that we or our affiliates operate on the Date of Termination. This prohibition applies to Mr. McCanless during the term of his employment agreement and for a period of two years after his termination. Mr. McCanless' employment agreement also places restrictions, for a period of two years after the termination of Mr. McCanless' employment, on the recruitment or solicitation of our employees or independent contractors for the purpose of being employed by Mr. McCanless or an entity on behalf of which Mr. McCanless is acting as agent, representative or employee. If, however, Mr. McCanless' employment is terminated prior to the first anniversary of the date on which a change in control occurs, the foregoing restrictions on competition and solicitation by Mr. McCanless shall not apply. Employment Agreements of Messrs. Farrington, Brunory and Gehl and Ms. Kendall We are party to employment agreements with each of the named executive officers. Messrs. Brunory and Gehl are each a party to an employment agreement that we assigned to Food Lion, and references to our company below refer to Food Lion in the case of Messrs. Brunory and Gehl. The employment agreement with Mr. Brunory was entered into on January 20, 2000, the employment agreement with Mr. Gehl was entered into on January 10, 2000, the employment agreement with Ms. Kendall was entered into on March 14, 2000 and the employment agreement with Mr. Farrington was entered into on July 31, 2000. The employment agreement with Mr. Farrington has a five-year term and the employment agreements with Messrs. Brunory and Gehl and Ms. Kendall have three-year terms. Each employment agreement will automatically be extended for additional periods of one year unless the executive or our company gives the other party at least 90 days' written notice (180 days' written notice, in the case of Mr. Farrington) prior to the expiration of the term. The employment agreement with Mr. Farrington provides for his employment as Vice Chairman of our company and Chief Executive Officer of Hannaford Bros., and for payment of a base salary of not less than $668,476 per year. The employment agreement with Ms. Kendall provides for her employment as Vice President of Finance and Chief Financial Officer of our company, and for payment to Ms. Kendall of a base salary of not less than $336,206 per year. The employment agreement with Mr. Brunory provides for his employment as Senior Vice President of Category Management/Procurement of Food Lion, and for the payment of a base salary of not less than $238,708 per year. The employment agreement with Mr. Gehl provides for his employment as Vice President of Real Estate/Store Development of Food Lion, and for payment of a base salary of not less than $217,313 per year. The employment agreements authorize our board of directors to increase such minimum amounts from time to time. The employment agreements also entitle the executives to participate in other compensation and benefit plans offered by our company. 72 We may terminate an executive's employment for cause. If we terminate an executive's employment for cause, or the executive's employment terminates due to death, then we will no longer be required to make payments to the executive or his or her estate under his or her employment agreement, except for compensation earned prior to termination and pursuant to plans, arrangements or agreements providing for payments after termination of employment, including, in the case of the executive's death, payments pursuant to a salary continuation agreement with us. We may terminate an executive's employment upon an executive's disability, in which case, we are required to pay the executive a lump sum payment equal to 50% of the present value of the executive's future base salary for the longer of the remainder of the term of employment under his or her employment agreement and a period of two years, in the case of Mr. Farrington, or one year, in the case of Messrs. Brunory and Gehl and Ms. Kendall. The executive may terminate his or her employment without liability to us for good reason. If Messrs. Brunory or Gehl or Ms. Kendall terminates his or her employment for good reason or if we terminate his or her employment (except for cause or by reason of the executive's death or disability), then we are required to pay the executive the full amount of the executive's base salary and other compensation earned prior to the Date of Termination (as defined in the employment agreements). In addition, we are required to pay the executive an amount equal to the product of the executive's current monthly base salary, in the case of Messrs. Brunory and Gehl and Ms. Kendall, or yearly base salary, in the case of Mr. Farrington, multiplied by the greater of: (i) 12 months, in the case of Messrs. Brunory and Gehl and Ms. Kendall, and three years, in the case of Mr. Farrington or (ii) the number of full months, in the case of Messrs. Brunory and Gehl and Ms. Kendall, and full years, in the case of Mr. Farrington, remaining in the term of the executive's employment agreement. If Messrs. Farrington, Brunory or Gehl or Ms. Kendall terminates his or her employment for good reason prior to a change in control or if we terminate his or her employment without cause within six months prior to a change in control, then we are required to maintain in full force and effect for the continued benefit of the executive and the executive's eligible dependents for one year, in the case of Messrs. Brunory and Gehl and Ms. Kendall, and three years, in the case of Mr. Farrington, after the Date of Termination (or for the number of years remaining in the term of the executive's employment agreement, whichever is greater), the employee fringe benefit plans and programs relating to medical, dental, health and life insurance in which the executive was entitled to participate immediately prior to the Date of Termination (but excluding our Annual Incentive Bonus Plan (Key Executive Annual Incentive Bonus Plan, in the case of Mr. Farrington)), Profit Sharing Plan, Profit Sharing Restoration Plan and any other bonus, retirement or similar compensation plans), if, in the case of Messrs. Brunory and Gehl and Ms. Kendall, the executive's continued participation is permitted under the general terms and provisions of such plans and programs and applicable law; provided, however, that in the case of Mr. Farrington, if participation in any such plan or program is not permitted under the terms of such plan or program, we are required to provide Mr. Farrington (and his eligible dependents) with benefits substantially similar to those which are being provided immediately prior to his termination of employment. If we terminate the employment of Messrs. Farrington, Brunory or Gehl or Ms. Kendall without cause (and, in the case of Messrs. Brunory and Gehl and Ms. Kendall, in contemplation of a change in control) within six months prior to such change in control or without cause, or with good reason within one year, in the case of Messrs. Brunory and Gehl and Ms. Kendall, and three years, in the case of Mr. Farrington, following a change in control, then we are required to pay the executive the compensation and benefits set forth in the two paragraphs above, and in addition, for one year following the Date of Termination (or for the number of years remaining in the term of the executive's employment agreement, whichever is greater). The executive shall be paid an annual amount equal to the amounts, if any, which would have been payable to the executive under: (i) in the case of Messrs. Brunory and Gehl and Ms. Kendall, the Annual Incentive Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan (or such other plans in which the executive was entitled to participate as of the Date of Termination) assuming the executive had remained employed for such one year (or greater) period and received an 73 annual salary at the rate in effect on the executive's Date of Termination and (ii) in the case of Mr. Farrington, our company's Key Executive Annual Incentive Bonus Plan, and any plan of Hannaford Bros. in which Mr. Farrington was entitled to participate immediately prior to the Date of Termination (or such other plans in which Mr. Farrington was entitled to participate as of the Date of Termination) assuming Mr. Farrington had remained employed for such three year (or greater) period and received an annual salary at the rate in effect on his Date of Termination. The employment agreements define a change in control of our company as a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; provided that a change in control shall be deemed to have occurred if: (i) an acquisition (other than directly from us) by a Person (as set forth in Sections 3(a)(2) and 13(d)(3) of the Exchange Act) excluding our company or an employee benefit plan of our company or an entity controlled by our shareholders, results in the aggregate number of shares of our voting securities beneficially owned by any other Person to exceed the number of shares of our voting securities beneficially owned, in the aggregate, by Delhaize Le Lion and Delhaize The Lion America, (ii) at any time during the term of the employment agreement there is a change in the composition of our board of directors resulting in a majority of our directors who are in office on the date of the employment agreement, which are referred to in this section as the incumbent company directors, no longer constituting a majority of the directors of our company; provided that, in making such determination, persons who are elected to serve as directors of our company and who are approved by at least 70% (100%, in the case of Mr. Farrington) of the incumbent company directors in office on the date of such election (other than in connection with an actual or threatened proxy contest) shall be treated as incumbent company directors, (iii) consummation of a business combination, other than a business combination in which all or substantially all of the beneficial holders of our voting securities (or the shareholders, in the case of Mr. Farrington) receive or retain (receive, in the case of Mr. Farrington) 50% or more of our voting securities or the voting securities of the entity resulting from the business combination, at least a majority of the board of directors of the resulting company were incumbent company directors, and after which no person or entity owns 20% or more of the voting securities of the resulting company, who did not beneficially own such stock immediately before the business combination, (iv) occurrence of any of the events described in (ii) or (iii) above to Delhaize Le Lion or (v) the acquisition by any Person of more than 30% of the stock (voting securities, in the case of Mr. Farrington) of Delhaize Le Lion. Notwithstanding any other provision of this paragraph, for purposes of the definition of change in control, a change in control of Delhaize Le Lion shall not constitute a change in control of our company unless it involves an event contemplated by (iv) or (v) above. With respect to (iii) above as it applies to Delhaize Le Lion under (iv) above, the beneficial ownership threshold shall be 30% rather than 20%. Upon a change in control, or if the executive's employment terminates other than for cause, all of the rights that we granted to the executive to own or acquire our stock (including stock options and restricted stock granted under our 1996 Stock Option Plan or other plans) will automatically vest upon the date of such change in control or date of termination; provided however, that such rights shall not vest (assuming no occurrence of a change in control) if the executive's employment is terminated for his or her failure (in the case of Mr. Farrington, other than by reason of incapacity due to physical or mental illness) to adequately perform his or her duties under his or her employment agreement, as determined by an affirmative vote of at least seventy percent of our board of directors, and further, in the case of Mr. Farrington, provided that Mr. Farrington is given written notice of such failure and is unable (other than by reason of incapacity due to physical or mental illness) or unwilling to correct such failure within thirty days after receipt of written notice of such failure. The employment agreements of Messrs. Brunory and Gehl and Ms. Kendall prohibit the executives, without the written consent of our board of directors, from owning, operating, controlling or being employed as an officer, director, manager or consultant, or as an employee with management or 74 executive level duties or responsibilities, in any case, for or by any business engaged in, or any entity whose business or whose direct or indirect parent entity's or direct or indirect subsidiary entity's business is, any retail or wholesale grocery or supermarket business within 10 miles of any store operated by us or any of our subsidiaries on the date on which the executive's employment with us ends; provided, however, that this restriction shall not apply if the executive works, consults or accepts employment with a business that does not directly compete with us or any of our subsidiaries. Mr. Farrington's employment agreement prohibits Mr. Farrington, without the written consent of our board of directors, from engaging in any retail or wholesale grocery business which is directly competitive with the business of our company or any of our affiliates in any geographic area in which we or any of our affiliates operate on the date of termination. These prohibitions apply to an executive during the term of his or her employment agreement and for a period of two years after his or her termination. The employment agreements also place restrictions, for a period of two years after termination of an executive's employment, on the recruitment or solicitation of our employees or independent contractors (or the employees or independent contractors of any of our affiliates, in the case of Mr. Farrington) for the purpose of being employed by such executive or an entity on behalf of which such executive is acting as agent, representative or employee. If, however, an executive's employment is terminated prior to the first anniversary of the date on which a change in control occurs, the foregoing restrictions on competition and solicitation by such executive shall not apply. Employment Agreement with Joseph C. Hall, Jr. Joseph C. Hall, Jr., the former President and Chief Operating Officer of Food Lion, retired on August 31, 2000. Mr. Hall's terms of employment, including the level of his base salary, for the period prior to his retirement on August 31, 2000, were set forth in a March 13, 2000 Employment Agreement between Mr. Hall and our company. Mr. Hall's employment agreement provided that Mr. Hall's annual base salary would be $521,390. This amount, however, would be reviewed by our board of directors from time to time, but in no event would such review result in any reduction in the base salary provided in the Mr. Hall's employment agreement. Mr. Hall's employment agreement further provided that Mr. Hall would be eligible to participate in our annual incentive bonus plan, stock option plans and other compensation plans and that he would be entitled to participate in all health, accident, disability, medical, life and other insurance programs and other benefit and compensation plans that we maintain. Mr. Hall's employment agreement further provided that we would provide Mr. Hall with split dollar life insurance in specified amounts. A retirement agreement dated August 31, 2000 between Mr. Hall and our company, among other things, terminated Mr. Hall's employment agreement. Retirement Agreement with Joseph C. Hall, Jr. On August 31, 2000, Mr. Hall retired as President and Chief Operating Officer of Food Lion. Mr. Hall's retirement agreement provides for Mr. Hall to receive his then current annual salary of $521,390 through August 31, 2003, plus an incentive and wellness bonus for 2000 prorated to his retirement date. Under Mr. Hall's retirement agreement, all vested stock options held by Mr. Hall on his retirement date remain exercisable for three months following his retirement date, and thereafter any of such stock options that remain unexercised shall terminate and cease to be exercisable and all other stock options granted to Mr. Hall that remain unvested on his retirement date remain outstanding, vested on his retirement date and remained exercisable for three months following his retirement date. Additionally, Mr. Hall's retirement agreement provides that Mr. Hall is to remain vested in all restricted stock that had vested as of his retirement date, and all restricted stock awarded to Mr. Hall that had not vested prior to his retirement date shall remain outstanding following his retirement date and vested as of his retirement date. Prior to Mr. Hall's retirement date, we transferred to Mr. Hall title to the vehicle that we provided him during the course of his employment. We will also continue to pay the premiums on and shall maintain in effect the split-dollar life insurance policy currently in effect with respect to Mr. Hall through August 31, 2003. As of August 31, 2003, this insurance policy will be transferred to Mr. Hall, Mr. Hall 75 will be responsible for all premiums under this policy and we will waive our right to receive reimbursement for premiums paid on this policy. Mr. Hall has agreed that he shall not, directly or indirectly, own, manage, operate, control, be employed by, or perform services for three years following his retirement date, for any business located within the continental United States that engages in any retail grocery or supermarket business and for two years following his retirement date, for any business located in the continental United States that engages in any non-retail grocery or supermarket business. In addition, for three years following Mr. Hall's retirement date, Mr. Hall may not solicit the customers, suppliers or employees of our company and our affiliates to terminate their relationship with us or any of our affiliates (or to modify this relationship in a manner that is adverse to our interests or to the interests of our affiliates), or to violate any valid contracts they may have with us or our affiliates. Salary Continuation Agreements We have entered into salary continuation agreements with certain of the named executive officers providing for payments to a named beneficiary in the event of that executive's death prior to attaining the age of 65 while employed by our company. The agreements are intended to encourage participants to continue employment with us. Payments for the first 12 months following death are fixed. If death occurs prior to attaining the age of 55, payments after the first 12 months following death are made through the month the decedent would have attained the age of 65 or for a maximum period of 24 years, whichever is less. If death occurs at or after 55 but prior to attaining the age of 65, payments after the first 12 months following death are made for a period of nine years. Except as provided above, all rights of the participant terminate upon his or her reaching age 65 or on the date he or she retires or, for reasons other than death, ceases to be an active employee of our company. The following table sets forth the amounts payable to the named executive officers at December 30, 2000 pursuant to the arrangements described above:
Monthly Payment Subsequent Monthly Payment ----------------------- ----------------------------------------- Name of Individual First 12 Months 24-Year Period OR 9-Year Period ---------------------------------- ----------------------- ------------------- ------------------ Bill McCanless.................... $40,494 $20,247 $16,198 Laura C. Kendall.................. 20,366 10,183 8,147 Hugh G. Farrington (1)............ -- -- -- Robert J. Brunory................. 14,460 7,230 5,784 Keith M. Gehl..................... 16,610 8,305 6,644 Joseph C. Hall, Jr. (2)........... -- -- -- -----------------------------------------------------------------------------------------------------
___________ (1) Mr. Farrington does not participate in this plan. (2) Effective August 31, 2000, Mr. Hall retired as President and Chief Operating Officer of Food Lion. Based on his retirement, no payments will be made to Mr. Hall under his salary continuation agreement. 76 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On April 25, 2001, our company and Delhaize Le Lion consummated a share exchange whereby Delhaize Le Lion exchanged each outstanding share of our Class A Common Stock and Class B Common Stock not already directly or indirectly held by Delhaize Le Lion for 0.4 Delhaize Le Lion American Depository Receipts, or ADRs, listed on The New York Stock Exchange or, at the option of our shareholders, 0.4 Delhaize Le Lion ordinary shares. The Delhaize Le Lion share exchange was structured to be tax-free to our shareholders for U.S. federal income tax purposes. The Delhaize Le Lion share exchange resulted from an agreement between Delhaize Le Lion and a four-person special committee of independent directors of our company. The Delhaize Le Lion share exchange was unanimously approved by our board of directors and the board of directors of Delhaize Le Lion, unanimously recommended to our board of directors by the special committee of our independent directors, and approved by our shareholders and the shareholders of Delhaize Le Lion. On October 1, 1986, we entered into a 20-year lease for the operation of a 20,000 square foot Food Lion store in Orange Park, Florida. An indirect subsidiary of Delhaize Le Lion owns a one-half interest in Debarry Place Joint Venture, which is involved in the development of the Orange Park, Florida store. The store opened in September 1987. Under the terms of the store's lease, the provisions of which we believe are no more favorable than a lease with a third party lessor, we are expected to make annual payments of $206,500 in fixed rent and $6,249 in common area maintenance fees. In addition, the store's lease provides for an annual payment to the lessor equal to the amount by which 1% of the annual gross receipts of the leased premises exceeds the fixed rent for the lease year. The lease includes an option to extend the lease for up to four five-year periods. We have also entered into a joint venture with Delhaize Le Lion regarding Bel-Thai Supermarket Co., Ltd., or Bel Thai, a supermarket company based in Thailand. On January 18, 2000, we acquired a 51% interest in Bel-Thai through a wholly-owned subsidiary of our company for approximately $3.9 million. Delhaize Le Lion owns the remaining 49% interest in Bel-Thai. Subsequent to our acquisition of an interest in Bel-Thai, we contributed additional capital of approximately $5.6 million to Bel-Thai for operations and acquisitions. Our investment in Bel-Thai was consummated pursuant to arms-length negotiations and was approved by our board of directors (by a vote of the directors unaffiliated with Delhaize Le Lion). In addition, we obtained a fairness opinion from Salomon Smith Barney, an investment banking firm, as to the fairness of the transaction to our company. On August 31, 2001, our company, through its wholly-owned subsidiary Delhaize Insurance Company, entered into a reinsurance arrangement with Pride Reinsurance, Ltd., a wholly-owned subsidiary of Delhaize Le Lion. Pursuant to this arrangement, Pride Reinsurance Ltd. reinsures certain self-insured risks of our company related to general liability, workers' compensation and vehicle accident claims. We believe that the terms and conditions of this reinsurance coverage, including the amount of the premium payment, are substantially similar to the terms and conditions that we could receive from a third-party. Although we expect to pay approximately $119 million in premiums in fiscal 2001 in connection with this reinsurance arrangement due to the transfer of outstanding claims previously filed, premiums are expected to be approximately $42 million in future fiscal years. 77 DESCRIPTION OF THE EXCHANGE SECURITIES General The old securities were issued and the exchange securities will be issued under an indenture, dated as of April 15, 2001, as supplemented by a first supplemental indenture dated April 19, 2001, between us, Food Lion, LLC and The Bank of New York, as debt trustee. On September 6, 2001 our company, Food Lion, The Bank of New York, as trustee, Hannaford Bros. and Kash n' Karry entered into a second supplemental indenture in order for Hannaford Bros. and Kash n' Karry to become guarantors of the securities. The terms of the old securities and the exchange securities are identical, except that the exchange securities are not subject to restrictions on transfer. The indenture and supplemental indentures are subject to, and governed by, the Trust Indenture Act of 1939, as amended. The following discussion summarizes selected provisions of the indenture under which the exchange securities will be issued. Because this is only a summary, it is not complete and does not describe every aspect of the exchange securities and the indenture. Whenever there is a reference to particular sections or defined terms of the indenture, the sections or defined terms are incorporated by reference, and the statement is qualified in its entirety by that reference. Capitalized terms are terms that are defined in the indenture. In this description, we refer to "our company" as Delhaize America, Inc. and not our subsidiaries and we refer to "Delhaize Le Lion" as Etablissements Delhaize Freres et Cie "Le Lion" S.A., and not to any of its subsidiaries. In this description, we refer to the old securities and the exchange securities collectively as the securities. A copy of the form of the indenture is available from us upon request. See the section of this prospectus, "Where You Can Find More Information." You should read the indenture for provisions that may be important to you but which are not included in this summary. General Terms of the Exchange Securities The exchange securities have the following terms: Principal Amount Interest Rate Maturity Date $ 600,000,000 7.375% April 15, 2006 $ 1,100,000,000 8.125% April 15, 2011 $ 900,000,000 9.000% April 15, 2031 The exchange securities are general unsecured and unsubordinated obligations of our company and rank in right of payment on a parity with all of our other unsecured and unsubordinated indebtedness. Because we are a holding company that conducts substantially all of our operations through our subsidiaries, the right of our company and the right of creditors of our company (including holders of the exchange securities) to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise is necessarily subject to the prior claims of creditors of such subsidiary, except to the extent that such subsidiary is a guarantor of our obligations or claims of our company as a creditor of the subsidiary may be recognized. Our wholly-owned subsidiaries, Food Lion, LLC, Hannaford Bros. and Kash n' Karry Food Stores will fully and unconditionally and jointly and severally guarantee the exchange securities as to payments of principal, premium, if any, and interest. See "--The Guarantees." The exchange securities are redeemable in whole or in part at any time at our option. See "--Optional Redemption." The holders of the exchange securities will not be entitled to the benefit of any mandatory redemption or sinking fund. 78 The indenture does not limit the amount of notes, debentures or other evidences of indebtedness that we may issue under the indenture and provides that notes, debentures or other evidences of indebtedness may be issued from time to time in one or more series. We may, without the consent of the holders of the exchange securities, issue additional securities of any series outstanding and thereby increase that principal amount in the future, on the same terms and conditions and with the same CUSIP number as that series of outstanding exchange securities. Interest on the exchange securities will accrue from October 15, 2001. Interest on the exchange securities is payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2002, to the persons in whose names the exchange securities were registered at the close of business on the next preceding April 1 and October 1, respectively. Interest on the exchange securities is computed on the basis of a 360-day year comprised of twelve 30-day months. All amounts resulting from these calculations are rounded to the nearest cent. The trustee, through its corporate trust offices in New York, is acting as our paying agent with respect to the exchange securities. Payments of principal, premium, if any, and interest on the exchange securities are made by us through the paying agent to DTC Any payment otherwise required to be made in respect of exchange securities on a date that is not a Business Day (as defined herein) for the exchange securities may be made on the next succeeding Business Day with the same force and effect as if made on that date. No additional interest shall accrue as a result of a delayed payment. "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in New York City are authorized or required by law to close. The exchange securities will be issued only in fully registered form without coupons in denominations of $1,000 or any whole multiple of $1,000. No service charge will be made for any transfer or exchange of the exchange securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with a transfer or exchange. Each series of exchange securities will be issued in the form of one or more fully registered global securities. Except as described under "--Book-Entry; Delivery and Form"' below, the exchange securities are not issuable in certificated form. Guarantees Our wholly-owned subsidiaries, Food Lion, LLC, Hannaford Bros. and Kash n' Karry Food Stores have fully and unconditionally and jointly and severally guaranteed all payments with respect to the exchange securities at the time of the issuance of the exchange securities. These guarantees of the exchange securities are a general unsecured obligation of each subsidiary and ranks in right of payment equally with all of each subsidiary's respective other unsecured and unsubordinated indebtedness. The indenture provides that in the event that a subsidiary guarantee constitutes or results in a fraudulent transfer or conveyance for purposes of, or is a violation of, any U.S. federal, or applicable U.S. state fraudulent transfer or conveyance or similar law, then the subsidiary guarantor's liability under the guarantee will be reduced to the extent necessary to eliminate such fraudulent transfer or conveyance or violation under the applicable fraudulent transfer or conveyance or similar law. Application of this clause could limit the amount which holders of securities may be entitled to collect under the guarantee. Holders, by their acceptance of the exchange securities, have agreed to such limitations. See "Risk Factors--Risks Related to the Exchange Securities--Fraudulent conveyance laws may result in the subordination or avoidance of the subsidiary guarantees of the exchange securities." 79 Optional Parent Guarantee We and Delhaize Le Lion have explored the advisability of cross- guaranteeing each other's indebtedness for borrowed money and other financial indebtedness and believe that there may be operational and financial benefits to such an arrangement. While we would not implement any cross-guarantees until at least October 2001, which is six months after the consummation of the share exchange between our companies, we may implement the cross-guarantees thereafter, although we can not assure you that we will implement the cross- guarantees or if we do, when. The indenture governing the exchange securities will limit our ability to implement the cross-guarantees if the cross-guarantees would adversely affect our credit ratings. Proposed EU Directive on the Taxation of Savings Income The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of conditions being met, it is proposed that member states of the European Union will be required to provide to the tax authorities of another member state details of payments of interest or other similar income paid by a paying agent resident within its jurisdiction to an individual resident in that other member state, subject to the right of certain member states to opt instead for a withholding system for a transitional period in relation to such payments. This directive, if adopted, may be conditioned on the adoption of equivalent measures in non- European Union countries with significant financial centers (such as the United States) and in dependent or associated territories of certain member states. Pending agreement on the precise text of the directive, it is difficult to say what effect, if any, the adoption of the directive would have on the exchange securities or payments in respect thereof. Payment of Additional Amounts; Redemption for Tax Reasons The following discussion is relevant only in the event that Delhaize Le Lion guarantees the exchange securities and is required under the terms of the guarantee to make payments of principal, premium, if any, and interest on the exchange securities. If, as a result of any change in, or amendment to, the laws (or any regulations or rulings promulgated under the laws) of the jurisdiction in which Delhaize Le Lion or any successor is organized (or any political subdivision or taxing authority in such jurisdiction), or any change in, or amendments to, an official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment is announced or becomes effective on or after the date of this prospectus, Delhaize Le Lion becomes or, based upon a written opinion of independent counsel selected by Delhaize Le Lion, will become obligated to pay additional amounts with respect to the exchange securities of any series as described below, then Delhaize Le Lion may at its option redeem, in whole, but not in part, the exchange securities of the series on which it is obligated to pay additional amounts on not less than 30 days' nor more than 60 days' prior notice to the holders of such exchange securities, at a redemption price equal to 100% of their principal amount (and premium, if any), together with interest accrued but unpaid on those exchange securities to the date fixed for redemption. Delhaize Le Lion will make all payments of principal of and any premium, interest and any other amounts on the exchange securities without withholding or deduction for any present or future taxes, fees, duties, assessments or governmental charges imposed or levied by or on behalf the jurisdiction in which Delhaize Le Lion or any successor is organized or resident for tax purposes (each, a "Relevant Taxing Jurisdiction") or any political subdivision or taxing authority thereof or therein having power to tax, unless such taxes, fees, duties, assessments or governmental charges are required to be withheld or deducted by: 80 . the laws or any related regulations or rulings of a Relevant Taxing Jurisdiction or any political subdivision or taxing authority of a Relevant Taxing Jurisdiction; or . an official position regarding the application, administration, interpretation or enforcement of any such laws, regulations or rulings, including, without limitation, a ruling by a court of competent jurisdiction or by a taxing authority in a Relevant Taxing Jurisdiction or any political subdivision of a Relevant Taxing Jurisdiction. If any withholding or deduction is required in any Relevant Taxing Jurisdiction, Delhaize Le Lion will, subject to the limitations and exceptions described below, pay to the holder of the exchange securities such additional amounts as may be necessary so that every net payment made to the holder after the withholding or deduction will not be less than the amount provided for in the exchange security and the indenture. The foregoing obligation of Delhaize Le Lion to pay additional amounts which are due will not apply to any tax, fee, assessment, duty or governmental charge which is payable: . otherwise by deduction or withholding from payments of principal of, or premium, any, or interest on such exchange securities; . by reason of such holder having, or having held, some personal or business combination with the country in which Delhaize Le Lion is organized and not merely by reason of the fact that payments are, or for the purposes of taxation are deemed to be, from sources in, or secured in, such country; . by reason of a change in law or official practice of any Relevant Taxing Jurisdiction that becomes effective more than 15 days after the Relevant Date (as defined below) for payment of principal of, or premium, if any, or interest on such exchange securities; . by a paying agent from a payment of principal of, premium, if any, or interest on such exchange securities if the payment could have been made by another paying agent without such deduction or withholding; . by reason of such holder's present or former status as a personal holding company, foreign personal holding company, passive foreign investment company or controlled foreign corporation for U.S. tax purposes or a corporation which accumulates earnings to avoid U.S. federal income tax, and not merely by reason of the fact that payments in respect of exchange securities or the guarantee are, or for purposes of taxation are deemed to be, derived from sources in, or are secured in Belgium; . by reason of such holder's past or present status as the actual or constructive owner of 10% or more of the combined voting power of all classes of stock of our company entitled to vote; . by reason of any estate, excise, inheritance, gift, sales, transfer, wealth or personal property tax or any similar assessment or governmental charge; . as a result of such holder's failure to comply with certification, identification or other information reporting requirements or to make a declaration of non-residence or other similar claim for exemption to the relevant tax authority; 81 . pursuant to any European Union directive on the taxation of savings income or any law implementing or complying with, or introduced to conform to any such directive (see "--Proposed EU Directive on the Taxation of Savings Income" above); or . owing to any combination of the above. In addition, Delhaize Le Lion will not be required to pay additional amounts with respect to any payment to any holder of an exchange security who is a fiduciary or partnership other than the sole beneficial owner of such exchange security, to the extent that such payment would be required to be included in income for tax purposes of a beneficiary with respect to such fiduciary or a partner of such partnership or a beneficial owner that would not have been entitled to such additional amounts if it had been the holder of the exchange securities. "Relevant Date" means the date on which the payment of principal of, or premium, if any, or interest on any series of exchange securities becomes due and payable, but, if the full amount of the monies payable on such date has not been received by the relevant paying agent or as it shall have directed on or prior to such date, the "Relevant Date" means the date on which such monies shall have been so received. Optional Redemption All or a portion of the exchange securities of any series may be redeemed at our option at any time or from time to time. The redemption price for the series of exchange securities to be redeemed on any redemption date will be equal to the greater of the following amounts: . 100% of the principal amount of the exchange securities being redeemed on the redemption date; or . the sum of the present values of the remaining scheduled payments of principal and interest on the series of exchange securities being redeemed on that redemption date (not including any portion of any payments of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis at the Treasury Rate (as defined below), plus 30 basis points for the 7.375% exchange notes due 2006, 40 basis points for the 8.125% exchange notes due 2011 and 50 basis points for the 9.000% exchange debentures due 2031 as determined by the Reference Treasury Dealer (as defined below), plus, in each case, accrued and unpaid interest on the series of exchange securities to the redemption date. Notwithstanding the foregoing, installments of interest on exchange securities that are due and payable on interest payment dates falling on or prior to a redemption date will be payable on the interest payment date to the registered holders as of the close of business on the relevant record date according to the exchange securities and the indenture. The redemption price for the exchange securities will be calculated on the basis of a 360-day year consisting of twelve 30-day months. We will mail notice of any redemption at least 30 days but not more than 60 days before the redemption date to each registered holder of the series of exchange securities to be redeemed. Once notice of redemption is mailed, the exchange securities called for redemption will become due and payable on the redemption date at the applicable redemption price, plus accrued and unpaid interest to the redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated on the third Business Day preceding such redemption date, assuming a price for the Comparable Treasury Issue 82 (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the U.S. Treasury security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the series of exchange securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such exchange securities. "Comparable Treasury Price" means, with respect to any redemption date, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, (B) if the trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations or (C) if only one Reference Treasury Dealer Quotation is received, such Reference Treasury Dealer Quotation. "Reference Treasury Dealer" means (A) each of Salomon Smith Barney Inc., Chase Securities Inc. and Deutsche Banc Alex. Brown Inc. (or their respective affiliates which are Primary Treasury Dealers), and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), we will substitute therefor another Primary Treasury Dealer and (B) any other Primary Treasury Dealer(s) selected by us. "Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. (New York City time) on the third Business Day preceding such redemption date. On or before the redemption date, we will deposit with the paying agent money sufficient to pay the redemption price of and accrued interest on the series of exchange securities to be redeemed on that date. If less than all of the exchange securities of any series are to be redeemed, the exchange securities to be redeemed shall be selected by lot by DTC, in the case of exchange securities represented by a global security, or by the trustee by a method the trustee deems to be fair and appropriate in the case of exchange securities that are not represented by a global security. We, Food Lion, LLC, Hannaford Bros. or Kash n' Karry Food Stores may at any time and from time to time, purchase exchange securities of any series at any price or prices in the open market or otherwise. Book-Entry; Delivery and Form Except as described below, we will initially issue the exchange securities in the form of one or more registered exchange securities in global form without coupons. We will deposit each global security on the date of the closing of the exchange offer with DTC and registered in the name of Cede & Co., as nominee of DTC. The global securities may be transferred in whole, and not in part, solely to another nominee of DTC or a successor to DTC or its nominee. All interests in the global securities may be subject to the procedures and requirements of DTC. In the case of a transfer by an owner of a beneficial interest in a global security, the transferor may be required to deliver a written certification in the form provided in the indenture. 83 Exchanges of beneficial interests in one global security for interests in another global security will be subject to the applicable rules and procedures of DTC and its respective direct and indirect participants. Any beneficial interest in one of the global securities that is transferred to a person who takes delivery in the form of an interest in another global security will, upon transfer, cease to be an interest in that global security and become an interest in the global security to which the beneficial interest is transferred and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in the global security to which the beneficial interest is transferred for as long as it remains an interest in that global security. Depository Procedures for the Global Securities The descriptions of the operations and procedures of DTC set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC's settlement systems and are subject to change by DTC from time to time. Our company does not take any responsibility for these operations or procedures, and investors are urged to contact DTC or its participants directly to discuss these matters. DTC has advised us that it is: . limited purpose trust company organized under the laws of the State of New York; . a "banking organization" within the meaning of the New York Banking Law; . a member of the Federal Reserve System; . a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended; and . a "clearing agency" registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers, including banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies, referred to as "indirect participants," that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. Pursuant to procedures established by DTC, upon deposit of each of the global securities for the exchange securities, DTC will credit the accounts of participants whose tender of old securities has been accepted in the exchange offer with an interest in such global securities. Ownership of the securities will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC, with respect to the interests of participants, and the records of participants and the indirect participants, with respect to the interests of persons other than participants. The laws of some jurisdictions may require that some types of purchasers of securities take physical delivery of the securities in definitive form. Accordingly, the ability to transfer interests in the securities represented by a global security to these persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through 84 participants, the ability of a person having an interest in exchange securities represented by a global security to pledge or transfer the interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of the interest, may be affected by the lack of a physical definitive security representing the interest. So long as DTC or its nominee is the registered owner of a global security, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the exchange securities represented by the global security for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global security will not be entitled to have exchange securities represented by the global security registered in their names, will not receive or be entitled to receive physical delivery of certificated securities, and will not be considered the owners or holders thereof under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee under the indenture. Accordingly, each holder owning a beneficial interest in a global security must rely on the procedures of DTC and, if the holder is not a participant or an indirect participant, on the procedures of the participant through which the holder owns its interest, to exercise any rights of a holder of such exchange securities under the indenture or the global security. We understand that under existing industry practice, in the event that we request any action of holders of exchange securities, or a holder that is an owner of a beneficial interest in a global security desires to take any action that DTC, as the holder of such global security, is entitled to take, DTC would authorize the participants to take the action and the participants would authorize holders owning through the participants to take the action or would otherwise act upon the instruction of the holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of exchange securities by DTC, or for maintaining, supervising or reviewing any of DTC's records of relating to the exchange securities. Payments with respect to the principal of, and premium, if any, liquidated damages, if any, and interest on, any exchange securities represented by a global security registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the global security representing such exchange securities under the indenture. Under the terms of the indenture, we may treat, and the trustee may treat, the persons in whose names the exchange securities, including the global securities, are registered as the owners of the exchange securities for the purpose of receiving payment on the exchange securities and for any and all other purposes whatsoever. Accordingly, neither our company nor the trustee has or will have any responsibility or liability for the payment of these amounts to owners of beneficial interests in the global security, including principal, premium, if any, liquidated damages, if any, and interest. Payments by the participants and the indirect participants to the owners of beneficial interests in the global securities will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Certificated Securities If: . we notify the trustee in writing that DTC is no longer willing or able to act as a depositary or is no longer registered as a clearing agency under the Exchange Act, and a successor depositary is not appointed within 90 days of this notice or cessation; 85 . we, at our option, notify the trustee in writing that we elect to cause the issuance of exchange securities in definitive form under the indenture; or . upon the occurrence and continuation of an event of default under the indenture, then, upon DTC's surrender of the global securities, certificated securities will be issued to each person that DTC identifies as the beneficial owner of the exchange securities represented by the global securities. Upon any such issuance, the trustee is required to register the certificated exchange securities in the name of the person or persons or the nominee of any of these persons and cause the same to be delivered to these persons. Neither our company nor the trustee shall be liable for any delay by DTC or any participant or indirect participant of DTC in identifying the beneficial owners of the related securities, and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes, including with respect to the registration and delivery, and the respective principal amounts, of the exchange securities. Material Covenants The indenture contains the covenants described below which are applicable to our company. Other than as described below, the indenture does not contain any provisions that would limit our ability to pay dividends, incur additional indebtedness or that would afford holders of exchange securities protection in the event of a sudden and significant decline in our credit quality or a takeover, recapitalization or highly leveraged or similar transaction involving us. See "Risk Factors--Risks Related to the Exchange Securities." Limitations on Liens Under the indenture, if we or any of our Subsidiaries incur debt that is secured by a mortgage on an Operating Property or stock or debt of a Subsidiary, we must secure the exchange securities at least equally and ratably with the secured debt for as long as such debt is so secured. The foregoing restriction shall not apply to: . mortgages on any property acquired, constructed or improved by us or by any of our Subsidiaries after the date of the indenture which are created or assumed contemporaneously with, or within 36 months after, such acquisition, or completion of such construction or improvement, or within six months thereafter, pursuant to a firm commitment for financing arranged with a lender or investor within such 36 month period, to secure or provide for the payment of all or any part of the purchase price of such property or the cost of such construction or improvement incurred after the date of the indenture, or, in addition to the mortgages contemplated by the two subparagraphs immediately following below, mortgages on any property existing at the time of acquisition thereof, provided that the mortgage shall not apply to any property theretofore owned by us or any of our Subsidiaries other than, in the case of any such construction or improvement, any theretofore unimproved real property on which the property so constructed, or the improvement, is located; . mortgages on property, shares of stock or debt existing at the time of acquisition thereof from a corporation which is merged with or into us or any of our Subsidiaries; . mortgages on property of a corporation existing at the time such corporation becomes a Subsidiary; 86 . mortgages to secure debt of a Subsidiary to us or to any of our Subsidiaries; . mortgages in favor of the United States of America or any state thereof or Belgium, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof or Belgium, to secure partial progress, advance or other payments pursuant to any contract or statute or to secure any debt incurred for the purpose of financing all or any part of the purchase price or the cost of constructing or improving the property subject to such mortgages; or . mortgages for the sole purpose of extending, renewing or replacing in whole or in part debt secured by any mortgage referred to in the foregoing five subparagraphs, or in this subparagraph; provided, however, that the principal amount of debt secured thereby shall not exceed the principal amount of debt so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the mortgage so extended, renewed or replaced, plus improvements on such property. However, if the total amount of secured debt that would otherwise be subject to this covenant and the present value of any remaining rent payments for certain sale and leaseback transactions involving an Operating Property would not exceed 8% of our Consolidated Capitalization on the date as of which the determination is being made, this requirement does not apply to such incurrence of debt. A "Subsidiary" is any corporation or any other person of which the relevant person or the relevant person and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly owns voting securities or other similar equity interests entitling the owners thereof to elect a majority of the directors or individuals holding similar positions in other persons, either at all times or so long as there is no default or contingency which permits the owners of any other class or classes of securities or other interests to vote for the election of one or more directors or individuals holding similar positions in other persons, but shall not include any corporation or other person which respect to which the relevant person or any other Subsidiary has become entitled to elect a majority of the directors or individuals holding similar positions in other persons solely due to a default or other contingency which is temporary in character and has had a continuous existence of less than one year. "Operating Property" means any manufacturing or processing plant, office facility, retail store, supermarket, warehouse, distribution center or equipment owned and operated now or hereafter by us or any Subsidiary and having a Net Book Value on the date as of which the determination is being made of more than 1% of Consolidated Capitalization as most recently determined prior to such date. "Net Book Value" means the cost of any asset less accumulated depreciation and amortization taken with respect to such asset. "Consolidated Capitalization" means the total assets of a person and its Subsidiaries determined on a consolidated basis, less (A) current liabilities, including liabilities for debt maturing more than 12 months from the date of the original creation of the debt but maturing within 12 months from the date of determination and (B) deferred income taxes. Sale and Leaseback We will not, and will not permit any Subsidiary to, enter into any Sale and Leaseback Transaction (as defined below) with respect to any Operating Property, unless the net proceeds of such Sale and Leaseback Transaction are at least equal to the Acquisition Costs (as defined below) incurred by us in 87 connection with the acquisition and the construction of any improvements on the Operating Property to be leased and either: . our company or such Subsidiary would be entitled to incur debt secured by a mortgage on such Operating Property without equally and ratably securing the exchange securities; or . our company shall, within 24 months of the effective date of any such arrangement (or within six months thereafter pursuant to a firm purchase commitment entered into within such 24 month period), apply an amount equal to the sum of our costs relating to such Operating Property: . to the payment or other retirement of debt incurred or assumed by our company which ranks in right of payment pari passu with the exchange securities or of debt incurred or assumed by any Subsidiary, other than, in either case, debt owned by our company or any Subsidiary; or . to the purchase of Operating Property, other than the Operating Property involved in such sale. "Sale and Leaseback Transaction" means any arrangement with any person providing for the leasing to our company or any Subsidiary of any Operating Property (except for temporary leases for a term, including any renewal thereof, of not more than 48 months and except for leases between our company and a Subsidiary or between Subsidiaries), which Operating Property has been or is to be sold or transferred by our company or such Subsidiary to such person. "Acquisition Costs" are an amount equal to a percentage of all costs incurred by our company in connection with the acquisition and construction of any improvements on the Operating Property to be leased, such percentage to be determined as follows: . if the Sale and Leaseback Transaction occurs within 36 months following completion of the construction of the principal improvement on the Operating Property to be leased, then such percentage shall be 100%; . if the Sale and Leaseback Transaction occurs between 37 months and 60 months following completion of the construction of the principal improvement on the Operating Property to be leased, then such percentage shall be 95%; or . if the Sale and Leaseback Transaction occurs after 60 months following completion of the construction of the principal improvement on the Operating Property to be leased, then such percentage shall be 90%. Limitation on Guarantees We will not, directly or indirectly, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, for (collectively, "guarantee") any Indebtedness (as defined below) of Delhaize Le Lion or any direct or indirect Subsidiary of Delhaize Le Lion other than our company or any of our Subsidiaries unless: . at the time of and after giving effect to such guarantee, no default or Event of Default (as defined below) has occurred and is continuing or would occur as a consequence of such guarantee; and . we have first obtained and provided to the trustee a letter or such other certification reasonably satisfactory to the trustee from each of Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. (or their respective 88 successors, or, if no successors exist, other nationally-recognized ratings agencies) to the effect that such organization will not decrease its rating of, or place under surveillance or review (other than a surveillance or review with positive implications of a possible upgrading) its rating or outlook of, the securities, as a consequence of the guarantee (after taking into account all contemporaneous transactions). "Indebtedness" means, with respect to any person (without duplication): (1) the principal of and any premium and interest on indebtedness of such person for borrowed money or evidenced by notes, debentures, bonds or other similar instruments; (2) all Capitalized Lease Obligations of such person; (3) all obligations of such person to pay the purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) all obligations of such person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, other than obligations for letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by such person of a demand for reimbursement following payment on the letter of credit; (5) all obligations of the type referred to in clauses (1) through (4) above of other persons and all dividends of other persons for the payment of which, in either case, such person is responsible or liable as obligor, guarantor or otherwise; and (6) all obligations of the type referred to in clauses (1) through (5) above of other persons secured by any Lien on any property or asset of such person (whether or not such obligation is assumed by such person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. Notwithstanding the foregoing, we may guarantee Indebtedness of Delhaize Le Lion or any direct or indirect subsidiary of Delhaize Le Lion so long as such Indebtedness for any single obligation does not exceed $1 million in principal amount and such Indebtedness in the aggregate does not, at any time, exceed $10 million in principal amount. "Capitalized Lease Obligation" means an obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with generally accepted accounting principles, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with such principles. "Lien" means any mortgage, deed of trust, security interest, pledge, lien or other encumbrance. Merger, Consolidation, Sale or Lease of Assets Under the terms of the indenture, we generally would be permitted to merge or consolidate with another company. We would also be permitted to sell or lease all or substantially all of our respective assets to another person. However, we may not take any of these actions unless all of the following conditions are met: 89 . the person we would merge or consolidate with or sell or lease all or substantially all of our respective assets to must assume all of our obligations with respect to the exchange securities and the indenture; . the merger, consolidation or sale or lease of assets must not cause an Event of Default, including any event that would be an Event of Default if the notice or time requirements were disregarded; and . we must deliver specified certificates and documents to the trustee. Events of Default An "Event of Default" with respect to the exchange securities of any series is defined as being: . any default for 30 days in payment of interest on any exchange security of that series; . any default in payment of principal of or any premium on any exchange security of that series as and when the same becomes due either upon maturity, upon redemption, by declaration or otherwise; . any default by us in the performance of any of the other covenants or agreements in the indenture relating to the exchange securities of such series which shall not have been remedied within a period of 90 days after we receive notice from the trustee or holders of at least 25% in aggregate principal amount of the exchange securities of that series then outstanding; . any default by us under one or more instruments under which we have debt in excess of 2% of our Consolidated Capitalization (including securities of another series) and such debt shall have been accelerated so that it has become due and payable prior to its stated maturity; or default in the payment of debt in excess of 2% of our Consolidated Capitalization (including securities of another series) at its stated maturity (but in either case, not if the underlying default has been remedied, cured or waived); and . certain events of bankruptcy, insolvency or reorganization occur with respect to our company. The indenture provides that the trustee shall, with certain exceptions, notify the holders of the exchange securities of any series of any Event of Default known to it and affecting that series within 90 days after the occurrence of the Event of Default. The indenture provides that if an Event of Default with respect to the exchange securities of any series shall have occurred and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of all of the exchange securities of that series then outstanding may declare the principal amount of all of the exchange securities of such series to be due and payable immediately. However, upon certain conditions, such declaration may be annulled and past uncured defaults may be waived (except for a continuing default in payment of principal (including any required purchase and/or premium, if any)) by the holders of a majority in principal amount of such series of exchange securities then outstanding. Subject to the provisions of the indenture relating to the duties of the trustee, in case an Event of Default shall occur and be continuing, the trustee shall be under no obligation to exercise any of the rights or powers in the indenture at the request or direction of any of the holders of the exchange securities, unless the holders shall have offered to the trustee security or indemnity satisfactory to the trustee. 90 Subject to the provisions for security or indemnification and certain limitations contained in the indenture, the holders of a majority in principal amount of the outstanding exchange securities affected by an Event of Default shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee under the indenture or exercising any trust or power conferred on the trustee with respect to the exchange securities. The indenture requires the annual filing by us with the trustee of a certificate as to compliance with certain covenants contained in the indenture. No holder of any exchange security of any series will have any right to institute any proceeding with respect to the indenture or for any remedy under the indenture, unless the holder shall have previously given the trustee written notice of an Event of Default with respect to the exchange securities, the holders of at least 25% in aggregate principal amount of the outstanding exchange securities of such series shall have made written request and offered indemnity satisfactory to the trustee to institute such proceeding as trustee and the trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding exchange securities of such or all series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, any right of a holder of any exchange security to receive payment of the principal of and any premium and interest on such exchange security on or after the due dates expressed in such exchange security, and to institute suit for the enforcement of any such payment on or after such dates, shall not be impaired or affected without such holder's consent. Satisfaction and Discharge of Indenture The indenture, except for certain specified surviving obligations, will be discharged and cancelled upon the satisfaction of certain conditions, including the payment of all of the exchange securities or the deposit with the trustee of cash or appropriate government obligations or a combination of the two sufficient for the payment or redemption of the exchange securities in accordance with the indenture and the terms of the exchange securities. Modification of the Indenture The indenture also contains provisions permitting us and the trustee to execute certain supplemental indentures adding, changing or eliminating any provisions to the indenture or any supplemental indenture with respect to the exchange securities or modifying in any manner the rights of the holders of the exchange securities. However, no supplemental indenture may, among other things, without the consent of the holders of at least a majority of the series of exchange securities then outstanding that would be affected (with each series of exchange securities voting as a separate class): . extend the final maturity of any exchange security, reduce the rate or extend the time of payment of any interest on the exchange security, reduce the principal amount of any exchange security or premium on any exchange security, or reduce any amount payable upon any redemption of any exchange security, without the consent of the holder of each exchange security so affected; and . reduce the percentage of exchange securities that is required to approve a supplemental indenture. The indenture also contains provisions permitting our company and the trustee, without the consent of the holders of exchange securities, to execute supplemental indentures modifying the indenture for the purpose of: . adding Delhaize Le Lion or any other party as a guarantor of the exchange securities; 91 . adding covenants, restrictions, conditions or provisions for the protection of holders of all or any series of exchange securities; . curing any ambiguity in the indenture or any supplemental indenture; . correcting or supplementing any provision of the indenture or any supplemental indenture which may be defective or inconsistent with any other provision contained in the indenture or any supplemental indenture; and . taking any other actions that shall not adversely affect the rights of any holder of exchange securities. Replacement Exchange Securities In case of mutilation, destruction, loss or theft of any exchange security, application for replacement is to be made at the office of the trustee. Any such definitive exchange security will be replaced by the trustee in compliance with such procedures, and on such terms as to evidence any indemnity, as our company or the trustee, as the case may be, may require. All costs incurred in connection with the replacement of exchange securities will be borne by the holder of the exchange securities. Mutilated or defaced exchange securities must be surrendered before new ones will be issued. Governing Law The exchange securities will be governed by and construed in accordance with the internal laws of the State of New York. Concerning the Trustee We maintain customary banking relationships with The Bank of New York, the trustee under the indenture. 92 MATERIAL UNITED STATES TAX CONSIDERATIONS General The following describes the material United States federal income tax consequences relevant to the exchange of old securities for exchange securities pursuant to the exchange offer and to the ownership and disposition of the exchange securities. This description is based on the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), administrative pronouncements, judicial decisions and existing and proposed Treasury Regulations, and interpretations of the foregoing, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. These statements address only the tax consequences to initial holders holding the exchange securities as capital assets within the meaning of Section 1221 of the Code. They do not discuss all of the tax consequences that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as certain financial institutions, insurance companies, tax- exempt entities, dealers in securities or foreign currencies, traders in securities that elect to mark to market, United States Holders (as defined below) whose functional currency (as defined in Code Section 985) is not the U.S. dollar or persons holding the exchange securities in connection with a hedging, "straddle," or conversion transaction or other integrated transaction. Persons considering exchanging their old securities for exchange securities should consult their tax advisors concerning the application of United States federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdictions, to their particular situations. For purposes of this summary, the term "United States Holder" means a beneficial owner of an exchange security that is: . an individual who is a citizen or resident of the United States; . a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any political subdivision thereof or therein; . an estate the income of which is subject to United States federal income taxation regardless of its source; or . a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and (b) one or more U.S. persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in the Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons prior to such date that elect to continue to be treated as United States persons, will also be United States persons. Federal Income Tax Consequences of the Exchange Offer A United States Holder will not recognize gain or loss upon an exchange of the old securities for exchange securities pursuant to the exchange offer. A United States Holder's tax basis in the exchange securities received pursuant to the exchange offer will be the same as such United States Holder's basis in the old securities exchanged therefor, and a United States Holder's holding period for exchange securities received pursuant to the exchange offer will include such United States Holder's holding period for the old securities. A United States Holder of an old security may have acquired it at a "market discount." For this purpose, "market discount" is the excess (if any) of the principal amount over the holder's acquisition 93 price, subject to a statutory de minimis exception. While accrued market discount generally must be recognized to the extent of gain realized on the disposition of a market discount debt instrument, an exchange pursuant the exchange offer will not cause any exchanging holder of an old security that acquired it at a market discount to recognize any accrued market discount as income. Instead, any accrued market discount on an old security that is exchanged for an exchange security will attach to the exchange security. In addition, unaccrued market discount on such old security will carry over to the exchange security and will accrue over the term of the exchange security. If a United States Holder's acquisition price of an old security exceeded the principal amount of such old security, such excess constituted amortizable bond premium which the U.S. Holder may have elected to amortize under a constant yield method under Section 171 of the Code. If such holder exchanges an old security for an exchange security, the remaining bond premium on the old security will carry over to and become bond premium on the exchange security and would be amortizable over the term of the exchange security. Tax Consequences to United States Holders-The Exchange Securities Payments of Interest The payment of interest on the exchange securities will generally be taxable to a United States Holder as ordinary interest income at the time it accrues or is received in accordance with the United States Holder's method of accounting for federal income tax purposes. It is not anticipated that the exchange securities will give rise to original issue discount income. If additional interest is paid to a holder of securities pursuant to the registration rights agreement, we believe that this interest should be treated in the same manner as regular interest on the securities, but it is possible that a cash method holder might be required to report that interest as it accrues on the securities rather than when it is paid. Sale, Exchange or Retirement Upon the sale, exchange or retirement of exchange securities, a United States Holder will recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement of the exchange securities and such Holder's adjusted tax basis in the exchange securities. A United States Holder's adjusted tax basis in exchange securities will equal the cost of the exchange securities to such Holder, subject to possible reduction by the amount of any payment, other than stated interest, on such security before disposition and by amortized bond premium. The amount realized excludes any amounts attributable to unpaid interest accrued between interest payment dates and not previously included in income, which will be taxable as ordinary income. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if at the time of the sale, exchange or retirement the exchange securities have been held for more than one year (including, in the case of a United State Holder who acquired exchange securities in exchange for old securities, the period of time the old securities were held by such United States Holder). Under current laws, the excess of the taxpayer's net long-term capital gains over net short-term capital losses is taxed at a lower rate than ordinary income for certain non-corporate taxpayers. The distinction between capital gain or loss and ordinary income or loss is also relevant for purposes of, among other things, the limitations on the deductibility of capital losses. Amortizable Bond Premium If an exchange security has carry-over bond premium (as described in "-- Federal Income Tax Consequences of the Exchange Offer"), a United States Holder generally may elect to amortize the premium over the remaining term of such security on a constant yield method. However, if the old 94 security was purchased at a time when such security may be optionally redeemed for an amount that is in excess of its principal amount, special rules would apply that could result in a deferral of the amortization bond premium until later in the term of the security. The amount amortized in any year will be treated as a reduction of the United States Holder's interest income from the security. Bond premium on a security held by a United States Holder that does not make such an election will decrease the gain or increase the loss otherwise recognized on disposition of the security. The election to amortize premium on a constant yield method, once made, applies to all debt obligations held or subsequently acquired by the electing United States Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. Market Discount If an exchange security has carry-over market discount (as described in "-- Federal Income Tax Consequences of the Exchange Offer"), a United States Holder will be required to treat any partial principal payment on, or any gain on the sale, exchange, retirement or other disposition of such security as ordinary income to the extent of the lessor of: (i) the amount of such payment or realized gain and (ii) market discount which has not previously been included in income and is treated as having accrued on such security at the time of such payment or disposition. If a United States Holder makes a gift of an exchange security, accrued market discount, if any, will be recognized as if such United States Holder has sold such exchange security for a price equal to its fair market value. In addition, a United States Holder may be required to defer, until the maturity of the security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such exchange security. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the security, unless the United States Holder elects to accrue market discount on a constant interest method. A United States Holder may elect to include market discount in income currently as it accrues (on either a ratable or constant interest method), in which case the rules described above regarding the treatment of gain as ordinary income upon the disposition of, and the receipt of certain cash payments on, a security and the deferral of interest deductions will not apply. This election to include market discount in income currently, once made, applies to all market discount obligations acquired on or after the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. Tax Consequences to Non-United States Holders-The Exchange Securities The following discussion is limited to the United States federal income tax consequences relevant to a Non-United States Holder. As used herein, the term "Non-United States Holder" shall mean the beneficial owner of an exchange security other than a United States Holder. Under present United States federal tax law, and subject to the discussions below concerning backup withholding, payments of principal, interest and premium on the exchange securities by our company or our paying agent to any Non-United States Holder will be exempt from the 30% United States federal withholding tax, provided that: . such Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of our company entitled to vote; . such Holder is not a controlled foreign corporation related, directly or indirectly, to our company through stock ownership; 95 . such Holder is not a bank receiving interest pursuant to a loan agreement entered into in the ordinary course of its trade or business; and . the requirement to certify such Holder's non-U.S. status, as set forth in section 871(h) or section 881(c) of the Code, has been fulfilled with respect to the beneficial owner, as discussed below. A Non-United States Holder of exchange securities will not be subject to United States federal income tax on gain realized on the sale, exchange or retirement of such exchange securities, unless: . such Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition, and either the gain is attributable to an office or other fixed place of business maintained by such individual in the United States or, generally, such individual has a "tax home" in the United States; . such gain is effectively connected with the Holder's conduct of a trade or business in the United States (and, if an income tax treaty applies, generally is attributable to a U.S. "permanent establishment" maintained by such Holder); or . such Holder is liable for tax under the provisions of the Internal Revenue Code applicable to specified United States expatriates. Exchange securities held by an individual who is not, for United States estate tax purposes, a resident or citizen of the United States at the time of his death will not be subject to United States federal estate tax, provided that the individual does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of our company entitled to vote and, at the time of such individual's death, payments with respect to such exchange securities would not have been effectively connected with the conduct by such individual of a trade or business in the United States. The certification requirement referred to above will be fulfilled if the beneficial owner of securities certifies on Internal Revenue Service Form W-8BEN or successor form under penalties of perjury that it is not a United States person and provides its name and address, and (i) such beneficial owner files such Form W-8BEN or successor form with the withholding agent or (ii) in the case of exchange securities held on behalf of the beneficial owners by a securities clearing organization, bank or other financial institution holding customers' securities in the ordinary course of its trade or business, such financial institution files with the withholding agent a statement that it has received the Form W-8BEN or successor form from the Non-United States Holder, furnishes the withholding agent with a copy thereof and otherwise complies with the applicable Internal Revenue Service requirements. Alternatively, these certification requirements will not apply if the beneficial owner of the exchange securities holds those exchange securities directly through a "qualified intermediary" (which is a non-U.S. office of a bank, securities dealer or similar intermediary that has signed an agreement with the Internal Revenue Service concerning withholding tax procedures), the qualified intermediary has sufficient information in its files to indicate that the holder is a Non-United States Holder and the intermediary complies with Internal Revenue Service requirements. Special rules may apply with respect to exchange securities held by a foreign partnership. Prospective investors, including foreign partnerships and their partners and Holders who hold their exchange securities through a qualified intermediary, should consult their tax advisors regarding possible reporting requirements. If a Non-United States Holder of exchange securities is engaged in a trade or business in the United States, and if interest on the securities (or gain realized on their sale, exchange or other disposition) is effectively connected with the conduct of such trade or business (and, if an income tax 96 treaty applies, generally is attributable to a U.S. "permanent establishment" maintained by such Holder), the Non-United States Holder, although exempt from the withholding tax discussed in the preceding paragraphs, will be subject to regular United States income tax on such effectively connected income, generally in the same manner as if it were a United States Holder. See "--Tax Consequences to United States Holders-The Exchange Securities" above. In lieu of the certificate described in the preceding paragraph, such a Holder will be required to provide to the withholding agent a properly executed Internal Revenue Service Form W-8ECI or successor form, as appropriate, to claim an exemption from withholding tax. In addition, if such Non-United States Holder is a foreign corporation, it may be subject to a 30% branch profits tax (unless reduced or eliminated by an applicable treaty) on its earnings and profits for the taxable year attributable to such effectively connected income, subject to certain adjustments. Backup Withholding and Information Reporting United States Holders Under current United States federal income tax law, information reporting requirements apply to certain payments of principal premium and interest made to, and to the proceeds of sales before maturity by, non-corporate United States Holders. In addition, a 30.5% backup withholding tax will apply if the non- corporate United States Holder: . fails to furnish its Taxpayer Identification Number ("TIN") which, for an individual, is his Social Security Number; . furnishes an incorrect TIN; . is notified by the Internal Revenue Service that it is subject to backup withholding for failure to report interest and dividend payments; or . under certain circumstances fails to certify, under penalties of perjury, that it has furnished a correct TIN and has not been notified by the Internal Revenue Service that it is subject to backup withholding for failure to report interest and dividend payments. United States Holders should consult their tax advisers regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption if applicable. Non-United States Holders Backup withholding will not apply to payments made on securities if the certifications required by Sections 871(h) and 881(c) as described above are received or if the exemption for qualified intermediaries discussed above applies, provided that our company or our paying agent or the qualified intermediary, as the case may be, does not have actual knowledge or reason to know that the payee is a United States person. However, interest payments made to a Non-United States Holder will generally be reported to the Holder and to the Internal Revenue Service on Form 1042-S. This reporting does not apply if the Holder holds the exchange securities directly through a qualified intermediary. Payments on the sale, exchange or other disposition of exchange securities made to or through a foreign office of a broker generally will not be subject to backup withholding. However, if such broker is a United States person, a controlled foreign corporation for United States federal income tax purposes, a foreign person 50% or more of whose gross income for certain periods is effectively connected with a United States trade or business, or a foreign partnership with certain connections to the United States, information reporting will be required unless the broker has in its records documentary evidence that the 97 beneficial owner is not a United States person and certain other conditions are met or the beneficial owner otherwise establishes an exemption. Backup withholding may apply to any payment that such broker is required to report if the broker has actual knowledge or reason to know that the payee is a United States person. Payments to or through the United States office of a broker will be subject to backup withholding and information reporting unless the Holder certifies, under penalties of perjury, that it is not a United States person and the payor does not have actual knowledge or reason to know that the Holder is a United States person, or the Holder otherwise establishes an exemption. Non-United States Holders of exchange securities should consult their tax advisers regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a Non-United States Holder under the backup withholding rules will be allowed as a credit against such Holder's United States federal income tax liability and may entitle such Holder to a refund, provided that the Holder files a United States income tax return and the required information is furnished to the Internal Revenue Service. 98 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange securities for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange securities. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange securities or market-making activities or other trading activities. We have agreed that, for at least 180 days after the exchange offer is completed, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale of exchange securities. In addition, until [________], 2002, all dealers effecting transactions in the exchange securities may be required to deliver a prospectus. We will not receive any proceeds from any sale of exchange securities by broker-dealers. Exchange securities received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transaction in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from the broker-dealer or the purchasers of the exchange securities. Any broker-dealer that resells exchange securities that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange securities may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any resale of exchange securities and any commission or concessions received by any of those persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the exchange offer is completed, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer, including the expense of one counsel for the holders of the old securities, other than commissions or concessions of any broker-dealers, and will indemnify the holders of the old securities, including any broker-dealers, against related liabilities, including liabilities under the Securities Act. We note, however, that in the opinion of the Securities and Exchange Commission, indemnification against liabilities arising under federal securities laws is against public policy and may be unenforceable. 99 EXPERTS Our consolidated financial statements as of December 30, 2000 and January 1, 2000 and for each of the three years in the period ended December 30, 2000 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. LEGAL MATTERS Legal matters as to the validity of the exchange securities offered by this prospectus will be passed upon for our company by Akin, Gump, Strauss, Hauer & Feld, L.L.P. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act of 1933, as amended, relating to the exchange offer that incorporates important business and financial information about us that is not included in or delivered with this prospectus. This prospectus does not contain all of the information included in the registration statement. This information is available from us without charge to holders of the exchange securities and any old securities not tendered, as specified below. If we have made references in this prospectus to any contracts, agreements or other documents and also filed any of those contracts, agreements or documents as exhibits to the registration statement, you should read the relevant exhibit for a more complete understanding of the document or matter involved. In addition, the indenture governing the securities requires that we file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and provide those reports to the trustee. Information that we file with the Securities and Exchange Commission after the date of this prospectus will automatically supersede the information in this prospectus and any earlier filed incorporated information. We are also incorporating any future filings made with the Securities and Exchange Commission under Sections 13(a), 13(e), 14, or 15(d) of the Exchange Act until the termination of the exchange offer. If Delhaize Le Lion guarantees the exchange securities and any old securities not tendered in this exchange offer, we will not file separate periodic reports under the Exchange Act. If this occurs, there will be less publicly available information about our company and condensed, consolidating financial information about our company, Food Lion, LLC, Hannaford Bros. and Kash n' Karry Food Stores will be contained in a footnote to Delhaize Group's consolidated financial statements. You may read and copy the registration statement, including the attached exhibits, and any report, statements or other information that we file at the Securities and Exchange Commission's public reference facilities located in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and also at the regional offices of the Securities and Exchange Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of its public reference facilities. Our Securities and Exchange Commission filings will also be available to the public from commercial document retrieval services and at the Securities and Exchange Commission's web site at http://www.sec.gov. 100 You may request a copy of any of our filings with the Securities and Exchange Commission, or any of the agreements or other documents that constitute exhibits to those filings, at no cost, by writing or telephoning us at the following address or phone number: Delhaize America, Inc. 2100 Executive Drive P.O. Box 1330 Salisbury, North Carolina 28145-1330 Phone Number: (704) 633-8250 To obtain timely delivery of any of our filings, agreements or other documents, you must make your request to us no later than five business days before the expiration date of the exchange offer. The exchange offer will expire at 5:00 p.m., New York City time on [_________], 2001. The exchange offer can be extended by us in our sole discretion. See the section of this prospectus entitled "The Exchange Offer" for more detailed information. In accordance with the rules of the SEC, Food Lion , Hannaford Bros. and Kash n' Karry are not required to file annual, quarterly or current reports, proxy statements or other information with the Securities and Exchange Commission. Accordingly, Food Lion, Hannaford Bros. and Kash n' Karry do not file separate financial statements with the Securities and Exchange Commission or independently publish their financial statements. You should rely only on the information provided in this prospectus. No person has been authorized to provide you with different information. The information in this prospectus is accurate as of the date on the front cover. You should not assume that the information contained in this prospectus is accurate as of any other date. Any old securities not tendered and accepted in the exchange offer will remain outstanding. To the extent any old securities are tendered and accepted in the exchange offer, a holder's ability to sell untendered securities could be adversely affected. Following consummation of the exchange offer, the holders of old securities will continue to be subject to the existing restrictions upon transfer thereof and we will have fulfilled one of our obligations under the registration rights agreement. Holders of old securities who do not tender their old securities generally will not have any further registration rights under the registration rights agreement or otherwise. Each broker-dealer that receives exchange securities for its own account pursuant to this exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange securities. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange securities received in exchange for old securities where such old securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business 180 days after the expiration date, that we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 101 INDEX TO FINANCIAL STATEMENTS OF DELHAIZE AMERICA, INC.
Page ---- Unaudited Consolidated Statements of Income for the Period From April 29, 2001 to June 30, 2001, the Period From December 31, 2000 to April 28, 2001 and the Six Months Ended June 17, 2000......... 2 Unaudited Consolidated Balance Sheets as of June 30, 2001 and December 30, 2000.................... 3 Unaudited Consolidated Statements of Cash Flows for the Period From April 29, 2001 to June 30, 2001, the Period From December 31, 2000 to April 28, 2001 and the Six Months Ended June 17, 2000... 5 Unaudited Consolidated Statements of Shareholders' Equity for the Period from December 31, 2000 to April 28, 2001 Period from April 29, 2001 to June 30, 2001 and the ............................. 6 Notes to Unaudited Consolidated Financial Statements............................................... 7 Report of Independent Accountants.................................................................. 10 Consolidated Statements of Income for the Fiscal Years Ended December 30, 2000, January 1, 2000 and January 2, 1999................................................................................ 11 Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000............................ 12 Consolidated Statements of Cash Flows for the Fiscal Years Ended December 30, 2000, January 1, 2000 and January 2, 1999........................................................................... 13 Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended December 30, 2000, January 1, 2000 and January 2, 1999................................................................ 14 Notes to Consolidated Financial Statements......................................................... 15
F-1 DELHAIZE AMERICA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Successor Company Predecessor Company ----------------- ------------------- Period From April 29, Period From December 31, Six Months 2001 to June 30, 2001 2000 to April 28, 2001 Ended --------------------- ---------------------- June 17, 2000 ------------- (Dollars in thousands) --------------------------------------------------------------------------- Net sales and other revenues $ 2,594,781 $ 4,735,066 $ 5,131,225 Cost of goods sold 1,924,028 3,556,165 3,864,966 Selling and administrative expenses 535,123 978,518 998,879 Store closing provision 1,212 2,288 7,997 Merger expense 2,021 25,984 2,944 --------------------------------------------------------------------------- Operating income 132,397 172,111 256,439 Interest expense 63,636 108,362 55,374 --------------------------------------------------------------------------- Income before income taxes 68,761 63,749 201,065 Provision for income taxes 31,932 29,551 76,408 --------------------------------------------------------------------------- Net income $ 36,829 $ 34,198 $ 124,657 ===========================================================================
The accompanying notes are an integral part of the consolidated financial statements. F-2 DELHAIZE AMERICA, INC. CONSOLIDATED BALANCE SHEETS
Successor Company Predecessor Company ----------------- ------------------- June 30, 2001 December 30, 2000 ------------- ----------------- (Dollars in thousands) Assets Current assets: Cash and cash equivalents $ 125,742 $ 135,636 Receivables 175,373 204,695 Income tax receivable 16,665 82,483 Inventories 1,300,690 1,260,532 Prepaid expenses 25,849 49,409 Deferred tax assets 49,996 49,996 --------------------------------------------- Total current assets 1,694,315 1,782,751 Property and equipment, net 2,819,631 2,825,241 Intangible assets, net 4,130,627 3,275,718 Other assets 67,540 43,086 --------------------------------------------- Total assets $ 8,712,113 $ 7,926,796 ============================================= Liabilities and Shareholder's Equity Current liabilities: Short-term borrowings $ 71,000 $ 2,740,000 Accounts payable 800,564 762,552 Accrued expenses 357,849 339,837 Capital lease obligations - current 31,564 30,622 Long term debt- current 127,077 126,196 Other liabilities - current 64,124 64,494 --------------------------------------------- Total current liabilities 1,452,178 4,063,701 Long-term debt 3,043,749 455,240 Capital lease obligations 599,836 600,472 Deferred income taxes 292,473 153,018 Other liabilities 200,795 213,206 --------------------------------------------- Total liabilities 5,589,031 5,485,637 --------------------------------------------- Shareholder's equity: Class A non-voting common stock; 90,718,904,458 shares issued and outstanding 53,149 52,998 Class B voting common stock; 75,290,542 shares issued and outstanding 37,645 37,645 Other comprehensive income/(loss), net of tax (57,615) -- Additional paid-in capital 2,373,509 841,961 Retained earnings 716,394 1,508,555 ---------------------------------------------
F-3 Total shareholders' equity 3,123,082 2,441,159 --------------------------------------------- Total liabilities and shareholders' equity $ 8,712,113 $ 7,926,796 =============================================
The accompanying notes are an integral part of the consolidated financial statements. F-4 DELHAIZE AMERICA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Successor Company Predecessor Company ----------------- ------------------- Period From Period From April 29, 2001 to December 31, 2000 Six Months Ended June 30, 2001 to April 28, 2001 June 17, 2000 ------------- ----------------- ------------- Cash flows from operating activities Net income $ 36,829 $ 34,198 $ 124,657 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 92,440 162,259 130,315 Non-cash portion of merger expense -- 21,682 -- Non-cash portion of debt amortization fees 348 55 -- Non-cash portion of comprehensive loss amortization 3,291 523 -- (Gain) loss on disposals of property and capital lease terminations (2,687) 2,048 840 Deferred income taxes (930) (24) -- Other 699 1,273 -- Changes in operating assets and liabilities: Receivables (16,201) 45,523 12,190 Income tax receivable (4,312) 70,130 (6,712) Inventories (15,635) 53,504 (20,700) Prepaid expenses (1,641) 3,519 (3,920) Other assets 307 (1,243) (3,118) Accounts payable 100,856 (62,844) 26,143 Accrued expenses 71,619 (53,607) (50,467) Income taxes payable -- -- -- Other liabilities 203 (1,866) 9,366 ------------------------------------------------------------ Total adjustments 228,357 240,932 93,937 ------------------------------------------------------------ Net cash provided by operating activities 265,186 275,130 218,594 ------------------------------------------------------------ Cash flows from investing activities Capital expenditures (68,338) (122,577) (156,343) Proceeds from disposal of property 1,745 4,230 1,292 Direct costs associated with acquisition -- -- (3,239) Other investment activity -- (816) (9,508) ------------------------------------------------------------ Net cash used in investing activities (66,593) (119,163) (167,798) ------------------------------------------------------------ Cash flows from financing activities Net (payments) proceeds under short-term borrowings (174,000) (2,495,000) (67,000) Proceeds from issuance of long-term debt -- 2,600,000 -- Principal payments on long-term debt and capital lease obligations (8,775) (17,097) (13,470) Direct financing costs -- (23,105) (20,242) Dividends paid -- (28,572) (44,541) Parent common stock repurchased (9,463) -- -- Proceeds from issuance of parent common stock for options 3,598 2,031 835 Cash used to settle derivative instruments -- (214,071) -- ------------------------------------------------------------ Net cash used in financing activities (188,640) (175,814) (144,418) Net increase (decrease) in cash and cash equivalents 9,953 (19,847) (93,622) Cash and cash equivalents at beginning of period 115,789 135,636 193,721 ------------------------------------------------------------ Cash and cash equivalents at end of period $ 125,742 $ 115,789 $ 100,099 ============================================================
The accompanying notes are an integral part of the consolidated financial statements. F-5 Delhaize America, Inc. Unaudited Consolidated Statements of Shareholder's Equity
Class A Class B Common Common Additional Stock Stock Paid-in Shares Amount Shares Amount Capital ----------------------------------------------------------- Balances, December 30, 2000 90,461,523 $ 52,998 75,290 $ 37,645 $ 850,084 Cash dividends declared: Class A- Class B- Sale of stock 257,381 151 1,880 Shares granted under restricted plan 4,102 Amortization of restricted stock Unrealized loss on securities Net income Other comprehensive loss, net of tax, upon adoption of SFAS No. 133 Change in other comprehensive income (loss) ----------------------------------------------------------- Total comprehensive income (loss) ----------------------------------------------------------- Balances, April 28, 2001 90,718,904 53,149 75,290 37,645 856,066 ----------------------------------------------------------- Sale of stock 3,598 Shares granted under restricted plan (257) Amortization of restricted stock Unrealized loss on securities Parent common stock repurchased (9,463) Net income Change in other comprehensive income (loss) Adjustments in connection with the share exchange 1,533,326 ----------------------------------------------------------- Total comprehensive income (loss) ----------------------------------------------------------- Balances, June 30, 2001 90,718,904 $ 53,149 75,290 $ 37,645 $ 2,383,270 =========================================================== Other Comprehensive Unearned Retained Income(loss) Compensation Earnings Total ----------------------------------------------------------- Balances, December 30, 2000 $ 84 $ (8,207) $ 1,508,555 $ 2,441,159 Cash dividends declared: Class A- (28,572) (28,572) Class B- - Sale of stock 2,031 Shares granted under restricted plan (4,102) - Amortization of restricted stock 1,472 1,472 Unrealized loss on securities (195) (195) Net income 34,198 34,198 Other comprehensive loss, net of tax, upon adoption of SFAS No. 133 (122,500) (132,724) Change in other comprehensive income (loss) (9,900) 324 ----------------------------------------------------------- Total comprehensive income (loss) (98,313) ----------------------------------------------------------- Balances, April 28, 2001 (132,511) (10,837) 1,514,181 2,317,693 ----------------------------------------------------------- Adjustments in connection with the share exchange 72,979 (834,616) 771,689 Sale of stock 3,598 Shares granted under restricted plan 203 (54) Amortization of restricted stock 873 873 Unrealized loss on securities (123) (123) Parent common stock repurchased (9,463) Net income 36,829 36,829 Change in other comprehensive income (loss) 2,040 2,040 ----------------------------------------------------------- Total comprehensive income (loss) 38,746 ----------------------------------------------------------- Balances, June 30, 2001 $ (57,615) $ (9,761) $ 716,394 $ 3,123,082 ===========================================================
The accompaning notes are an integral part of the consolidated financial statements. F-6 DELHAIZE AMERICA, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1) Basis of Presentation: The accompanying financial statements do not include all the disclosures normally required by generally accepted accounting principles or those normally made in the Annual Report on Form 10-K of Delhaize America, Inc. (the "Company"). Accordingly, the reader should refer to the Company's Form 10-K for the year ended December 30, 2000 for further information. The financial information 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, all of which are normal and recurring. In 2001, the Company adjusted its calendar year to four 13 week quarters to align its calendar year with Delhaize Group's calendar year. As a result, in these unaudited consolidated financial statements and accompanying notes, the 26-week period ended June 30, 2001 is compared against the 24-week period ended June 17, 2000, unless otherwise indicated. On April 25, 2001, the Company became a wholly-owned subsidiary of Delhaize Le Lion as a result of the Delhaize Le Lion share exchange. The Delhaize Le Lion share exchange was accounted for using the purchase method of accounting. Effective as of the end of our April 28, 2001 fiscal period, the Company recorded adjustments to reflect the accounting basis of Delhaize Le Lion in the Company's financial statements. These adjustments principally included changes to the valuation of certain of the Company's tangible and intangible assets, net of deferred tax liabilities, with a corresponding increase in stockholders' equity in the amount of approximately $772 million. The preliminary allocation of the share exchange purchase price to the Company's assets and liabilities was based on estimates of the Company's management, and the Company's management does not expect the final allocation to have a material effect on the Company's consolidated financial position or results of operations. This preliminary allocation resulted in additional intangible asset and goodwill amortization expense for the period from April 29, 2001 to June 30, 2001 in the amount of approximately $4.9 million, net of tax. The amortization periods used were approximately 10 years for identifiable intangible assets and 40 years for goodwill. In connection with the recording of the accounting basis of Delhaize Le Lion in the Company's financial statements, a new entity has been deemed created for financial reporting purposes. Accordingly, in this prospectus, the periods prior to the date of the Delhaize Le Lion share exchange relate to the "predecessor company" and the periods subsequent to the date of the Delhaize Le Lion share exchange relate to the "successor company". 2) Supplemental Disclosure of Cash Flow Information Selected cash payments and non-cash activities were as follows:
Successor Company Predecessor Company ----------------- ------------------- Period From April Period From 29, 2001 to December 31, 2000 Six Months Ended June 30, 2001 to April 28, 2001 June 17, 2000 ------------- ----------------- ------------- (Dollars in thousands) Cash (refunds) payments for income taxes $ 36,825 $ (40,206) $ 83,114 Cash payments for interest, net of amounts capitalized 21,831 114,494 55,734
F-7 Non-cash investing and financing activities: Excess purchase price related to parent acquisition 827,123 -- -- LIFO fair value adjustment related to parent acquisition 78,027 -- -- Capitalized lease obligations incurred for store properties and equipment 21,128 41,107 Capitalized lease obligations terminated for store properties and equipment 5,560 1,120 Adjustment to goodwill and store closing 7,225 3,893 --
The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. 3) Inventories Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first out (LIFO) method comprised approximately 82% of inventories as of June 30, 2001 and June 17, 2000, respectively. Meat, produce, deli and bakery inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method were used entirely, inventories would have been $65.0 million and $146.8 million greater as of June 30, 2001 and June 17, 2000, respectively. In connection with the accounting for the Delhaize Le Lion share exchange discussed in Note 1, the Company recorded an adjustment to the basis of LIFO inventories in the amount indicated in Note 2 above. Application of the LIFO method resulted in an increase in the cost of goods sold of $0.8 million for the 17 weeks ended April 28, 2001, $0.4 million for the 9 week period ended June 30, 2001, and $3.9 million for June 17, 2000. 4) Reclassification Certain financial statement items previously reported have been reclassified to conform to the current year's format. 5) Merger Expenses Merger expenses for the six months ended June 30, 2001 and for fiscal 2000 consisted principally of the amortization of costs incurred in connection with the borrowings related to the Hannaford Bros. acquisition. Merger expenses for the six months ended June 30, 2001 and for fiscal 2000 also included costs incurred in connection with the Delhaize Le Lion share exchange. 6) Debt Offering On April 19, 2001, we completed the private offering of $600,000,000 7.375% notes due 2006, $1,100,000,000 8.125% notes due 2011 and $900,000,000 9.000% debentures due 2031. We used the proceeds of this offering to repay in full the $2.4 billion outstanding under our $2.5 billion term loan facility. Food Lion, LLC, Hannaford Bros. Co. and Kash n' Karry Food Stores, Inc., the Company's wholly-owned subsidiaries, are fully and unconditionally and jointly and severally guaranteeing each series of these securities. The Company has no independent assets or operations and the subsidiaries of the Company other than the subsidiary guarantors are minor. There are no restrictions on the ability of the Company or any subsidiary guarantor to obtain funds from its subsidiaries by dividend or loan and there are no other restricted net assets for the subsidiary guarantors. 7) Derivative Instruments On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which requires that all derivative instruments be recognized in the financial statements. We entered into interest rate hedge agreements against potential increases in interest rates prior to the offering of the old securities. The notional amount of the 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 securities that were being offered. The hedge agreements were settled as planned in connection with the completion of the private offering of the old securities resulting in a payment in the amount of the unrealized loss of approximately $214 million. As reflected in the accompanying Statement of Shareholders' Equity, upon adoption of Statement of Accounting Standards 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 transferred approximately $0.3 million, net of tax, of the other comprehensive loss associated with these hedge agreements to interest expense during the period from December 31, 2000 to April 28, 2001 and approximately $2.1 million, net of tax, of the other comprehensive loss associated with these hedge agreements to interest expense during the period from April 29, 2001 to June 30, 2001. F-8 8) Recently Issued Accounting Standards In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or 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. We do not expect this standard to have a significant effect on our financial statements. In June 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after they have initially been recognized in financial statements, eliminates goodwill amortization and requires annual impairment testing of goodwill. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001. Although we have not yet completed our evaluation of the impact of the adoption of SFAS No. 142 on our financial statements, we currently believe that the discontinuance of goodwill amortization will be the most significant change effecting our results of operations. 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. We are continuing to evaluate the potential effect of SFAS No. 143 on our financial statements. F-9 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Delhaize America, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity, and cash flows present fairly, in all material respects, the financial position of Delhaize America, Inc. and subsidiaries (the "Company") at December 30, 2000 and January 1, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Charlotte, North Carolina February 6, 2001, except for the information included in Note 19, for which the date is April 25, 2001 F-10 DELHAIZE AMERICA, INC. CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands) ----------------------------------- Year Ended December Year Ended Year Ended 30, January 1, January 2, 2000 2000 1999 ----------- ----------- ----------- Net sales and other revenues............... $12,669,932 $10,891,231 $10,230,840 Cost of goods sold......................... 9,562,855 8,209,491 7,794,754 Selling and administrative expenses........ 2,522,094 2,077,781 1,894,989 Store closing provision.................... 42,834 12,605 14,321 Asset impairment provision................. 26,961 1,495 3,460 Merger expense............................. 38,546 1,465 -- ----------- ----------- ----------- Operating income........................... 476,642 588,394 523,316 Interest expense........................... 213,057 103,820 95,334 ----------- ----------- ----------- Income before income taxes................. 263,585 484,574 427,982 Provision for income taxes................. 108,099 184,139 155,397 ----------- ----------- ----------- Net income............................... $ 155,486 $ 300,435 $ 272,585 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-11 DELHAIZE AMERICA, INC. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) ----------------------- December 30, January 1, 2000 2000 ------------ ---------- ASSETS Current assets: Cash and cash equivalents............................ $ 135,636 $ 193,721 Receivables.......................................... 204,695 210,106 Income tax receivable................................ 82,483 29,056 Inventories.......................................... 1,260,532 1,157,695 Prepaid expenses..................................... 49,409 26,734 Deferred tax assets.................................. 49,996 55,611 ---------- ---------- Total current assets............................... 1,782,751 1,672,923 Property and equipment, net............................ 2,825,241 2,039,569 Intangible assets, net................................. 3,275,718 254,276 Other assets........................................... 43,086 10,247 ---------- ---------- Total assets........................................... $7,926,796 $3,977,015 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings................................ $2,740,000 $ 302,000 Accounts payable..................................... 762,552 572,940 Accrued expenses..................................... 339,837 304,462 Capital lease obligations--current................... 30,622 23,877 Long-term debt--current.............................. 126,196 2,834 Other liabilities--current........................... 64,494 45,251 ---------- ---------- Total current liabilities.......................... 4,063,701 1,251,364 Long-term debt......................................... 455,240 426,930 Capital lease obligations.............................. 600,472 478,942 Deferred income taxes.................................. 153,018 7,421 Other liabilities...................................... 213,206 133,492 ---------- ---------- Total liabilities.................................. 5,485,637 2,298,149 ---------- ---------- Commitments and contingencies (see Note 16)............ -- -- Shareholders' equity: Class A non-voting common stock, authorized 1,280,160,900,000 shares; 90,461,523,000 shares issued and outstanding at December 30, 2000 and 68,039,082,000 shares at January 1, 2000............ 52,998 39,965 Class B voting common stock, authorized 1,500,000,000 shares; 75,290,000 shares issued and outstanding at December 30, 2000 and January 1, 2000..................................... 37,645 37,645 Additional paid-in capital............................. 841,961 155,280 Retained earnings...................................... 1,508,555 1,445,976 ---------- ---------- Total shareholders' equity......................... 2,441,159 1,678,866 ---------- ---------- Total liabilities and shareholders' equity......... $7,926,796 $3,977,015 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. F-12 DELHAIZE AMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended Year Ended December 30, January 1, January 2, 2000 2000 1999 ------------ ---------- ---------- (Dollars in thousands) Cash flows from operating activities Net income................................ $ 155,486 $300,435 $272,585 ---------- -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........... 372,541 258,512 236,021 Non-cash portion of merger expense...... 27,634 -- -- Loss (gain) on disposals of property.... 6,896 (3,835) (8,192) Store closing provisions................ 42,834 12,605 14,321 Asset impairment provisions............. 26,961 1,495 3,460 Deferred income taxes................... 27,970 30,116 44,999 Other................................... 3,525 -- -- Changes in operating assets and liabilities net of effect of acquisition: Receivables........................... 30,807 (11,838) (31,096) Income tax receivable................. (53,427) (19,038) (3,146) Inventories........................... 100,598 (54,060) (120,891) Prepaid expenses...................... (2,843) 5,384 2,042 Other assets.......................... (1,081) (6,400) 2,243 Accounts payable...................... (30,736) 6,822 48,941 Accrued expenses...................... (35,117) 8,049 19,451 Income taxes payable.................. 4,565 -- -- Other liabilities..................... (30,408) (22,326) (39,659) ---------- -------- -------- Total adjustments.................... 490,719 205,486 168,494 ---------- -------- -------- Net cash provided by operating activities.......................... 646,205 505,921 441,079 ---------- -------- -------- Cash flows from investing activities Capital expenditures...................... (392,968) (410,888) (356,058) Proceeds from sale of property............ 76,346 19,622 109,850 Investment in Hannaford, net of cash acquired................................. (2,637,870) -- -- Other investment activity................. (9,508) -- -- ---------- -------- -------- Net cash used in investing activities.......................... (2,964,000) (391,266) (246,208) ---------- -------- -------- Cash flows from financing activities Proceeds under 364-day term loan facility................................. 2,415,000 -- -- Net proceeds under short-term borrowings.. 23,000 241,000 (19,000) Principal payments on long-term debt...... (21,441) (42,517) (6,154) Proceeds from issuance of long-term debt.. 4,935 -- -- Principal payments under capital lease obligations.............................. (27,272) (22,518) (22,172) Direct financing costs.................... (45,998) -- -- Dividends paid............................ (92,907) (78,994) (71,271) Repurchase of common stock................ -- (142,694) (50,192) Proceeds from issuance of common stock.... 4,393 1,197 4,170 ---------- -------- -------- Net cash provided by (used in) financing activities................ 2,259,710 (44,526) (164,619) ---------- -------- -------- Net (decrease) increase in cash and cash equivalents............................... (58,085) 70,129 30,252 Cash and cash equivalents at beginning of year...................................... 193,721 123,592 93,340 ---------- -------- -------- Cash and cash equivalents at end of year... $ 135,636 $193,721 $123,592 ========== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-13 DELHAIZE AMERICA, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Class A Class B Common Common Additional Other (Dollars and shares in Stock Stock Paid-in Comprehensive Unearned Retained thousands except per Shares Amount Shares Amount Capital Income Compensation Earnings Total share amounts) --------- ------- ------ ------- ---------- ------------- ------------ ---------- ---------- Balances January 3, 1998.................. 67,201,001 $39,371 77,575 $38,788 $157,111 -- -- $1,097,915 $1,333,185 Cash dividends declared: Class A--.00055 per share (36,832) (36,832) Class B--$.44400 per share (34,439) (34,439) Sale of stock.......... 212,506 124 3,834 3,958 Repurchase of common stock................. (878,190) (515) (632) (316) (49,361) (50,192) Restricted shares (See Note 13).............. 8,534 5 207 212 Converted debt......... 3,977,033 2,330 108,115 110,445 Net income............. 272,585 272,585 ---------- ------- ------ ------- -------- --- ------- ---------- ---------- Balances January 2, 1999................... 70,520,884 41,315 76,943 38,472 219,906 -- -- 1,299,229 1,598,922 Cash dividends declared: Class A--$.00058 per share (41,045) (41,045) Class B--$.49800 per share (37,949) (37,949) Sale of stock.......... 46,939 27 1,189 1,216 Repurchase of common stock................. (2,355,496) (1,380) (1,636) (819) (66,421) (74,074) (142,694) Restricted shares (See Note 13).............. 23,896 14 606 620 Cash in lieu of fractional shares in connection with reverse stock split... (19,629) (11) (17) (8) (620) (639) Net income............. 300,435 300,435 ---------- ------- ------ ------- -------- --- ------- ---------- ---------- Balances January 1, 2000................... 68,216,594 39,965 75,290 37,645 155,280 -- -- 1,445,976 1,678,866 Cash dividends declared: Class A--$.00073 per share (49,960) (49,960) Class B--$.57040 per share (42,947) (42,947) Sale of stock.......... 311,506 183 2,429 2,612 Restricted shares (See Note 13).............. 65,715 38 1,048 1,086 Stock consideration given in Hannaford acquisition including options, net of issuance costs........ 21,867,708 12,812 681,509 694,321 Shares granted under restricted plan....... 9,818 (9,818) -- Amortization of restricted stock...... 1,611 1,611 Unrealized gain on securities............ 84 84 Net income............. 155,486 155,486 ---------- ------- ------ ------- -------- --- ------- ---------- ---------- Balances December 30, 2000................... 90,461,523 $52,998 75,290 $37,645 $850,084 $84 $(8,207) $1,508,555 $2,441,159 ========== ======= ====== ======= ======== === ======= ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. F-14 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Nature of Operations As of December 30, 2000, Delhaize America, Inc. (the "Company") operated 1,420 retail food supermarkets and 12 distribution centers in 16 states in the eastern United States. The Company's stores, which are operated under the names of "Food Lion," "Hannaford," and "Kash n' Karry," sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen foods, deli/bakery and non-food items, such as health and beauty care, prescriptions, and other household and personal products. Principles of Consolidation In August 1999, the Company changed its name from Food Lion, Inc. to Delhaize America, Inc., and in connection therewith substantially all of the assets and operations of the Company's Food Lion business were transferred to a newly-formed, wholly-owned, direct subsidiary of the Company. This transaction had no effect on the Company's consolidated financial statements since the transfers were among the Company's wholly-owned subsidiaries and were recorded at historical book values. As a result of this transaction, the Company is structured as a holding company with several wholly-owned operating subsidiaries. Delhaize America, Inc., the holding company, serves as the consolidating entity for all of the Company's supermarket chains. The consolidated financial statements include the accounts of Delhaize America, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Operating Segment The Company engages in one line of business, the operation of general food supermarkets located in the eastern United States. Fiscal Year The Company's fiscal year ends on the Saturday nearest to December 31. Fiscal years 2000, 1999 and 1998 ended on December 30, 2000, January 1, 2000, and January 2, 1999, respectively. Fiscal years 2000, 1999 and 1998 each included 52 weeks. Use of Estimates in Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Negative cash balances of $32.9 million and $0.5 million at December 30, 2000 and January 1, 2000, respectively, have been reclassified to Accounts Payable on the Company's Consolidated Balance Sheet. Accounts Receivable Accounts receivable principally include amounts due from suppliers, coupon handling fees, customer returned checks, pharmacy insurance programs and sublease tenants. Amounts due from suppliers are recognized as earned. Amounts received related to contractual purchasing commitments are deferred and recognized as a reduction to cost of goods sold over the period of the purchasing commitment. F-15 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Inventories Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first out (LIFO) method comprised approximately 83% of inventories, in both 2000 and 1999, respectively. Meat, produce, deli and bakery inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method were used entirely, inventories would have been $141.9 million and $142.9 million greater in 2000 and 1999, respectively. Application of the LIFO method resulted in a decrease in the cost of goods sold of $1.0 million in 2000, with increases of $3.8 million and $24.7 million for 1999 and 1998, respectively. Property and Equipment Property is stated at historical cost and depreciated on a straight-line basis over the estimated service lives of assets, generally as follows: Buildings................................................... 40 years Furniture, fixtures and equipment........................... 3-14 years Leasehold improvements...................................... 8 years Vehicles.................................................... 7-10 years Property under capital leases............................... Lease term Intangible Assets Intangible assets primarily include goodwill, trademarks and favorable lease rights, all of which have been acquired in conjunction with acquisitions accounted for under the purchase method of accounting. Intangible assets are amortized on a straight-line basis over the estimated useful lives. The following table summarizes the useful lives: Goodwill.................................................... 20 or 40 years Trademarks.................................................. 40 years Distribution network........................................ 40 years Workforce................................................... 2-13 years Favorable lease rights...................................... Lease term Prescription files.......................................... 15 years
Impairment of Long-Lived Assets The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company monitors the carrying value of its long-lived assets, including intangible assets, for potential impairment based on projected undiscounted cash flows. If impairment is identified for long-lived assets other than real property, the Company compares the asset's future discounted cash flows to its current carrying value and records 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 the Company's 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, reduced by estimated direct costs of disposal. The carrying value of assets to be disposed amounted to approximately $36.6 million, $18.6 million and $21.0 million at December 30, 2000, January 1, 2000 and January 2, 1999, respectively. The pre-tax charge included in the income statement for asset impairment amounts to $27.0 million, $1.5 million, and $3.5 million for 2000, 1999, and 1998, respectively. The fiscal 2000 impairment loss included $15.7 million attributable to certain under-performing store assets as reported in the Company's third quarter F-16 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) based on discounted future cash flows associated with those store assets. The other impairment charges in each of the three fiscal years related principally to write-down of leasehold improvements and idle equipment from closed stores. Deferred Income Taxes Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. Revenue Recognition Revenues from the sale of products to the Company's customers are recognized at the point of sale. The Company offers loyalty cards to its Food Lion and Kash n' Karry customers. Merchandise price reductions from the regular retail price are given at the point of sale to customers presenting a loyalty card. The discounts given at the point of sale are recognized as a reduction in sales as products are sold. Funding from suppliers for these discounts, if available, is recognized at the time the related products are sold and is recorded as a reduction of cost of sales. Cost of Goods Sold Purchases are recorded net of cash discounts and other supplier discounts. Cost of goods sold includes warehousing, distribution, and advertising costs. Advertising Costs Advertising costs are expensed as incurred and included in cost of goods sold. The Company recognizes co-operative advertising income received from suppliers as a reduction of advertising expense in the period in which the related expense occurs. The Company recorded advertising expense of $79.2 million in 2000, $67.3 million in 1999 and $67.0 million in 1998. Capitalized Interest The Company capitalizes interest costs incurred to bring certain assets to their intended use. Capitalized interest was $3.4 million in 2000, $2.8 million in 1999 and $2.4 million in 1998. Store Opening Costs Costs associated with the opening of new stores are expensed as incurred. Store Closing Costs Plans related to store closings are completed within one year of making the decision to close, and the Company generally intends to actually complete the closings within a one-year period following the business decision to close. As most of the Company's stores are located in leased facilities, a lease liability (recorded in Other Liabilities in the Consolidated Balance Sheet) is recorded for the present value of the estimated remaining non-cancelable lease payments after the closing date, net of estimated subtenant income. In addition, the Company records a liability for expenditures to be incurred after the store closing which are required under F-17 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) leases or local ordinances for site preservation during the period before lease termination or sale of the property. These other exit costs include estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes. The value of owned property and equipment related to a closed store is reduced to reflect recoverable values based on the Company's previous efforts to dispose of similar assets and current economic conditions. Any reductions in the recorded value of owned property and equipment for closed stores is reflected as an asset impairment charge. The Company discontinues depreciation on owned property and equipment for closed stores at the date of closing. Disposition efforts related to store leases and owned property begins immediately following the store closing. Inventory write-downs, if any, in connection with store closings, are classified in cost of sales. Costs to transfer inventory and equipment from closed stores are expensed as incurred. Severance costs are rarely incurred in connection with store closings. Store closing liabilities are reviewed quarterly to ensure that any accrued amount that is no longer needed for its originally intended purpose is reversed to income in a timely manner. Significant cash outflows associated with closed stores relate to ongoing lease payments. Because closed store leases are classified consistently with capital leases, the principal portion of lease payments reduces the lease liability, while the interest portion of the lease payment is recorded as interest expense in the current period. Self Insurance The Company is self-insured for workers' compensation, general liability and vehicle accident claims. The self-insurance liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Maximum self-insured retention, including defense costs per occurrence, is $500,000 per individual claim for workers' compensation, automobile liability and general liability. The Company is insured for covered costs, including defense costs, in excess of these limits. Self insurance expense related to the above totaled $43.8 million in 2000, $32.0 million in 1999, and $34.2 million in 1998. Total claim payments were $37.3 million in 2000, $32.9 million in 1999, and $31.2 million in 1998. Statements of Cash Flows Selected cash payments and non-cash activities were as follows:
2000 1999 1998 ---------- -------- -------- (Dollars in thousands) Cash payments for income taxes.................... $ 129,582 $175,816 $127,352 Cash payments for interest, net of amounts capitalized...................................... 199,072 103,717 103,820 Non-cash investing and financing activities: Capitalized lease obligations incurred for store properties and equipment....................... 98,215 43,173 62,608 Capitalized lease obligations terminated for store properties and equipment................. 16,244 32,436 36,191 Conversion of long term debt to stock........... -- -- 110,445 Acquisition of Hannaford: Fair value of assets acquired................... 4,079,087 -- -- Cash paid....................................... 2,637,870 -- -- Stock consideration and options given in acquisition.................................... 698,230 -- -- Liabilities assumed............................. 743,087 -- --
F-18 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Fair Value of Financial Instruments Accounting principles generally accepted in the United States require the disclosure of the fair value of certain financial instruments where estimates of fair value are practicable. Significant judgment is required to develop estimates of fair value. Estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Fair values stated are as of year-end and may differ significantly from current estimates. Cash and cash equivalents and short-term borrowings: The carrying amount of these items approximates fair value. Long-term debt: At December 30, 2000 and January 1, 2000, the Company estimated that the fair value of its long-term debt was approximately $555.0 million and $413.6 million, respectively. The fair value of the Company's long- term debt is estimated based on the current rates offered to the Company for debt with the same remaining maturities. Off-balance sheet instruments: The fair value of interest rate hedging agreements (See Note 7) is estimated using the present value of the difference between the contracted rates and the applicable forward rates. At December 30, 2000, the net unrealized loss on such agreements was approximately $197.6 million before taxes. Reclassification Certain financial statement items previously reported have been reclassified to conform to the current year's format. F-19 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Recently Issued Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 133, as amended, requires entities to report all derivatives as assets or liabilities in their statements of financial position at fair value. Adoption of SFAS No. 133 is required beginning in the first quarter of fiscal 2001. If the Company had adopted SFAS No. 133 early, an unrealized loss associated with the interest rate hedge on the Company's anticipated debt offering in the amount of approximately $122.5 million, net of tax, would have been recognized as other comprehensive loss in the Company's Statement of Shareholders' Equity at December 30, 2000. 2. Acquisition On July 31, 2000, the Company completed its acquisition of Hannaford Bros. Co. ("Hannaford"), a Maine-based supermarket retailer, in a cash and stock transaction totaling $3.5 billion. The Company began including the results of operations of Hannaford prospectively from July 31, 2000. As consideration for the merger, the Company paid cash of approximately $2.772 billion, and issued 25.6 million shares of the Company's Class A Common Stock having an aggregate value of approximately $658.3 million. The Company also issued fully vested options with an estimated fair value of $39.9 million in exchange for options held by Hannaford employees. Additional direct costs incurred in connection with the acquisition, principally investment banking, legal, and other professional fees, in the amount of $22.1 million have been included in the purchase price allocation. The Hannaford acquisition was accounted for using the purchase method of accounting. The purchase price is allocated to acquired assets and liabilities based on their estimated fair values at the date of the acquisition, and any excess is allocated to goodwill. Allocation of the purchase price is subject to revision, which is not expected to be material, based on the final determination of fair value of certain acquired assets and liabilities related principally to closed store properties. The acquisition resulted in goodwill of approximately $2.6 billion, which will be amortized over 40 years. The net purchase price was initially allocated as follows:
(Dollars in thousands) ---------- Current assets................................................. $ 401,776 Property and equipment......................................... 746,171 Goodwill....................................................... 2,575,103 Identified intangible and other non-current assets............. 512,617 Current liabilities............................................ (324,197) Non-current liabilities........................................ (418,890) ---------- Purchase price................................................. $3,492,580 ==========
The following table reflects the results of operations on a pro forma basis as if the acquisition had been completed as of the beginning of the fiscal years presented. This pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the dates indicated, nor are they necessarily indicative of future operating results. These unaudited pro forma results do not include any anticipated cost savings or other effects of the merger on operations.
2000 1999 ----------- ----------- (Dollars in thousands) Net sales......................................... $14,303,066 $13,653,940 Net income........................................ 80,353 210,377
F-20 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Property and Equipment Property and equipment consists of the following:
2000 1999 ---------- ---------- (Dollars in thousands) Land and improvements............................... $ 267,000 $ 107,811 Buildings........................................... 599,276 395,168 Furniture, fixtures and equipment................... 1,817,342 1,484,898 Vehicles............................................ 126,679 98,863 Leasehold improvements.............................. 852,531 602,105 Construction in progress............................ 47,146 57,307 ---------- ---------- 3,709,974 2,746,152 Less accumulated depreciation....................... 1,401,300 1,149,260 ---------- ---------- 2,308,674 1,596,892 ---------- ---------- Property under capital leases....................... 718,709 588,038 Less accumulated depreciation....................... 202,142 145,361 ---------- ---------- 516,567 442,677 ---------- ---------- $2,825,241 $2,039,569 ========== ========== Depreciation expense totaled $327.6 million, $248.9 million and $226.0 million for 2000, 1999 and 1998, respectively. At December 30, 2000 and January 1, 2000, the Company had $36.6 million and $18.6 million (net book value), respectively, in property held for sale. 4. Intangible Assets Intangible assets are comprised of the following: 2000 1999 ---------- ---------- (Dollars in thousands) Goodwill............................................ $2,794,964 $ 207,901 Trademarks.......................................... 287,000 58,000 Distribution network................................ 123,000 -- Workforce........................................... 61,000 -- Favorable lease rights.............................. 55,797 17,750 Prescription files.................................. 28,000 -- ---------- ---------- 3,349,761 283,651 Less accumulated amortization....................... 74,043 29,375 ---------- ---------- $3,275,718 $ 254,276 ========== ==========
5. Accrued Expenses Accrued expenses consist of the following:
2000 1999 -------- -------- (Dollars in thousands) Payroll and compensated absences............................................... $101,934 $ 75,061 Employee benefit plan................................... 84,431 114,875 Accrued interest........................................ 33,205 15,080 Closed store liabilities--current....................... 32,898 9,900 Other................................................... 87,369 89,546 -------- -------- $339,837 $304,462 ======== ========
F-21 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Employee Benefit Plan The Company has a non-contributory retirement plan covering all employees at Food Lion and Kash n' Karry with one or more years of service. Employees' benefits under the plan become vested after five years of consecutive service. Forfeitures of the plan are used to off-set plan expenses. The plan provides benefits to participants upon death, retirement or termination of employment with the Company. Contributions to the retirement plan are determined by the Company's Board of Directors. Expense related to the plan totaled $81.2 million in 2000, $108.8 million in 1999 and $94.9 million in 1998. Hannaford maintains a non-contributory, defined benefit pension plan covering approximately 50% of its employees. The plan provides for payment of retirement benefits on the basis of employees' length of service and earnings. The Company's policy is to fund the plan based upon legal requirements and tax regulations. Plan assets consist of common stocks, cash and cash equivalents and fixed income investments. Hannaford provides a defined contribution 401(k) plan to substantially all employees. The amount charged to expense for this plan in fiscal 2000 from the acquisition date through December 30, 2000 was approximately $2.3 million. The following table sets forth the change in plans' benefit obligations and assets as well as the plans' funded status reconciled with the amounts shown in the Company's financial statements for the Hannaford non-contributory, defined benefit pension plan from the acquisition date to December 30, 2000.
2000 ---------- (Dollars in thousands) Change in benefit obligation: Benefit obligation at acquisition............................. $ 94,574 Service cost.................................................. 1,754 Interest cost................................................. 2,912 Actuarial loss (gain)......................................... (63) Benefits paid................................................. (6,008) -------- Benefit obligation at end of year............................. $ 93,169 -------- Change in plan assets: Fair value of plan assets at acquisition...................... $106,286 Actual return on plan assets.................................. 1,463 Employer contribution......................................... 371 Benefits paid................................................. (6,008) -------- Fair value of plan assets at end of year...................... $102,112 -------- Funded status................................................... $8,943 Unrecognized transition obligation (asset).................... -- Unrecognized prior service cost............................... -- Unrecognized net actuarial loss............................... 3,014 -------- Prepaid (accrued) benefit cost................................ $ 11,957 ========
F-22 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of net periodic pension costs for the Hannaford plans from the acquisition date to December 30, 2000 were as follows:
2000 ---------- (Dollars in thousands) Components of net periodic pension cost: Service cost................................................ $ 1,754 Interest expense............................................ 2,912 Expected return on plan assets.............................. (4,568) ------- $ 98 ======= Weighted-average assumptions as of September 30, 2000 (the plan's measurement date): Discount rate............................................... 7.50% Expected return on plan assets.............................. 10.50% Rate of compensation increase............................... 4.50%
7. Long-Term Debt Long-term debt consists of the following:
2000 1999 -------- -------- (Dollars in thousands) Medium-term notes, due from 2001 to 2006. Interest ranges from 8.40% to 8.73%............................ $122,300 $123,300 Debt securities, 7.55%, due 2007....................... 150,000 150,000 Debt securities, 8.05%, due 2027....................... 150,000 150,000 Medium-term notes, due from 2001 to 2017. Interest ranges from 6.16% to 14.15%........................... 106,659 -- Mortgage payables due from 2001 to 2011. Interest ranges from 7.55% to 10.35%........................... 42,912 -- Mortgage payables due from 2001 to 2011. Interest ranges from 7.50% to 9.30%............................ 4,630 5,148 Other.................................................. 4,935 1,316 -------- -------- 581,436 429,764 Less current portion................................... 126,196 2,834 -------- -------- $455,240 $426,930 ======== ========
At December 30, 2000, $84.4 million (net book value) in property was pledged as collateral for mortgage payables. Approximate maturities of long-term debt in the years 2001 through 2005 are $126.2, $18.5, $28.6, $13.4, and $14.4 million, respectively. The Company entered into agreements to hedge against a potential increase in interest rates prior to the planned future bond issues related to the acquisition of Hannaford Bros. Co. (See Note 2). The agreements are 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 planned debt issue. The notional amount of the agreements totals $1.75 billion. The Company believes the issuance of the debt is probable, and the contractual interest rates in the agreements are highly correlated with the expected interest rates to be incurred on the debt. F-23 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In October 2000, the Company entered into related agreements to limit the amount of any unrealized loss associated with future interest rate reduction. The Company paid $19.8 million as consideration for these agreements which is being amortized to expense over the period of the contract through March 2001. The agreements will be settled upon issuance of the debt. Upon settlement of the agreements, the realized gain or loss to be paid or received by the Company will be amortized as interest expense over the life of the underlying debt. At December 30, 2000, the unrealized loss related to these agreements was $197.6 million before taxes. At January 1, 2000, the unrealized gain related to these agreements was $7.2 million before taxes. The Company is subject to risk of nonperformance by the counterparties to the agreement. The Company regularly monitors the creditworthiness of the counterparties and does not anticipate nonperformance by the counterparties, who are major US financial institutions. 8. Credit Arrangements The Company maintains two revolving credit facilities with a syndicate of commercial banks providing $1.0 billion in committed lines of credit, of which $500.0 million will expire in November 2001 and the remaining $500.0 million in July 2005. As of December 30, 2000, the Company had $285.0 million in outstanding borrowings. During 2000, the Company had average borrowings of $190.7 million at a daily weighted average interest rate of 7.95%. There were borrowings of $205.0 million outstanding at January 1, 2000. The Company obtained, in connection with the Hannaford acquisition, a 364- day term loan facility providing $2.5 billion that expires in July 2001. As of December 30, 2000, the Company had $2.4 billion in outstanding borrowings under this facility bearing interest at a rate of 8.1875%. During 2000, the Company had average borrowings of $1.0 billion at a daily weighted average interest rate of 8.07%. The Company paid fees for this term loan facility of $29.5 million which are being amortized to expense over the expected outstanding term. The related expense in 2000 is classified in Merger Expense in the Company's Consolidated Statements of Income. The Company plans to refinance this term loan through a long-term debt offering to occur in early 2001. In addition, the Company has periodic short-term borrowings under other informal arrangements. Outstanding borrowings under these arrangements were $40.0 million at December 30, 2000 at an average interest rate of 7.58% and $77.0 million at January 1, 2000 at an average interest rate of 6.37%. F-24 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Leases The Company's stores operate principally in leased premises. Lease terms for open stores generally range from 10 to 25 years with renewal options ranging from five to 20 years. The average remaining lease term for closed stores is 8.9 years. The following schedule shows, as of December 30, 2000, the future minimum lease payments under capital and operating leases.
Operating Leases ------------------------ Capital Open Leases Stores Closed Stores ------- ------ ------------- (Dollars in thousands) 2001.................................. $ 103,554 $ 196,277 $ 28,971 2002.................................. 103,652 197,856 25,712 2003.................................. 103,221 193,840 25,622 2004.................................. 102,088 189,677 24,800 2005.................................. 101,340 185,765 23,811 Thereafter............................ 918,310 1,663,102 153,053 --------- ---------- -------- Total minimum payments.............. 1,432,165 $2,626,517 $281,969 Less estimated executory costs........ 42,954 --------- Net minimum lease payments............ 1,389,211 Less amount representing interest..... 758,117 --------- Present value of net minimum lease payments............................. $ 631,094 =========
Minimum payments have not been reduced by minimum sublease income of $53.2 million due over the term of non-cancelable subleases. The Company recognizes rent expense for operating leases with step rent provisions on a straight-line basis over the minimum lease term. Total rent payments (net of sublease income) under operating leases for open and closed stores are as follows:
2000 1999 1998 ---- ---- ---- (Dollars in thousands) Minimum rents.................................. $195,584 $169,954 $172,481 Contingent rents, based on sales............... 251 101 255 -------- -------- -------- $195,835 $170,055 $172,736 ======== ======== ========
In addition, the Company has signed lease agreements for additional store facilities, the construction of which were not complete at December 30, 2000. The leases expire on various dates extending to 2025 with renewal options generally ranging from 10 to 20 years. Total future minimum rents under these agreements are approximately $374.5 million. F-25 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Closed Store Liabilities The following table is presented to show the number of stores closed and planned to be closed at the end of each year, along with the number of stores committed for closure during the year, the number of stores closed, the number of closed stores acquired and the number of stores sold or for which the lease was terminated.
Planned Closed Closings Total ------ -------- ----- As of January 3, 1998..................................... 179 24 203 Stores added.............................................. -- 33 33 Stores acquired........................................... 6 -- 6 Planned closings completed................................ 28 (28) -- Stores sold/lease terminated.............................. (82) -- (82) Stores not closed (Kash n' Karry)......................... -- (3) (3) --- --- --- As of January 2, 1999..................................... 131 26 157 Stores added.............................................. -- 16 16 Stores acquired........................................... 14 -- 14 Planned closings completed................................ 35 (35) -- Stores sold/lease terminated.............................. (24) -- (24) --- --- --- As of January 1, 2000..................................... 156 7 163 Stores added.............................................. -- 36 36 Stores acquired........................................... 25 1 26 Planned closings completed................................ 30 (30) -- Stores sold/lease terminated.............................. (24) -- (24) --- --- --- As of December 30, 2000................................... 187 14 201 === === ===
F-26 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table reflects closed store liabilities at each year end and activity during the year including additions to closed store liabilities charged to operations, additions for closed stores acquired in purchase transactions, adjustments to liabilities based on changes in facts and circumstances and payments made. See Note 1 for further discussion of related asset impairment provisions.
2000 1999 1998 ------ ------ ------ (dollars in millions) Balance beginning of year............................. $106.8 $113.5 $130.5 Additions charged to earnings: Store closings--lease obligations................... 33.5 13.7 12.2 Store closings--other exit costs.................... 4.6 1.7 2.8 Adjustments to prior year estimates--lease obligations........................................ 0.8 (1.0) 1.1 Adjustments to prior year estimates--other exit costs.............................................. 3.9 -- (1.0) Reserves reversed to income......................... -- (1.8) (0.8) ------ ------ ------ Total charge to earnings.......................... 42.8 12.6 14.3 ------ ------ ------ Reductions: Lease payments made................................. (11.0) (8.2) (7.2) Lease termination payments.......................... (3.4) (10.5) (15.5) Payments for other exit costs....................... (6.0) (3.8) (4.8) ------ ------ ------ Total reductions.................................. (20.4) (22.5) (27.5) ------ ------ ------ Closed store liabilities associated with purchase transactions: Lease obligations................................... 39.8 2.4 2.8 Other exit costs.................................... 19.9 0.8 0.6 Adjustment to goodwill.............................. (3.7) -- (7.2) ------ ------ ------ Total acquired liabilities........................ 56.0 3.2 (3.8) ------ ------ ------ Balance at end of year................................ $185.2 $106.8 $113.5 ====== ====== ======
The fiscal 2000 end of year balance of $185.2 million is comprised of lease liabilities and exit cost liabilities of $152.3 million and $32.9 million, respectively. The fiscal 1999 balance of $106.8 million is comprised of $96.9 million and $9.9 million, respectively, and the fiscal 1998 balance of $113.5 million consisted of $102.3 million and $11.2 million, respectively, and the fiscal 1998 opening balance is comprised of $116.9 million and $13.6 million, respectively. The Company provided for closed store liabilities in each of the fiscal years presented above relating to the estimated post-closing lease liabilities and related other exit costs associated with the store closing commitments reflected in the above table. These other exit costs include estimated real estate taxes, common area maintenance, insurance and utility costs to be incurred after the store closes. Adjustments to closed store liabilities and other exit costs primarily relate to changes in subtenants and actual exit costs differing 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. The Company uses a discount rate based on the current treasury note rates to calculate the present value of the remaining rent payments on closed stores. During fiscal 2000, the Company recorded additions to closed store liabilities of $59.7 million related to 26 store properties acquired, or for which the lease was assumed, in the Hannaford acquisition. All but one of the 26 stores included in the reserve had been closed prior to the acquisition date. The remaining activities associated with exiting these stores are to maintain the store under the leasehold requirements, to dispose of any owned property and equipment and to settle the remaining lease obligations. The acquired Hannaford liabilities for closed stores include $39.8 million related to the present value of future unrecoverable lease F-27 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) liabilities with remaining non-cancelable terms ranging from 3 to 22 years. Other accrued exit cost are approximately $19.9 million for activities that are directly related to the remaining lease obligations, comprised of $10.3 million for real estate taxes, $7.9 million for property maintenance and utilities and $1.7 million for property insurance. Accrued exit costs are paid over the remaining lease term. A non-cash reduction in the amount of approximately $3.7 million was made prior to December 30, 2000, with a corresponding reduction in goodwill principally related to a lease liability that was canceled. In fiscal 1999 and 1998, the Company acquired 14 closed stores and 6 closed stores, respectively. The related lease obligations and other exit costs of $3.2 million and $3.4 million for 1999 and 1998, respectively were recorded as an addition to goodwill. In conjunction with the Kash n' Karry acquisition in late fiscal 1996, the Company identified 23 Kash n' Karry locations for closing based on either unacceptable performance or an anticipated relocation of the store. The Company closed 13 of these stores in 1998 and 4 additional stores in 1999. Based on improved operating performance in 1998, a decision was made to not close 3 of the 23 identified Kash n' Karry locations. The original estimated store-closing costs of $7.2 million related to these three stores were recognized as a reduction of goodwill in 1998. It has taken the Company an unusually longer than anticipated time to execute its Kash n' Karry store closing plan due to real estate constraints in relocating the stores. The revenues and operating results for stores closed are not material to the Company's total revenues and operating results for any of the fiscal years presented above. Future cash obligations for closed store liabilities are tied principally to the remaining non-cancelable lease payments less sublease payments to be received. See Note 9 for a summary of the gross future cash flows for closed store leased obligations. 11. Income Taxes Provisions for income taxes for 2000, 1999 and 1998 consist of the following:
Current Deferred Total -------- -------- -------- (Dollars in thousands) 2000 Federal....................................... $ 73,251 $21,215 $ 94,466 State......................................... 6,878 6,755 13,633 -------- ------- -------- $ 80,129 $27,970 $108,099 ======== ======= ======== 1999 Federal....................................... $134,195 $27,123 $161,318 State......................................... 19,828 2,993 22,821 -------- ------- -------- $154,023 $30,116 $184,139 ======== ======= ======== 1998 Federal....................................... $ 95,839 $40,199 $136,038 State......................................... 14,559 4,800 19,359 -------- ------- -------- $110,398 $44,999 $155,397 ======== ======= ========
F-28 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's effective tax rate varied from the federal statutory rate as follows:
2000 1999 1998 ---- ---- ---- Federal statutory rate................................... 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit........... 3.4 3.1 2.9 Federal refund........................................... 0.0 0.0 (1.7) Goodwill................................................. 4.2 0.4 0.4 Other.................................................... (1.6) (0.5) (0.3) ---- ---- ---- 41.0% 38.0% 36.3% ==== ==== ====
The components of deferred income tax assets and liabilities at December 30, 2000 and January 1, 2000 are as follows:
2000 1999 --------- --------- (Dollars in thousands) Current assets: Inventories........................................ $ 5,520 $ 5,233 Accrued expenses................................... 44,476 50,378 --------- --------- Total current assets................................. 49,996 55,611 --------- --------- Non-current assets/(liability): Depreciation and amortization...................... (293,813) (145,853) Leases............................................. 49,886 45,786 Provision for store closings....................... 67,771 68,116 Tax loss carryforwards............................. 42,100 18,358 Valuation allowance................................ (27,938) -- Other.............................................. 8,976 6,172 --------- --------- Total non-current assets/(liability)................. (153,018) (7,421) --------- --------- Net deferred taxes................................. $(103,022) $ 48,190 ========= =========
The valuation allowance relates to state net operating loss carryforwards generated by Hannaford in the Southeast for which realization is not considered likely. 12. Other Liabilities Other liabilities consist of the following:
2000 1999 -------- -------- (Dollars in thousands) Closed store liabilities............................. $152,342 $ 96,876 Self insurance reserves.............................. 108,311 72,424 Other................................................ 17,047 9,443 -------- -------- 277,700 178,743 Less current portion................................. 64,494 45,251 -------- -------- $213,206 $133,492 ======== ========
F-29 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Stock Options and Restricted Stock Plans (see also Note 18) The Company has a stock option plan under which options to purchase up to 9.4 million shares of Class A common stock may be granted to officers and key employees at prices equal to fair market value on the date of the grant. Options become exercisable as determined by the Stock Option Committee of the Board of Directors of the Company on the date of grant, provided that no option may be exercised more than ten years after the date of grant. A summary of shares reserved for outstanding options for the last three fiscal years, activity during each year and related weighted average exercise price is presented below:
Weighted Average Shares Exercise Price ------ ---------------- 2000 Outstanding at beginning of year............. 1,345,595 $26.60 Granted...................................... 1,751,094 21.27 Conversion of Hannaford options.............. 4,186,194 8.44 Exercised.................................... (367,326) 7.22 Forfeited/expired............................ (252,246) 22.24 --------- ------ Outstanding at end of year................... 6,663,311 13.83 --------- ------ Options exercisable at end of year........... 4,085,490 9.58 --------- ------ 1999 Outstanding at beginning of year............. 940,046 $24.63 Granted...................................... 588,353 29.12 Exercised.................................... (53,325) 22.50 Forfeited/expired............................ (129,479) 25.53 --------- ------ Outstanding at end of year................... 1,345,595 26.60 --------- ------ Options exercisable at end of year........... 93,165 25.20 --------- ------ 1998 Outstanding at beginning of year............. 1,001,863 $21.99 Granted...................................... 340,058 30.34 Exercised.................................... (247,442) 15.89 Forfeited/expired............................ (154,433) 20.40 --------- ------ Outstanding at end of year................... 940,046 24.63 --------- ------ Options exercisable at end of year........... 45,535 26.31 --------- ------
F-30 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table summarizes options outstanding and options exercisable as of December 30, 2000, and the related weighted average remaining contractual life (years) and weighted average exercise price. Options Outstanding
Weighted Average Weighted Remaining Average Range of Number Contractual Exercise exercise prices Outstanding Life Price --------------- ------------ ----------- -------- $ 4.31-$10.00 2,568,263 5.5 $ 6.81 $10.01-$20.00 2,914,958 8.3 14.82 $20.01-$37.78 1,180,090 6.8 26.68 ------------- --------- --- ------ $ 4.31-$37.78 6,663,311 6.9 $13.83 ============= ========= === ======
Options Exercisable
Weighted Range of Average exercise Number Exercise prices Exercisable Price -------- ------------ -------- $ 4.31-$10.00 2,568,263 $ 6.81 $10.01-$20.00 1,255,715 12.30 $20.01-$37.78 261,512 23.74 ------------- --------- ------ $ 4.31-$37.78 4,085,490 $ 9.58 ============= ========= ======
The weighted average fair value at date of grant for options granted during 2000, 1999, and 1998 was $6.40, $10.57, and $7.86 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions:
2000 1999 1998 ---- ---- ---- Expected dividend yield (%)................................. 3.0 1.8 1.5 Expected volatility (%)..................................... 37.0 35.0 30.0 Risk-free interest rate (%)................................. 6.3 5.4 5.6 Expected term (years)....................................... 9.0 7.5 5.0
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock options granted in 2000, 1999 or 1998. Had compensation cost been determined based on the fair value at the grant date consistent with the provisions of this statement, the Company's pro forma net earnings and earnings per share would have been as follows:
2000 1999 1998 -------- -------- -------- (Dollars in thousands) Net earnings--as reported...................... $155,486 $300,435 $272,585 Net earnings--pro forma........................ 152,692 299,687 272,144
The Company has restricted stock plans for executive employees. These shares of stock will vest over five years from the grant dates. The weighted average grant date fair value for these shares is $18.91, $27.17 and $24.42 for 2000, 1999 and 1998, respectively. The Company recorded compensation expense related to restricted stock of $1.6 million, $0.3 million and $0.2 million in 2000, 1999 and 1998, respectively. F-31 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A summary of shares reserved for outstanding restricted stock grants for the last three fiscal years and activity during each year is presented below:
Shares ------- 2000 Outstanding at beginning of year............................... 160,048 Granted........................................................ 436,698 Exercised...................................................... (76,686) Forfeited/expired.............................................. (3,519) ------- Outstanding at end of year..................................... 516,541 ======= 1999 Outstanding at beginning of year............................... 141,059 Granted........................................................ 62,317 Exercised...................................................... (28,168) Forfeited/expired.............................................. (15,160) ------- Outstanding at end of year..................................... 160,048 ======= 1998 Outstanding at beginning of year............................... 105,734 Granted........................................................ 53,848 Exercised...................................................... (9,603) Forfeited/expired.............................................. (8,920) ------- Outstanding at end of year..................................... 141,059 =======
As of December 30, 2000, there were 7,243,944 shares of Class A common stock available for future grants. 14. Common Stock (see also Note 18) On December 30, 2000, approximately 25.9% and 11.3% of the issued and outstanding Class A non-voting common stock and 28.3% and 28.0% of the issued and outstanding Class B voting common stock was held, respectively, by Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize Group") and Delhaize The Lion America, Inc. ("Detla"), a wholly owned subsidiary of Delhaize. In the aggregate, Delhaize Group and Detla owned approximately 56.3% of the Class B voting common stock and 37.2% of the Class A non-voting common stock. The Delhaize Group and Delhaize America have announced an agreement for a share exchange pursuant to which Delhaize Group, through its ownership interests held in Delhaize and Detla, will exchange each outstanding share of Delhaize America common stock not currently held by Delhaize Group for 0.4 shares of Delhaize Group. The transaction is expected to be consummated in the second quarter of 2001. Holders of Class B common stock are entitled to one vote for each share of Class B common stock held, while holders of Class A common stock are not entitled to vote except as required by law. The Board of Directors of the Company may declare dividends with respect to Class A common stock without declaring and paying any dividends with respect to the Class B common stock. When dividends are declared with respect to the Class B common stock, the Board of Directors of the Company must declare a greater per share dividend to the holders of Class A common stock. F-32 DELHAIZE AMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On September 9, 1999, the Company authorized a one-for-three reverse stock split of all outstanding shares of common stock. All share and per share data have been restated to give retroactive effect to the reverse stock split. The Company repurchased shares of its outstanding common stock in fiscal 1999 and 1998. In 1999, the Company repurchased 2,759,700 shares of Class A common stock at a cost of $89.3 million and 1,636,100 shares of Class B common stock at a cost of $53.4 million. In 1998, the Company repurchased 1,028,567 shares of Class A common stock at a cost of $32.0 million and 632,333 shares of Class B common stock at a cost of $18.2 million. During 1998, the Company's convertible subordinated debentures were redeemed, principally through the conversion into shares of the Company's Class A non-voting common stock. This transaction resulted in the issuance of 4,660,000 shares of Class A non-voting common stock for an aggregate conversion value, approximating the carrying value of the debentures, of $110.4 million based on the original terms for such conversion. The debentures not converted were redeemed for cash in the amount of approximately $3.8 million representing the face value of the debentures and accrued interest. 15. Interest Expense Interest expense consists of the following:
2000 1999 1998 -------- -------- ------- (Dollars in thousands) Other interest (net of $3.4, $2.8 and $2.4 million capitalized in 2000, 1999 and 1998, respectively).................................... $150,423 $ 45,682 $36,560 Interest on capital leases........................ 62,634 58,138 58,774 -------- -------- ------- $213,057 $103,820 $95,334 ======== ======== =======
16. Commitments and Contingencies The Company is involved on various claims and lawsuits arising out of the normal conduct of its business. Although the ultimate outcome of these legal proceedings cannot be predicted with certainty, the Company's management believes that the resulting liability, if any, will not have a material effect upon the Company's consolidated results of operations, financial position or liquidity. 17. Related Parties On March 27, 2000, the Delhaize Group and the Company entered into an agreement (the "Shareholders Agreement") containing provisions regarding, among other things, the nomination of candidates for election to the Company's board of directors, the voting of securities beneficially owned by the parties to the Shareholders Agreement for the election of directors and the voting requirements applicable to specified actions by the board of directors. The Shareholders Agreement is effective until April 30, 2007, unless the Delhaize Group's aggregate ownership of voting shares of the Company is reduced below 10%, in which case the Shareholders Agreement would terminate at that time. The Company has entered into a joint venture with Delhaize Group regarding Bel-Thai Supermarket Co., Ltd. ("Bel-Thai"), a supermarket company based in Thailand. On January 18, 2000, the Company acquired, through a wholly-owned subsidiary, a 51% interest in Bel-Thai for approximately $3.9 million. Delhaize Group owns the remaining 49% interest in Bel-Thai. The Company subsequently contributed additional capital of approximately $5.6 million to Bel-Thai. The Company's share of Bel-Thai's operating loss for fiscal 2000 was not material to the Company's consolidated results of operations. F-33 18. Subsequent Events (unaudited) On April 25, 2001, the Company became a wholly-owned subsidiary of Delhaize Le Lion as a result of the Delhaize Le Lion share exchange. The Delhaize Le Lion share exchange was accounted for using the purchase method of accounting. Effective as of the close of the Company's April 28, 2001 fiscal period, the Company recorded adjustments to reflect the accounting basis of Delhaize Le Lion in the Company's financial statements. These adjustments principally included changes to the valuation of certain of the Company's tangible and intangible assets, net of deferred tax liabilities, with a corresponding increase in stockholders' equity in the amount of approximately $772 million. The preliminary allocation of the share exchange purchase price to the Company's assets and liabilities was based on estimates of our management, and our management does not expect the final allocation to have a material effect on our consolidated financial position or results of operations. This preliminary allocation will result in additional intangible asset and goodwill amortization prospectively. Subsequent to this transaction, the Company had no publicly traded stock; therefore, all prior presentation of earnings per share has been removed from these consolidated financial statements. Immediately prior to the share exchange mentioned above, the Company authorized a common stock dividend of 499 shares of Class A common stock for each share of the Company's Class A and Class B common stock held. In addition, upon completion of the Delhaize Le Lion share exchange, each of the Company's options to purchase common stock, whether vested or unvested, was converted into an option to purchase the number of Delhaize Group ADSs, rounded up to the nearest whole share, equal to the number of shares of the Company's Class A common stock subject to the option, multiplied by 0.40. With some exceptions, the converted options will be subject to substantially the same terms and conditions as were applicable to the converted option prior to the effective time of the share exchange. Note 13 in these consolidated financial statements includes stock option and restricted stock information prior to the stock dividend and the option conversion mentioned above. 19. Stock Dividend In connection with the stock dividend mentioned above, share data included in the Consolidated Balance Sheets and Statements of Shareholders' Equity has been restated to give effect to the stock dividend. On April 19, 2001, the Company completed the private offering of $600,000,000 7.375% notes due 2006, $1,100,000,000 8.125% notes due 2011 and $900,000,000 9.000% debentures due 2031. The proceeds of this offering were used to repay in full the $2.4 billion outstanding under our $2.5 billion term loan facility. Food Lion, LLC, Hannaford Bros. Co. and Kash n' Karry Food Stores, Inc., the Company's wholly-owned subsidiaries, are fully and unconditionally and jointly and severally guaranteeing each series of the securities issued by the Company. The Company has no independent assets or operations and the subsidiaries of the Company other than the subsidiary guarantors are minor. There are no restrictions on the ability of the Company or any subsidiary guarantor to obtain funds from its subsidiaries by dividend or loan and there are no other restricted net assets for the subsidiary guarantors. F-34 [PROSPECTUS BACK COVER PAGE] PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. Sections 55-8-50 through 55-8-58 of the revised North Carolina Business Corporation Act contain specific provisions relating to indemnification of directors and officers of North Carolina corporations. In general, the statutes provide that (i) a corporation must indemnify a director or officer who is wholly successful in his defense of a proceeding to which he is a party because of his status as such, unless limited by the articles of incorporation and (ii) a corporation may indemnify a director or officer if he is not wholly successful in such defense, if it is determined as provided by statute that the director or officer meets a certain standard of conduct, provided when a director or officer is liable to the corporation or is adjudged liable on the basis that personal benefit was improperly received by him, the corporation may not indemnify him. A director or officer of a corporation who is a party to a proceeding also may apply to the courts for indemnification, unless the articles of incorporation provide otherwise, and the court may order indemnification under certain circumstances set forth in the statute. A corporation may, in its articles of incorporation or bylaws or by contract or resolution, provide indemnification in addition to that provided by statute, subject to certain conditions. Our bylaws provide for the indemnification of any director or officer of the company against liabilities and litigation expenses arising out of his status as such, excluding (i) any liabilities or litigation expenses relating to activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of the company and (ii) that portion of any liabilities or litigation expenses with respect to which such person is entitled to receive payment under any insurance policy other than a directors' and officers' insurance policy maintained by the company. Our articles of incorporation provide for the elimination of the personal liability of each director of the company to the fullest extent permitted by law. We maintain directors' and officers' liability insurance, under which any controlling persons, director or officer of the company is insured or indemnified against certain liabilities which he may incur in his capacity as such. Item 21. Exhibits and Financial Statement Schedules. Exhibits to be filed by amendment to this registration statement. Delhaize America agrees to furnish supplementally a copy of any omitted schedules or exhibits to the SEC upon request. Item 22. Undertakings. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (d) That, for the purpose of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act (and, where applicable, each filing of any employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 20, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a directors, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (f) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the date of the registration statement through the date of responding to the request. (g) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salisbury, State of North Carolina, on September 17, 2001. DELHAIZE AMERICA, INC. By: /s/ R. William McCanless ----------------------------------------- R. William McCanless President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Delhaize America, Inc., hereby constitute and appoint R. William McCanless and Michael R. Waller, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name place and stead, in any and all capacities, to execute any and all amendments (including post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated below.
Name Title Date ---- ----- ---- /s/ R. William McCanless President, Chief Executive ------------------------------ Officer (principal executive officer) and R. William McCanless Director September 17, 2001 /s/ Pierre-Olivier Beckers Chairman of the Board, Director September 17, 2001 ------------------------------ Pierre-Olivier Beckers /s/ Hugh G. Farrington Director September 17, 2001 ------------------------------ Hugh G. Farrington /s/ Laura C. Kendall Chief Financial Officer and Vice September 17, 2001 ------------------------------ President of Finance (principal Laura C. Kendall financial officer)
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salisbury, State of North Carolina, on September 17, 2001. FOOD LION, LLC By: /s/ R. William McCanless ----------------------------------- R. William McCanless Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned managers and officers of Food Lion, LLC hereby constitute and appoint R. William McCanless and Michael R. Waller, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name place and stead, in any and all capacities, to execute any and all amendments (including post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in- fact and agents or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated below.
Name Title Date ---- ----- ---- /s/ R. William McCanless Chief Executive ------------------------------ Officer (principal executive officer) and R. William McCanless Manager September 17, 2001 /s/ Pierre-Olivier Beckers Manager September 17, 2001 ------------------------------ Pierre-Olivier Beckers /s/ Hugh G. Farrington Manager September 17, 2001 ------------------------------ Hugh G. Farrington /s/ Laura C. Kendall Executive Vice President and Chief September 17, 2001 ------------------------------ Financial Officer (principal financial Laura C. Kendall officer)
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salisbury, State of North Carolina, on September 17, 2001. HANNAFORD BROS. CO. By: /s/ Ronald C. Hodge ------------------------------- Ronald C. Hodge Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Hannaford Bros. Co., hereby constitute and appoint Hugh G. Farrington and Michael R. Waller, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name place and stead, in any and all capacities, to execute any and all amendments (including post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated below.
Name Title Date ---- ----- ---- /s/ Ronald C. Hodge President, Chief Executive ---------------------------- Officer (principal executive officer) and September 17, 2001 Ronald C. Hodge Director /s/ Hugh G. Farrington Director September 17, 2001 ---------------------------- Hugh G. Farrington /s/ R. William McCanless Director September 17, 2001 ---------------------------- R. William McCanless /s/ Paul A. Fritzson Executive Vice President and Chief September 17, 2001 ---------------------------- Financial Officer (principal financial Paul A. Fritzson officer)
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Salisbury, State of North Carolina, on September 17, 2001. KASH N' KARRY FOOD STORES, INC. By: /s/ Michael D. Byars --------------------------- Michael D. Byars Chief Operating Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Kash n' Karry Food Stores, Inc., hereby constitute and appoint R. William McCanless and Michael R. Waller, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name place and stead, in any and all capacities, to execute any and all amendments (including post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated below.
Name Title Date ---- ----- ---- /s/ Michael D. Byars Chief Operating Officer (principal September 17, 2001 ------------------------------- executive officer) Michael D. Byars /s/ Hugh G. Farrington Director September 17, 2001 ------------------------------- Hugh G. Farrington /s/ R. William McCanless Director September 17, 2001 ------------------------------- R. William McCanless /s/ Michael R. Waller Director September 17, 2001 ------------------------------ Michael R. Waller Executive Vice President and Chief /s/ Laura C. Kendall Financial Officer of Food Lion September 17, 2001 ------------------------------ (principal financial officer) Laura C. Kendall
INDEX TO EXHIBITS ----------------- Exhibit Number Description 2 Agreement and Plan of Share Exchange dated as of November 16, 2000 between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and the Company, as amended (incorporated by reference to Exhibit 2.1 of the Registration Statement on Form F-4 of Etablissements Delhaize Freres et Cie "Le Lion" S.A. dated March 23, 2001) 3(a) Articles of Incorporation, together with all amendments thereto (through May 5, 1988)(incorporated by reference to Exhibit 3(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) (SEC File No. 0-6080) 3(b) Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated September 7, 1999) (SEC File No. 1-15275) 3(c) Bylaws of the Company effective December 31, 2000 (incorporated by reference to Exhibit 3(c) of the Company's Annual Report on Form 10-K dated March 30, 2001) 4(a) Indenture dated as of August 15, 1991, between the Company and The Bank of New York, as Trustee, providing for the issuance of an unlimited amount of debt securities in one or more series (incorporated by reference to Exhibit 4(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) (SEC File No. 0-6080) 4(b) Form of Food Lion, Inc. Medium Term Note (Global Fixed Rate) (incorporated by reference to Exhibit 4(b) of the Company's Annual Report on Form 10-K dated March 24, 1992) (SEC File No. 0-6080) 4(c) Indenture, dated as of April 15, 2001, by and among the Company, Food Lion and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated April 26, 2001). 4(d) First Supplemental Indenture, dated as of April 19, 2001, by and among the Company, Food Lion and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K dated April 26, 2001) 4(e) Second Supplemental Indenture, dated as of September 6, 2001, by and among the Company, Food Lion, Hannaford Bros., Kash n' Karry and The Bank of New York, as Trustee+ 4(f) Registration Rights Agreement, dated as of April 19, 2001, by and among the Company, Food Lion and Salomon Smith Barney, Inc., Chase Securities Inc. and Deutsche Banc Alex. Brown, in their respective capacities as initial purchasers and as representatives of the other initial purchasers (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K dated April 26, 2001) 5 Form of opinion of Akin, Gump, Strauss, Hauer & Feld, LLP regarding the validity of the securities offered hereby+ 10(a) 2000 Stock Incentive Plan of Delhaize America, Inc. dated as of March 27, 2000 (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated August 1, 2000) 10(b) Form of Deferred Compensation Agreement (incorporated by reference to Exhibit 19(b) of the Company's Report on Form 8-K dated October 27, 1986) (SEC File No. 0-6080) 10(c) Form of Salary Continuation Agreement (incorporated by reference to Exhibit 19(c) of the Company's report on Form 8-K dated October 27, 1986) (SEC File No. 0-6080) 10(d) 1994 Shareholders' Agreement dated as of September 15, 1994 among Etablissements Delhaize Freres et Cie "Le Lion" S.A., Delhaize The Lion America, Inc., and the Company (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 7, 1994) (SEC File No. 0-6080) 10(e) Proxy Agreement dated January 4, 1991, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and Delhaize The Lion, America, Inc. (incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K dated March 25, 1991) (SEC File No. 0-6080) 10(f) Retirement Agreement dated as of August 31, 2000, between the Company and Joseph C. Hall, Jr. (incorporated by reference to Exhibit 10(f) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(g) Hannaford Bros. Co. 1998 Stock Option Plan (incorporated by reference to Exhibit 10.25 of Hannaford's Annual Report on Form 10-K dated March 10, 1998) 10(h) Employment Agreement dated as of July 31, 2000 between Hugh G. Farrington and the Company (incorporated by reference to Exhibit 10(h) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(i) U.S. Distribution Agreement dated August 20, 1991, between the Company and Goldman, Sachs & Co. and Merrill Lynch & Co. relating to the sale of up to $300,000,000 in principal amount of the Company's Medium-Term Notes (incorporated by reference to Exhibit 10(p) of the Company's Annual Report on Form 10-K dated March 24, 1992) 10(j) License Agreement between the Company and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. dated January 1, 1983 (incorporated by reference to Exhibit 10(t) of the Company's Annual Report on Form 10-K dated March 31, 1994) 10(k) 1996 Employee Stock Incentive Plan of Food Lion, Inc. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(l) Key Executive Annual Incentive Bonus Plan (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(m) Profit Sharing Restoration Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(c) of the Company's 10-Q/A dated August 13, 1996) 10(n) Supplemental Executive Retirement Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(d) of the Company's 10-Q A dated August 13, 1996) 10(o) Hannaford Bros. Co. Supplemental Executive Retirement Plan, effective January 1, 1998 (incorporated by reference to Exhibit 10.8 of Hannaford's Annual Report on Form 10-K dated March 10, 2000). 10(p) Employment Agreement dated as of May 1, 2001, between R. William McCanless and the Company+ 10(q) Agreement and Plan of Merger dated as of October 31, 1996, among the Company, KK Acquisition Corp. and Kash n' Karry Food Stores, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated October 31, 1996) 10(r) Stockholders' Agreement, dated as of October 31, 1996, among the Company, KK Acquisition Corp., Kash n' Karry Food Stores, Inc. and the stockholders of Kash n' Karry Food Stores, Inc. signatory thereto (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 31, 1996) 10(s) License Agreement, dated as of June 19, 1997, among the Company, Kash n' Karry Food Stores, Inc., and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 25, 1997) 10(t) First Supplement Indenture dated as of April 21, 1997, among Food Lion Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(u) Underwriting Agreement dated as of April 16, 1997, between Food Lion, Inc. and Salomon Brothers, Inc. for itself and as representative for NationsBanc Capital Markets Inc. (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(v) Agreement and Plan of Merger dated as of August 17, 1999, among the Company, Hannaford Bros. Co. and FL Acquisition Sub, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated August 19, 1999) (SEC File No. 0-6080) 10(w) Agreement, dated as of January 4, 1998, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and the Company (incorporated by reference to 10(af) of the Company's Annual Report on Form 10-K dated April 8, 1998) (SEC File No. 0-6080) 10(x) Credit Agreement dated as of November 19, 1999, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent (incorporated by reference to 10(x)of the Company's Annual Report on Form 10-K dated March 30, 2000) (SEC File No. 1-15275) 10(y) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $2,500,000,000 364-Day Term Loan Facility (incorporated by reference to Exhibit 10(y) of the Company's Annual Report on Form 10-K dated March 30, 2000) (SEC File No. 1- 15275) 10(z) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $500,000,000 5-Year Revolving Credit Facility (incorporated by reference to 10 (z) of the Company's Annual Report on Form 10-K dated March 30, 2000) (SEC File No. 1- 15275) 10(aa) Stock Exchange Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K dated August 19, 1999) (SEC File No. 0-6080) 10(ab) Voting Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.3 of the Company's Current Report on Form 8-K dated August 19, 1999) (SEC File No. 0-6080) 10(ac) Registration Rights Agreement dated as of August 17, 1999, among the Company, Empire Company Limited, E.C.L. Investments Limited, Pension Plan for Employees of Sobeys, Inc. and Sobeys Inc. Master Trust Investment Fund (incorporated by reference to Exhibit 99.4 of the Company's Current Report on Form 8-K dated August 19, 1999) (SEC File No. 0-6080) 10(ad) Employment Agreement dated as of January 20, 2000 between the Company and Robert J. Brunory (incorporated by reference to Exhibit 10(ad) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(ae) Employment Agreement dated as of January 10, 2000 between the Company and Keith M. Gehl (incorporated by reference to Exhibit 10(ae) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(af) Employment Agreement dated as of March 13, 2000, between Joseph C. Hall, Jr. and Food Lion, a division of Delhaize America, Inc. (incorporated by reference to Exhibit 10 (af) of the Company's Annual Report on Form 10-K dated March 30, 2000) (SEC File No. 1-15275) 10(ag) Employment Agreement dated as of March 14, 2000, between Laura C. Kendall and Delhaize America, Inc. (incorporated by reference to Exhibit 10 (ag) of the Company's Annual Report on Form 10-K dated March 30, 2000) (SEC File No. 1-15275) 10(ah) 2000 Shareholders' Agreement dated as of March 27, 2000 among Etablissements Delhaize Freres et Cie "Le Lion" S.A., Delhaize the Lion America, Inc., and the Company (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated August 1, 2000) (SEC File No. 1-15275) 10(ai) Amendment No. 1 to the 2000 Shareholders Agreement dated as of September 14, 2000 among Etablissements Delhaize Freres et Cie "Le Lion" S.A., Delhaize America and Delhaize The Lion America, Inc. (incorporated by reference to Exhibit 10(ai) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(aj) Amendment to Credit Agreement dated as of November 19, 1999, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent (incorporated by reference to Exhibit 10(aj) of the Company's Annual Report on Form 10-K dated March 30, 2001) 10(ak) Amended and Restated Hannaford Bros. Co. Deferred Compensation Plan for Officers (incorporated by reference to Exhibit 10.1 of Hannaford's Quarterly Report on Form 10-Q dated November 7, 1997) (SEC File No. 1- 7603). 10(al) Hannaford Bros. Co. 1988 Stock Plan (incorporated by reference to Exhibit 4.5 of Hannaford's Registration Statement on Form S-8 dated June 27, 1995) (Registration No. 33-60655) 10(am) There are incorporated herein by reference (i) the Hannaford Cash Balance Plan, a copy of which was filed as Exhibit 10.3 to the Hannaford's Annual Report on Form 10-K for the fiscal year ended January 2, 1999 (SEC File No. 1-7603) and (ii) the First Amendment to the Hannaford Cash Balance Plan, a copy of which was filed as Exhibit 10.1 to the Hannaford's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1998 (SEC File No. 1-7603), and the Proposed Amendment to the Hannaford Cash Balance Plan submitted to the Internal Revenue Service for approval (incorporated by reference to Exhibit 10.4 of Hannaford's Annual Report on Form 10-K dated March 10, 2000), the Second Amendment to The Hannaford Cash Balance Plan (incorporated by reference to Exhibit 10.5 of Hannaford's Annual Report on Form 10-K dated March 10, 2000), and the Third Amendment to the Hannaford Cash Balance Plan (incorporated by reference to Exhibit 10.6 of Hannaford's Annual Report on Form 10-K dated March 10, 2000). 12 Computation of ratio of earnings to fixed charges+ 21 Subsidiaries of the Registrants+ 23 Consent of Independent Accountants+ 25 Statement of Eligibility of Trustee on Form T-1 under the Trust Indenture Act of 1939 of The Bank of New York+ 99(a) Form of Letter of Transmittal+ 99(b) Form of Notice of Guaranteed Delivery+ 99(c) Form of Exchange Agent Agreement+ 99(d) Undertaking of the Company+ ______________ + Filed herewith EX-4.(E) 3 dex4e.txt SECOND SUPPLEMENTAL INDENTURE - DATED SEPT 6, 2001 EXHIBIT 4(e) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DELHAIZE AMERICA, INC., as Issuer FOOD LION, LLC, HANNAFORD BROS. CO. and KASH N' KARRY FOOD STORES, INC., as Guarantors AND THE BANK OF NEW YORK as Trustee -------------- SECOND SUPPLEMENTAL INDENTURE Dated as of September 6, 2001 -------------- $600,000,000 7.375% Notes due 2006 $1,100,000,000 8.125% Notes due 2011 900,000,000 9.000% Debentures due 2031 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECOND SUPPLEMENTAL INDENTURE THIS SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"), dated as of September 6, 2001, among Delhaize America, Inc., a North Carolina corporation (the "Company"), Food Lion, LLC, a North Carolina limited liability company ("Food Lion"), Hannaford Bros. Co., a Maine corporation ("Hannaford"), Kash n' Karry Food Stores, Inc., a Delaware corporation ("Kash n' Karry") and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"). WHEREAS, the Company and Food Lion have previously executed and delivered to the Trustee an indenture, dated as of April 15, 2001 (the "Base Indenture"), providing for the issuance from time to time of one or more series of the Company's securities; WHEREAS, the Company, Food Lion and the Trustee have previously executed a First Supplemental Indenture to the Base Indenture, dated as of April 19, 2001 (the "First Supplemental Indenture"), creating three new series of securities of the Company: (i) 7.375% Notes due 2006, (ii) 8.125% Notes due 2011 and (iii) 9.000% Debentures due 2031; WHEREAS, pursuant to Section 15.7 of the Base Indenture, any Person (as defined in the Base Indenture) may assume the rights, duties and obligations of a Guarantor (as defined in the Base Indenture) under the Base Indenture by executing an indenture supplemental to the Base Indenture; WHEREAS, Section 9.1(2) of the Base Indenture provides that modifications and amendments to the Base Indenture may be made and one or more indentures supplemental to the Base Indenture may be entered into to evidence the addition of one or more additional Persons as a Guarantor under the Base Indenture, without the written consent of the Holders of the Securities; WHEREAS, Hannaford and Kash n' Karry each desire to become a Guarantor under the Base Indenture; and WHEREAS, all conditions precedent provided for in the Base Indenture relating to this Second Supplemental Indenture have been complied with. NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH, the Company, Food Lion, Hannaford, Kash n' Karry and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Securities: ARTICLE I --------- 1.1. Additional Guarantors. Hannaford and Kash n' Karry hereby agree to --------------------- assume the rights, duties and obligations of a Guarantor under the Base Indenture as provided for in Section 15.7 of the Base Indenture. 1.2. Mutatis Mutandis Effect. The Base Indenture is hereby amended mutatis ----------------------- mutandis to reflect the addition of each of Hannaford and Kash n' Karry as a Guarantor under the Base Indenture. ARTICLE II ---------- Miscellaneous ------------- 2.1. Counterparts. ------------ This Second Supplemental Indenture may be executed in counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 2.2. Severability. ------------ In the event that any provision of this Second Supplemental Indenture is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 2.3. Headings. -------- The article and section headings herein are for convenience only and shall not effect the construction hereof. 2.4. Successors and Assigns. ---------------------- Any agreements in this Second Supplemental Indenture by the Company, Food Lion, Hannaford and Kash n' Karry shall bind their successors and assigns, whether so expressed or not. 2.5. Governing Law. ------------- THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE DEEMED TO BE A CONTRACT UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. 2.6. Effect of Second Supplemental Indenture. --------------------------------------- Except as amended by this Second Supplemental Indenture, the terms and provisions of the Base Indenture shall remain in full force and effect. 2.7. Trustee. ------- The Trustee accepts the modifications effected by this Second Supplemental Indenture, but only upon the terms and conditions set forth in the Base Indenture. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals contained herein, which shall be taken as the statements of the Company, Food Lion, 2 Hannaford and Kash n' Karry, and the Trustee shall not be responsible or accountable in any way whatsoever for or with respect to the validity, execution or sufficiency of this Second Supplemental Indenture and the Trustee makes no representation with respect thereto. [The remaining portion of this page is intentionally left blank.] 3 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the day and year first written above. DELHAIZE AMERICA, INC. By: /s/ G. Linn Evans ------------------ Name: G. Linn Evans Title: Assistant Secretary FOOD LION, LLC By: /s/ G. Linn Evans ------------------ Name: G. Linn Evans Title: Assistant Secretary HANNAFORD BROS. CO. By: /s/ Emily Dickinson -------------------- Name: Emily Dickinson Title: Vice President KASH N' KARRY, INC. By: /s/ G. Linn Evans ------------------ Name: G. Linn Evans Title: Assistant Secretary THE BANK OF NEW YORK, as Trustee By: /s/ Julie Salovitch Miller --------------------------- Name: Julie Salovitch-Miller Title: Vice President EX-5 4 dex5.txt OPINION OF AKIN GUMP EXHIBIT 5 FORM OF OPINION OF AKIN, GUMP, STRAUSS, HAUER & FELD L.L.P. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. 590 MADISON AVENUE NEW YORK, NEW YORK 10022 (212) 872-1000 __________, 2001 Delhaize America, Inc. 2110 Executive Drive P.O. Box 1330 Salisbury, North Carolina 28145-1330 Ladies and Gentlemen: We have acted as special counsel to Delhaize America, Inc., a North Carolina corporation (the "Company"), Food Lion, LLC, a North Carolina limited liability company ("Food Lion"), Hannaford Bros. Co., a Maine corporation ("Hannaford"), and Kash n' Karry Food Stores, Inc., a Delaware corporation ("Kash n' Karry" and, together with Food Lion and Hannaford, the "Guarantors," and together with the Company, the "Registrants"), in connection with the proposed offer (the "Exchange Offer") to exchange up to $600,000,000 aggregate principal amount of the Company's 7.375% notes due 2006, $1,100,000,000 aggregate principal amount of the Company's 8.125% notes due 2011 and $900,000,000 aggregate principal amount of the Company's 9.000% debentures due 2031 (collectively, the "Old Securities") for $600,000,000 aggregate principal amount of the Company's 7.375% notes due 2006, $1,100,000,000 aggregate principal amount of the Company's 8.125% notes due 2011 and $900,000,000 aggregate principal amount of the Company's 9.000% debentures due 2031 (collectively, the "Exchange Securities"), pursuant to a registration statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"). The Exchange Securities, to be guaranteed by the Guarantors (the "Exchange Guarantees"), will be issued in three series pursuant to an Indenture dated as of April 15, 2001 by and among the Company, Food Lion, LLC and The Bank of New York, as trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of April 19, 2001 by and among the Company, Food Lion, LLC and the Trustee and a Second Supplemental Indenture dated as of September 6, 2001 by and among the Company, the Guarantors and the Trustee (collectively, the "Indenture"). We have examined originals or certified copies of such corporate records, documents, instruments and certificates of the Registrants, public officials and others as we have deemed necessary, relevant or appropriate for purposes of this letter. In such examination, we have assumed the genuineness of all signatures, the authenticity of all records, documents, instruments and certificates submitted to us as originals and the conformity to authentic original documents of all copies submitted to us as conformed, certified or reproduced copies. We have also assumed the legal capacity of natural persons, the corporate or other power of all persons signing on behalf of the parties thereto other than the Registrants, the due authorization, execution and delivery of all documents by the parties thereto other than the Registrants and that the Exchange Securities will conform to the specimens examined by us and the Trustee's certificate of authentication of the Exchange Securities will be manually signed by one of the Trustee's authorized officers. Based upon the foregoing and subject to the assumptions, exceptions, qualifications and limitations set forth hereinafter, we are of the opinion that: 1. The Exchange Securities and Exchange Guarantees have been duly authorized by the Company and the Guarantors, as applicable. 2. Assuming due authentication by the Trustee in accordance with the terms of the Indenture, the Exchange Securities and Exchange Guarantees, when issued pursuant to the Exchange Offer, will constitute valid and legally binding obligations of the Company and the Guarantors, as the case may be, enforceable in accordance with their terms, except as such enforcement is subject to any applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other law relating to or affecting creditors' rights and remedies generally and general principles of equity. The law covered by the opinions expressed herein is limited solely to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law and Limited Liability Company Act of the State of Delaware. For purposes of our opinion in paragraph 1 above with respect to the due authorization of the Exchange Securities and Exchange Guarantees by the Company, Hannaford and Food Lion, as applicable, we have assumed, with your permission, that the corporate and limited liability company laws of the States of North Carolina and Maine are identical to that of the General Corporation Law and the Limited Liability Company Act of the State of Delaware. In connection with the opinions expressed above, we have also assumed that, at or prior to the time of the delivery of the Exchange Securities and the Exchange Guarantees, (i) the board of directors or managers, as the case may be, of each of the Registrants, shall have duly established the terms of the Exchange Securities and Exchange Guarantees, as applicable, and the authorizations of issuance of the Exchange Securities and Exchange Guarantees shall not have been modified or rescinded, (ii) the Registration Statement shall have been declared effective by the Securities and Exchange Commission and such effectiveness shall not have been terminated or rescinded, (iii) there shall not have occurred any change in law affecting the validity, legally binding character or enforceability of the Exchange Securities and Exchange Guarantees and (iv) the issuance and delivery of the Exchange Securities and Exchange Guarantees, all of the terms of the Exchange Securities and Exchange Guarantees and each Registrant's performance of its respective obligations under the Exchange Securities or Exchange Guarantees, as the case may be, will comply with all applicable laws and with each requirement or restriction imposed by any court or governmental body having jurisdiction over the Registrants and will not result in a default under or a breach of any agreement or instrument then binding upon any of the Registrants. This firm is a registered limited liability partnership organized under the laws of the State of Texas. We consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the statements made with respect to us under the caption "Legal Matters" in the prospectus included as part of the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. This letter is solely for your benefit and no other persons shall be entitled to rely upon this letter. Without our prior written consent, this letter may not be quoted in whole or in part or otherwise referred to in any document and may not be furnished or otherwise disclosed to or used by any other Person, except for (i) delivery of copies hereof to counsel for the addressees hereof, (ii) inclusion of copies hereof in a closing file and (iii) use hereof in any legal proceeding arising out of the transactions contemplated by the Indenture against this law firm or in which any addressee hereof is a defendant. Very truly yours, 2 EX-10.(P) 5 dex10p.txt EMPLOYMENT AGREEMENT EXHIBIT 10(p) EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT, made as of this 1st day of May, 2001 (the "Effective Date"), between DELHAIZE AMERICA, INC., a North Carolina corporation with its principal place of business in Salisbury, North Carolina (the "Company"), and R. WILLIAM McCANLESS, an individual residing at 244 Confederate Avenue, Salisbury, North Carolina 28144 ("Mr. McCanless"), W I T N E S S E T H: WHEREAS, Mr. McCanless is currently employed by the Company as its President and Chief Executive Officer; WHEREAS, the Board of Directors of the Company recognizes that it is in the best interests of the Company and its shareholders to retain capable and experienced executive officers such as Mr. McCanless; WHEREAS, the Board of Directors recognizes that Mr. McCanless has made substantial contributions to the growth and success of the Company and desires to provide for the continuing employment of Mr. McCanless and to encourage the continued dedication and attention of Mr. McCanless to the Company; WHEREAS, Mr. McCanless is willing to continue to serve the Company; and WHEREAS, the Company and Mr. McCanless desire to enter into this Employment Agreement in order to revise the existing employment agreement of Mr. McCanless, dated April 7, 1999 (the "Prior Agreement"), in light of recent corporate changes, which Prior Agreement shall be superseded by this Agreement. NOW, THEREFORE, in consideration of the premises, and the mutual agreements herein contained, the Company and Mr. McCanless hereby agree as follows: 1. Continue to Employ. The Company hereby agrees to continue to employ ------------------ Mr. McCanless as President and Chief Executive Officer of the Company reporting directly to the President and Chief Executive Officer of Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize Group") for the Term of Employment as herein set forth. Mr. McCanless hereby agrees to continue to serve the Company as President and Chief Executive Officer for such term. During his employment hereunder, Mr. McCanless shall be entitled to a seat on the board of directors of Delhaize Group and to be a member of the Office of the Chief Executive of Delhaize Group. 2. Term of Employment. The "Term of Employment," as used herein, will ------------------ commence on the Effective Date and, unless sooner terminated as hereinafter provided, shall terminate on the fifth (5th) anniversary of such date; provided, however, that at the end of each one (1) year anniversary of the Effective Date, the Term of Employment shall automatically be extended for an additional period of one (1) year, on the terms and conditions provided herein, unless either party shall give written notice to the other party no less than one hundred eighty (180) days prior to such one year anniversary. 3. Employment During the Term. During the Term of Employment, Mr. -------------------------- McCanless shall devote his full professional time to the business of the Company, shall use his best efforts to promote the interests of the Company, and shall serve as President and Chief Executive Officer of the Company, reporting directly to the President and Chief Executive Officer of Delhaize Group, a member of the Office of the Chief Executive Officer of Delhaize Group, and a member of the board of directors of Delhaize Group. Mr. McCanless's duties and responsibilities will be commensurate with his positions and titles and not be altered to be less favorable than his duties and responsibilities with respect to the Company and Delhaize Group as in effect as of the Effective Date. By way of example and not limitation, the management processes and corporate governance of the Company and Delhaize Group, as in effect on the Effective Date (the "Governing Procedures"), shall not be modified to the detriment of Mr. McCanless. 4. Vacation. Mr. McCanless shall be entitled to annual vacations in -------- accordance with the vacation policy and practices of the Company. 5. Compensation. ------------ (a) Base Salary. As compensation for Mr. McCanless's services hereunder ----------- and for his covenants set forth in Sections 10, 11 and 12 below, the Company shall pay to Mr. McCanless a base salary which shall not be less than $735,323 per annum; provided, however, such amount shall be increased from time to time by the Board of Directors of the Company to assure that the compensation paid to Mr. McCanless under this Employment Agreement remains competitive with amounts paid to other chief executive officers in the large supermarket chain industry and reflects the performance of Mr. McCanless and the financial performance of the Company. In no event shall such annual review result in any reduction in base salary provided in this Employment Agreement. Such compensation shall be payable in accordance with the Company's payroll practices for executive employees. (b) Bonus Plans. Mr. McCanless annually shall be eligible to receive no ----------- less than forty-five percent (45%) of his base salary in the form of a bonus. The bonus shall be paid under the Company's Annual Incentive Bonus Plan ("Bonus Plan"), as it shall be administered by the Board of Directors of the Company and the relevant committees thereof, or a replacement plan, but in any case pursuant to a methodology that is no less favorable to Mr. McCanless than the methodology in effect under the Bonus Plan on April 24, 2001. In addition, Mr. McCanless shall be eligible to participate in the Company's stock option plans and other compensation plans of the Company including, without limitation, the Company's Supplemental Executive Retirement Plan ("SERP"), as they shall be administered by the Board of Directors of the Company and the relevant committees thereof, provided, however, that Mr. McCanless shall receive annual equity awards with a value of not less than the value of the aggregate equity grants awarded him in respect of calendar year 2000 (such value to be determined as of the date of grant, using reasonable assumptions and methodology), with the same weighting (restricted stock to options) as under the Company's current annual equity award programs and vesting ratably over three years in the case of options and four years in the case of restricted stock. -2- (c) Deferral Arrangement. -------------------- (i) Right to Defer. Mr. McCanless may elect to defer some or all -------------- of his bonus compensation and up to fifty percent (50%) of his base salary payable to him pursuant to this Employment Agreement. Any deferral of bonus compensation shall be irrevocable and must be requested by Mr. McCanless in writing prior to the start of the fiscal year to which such bonus relates. Any deferral of base salary shall be irrevocable and must be requested by Mr. McCanless in writing prior to the start of the fiscal year to which such salary relates. Any deferral of base compensation or bonus compensation for fiscal year 2001 shall be made in accordance with procedures established under the Prior Agreement. An election for a given fiscal year shall be deemed a continuing election for each subsequent fiscal year, unless a subsequent written election to defer (or not to defer) is provided to the Company by Mr. McCanless prior to the start of such fiscal year. (ii) Bookkeeping Account and Grantor Trust. Any amounts deferred ------------------------------------- by Mr. McCanless hereunder will be credited to a bookkeeping account established on the books and records of the Company for the purpose of accounting for the amounts deferred by Mr. McCanless. In addition, the Company will maintain in a separate, irrevocable grantor trust established by the Company an amount in cash equal to the amounts deferred by Mr. McCanless. In connection with the deferral election, Mr. McCanless shall have the right to specify the investments in which his bookkeeping account shall be deemed invested; provided, however, the Company shall be under no obligation to purchase any such investments chosen by Mr. McCanless. Mr. McCanless's bookkeeping account shall be credited to reflect all income, gains and losses of such deemed investments. The parties hereto agree that, to the extent that any investment vehicle that Mr. McCanless selects results in a loss to the bookkeeping account, the Company will have no obligation to compensate Mr. McCanless for such loss or to make any compensatory adjustment to the bookkeeping account to make up for such loss. Notwithstanding the foregoing, at no time shall Mr. McCanless's rights to any amounts deferred under this Section 5(c)(ii) be greater than those of general unsecured creditors of the Company. (iii) Distribution. The timing of the payment of all amounts ------------ deferred by Mr. McCanless shall be specified in his initial deferral election and may not be subsequently changed by Mr. McCanless without the prior written approval of the Board of Directors. The initial deferral may specify a lump sum payment of up to five (5) annual installment payments to be paid out in their entirety by no later than the sixth anniversary of the Date of Termination (as defined below); provided, however, that, notwithstanding Mr. McCanless's deferral election, all amounts will be paid to Mr. McCanless within thirty (30) days following a termination of this Employment Agreement for any reason specified in Sections 7(c) or 7(e). (d) Jump Start Options. As of April 7, 1999, the Company granted to Mr. ------------------ McCanless options to purchase 600,000 shares of Class A Common Stock of the Company, which on April 25, 2001, converted into options to purchase depositary shares represented by American Depositary Receipts of Delhaize Group ("ADRs") (the "Jump Start Options"). The option agreement governing the Jump Start Options shall be made consistent with this paragraph. The Jump Start Options shall have a term commencing on April 7, 1999, and ending on April 7, 2009 (the "Option Term") and shall entitle Mr. McCanless to purchase 80,000 ADRs, reflecting the 3:1 reverse split of the Company's common stock in 2000 and the conversion ratio provided for in the Agreement and Plan of Share Exchange dated November 16, 2000, between the Company -3- and Delhaize Group. If the closing price per share of the ADRs (as reported on the New York Stock Exchange or other nationally-recognized securities market or exchange on which such shares are traded) is $114.48 or greater for forty-five (45) consecutive trading days ending on or prior to April 7, 2002, and Mr. McCanless is employed as the President and Chief Executive Officer of the Company on such date, the Jump Start Options shall vest and be exercisable on such date and remain exercisable until April 7, 2009. If the Jump Start Options have not vested on or prior to April 7, 2002, the Jump Start Options shall automatically vest and be exercisable on April 7, 2006, provided that Mr. McCanless remains employed as the President and Chief Executive Officer of the Company on such date. The exercise price per share for the Jump Start Options shall be $50.88 (which is the closing price per share of ADRs as reported on the New York Stock Exchange on April 26, 2001). At the end of the Option Term, all unexercised Jump Start Options shall terminate and cease to be exercisable. 6. Benefits. Mr. McCanless shall be entitled to participate in all -------- health, accident, disability, medical, life and other insurance programs and other benefit and compensation plans maintained by the Company for the benefit of Mr. McCanless and/or other executive employees of the Company in accordance with the Company's policies. In addition, the Company shall maintain in full force and effect on the life of Mr. McCanless a life insurance policy subject to a split dollar arrangement in the face amount of three and one-half (3.5) times Mr. McCanless's base salary if his death occurs prior to his retirement (provided his retirement is on terms consistent with the terms of the life insurance policy and any split dollar arrangements between Mr. McCanless and the Company relating thereto ) and two (2) times Mr. McCanless's last base salary if his death occurs after any such retirement. Mr. McCanless shall be the owner of such policy with the authority to designate the beneficiary thereof. 7. Termination. Termination of Mr. McCanless's employment under any of ----------- the following circumstances shall not constitute a breach of this Employment Agreement: (a) Death. Termination upon the death of Mr. McCanless. ----- (b) Cause. Termination by the Company for "Cause" as described in this ----- Section 7(b). For purposes of this Employment Agreement, "Cause" shall mean (i) willful failure (other than by reason of incapacity due to physical or mental illness) to perform his material duties hereunder and his inability or unwillingness to correct such failure within thirty (30) days after receipt of written notice, (ii) conviction of Mr. McCanless of a felony or plea of guilty or no contest to a felony or (iii) perpetration of a material dishonest act or fraud against the Company or any affiliate thereof. The definition of "Cause" expressly excludes any mistake of fact or judgment made by Mr. McCanless in good faith with respect to the Company's business. (c) Good Reason. Termination by Mr. McCanless for "Good Reason" as ----------- described in this Section 7(c). For purposes of this Employment Agreement, "Good Reason" shall mean a material breach of this Employment Agreement by the Company or Delhaize Group. By way of example and not limitation, "Good Reason" shall include (i) a material diminution of the professional responsibilities of Mr. McCanless, (ii) assignment of inappropriate duties to Mr. McCanless, (iii) a failure by the Company or Delhaize Group to comply with the Governing Procedures, (iv) diminution of Mr. McCanless's titles, positions, board or committee memberships, (v) a change in reporting relationships or assignment of duties, responsibilities or titles materially inconsistent with Mr. McCanless's job description, (vi) failure of the Company -4- to comply with compensation and benefits obligations to Mr. McCanless, (vii) transfer of Mr. McCanless to a normal work location that is more than fifty (50) miles from Salisbury, North Carolina, (viii) the person holding the office of Chief Executive Officer of Delhaize Group on the Effective Date is replaced, unless the replacement, and any successor thereto, is approved by every member of the Delhaize Group Board, excepting Mr. McCanless, (ix) Mr. McCanless is required to travel extensively for business purposes not directly related to his essential duties as Chief Executive Officer of the Company, (x) a purported termination of this Employment Agreement by the Company other than in accordance with the terms hereof, or (xi) failure of the Company to require any successor to the Company to assume and comply with this Employment Agreement. For purposes of this Employment Agreement, a determination in good faith by Mr. McCanless of "Good Reason" shall be conclusive. An election by Mr. McCanless to terminate his employment under this Section 7(c) shall not be deemed a voluntary termination of employment by Mr. McCanless for the purpose of this Employment Agreement or any plan, arrangement or program of the Company. (d) Disability. Termination by the Company or Mr. McCanless upon ---------- Disability of Mr. McCanless. For the termination by the Company to be valid, (i) the Company must first give forty-five (45) days written Notice of Termination, as defined below (which may occur before or after the end of the 180-day period specified in the definition of Disability below), and (ii) Mr. McCanless shall not have returned to the performance of his duties hereunder on a full-time basis during such 180-day period. For purposes of this Employment Agreement, "Disability" shall mean Mr. McCanless's absence from continuous full-time employment with the Company for a period of at least 180 consecutive days by reason of a mental or physical illness. The Company shall have the right to have Mr. McCanless examined at such reasonable times by such physicians satisfactory to Mr. McCanless as the Company may designate, and Mr. McCanless will make himself available for and submit to such examination as and when requested. Except as otherwise provided in this Section 7(d), the inability of Mr. McCanless to perform his duties hereunder, whether by reason of injury, illness (physical or mental) or otherwise shall not result in the termination of Mr. McCanless's employment hereunder, and he shall be entitled to continue to receive his base salary and other benefits as provided herein. (e) Without Cause. Termination by the Company without Cause. ------------- (f) Date and Notice of Termination. Any termination of Mr. McCanless's ------------------------------ employment by the Company or by Mr. McCanless (other than termination pursuant to Section 7(a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Employment Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Employment Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Mr. McCanless's employment under the provision so indicated. "Date of Termination" shall mean (i) if Mr. McCanless's employment is terminated by his death, the date of his death, and (ii) if Mr. McCanless's employment is terminated pursuant to a Notice of Termination, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date which is finally determined to be the Date of Termination, either -5- by mutual written agreement of the parties, by a binding and final arbitration award, or by a final judgment, order, or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 8. Effect of Termination. In the event of termination of employment --------------------- as described in Section 7 hereof, the Company shall compensate Mr. McCanless as follows: (a) Death. If Mr. McCanless's employment is terminated as a result of his ----- death, as specified in Section 7(a), the Company shall pay Mr. McCanless's beneficiary the benefit called for under his Salary Continuation Agreement with the Company. Mr. McCanless's beneficiary shall accept the payment provided for in this Section 8(a) in full discharge and release of the Company of and from any further obligations under this Employment Agreement, except for any other benefits due under any applicable plan or policy of the Company (including life insurance policies and pension or similar plans), as determined under the provisions of such plans or policies. (b) Disability. If Mr. McCanless's employment is terminated by the Company ---------- or Mr. McCanless as a result of his disability as specified in Section 7(d), then the Company shall pay Mr. McCanless his full compensation until the Date of Termination. Within thirty (30) days after the termination of his employment, the Company shall pay Mr. McCanless a lump sum payment equal to fifty percent (50%) of the present value of the future base salary payable to Mr. McCanless during the remainder of his Term of Employment under this Employment Agreement or for a period of two (2) years, whichever is longer. Such lump sum amount shall be calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Internal Revenue Code of 1986 (the "Code") and the regulations thereunder, and by assuming that Mr. McCanless's annual salary in effect on the Date of Termination would continue for the remainder of the Term of Employment, or for a period of two (2) years, whichever is longer. This payment shall be in addition to any payments Mr. McCanless shall be entitled to receive under any applicable disability insurance policies maintained by the Company for Mr. McCanless. (c) Cause. If Mr. McCanless's employment is terminated for any reason ----- specified in Section 7(b) hereof, the Company shall no longer be obligated to make any payments to Mr. McCanless pursuant to this Employment Agreement, except for the full amount of his base salary and all compensation earned prior to the Date of Termination and payments pursuant to plans, programs, or arrangements, as determined under the provisions of such plans or policies. (d) Good Reason or Without Cause or in the Context of a Change of Control. --------------------------------------------------------------------- (i) If Mr. McCanless's employment is terminated: (A) by Mr. McCanless for Good Reason as specified in Section 7(c) hereof; or (B) by the Company without Cause as specified in Section 7(e), Mr. McCanless shall receive the benefits described in clause (ii) below. In addition, upon a Change of Control of the Company (as defined below) Mr. McCanless shall be entitled to terminate his employment and receive the benefits described in clause (ii) below. (ii) In the event of a termination described in clause (i), Mr. McCanless shall be provided the following: -6- (A) the Company shall pay Mr. McCanless the full amount of his base salary and other compensation earned prior to the Date of Termination; (B) Mr. McCanless shall receive payment for all of the Company's accrued obligations to him, to the extent not otherwise provided under this Subsection 8(d), including, without limitation, a pro-rata portion of his bonus through the date of termination, based on the higher of the Target Annual Bonus and the average Annual Bonuses earned in respect of the three (3) years prior to the date of termination (the "Highest Annual Bonus"), other vested benefits, and shall be fully vested in all equity incentive awards (including annual grants); (C) the Company shall pay Mr. McCanless, within thirty (30) days after the Date of Termination, a lump-sum amount equal to the sum of his base salary and the Highest Annual Bonus times five (5); (D) the Company shall maintain in full force and effect for the continued benefit of Mr. McCanless and his eligible dependents for five (5) years after the Date of Termination, the employee welfare benefit plans and programs such as medical, dental, health and life insurance in which Mr. McCanless was entitled to participate immediately prior to the Date of Termination (If Mr. McCanless's continued participation is not permitted under the general terms and provisions of any such plan or program, or applicable law, the Company shall, at its expense, provide similar or better benefits, including benefits lost due to different tax treatment, for Mr. McCanless and, if applicable, his dependents on an individual basis.); (E) Mr. McCanless shall be entitled to the greater of (I) the benefit to which he would otherwise be entitled under the SERP and (II) a lifetime annual benefit beginning at age 65 equal to sixty percent (60%) of his final average base and bonus compensation (assuming that his base and bonus compensation is equal to the highest annual compensation he earned in the five (5) years prior to the date of termination), net of the offsets provided for under the SERP; and (F) For the five (5) year period following the Date of Termination Mr. McCanless shall be paid an annual amount equal to the amounts, if any, which would have been payable to him under the Wellness Bonus Plan, the Profit Sharing Plan, and the Profit Sharing Restoration Plan (or such other plans in which Mr. McCanless was entitled to participate as of the Date of Termination) assuming Mr. McCanless had remained employed for such five (5) year period and received an annual salary at the rate in effect on his Date of Termination. (iii) For purposes of this Employment Agreement, "a Change in Control of the Company" shall be deemed to have occurred if: -7- (A) an acquisition (other than directly from Delhaize Group) by a Person (as defined below) (excluding Delhaize Group or an employee benefit plan of Delhaize Group or an entity controlled by Delhaize Group's shareholders) of twenty-five percent (25%) of the common stock or voting securities of Delhaize Group; (B) at any time during the term of this Employment Agreement there is a change in the composition of the Board of Directors of Delhaize Group resulting in a majority of the directors of Delhaize Group who are in office on the date hereof ("Incumbent Delhaize Group Directors") no longer constituting a majority of the directors of Delhaize Group; provided that, in making such determination, persons who are elected to serve as directors of Delhaize Group and who are approved by all of the directors in office on the date of such election (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Delhaize Group Directors; (C) consummation of a complete liquidation or dissolution of Delhaize Group or a merger, consolidation or sale of all or substantially all of Delhaize Group's assets (collectively, a "Business Combination") other than a Business Combination in which all or substantially all of the holders of voting securities of Delhaize Group receive sixty percent (60%) or more of the voting securities of the company or entity resulting from the Business Combination ("Resulting Company"), at least a majority of the board of directors of the Resulting Company were Incumbent Delhaize Group 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 Delhaize Group; (E) a direct or indirect sale or transfer of the voting securities of the Company following which one or more persons (other than Delhaize Group) beneficially owns fifty (50%) percent or more of the voting power of the Company; and (F) a sale or transfer of all or substantially all of the Company's assets or the liquidation or dissolution of the Company. For the purpose of this paragraph, the term "beneficially owned" shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act, the term "Person" shall have the meaning set forth in Sections 3(a)(2) and 13(d)(3) of the Exchange Act and the term "voting securities" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. 9. Business Expenses. The Company agrees that during the Term of ----------------- Employment, the Company will reimburse Mr. McCanless for actual travel and other out-of-pocket expenses reasonably incurred by him in connection with the performance of his duties hereunder and accounted for in accordance with the policies and procedures currently established by the Company. 10. No Competing Employment. Mr. McCanless agrees that, during the Term of ----------------------- Employment and for a period of two (2) years after the Date of Termination ("Restricted -8- Period"), he will not, without the written consent of the Board of Directors, engage in any retail or wholesale grocery business which is directly competitive with the business of the Company or any affiliate thereof in any geographic area in which the Company or any affiliate operates on the Date of Termination. Mr. McCanless understands and agrees that a portion of the amounts paid to him under Section 5(a) hereof is in consideration for his covenants set forth in Sections 10, 11, and 12. 11. No Solicitation. Mr. McCanless agrees that, during the Restricted --------------- Period, he will not, without the prior written consent of the Board of Directors, directly or indirectly solicit or recruit any employee or independent contractor of the Company for the purpose of being employed by Mr. McCanless, directly or indirectly, or any other person or entity on behalf of which Mr. McCanless is acting as an agent, representative or employee. Notwithstanding the above, if Mr. McCanless's employment is terminated for any reason specified in Section 7 hereof prior to the first anniversary of the date on which a Change in Control (as defined above) occurred, the covenants of Sections 10 and 11 shall not be applicable. 12. Confidentiality. Mr. McCanless agrees that, during the Term of --------------- Employment and thereafter, he will not, without the prior written consent of the Company, disclose to anyone not entitled thereto, any confidential information relating to the business, sales, financial condition, or products of the Company or any affiliate thereof. Mr. McCanless also recognizes and acknowledges that he has a common law obligation not to disclose trade secrets and other proprietary information of the Company. Mr. McCanless further agrees that, should he leave the active service of the Company, he will not take with him or retain, without the written authorization of the Board of Directors, any papers, files, or other documents or copies thereof or other confidential information of any kind belonging to the Company pertaining to its business, sales, financial condition, or products. Mr. McCanless understands and agrees that the rights and obligations set forth in this Section 12 are perpetual and, in any case, shall extend beyond the Restricted Period. 13. Injunctive Relief. Without limiting the remedies available to the ----------------- Company, Mr. McCanless acknowledges that a breach of the covenants contained in Sections 10, 11, and 12 herein may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary injunction restraining Mr. McCanless from engaging in activities prohibited by Sections 10, 11 and 12 or such other relief as may be required to specifically enforce any of the covenants in such Sections. 14. Indemnification. The Company shall indemnify and hold harmless Mr. --------------- McCanless to the fullest extent permitted under North Carolina law, including, without limitation, the provisions of Part 5 (or any successor provision) of the North Carolina Business Corporation Act, from and against all losses, claims, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees), which may, at any time, be suffered by Mr. McCanless as a result of the fact that Mr. McCanless is or was an officer of the Company, or is or was serving at the request of the Company as an officer, employee or agent of an affiliate of the Company. The expenses incurred by Mr. McCanless in any proceeding shall be paid promptly by the Company in advance of the final disposition of any proceeding at the written request of Mr. McCanless to -9- the fullest extent permitted under North Carolina law. The indemnification provision of this Section 14 shall survive the termination or expiration of this Employment Agreement. 15. Gross-Up Payment. In the event that any payments to which Mr. McCanless ---------------- becomes entitled under this Employment Agreement (the "Agreement Payments") will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to Mr. McCanless at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by Mr. McCanless (taking into account the Total Payments (as hereinafter defined) and the Gross-Up Payment), after deduction of any Excise Tax on the Total Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 15, but before deduction for any federal, state or local income tax on the Total Payments, shall be equal to the "Total Payments," as defined below. Except as otherwise provided below, the Gross-Up Payment or portion thereof provided for in this Section 15 shall be paid not later than the thirtieth (30th) day following payment of any amounts under the Employment Agreement that will be subject to the Excise Tax; provided, however, that if the amount of such Gross-Up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under the Employment Agreement that will be subject to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Mr. McCanless, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments, accruals, vestings or other compensatory benefits received or to be received by Mr. McCanless in connection with a Change in Control of the Company or the termination of Mr. McCanless's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company's independent auditors, such other payments or benefits (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Payments and (b) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. -10- For purposes of determining the amount of the Gross-Up Payment, Mr. McCanless shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, Mr. McCanless shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid) if such repayment results in a reduction in Excise Tax and/or a federal, state, and local income tax deduction, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including, by reason of any payment, the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 16. Vesting. Upon a Change in Control of the Company or if Mr. McCanless's ------- employment is terminated for reasons specified in Sections 7(a), 7(c), 7(d) or 7(e) hereof, all of the rights granted to Mr. McCanless by the Company to own or acquire stock of the Company (including, without limitation, stock options and restricted stock granted under the Company's Stock Option Plan and including, subject to the last sentence of this Section 16, the Jump Start Options) shall automatically vest upon the date of such Change in Control or Date of Termination, respectively, without the need for further action or consent by the Company. For purposes of the preceding sentence, "Change in Control of the Company" shall have the meaning set forth in Section 8(d)(iii) hereof. Notwithstanding anything herein to the contrary, if the Jump Start Options have not vested by April 7, 2002, the Jump Start Options shall not vest for any reason, including, without limitation, a Change in Control of the Company or a termination of Mr. McCanless's employment (pursuant to Sections 7(a), 7(c), 7(d) or 7(e) hereof or otherwise) prior to April 7, 2006. 17. Legal Expenses. The Company shall reimburse Mr. McCanless for all -------------- reasonable legal fees incurred in a successful effort to establish entitlement to compensation and benefits under this Employment Agreement. 18. Mitigation. The Company recognizes that Mr. McCanless has no duty to ---------- mitigate the amounts due to him upon termination of this Employment Agreement, and the obligations of the Company will not be diminished in the event Mr. McCanless is employed by another employer after the termination of his employment with the Company. 19. Successors. This Employment Agreement shall inure to the benefit of and ---------- be binding upon the Company and its successors and assigns and upon Mr. McCanless and his legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Employment Agreement in the -11- same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 20. Amendments. This Employment Agreement, which contains the entire ---------- contractual understanding between the parties, may not be changed orally but only by a written instrument signed by the parties hereto. 21. Governing Law. This Employment Agreement shall be governed by and ------------- construed in accordance with the laws of the State of North Carolina. 22. Waiver. The waiver of breach of any term or condition of this ------ Employment Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 23. Severability. In the event that any provision or portion of this ------------ Employment Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Employment Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent provided by law. 24. Notices. Any notices or other communications required or permitted ------- hereunder shall be deemed sufficiently given if sent by registered mail, postage prepaid, as follows: (a) If to Mr. McCanless: R. William McCanless 244 Confederate Avenue Salisbury, North Carolina 28144 (b) If to the Company: Delhaize America, Inc. Post Office Box 1330 2110 Executive Drive Salisbury, North Carolina 28145-1330 Attention: Secretary with a copy to: J. Steven Patterson, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Avenue, N.W. Suite 400 Washington, D.C. 20036 or to such other address as shall have been specified in writing by either party to the other. Any such notice or communication shall be deemed to have been given on the second (2nd) day (excluding any days U.S. Post Offices are not open) after the date so mailed. -12- IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized representative, and Mr. McCanless has hereunto set his hand as of the date first above written. DELHAIZE AMERICA, INC. By: /s/ William G. Ferguson ----------------------- William G. Ferguson Chairman, Senior Management Compensation Committee By: /s/ Pierre-Olivier Beckers -------------------------- Pierre-Olivier Beckers Chairman, Board of Directors of Delhaize America, Inc. /s/ R. William McCanless ------------------------ R. William McCanless -13- EX-12 6 dex12.txt COMPUTATION OF RATION EXHIBIT 12 Fixed Charge & Pretax Earnings Calculation For SEC Ratio of Earnings to Fixed Charges
-------------------------------------------------------------------------------------------------------- Successor Predecessor -------------------------------------------------------------------------------------------------------- Period from Apr 29, 2001 Period from Dec 31, 2000 to Jun 30, 2001 to Apr 28, 2001 Jun 17, 2000 Dec 30, 2000 Jan 1, 2000 Jan 2, 1999 -------------------------------------------------------------------------------------------------------- Interest Expense 63,636 108,362 55,374 213,057 103,820 95,334 Capitalized Interest 493 1,018 1,398 3,421 2,763 2,372 Amort of Debt Expense/ Premium 58 93 139 302 316 1,885 1/3 Operating Leases 12,835 24,806 32,102 65,195 56,651 57,494 ------------------------------------------------------------------------------------------------------- Fixed Charges 77,022 134,279 89,013 281,974 163,550 157,085 Pre-tax Income 68,761 63,749 201,065 263,585 484,574 427,982 Fixed Charges 77,022 134,279 89,013 281,974 163,550 157,085 Capitalized Interest (493) (1,018) (1,398) (3,421) (2,763) (2,372) ------------------------------------------------------------------------------------------------------- Earnings (for Ratio Calc) 145,290 197,010 288,680 542,139 645,361 582,695 Ratio 1.89 1.47 3.24 1.92 3.95 3.71
EX-21 7 dex21.txt SUBSIDIARIES OF THE REGISTRANTS EXHIBIT 21 Subsidiaries State of Incorporation ------------ ---------------------- Food Lion, LLC North Carolina Kash n' Karry Food Stores, Inc. Delaware Risk Management Services, Inc. North Carolina FL Food Lion, Inc. Florida Food Lion (Thailand), Inc. Delaware Delhaize Insurance Co. Vermont Hannaford Bros. Co. Maine Athenian Real Estate Development, Virginia Inc.(1) Hannbro Company(1) Maine Boney Wilson & Sons, Inc.(2) North Carolina Hannaford Licensing Corp.(2) Maine Hannaford Procurement Corp.(2) Maine Hannaford Trucking Company(2) Maine Martin's Foods of 'South Burlington, Vermont Inc.(2) Progressive Distributors, Inc.(2) Maine Shop n' Save-Mass., Inc. Massachusetts _____________ (1) Corporation is wholly-owned by Hannaford Bros. Co. (2) Corporation is wholly-owned by Hannbro Company EX-23 8 dex23.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the use in this Registration Statement on Form S-4 of Delhaize America, Inc. of our report dated February 6, 2001, except for the information included in Note 19, for which the date is April 25, 2001, relating to the financial statements of Delhaize America, Inc., which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Charlotte, NC September 17, 2001 EX-25 9 dex25.txt FORM T-1 EXHIBIT 25 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [_] --------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) --------- DELHAIZE AMERICA, INC. (Exact name of obligor as specified in its charter) North Carolina 56-0660192 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) FOOD LION, LLC (Exact name of obligor as specified in its charter) North Carolina (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) HANNAFORD BROS. CO. (Exact name of obligor as specified in its charter) Maine 01-0345166 and 01-0345516 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) KASH N' KARRY FOOD STORES, INC. (Exact name of obligor as specified in its charter) Delaware 95-4161591 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2110 Executive Drive P.O. Box 1330 Salisbury, North Carolina 28145-1330 (Address of principal executive offices) (Zip code) ------------- 7.375% Notes due 2006 8.125% Notes due 2011 9.000% Debentures due 2031 (Title of the indenture securities) ================================================================================ -2- 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. -------------------------------------------------------------------------------- Name Address -------------------------------------------------------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 23rd day of August, 2001. THE BANK OF NEW YORK By: /s/ MARY LAGUMINA ---------------------------------- Name: MARY LAGUMINA Title: VICE PRESIDENT -4- Exhibit 7 to Form T-1 Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.. $2,811,275 Interest-bearing balances........................... 3,133,222 Securities: Held-to-maturity securities......................... 147,185 Available-for-sale securities....................... 5,403,923 Federal funds sold and Securities purchased under agreements to resell................................ 3,378,526 Loans and lease financing receivables: Loans and leases held for sale...................... 74,702 Loans and leases, net of unearned income............................................ 37,471,621 LESS: Allowance for loan and lease losses...................................... 599,061 Loans and leases, net of unearned income and allowance.............................. 36,872,560 Trading Assets......................................... 11,757,036 Premises and fixed assets (including capitalized leases)............................................. 768,795 Other real estate owned................................ 1,078 Investments in unconsolidated subsidiaries and associated companies................................ 193,126 Customers' liability to this bank on acceptances outstanding......................................... 592,118 Intangible assets...................................... Goodwill............................................ 1,300,295 Other intangible assets............................. 122,143 Other assets........................................... 3,676,375 ----------- Total assets........................................... $70,232,359 =========== LIABILITIES Deposits: In domestic offices................................. $25,962,242 Non-interest-bearing................................ 10,586,346 Interest-bearing.................................... 15,395,896 In foreign offices, Edge and Agreement subsidiaries, and IBFs............................ 24,862,377 Noninterest-bearing................................. 373,085 Interest-bearing.................................... 24,489,292 Federal funds purchased and securities sold under agreements to repurchase............................ 1,446,874 Trading liabilities.................................... 2,373,361 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)....... 1,381,512 Bank's liability on acceptances executed and outstanding......................................... 592,804
Subordinated notes and debentures...................... 1,646,000 Other liabilities...................................... 5,373,065 ----------- Total liabilities...................................... $63,658,235 =========== EQUITY CAPITAL Common stock........................................... 1,135,284 Surplus................................................ 1,008,773 Retained earnings...................................... 4,426,033 Accumulated other comprehensive income................. 4,034 Other equity capital components........................ 0 ----------- Total equity capital................................... 6,574,124 ----------- Total liabilities and equity capital................... $70,232,359 ===========
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. /s/ Thomas J. Mastro ------------------------------------- Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ] Gerald L. Hassell ] Directors Alan R. Griffith ] -2- EX-99.(A) 10 dex99a.txt LETTER OF TRANSMITTAL EXHIBIT 99(a) LETTER OF TRANSMITTAL DELHAIZE AMERICA, INC. OFFER TO EXCHANGE $600,000,000 7.375% NOTES DUE 2006 and $1,100,000,000 8.125% NOTES DUE 2011 and $900,000,000 9.000% DEBENTURES DUE 2031 for $600,000,000 7.375% NOTES DUE 2006 and $1,100,000,000 8.125% NOTES DUE 2011 and $900,000,000 9.000% DEBENTURES DUE 2031 all of which have been registered under the Securities Act of 1933, as amended (the "Securities Act") -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [___________], 2001, UNLESS EXTENDED (THE "EXPIRATION DATE"). PLEASE READ THE ATTACHED INSTRUCTIONS CAREFULLY -------------------------------------------------------------------------------- If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed and submitted to the Exchange Agent: The Bank of New York By Registered Mail or Certified Mail: By Hand Delivery or Overnight Carrier: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street New York, New York 10286 Corporate Trust Services Window Attention: Diane Amoroso Ground Level Reorganization Section, 7 East New York, New York 10286 Attention: Diane Amoroso Reorganization Section, 7 East Facsimile Transmission (for eligible guarantor institutions only): (212) 815-6339 To confirm by telephone or for information call: (212) 815-3738 Delivery of this Letter of Transmittal to an address other than as set forth above or transmission of this letter of transmittal via facsimile to a number other than as set forth above does not constitute a valid delivery. The undersigned hereby acknowledges receipt of the prospectus dated [_________], 2001 (the "Prospectus") of Delhaize America, Inc., a North Carolina corporation (the "Company"), and this Letter of Transmittal, that together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount at maturity of its newly-issued 7.375% notes due 2006, 8.125% notes due 2011 and 9.000% debentures due 2031, all of which have been registered under the Securities Act (collectively, the "Exchange Securities") for each $1,000 in principal amount at maturity of its outstanding 7.375% notes due 2006, 8.125% notes due 2011 and 9.000% debentures due 2031 (collectively, the "Old Securities"). The Exchange Securities and the Old Securities are collectively referred to in this Letter of Transmittal as the "Securities." Capitalized terms used and not defined herein have the meanings ascribed to them in the Prospectus. This Letter of Transmittal is to be completed by holders of Old Securities either if Old Securities are to be forwarded herewith or if tenders of Old Securities are to be made by book-entry transfer to an account maintained by The Bank of New York (the "Exchange Agent") at The Depository Trust Company ( "DTC") pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus. Holders of Old Securities who wish to tender their Old Securities and whose Old Securities are not immediately available or who cannot deliver their Old Securities, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Securities pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES The undersigned has completed the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.
------------------------------------------------------------------------------------------------------------------------------- BOX 1 ------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD SECURITIES TENDERED 1 2 3 ------------------------------------------------------------------------------------------------------------------------------- Name(s) and Address(es) of Registered Holder(s), exactly Certificate Aggregate Principal Principal Amount of Old as name(s) appear(s) on Old Securities Certificate(s): Number(s)* Amount of Old Securities Securities Tendered** (Please fill in, if blank) ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- Total ------------------------------------------------------------------------------------------------------------------------------- * Need not be completed if Old Securities are being tendered by book-entry holders. ** The minimum permitted tender is $1,000 in principal amount of any series of Old Securities. All other tenders must be in integral multiples of $1,000 of principal amount of any series of Old Securities. Unless otherwise indicated in the column, a holder will be deemed to have tendered all Old Securities represented by the aggregate principal amount of Old Securities indicated in Column 2. See Instruction 4. ------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------------------------------------------------- BOX 2 ---------------------------------------------------------------------------------------------------------------------------------- BENEFICIAL OWNER(S) ---------------------------------------------------------------------------------------------------------------------------------- State of Principal Residence of Each Beneficial Owner of Aggregate Principal Amount of Tendered Securities Held For Tendered Securities Account of Beneficial Owner ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- (BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY) [_] CHECK HERE IF OLD SECURITIES TENDERED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution --------------------------------------------------- Account Number ------------------------------------------------------------------ Transaction Code Number --------------------------------------------------------- [_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF OLD SECURITIES TENDERED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) ---------------------------------------------------- Window Ticket Number (if any) ----------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ------------------------- Name of Institution which Guaranteed Delivery ----------------------------------- If Guaranteed Delivery is to be made by Book-Entry Transfer: Name of Tendering Institution --------------------------------------------------- Account Number ------------------------------------------------------------------ Transaction Code Number --------------------------------------------------------- [_] CHECK HERE IF OLD SECURITIES TENDERED BY BOOK-ENTRY TRANSFER AND NOT ACCEPTED FOR EXCHANGE OR OTHERWISE NOT EXCHANGED ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER SET FORTH ABOVE. [_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ -------------------------------------------------------------------------------- Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Old Securities described in Box 1 above (the "Tendered Securities") pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all of the Tendered Securities and the undersigned represents that it has received from each beneficial owner of the Tendered Securities (the "Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder and/or book entry transfer participant from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in the Letter of Transmittal. Subject to, and effective upon, the Company's acceptance for exchange of all or any portion of the Tendered Securities, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company, all right, title and interest in, to and under the Tendered Securities. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the Exchange Securities be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of the Tendered Securities, that such Exchange Securities be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing Old Securities not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of the Tendered Securities, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated herein in the box entitled "Special Delivery Instructions" below, please deliver Exchange Securities to the undersigned at the address shown below the undersigned's signature. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company in connection with the Exchange Offer and as Trustee under the Indenture for the Securities) with respect to the Tendered Securities, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver the Tendered Securities to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Securities to be issued in exchange for the Tendered Securities, (ii) present the Tendered Securities for transfer, and transfer the Tendered Securities on the books of the Company and (iii) receive for the Company's account all benefits and otherwise exercise all rights of beneficial ownership of the Tendered Securities, all in accordance with the terms and conditions of the Exchange Offer. The undersigned understands that tenders of Old Securities pursuant to any one of the procedures described in "The Exchange Offer" in the Prospectus and in the instructions attached hereto will, upon the Company's acceptance for exchange of such Old Securities tendered, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Securities tendered hereby. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s) and every obligation of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon the heirs, representatives, successors, and assigns of the undersigned and such Beneficial Owner(s). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Tendered Securities and that, when the same are accepted for exchange, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and that the Old Securities tendered hereby are not subject to any adverse claims or proxies. The undersigned and any Beneficial Owner will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of the Tendered Securities and the undersigned will comply with its obligations under the registration rights agreement. The undersigned has read and agrees to all of the terms of the Exchange Offer. If any Old Securities tendered are not exchanged pursuant to the Exchange Offer for any reason, or if the certificate(s) for such Old Securities (the "Certificates") are submitted in a principal amount not tendered or accepted for exchange, Certificates for such non-exchanged or non-tendered Old Securities will be returned (or, in the case of Old Securities tendered by book-entry transfer, such Old Securities will be credited to an account maintained at DTC), without expense to the tendering holder promptly following the expiration or termination of the Exchange Offer. The undersigned hereby represents and warrants that the information set forth in Box 2 is true and correct. By tendering Old Securities and executing this Letter of Transmittal, the undersigned and any Beneficial Owner hereby represents and warrants that: (i) the Exchange Securities acquired pursuant to the Exchange Offer are being acquired by the undersigned and any Beneficial Owner(s) in the ordinary course of business of the undersigned and any Beneficial Owner, (ii) neither the undersigned nor any Beneficial Owner has an arrangement or understanding with any other person to participate in a "distribution" of such Exchange Securities, as such term is defined in the Securities Act, (iii) if the undersigned is not a broker-dealer, or is a broker-dealer but will not receive Exchange Securities for its own account in exchange for Old Securities, neither the undersigned nor any such other person is engaged in or intends to participate in the distribution of such Exchange Securities and (iv) neither the undersigned nor any Beneficial Owner is an "affiliate" of the Company, Food Lion, LLC, Hannaford Bros. Co. or Kash n' Karry Food Stores, Inc. within the meaning of Rule 144 under the Securities Act or, if the undersigned or any Beneficial Owner is an "affiliate," that the undersigned or any Beneficial Owner understands and acknowledges that the Exchange Securities may not be offered for resale, resold or otherwise transferred by the undersigned or any Beneficial Owner without registration under the Securities Act or an exemption therefrom. The undersigned and any Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer for the purpose of distributing the Exchange Securities must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Securities acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in the no-action letters that are discussed in the section of the Prospectus entitled "Risk Factors--Risks Related to the Exchange Offer--Some people who participate in the exchange offer must deliver a prospectus in connection with resales of exchange securities." The undersigned and each Beneficial Owner understand that any such secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 of Regulation S-K of the Commission. If the undersigned or any Beneficial Owner is a broker-dealer that will receive Exchange Securities for its own account in exchange for Old Securities that were acquired as a result of market-making or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities; provided, however, that by so acknowledging and delivering a prospectus, the -------- ------- undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. -------------------------------------------------------------------------------- REGISTERED HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9) (NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) Must be signed by registered holder(s) exactly as name(s) appear(s) on the face of the Certificate(s) for the Old Securities hereby tendered or in whose name Old Securities are registered on the books of the Company, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company for the Old Securities to comply with the restrictions on transfer applicable to the Old Securities). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. ------------------------------------------------------------------- ------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Date: , 2001 -------------- Name(s) --------------------------------------------------------------- --------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) ----------------------------------------------------------- Address --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------- ------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 2 AND 5) ------------------------------------------------------------------- AUTHORIZED SIGNATURE Date: , 2001 -------------- Name of Firm -------------------------------------------------------------------- Capacity (full title) ----------------------------------------------------------- (PLEASE PRINT) Address --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number -------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 2 AND 6) To be completed ONLY if the Exchange Securities or Old Securities not tendered are to be issued in the name of someone other than the registered holder of the Old Securities whose name(s) appear(s) above. Issue [_] Old Securities not tendered to: [_] Exchange Securities to: Name(s) ------------------------------------------------------------------------- Address ------------------------------------------------------------------------- ------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ---------------------------------------------------------------- ------------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 2 AND 6) To be completed ONLY if Exchange Securities or Old Securities not tendered are to be sent to someone other than the registered holder of the Old Securities whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail [_] Old Securities not tendered to: [_] Exchange Securities to: Name(s) ------------------------------------------------------------------------- Address ------------------------------------------------------------------------- ------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ---------------------------------------------------------------- ---------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)) -------------------------------------------------------------------------------- INSTRUCTIONS ------------ FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if: (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in the sections of the Prospectus entitled "The Exchange Offer--Procedure for Tendering" and "The Exchange Offer--Book-Entry Transfer." Certificates, or timely confirmation of a book-entry transfer of such Old Securities into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date. Old Securities may be tendered in whole or in part. Holders of Old Securities who wish to tender their Old Securities and whose Old Securities are not immediately available or who cannot deliver to the Exchange Agent their Old Securities, this Letter of Transmittal or any other documents required by the Letter of Transmittal prior to the Expiration Date, must tender their Old Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such procedures: (i) such tender must be made by or through an Eligible Guarantor Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form described in the Prospectus or made available by the Exchange Agent, or a properly transmitted agent's message (as defined in the Prospectus) and Notice of Guaranteed Delivery, must be received by the Exchange Agent prior to the Expiration Date; and (iii) the Certificates (or a book-entry transfer confirmation) representing all tendered Old Securities, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three business days after the Expiration Date, all as provided in "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or overnight courier or transmitted by telegram, telex, facsimile or mail to the Exchange Agent and must include a guarantee by an Eligible Guarantor Institution in the form set forth in such Notice. For Old Securities to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein, "Eligible Guarantor Institution" means a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank, (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer, (iii) a credit union, (iv) a national securities exchange, registered securities association or clearing agency or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in DTC whose name is registered on the Company's books as the owner of the Old Securities) of the Tendered Securities, unless such holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above or (ii) such Old Securities are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Old Securities" is inadequate, the Certificate number(s) and/or the aggregate principal amount of the Tendered Securities and any other required information should be listed on a separate signed schedule. 4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all of the Old Securities held by a registered holder of Old Securities are to be tendered, fill in the principal amount of the Old Securities which are to be tendered in the column labeled "Principal Amount of Old Securities Tendered" of the box entitled "Description of Outstanding Securities Tendered" (box 1) above. If the entire principal amount of all Old Securities held by a registered holder is not tendered, then Old Securities in an amount equal to the principal amount of Old Securities not tendered and Exchange Securities issued in exchange for any Old Securities tendered and accepted will be sent to such holder at its registered address, unless a different address is provided for in the appropriate box of this Letter of Transmittal, as soon as practicable following the Expiration Date. All Old Securities delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Old Securities may be withdrawn at any time prior to 5:00 p.m., New York City time on the Expiration Date, unless previously accepted for exchange. To withdraw a tender of Old Securities in the Exchange Offer, a written or facsimile transmission notice of withdrawal from the holder of such Old Securities, or a computer generated notice of withdrawal transmitted by DTC on behalf of such holder in accordance with the standard operating procedures of DTC must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date and prior to acceptance for exchange by the Company. Any such notice of withdrawal must: (i) specify the name of the person that deposited the Old Securities to be withdrawn (the "Depositor"), (ii) identify the Old Securities to be withdrawn (including the certificate number(s) and aggregate principal amount of such Old Securities, or, in the case of Old Securities transferred by book-entry transfer, identify the name and number of the DTC account to be credited, and otherwise comply with the procedures of DTC), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such Old Securities were tendered (including required signature guarantees) or be accompanied by documents of transfer sufficient to permit the trustee with respect to the Old Securities to register the transfer of such Old Securities into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Securities are to be registered if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Securities so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Securities will be issued with respect thereto unless the Old Securities so withdrawn are validly retendered. Any Old Securities which have been tendered but which are withdrawn or not accepted for exchange will be returned by the Exchange Agent to the holder thereof without cost to such holder as promptly as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Securities may be retendered by following one of the procedures described in "The Exchange Offer--Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 5. SIGNATURES ON LETTER OF TRANSMITTAL; ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Old Securities tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If this Letter of Transmittal is signed by a participant in DTC, the signature must correspond with the name as it appears on the security position listing as the owner of the Old Securities. If any of the Old Securities tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any Old Securities that are registered in different name(s) are tendered, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Old Securities. If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, must submit proper evidence satisfactory to the Company, in its sole discretion, of each such person's authority so to act. When this Letter of Transmittal is signed by the registered owner(s) of the Old Securities (which term, for the purposes described herein, shall include a participant in DTC whose name appears on a security listing as the owner of the Old Securities) listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless Exchange Securities are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by the registered holder(s) of the Tendered Securities, and Exchange Securities issued in exchange therefore are to be issued (and any untendered principal amount of Old Securities is to be re-issued) in the name of such registered holder(s), then such registered holder(s) need not and should not endorse any Tendered Securities, nor provide a separate bond power. In any other case, such registered holder(s) must either properly endorse the Tendered Securities or transmit a properly completed separate bond power with this Letter of Transmittal, with the signature(s) on such endorsement or bond power guaranteed by an Eligible Guarantor Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Securities are to be issued in the name of a person other than the undersigned, or if Exchange Securities are to be sent to someone other than the undersigned or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Securities not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. If no such instructions are given, the Exchange Securities (and any Old Securities withdrawn, not tendered or not accepted) will be issued in the name of and sent to the registered holder of the Old Securities or deposited in such holder's account at DTC. 7. IRREGULARITIES; VALIDITY AND FORM. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Securities, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders that it determines not to be in proper form or the acceptance of which, or exchange for which, may, in the view of the Company's counsel, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer--Conditions to the Exchange Offer" or any conditions or irregularities in any tender of Old Securities of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Securities will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Any Old Securities received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived, will be returned by the Exchange Agent to the tendering holder, unless otherwise provided in this Letter of Transmittal, as soon as practicable after the Expiration Date. The Company, any affiliates or assigns of the Company, the Exchange Agent, or any other person shall not be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 9. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions related to the Exchange Offer that are described in the Prospectus. 10. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Securities, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Securities for exchange. 11. MUTILATED, LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Old Securities have been mutilated, lost, destroyed or stolen, the holder(s) thereof should promptly notify the Exchange Agent. The holder(s) will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing mutilated, lost, destroyed or stolen Certificate(s) have been followed. 12. SECURITY TRANSFER TAXES. Holders who tender their Old Securities for Exchange Securities will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Securities are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Securities tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Securities in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be collected from the tendering holder by the Exchange Agent. IMPORTANT TAX INFORMATION General. Under federal income tax law, a holder tendering Old Securities is required to provide the Exchange Agent with such holder's correct TIN on Substitute Form W-9 attached to this Letter of Transmittal. If such holder is an individual, the TIN is such Holder's social security number. The Certificate of Awaiting Taxpayer Identification Number (described below) should be completed if such holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the Exchange Agent is not provided with the correct TIN, such holder may be subject to a $50 penalty imposed by the IRS. In addition, payments that are made to such holder with respect to tendered Old Securities may be subject to backup withholding. Certain holders tendering Old Securities (including, among others, all domestic corporations and certain foreign individuals and foreign entities) are not subject to these backup withholding and reporting requirements. A United States Holder who satisfies one or more of the conditions set forth in Part 2 of the Substitute Form W-9 should execute the certification following such Part 2. Non-United States Holders must submit a properly completed IRS Form W-8BEN or similar form to avoid backup withholding. IRS Form W-8BEN or such similar form may be obtained by contacting the exchange agent at one of the addresses on the face of this Letter of Transmittal. If backup withholding applies, the Exchange Agent is required to withhold 31% of any amounts otherwise payable to such holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. Purpose of Substitute Form W-9. To prevent backup withholding on payments that are made to a holder with respect to Old Securities tendered for exchange, such holder is required to notify the Exchange Agent of its correct TIN by completing the form herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that: (i) such holder is exempt from backup withholding, (ii) such holder has not been notified by the IRS that it is subject to backup withholding as a result of failure to report all interest or dividends or (iii) the IRS has notified such holder that it is no longer subject to backup withholding. What Number to Give the Exchange Agent. Each holder tendering Old Securities is required to give the Exchange Agent the social security number or employer identification number of the registered holder(s) of the Old Securities. If Old Securities are registered in more than one name or are not registered in the name of the actual holder of such Old Securities, consult the instructions on IRS Form W-9, which may be obtained from the Exchange Agent, for additional guidance on which number to report. Certificate of Awaiting Taxpayer Identification Number. If the tendering holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, write "Applied For" in the space for the TIN on Substitute Form W-9, sign and date the form and the Certificate of Awaiting Taxpayer Identification Number and return these documents to the Exchange Agent. If such certificate is completed and the Exchange Agent is not provided with the TIN within 60 days thereafter, the Exchange Agent will withhold 31% of all payments made thereafter until it receives a TIN. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS. (See the section of this Letter of Transmittal entitled "Important Tax Information") PAYER'S NAME: DELHAIZE AMERICA, INC.
-------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1-PLEASE PROVIDE YOUR TIN ON THE LINE AT RIGHT TIN: _________________________ Form W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number or Employer Identification Number Department Of The Treasury Internal Revenue Service ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- PART 2 - TIN Applied for |_| ------------------------------------------------------------------------------------------------- Payor's Request for CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: Taxpayer Identification Number (1) the number shown on this form is my correct taxpayer identification number (or I am waiting ("TIN") and for a number to be issued to me), Certification (2) I am not subject to backup withholding either because: (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the IRS has notified me that I am no longer subject to backup withholding; and (3) any other information provided on this form is true and correct. Signature ________________________________ Date _______________, 2001 ------------------------ ------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- You must cross out item (iii) in Part (2), subsection 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. --------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either: (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver such an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the Exchange Securities shall be retained until I provide a taxpayer identification number to the Exchange Agent, and that if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number. Signature _______________________________ Date ___________________, 2001 ----------------------------------------- Name (Please Print) -------------------------------------------------------------------------------- GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. - social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
------------------------------------------------------------------------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY NUMBER OF-- ------------------------------------------------------------------------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner of the account or, if combined (joint account) funds, any one of the individuals (1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person (1) 4. Custodian account of a minor The minor (2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributors, the minor (1) 6. Account in the name of guardian of committee for The ward, minor, or incompetent person (3) a designated ward, minor or incompetent person 7. a. The usual revocable savings trust account The grantor trustee(1) (grantor is also trustee) b. So-called trust account that is not a legal or The actual owner (1) valid trust under state law ------------------------------------------------------------------------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY NUMBER OF-- ------------------------------------------------------------------------------------------------------------------------------ 8. Sole proprietorship account The owner (4) 9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identification number of the personal representative or trustee unless the legal entity itself is not designated in the Account title.) (5) 10. Corporate Account The corporation 11. Religious, charitable, or educational account The organization 12. Partnership account The partnership 13. Association, club or other tax-exempt organization The organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of Agriculture in the The public entity name of a public entity (such as a State or local government, School District or prison) that receives agricultural program payments ------------------------------------------------------------------------------------------------------------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.
OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local offices of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments including the following: . A corporation. . A financial institution . An organization exempt from tax under section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan. . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. . A registered dealer in the securities or commodities registered in the United States or a possession of the United States. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a) of the Code. . An exempt charitable remainder trust, or a nonexempt trust described in section 4947(a)(1) of the Code. . An entity registered at all times under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup witholding include the following: . Payments to nonresident aliens subject to withholding under section 1441 of the Code. . Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code). . Payments described in section 6049(b)(5) of the Code to non-resident aliens. . Payments on tax-free covenant bond under section 1451 of the Code. . Payments made by certain foreign organizations. . Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Payments that are not subject to information reporting are also not subject to backup withholding. For details, see section 6041, 6041A(a), 6042, 6044, 6045, 6049, 605A, and 6050N of the Code and their regulations. PRIVACY ACT NOTICE - Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments of IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties must also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER --If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - Falsifying certification or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(B) 11 dex99b.txt NOTICE OF GAURANTEED DELIVERY EXHIBIT 99(b) NOTICE OF GUARANTEED DELIVERY DELHAIZE AMERICA, INC. WITH RESPECT TO THE EXCHANGE OFFER Pursuant to the Prospectus Dated ?, 2001 This form must be used by a holder of 7.375% Notes due 2006, 8.125% Notes due 2011 or 9.00% Debentures due 2031 (the "Old Securities") of Delhaize America, Inc., a North Carolina corporation (the "Company"), who wishes to tender Old Securities to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus, dated [_], 2001 and in Instruction 1 to the accompanying Letter of Transmittal. Any holder of Old Securities that wishes to tender Old Securities pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to 5:00 p.m. New York City time, on the Expiration Date. In addition, in order to utilize the guaranteed delivery procedures to tender Old Securities pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m. New York City time, on the Expiration Date. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. The Exchange Agent for the Exchange Offer is: The Bank of New York By Registered Mail or Certified Mail: By Hand Delivery or Overnight Carrier: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street New York, New York 10286 Corporate Trust Services Window Attention: Diane Amoroso Ground Level Reorganization Section, 7 East New York, New York 10286 Attention: Diane Amoroso Reorganization Section, 7 East Facsimile Transmission (for eligible guarantor institutions only): (212) 815-6339 To confirm by telephone or for information call: (212) 815-3738 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN THE PROSPECTUS), SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: Upon the terms and subject to the conditions set forth in the Prospectus and the accompanying Letter of Transmittal, receipt of which is hereby acknowledged, the undersigned hereby tenders to Delhaize America, Inc., the principal amount of Old Notes set forth below, pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering" and in Instruction 1 of the Letter of Transmittal. Aggregate Principal Amount of Name(s) of Registered Holder(s): Old Securities Tendered: $ -------------------- -------------------------------- Certificate No.(s) (if known): ----------------------------------- (Total Principal Amount Represented by Old Notes Certificate(s)) $ ---------------------------- [ ] The Depositary Trust Company ("DTC") (Check if Old Notes will be tendered by book-entry transfer and provide the following information): DTC Account Number: -------------------------------- Date: ---------------------------------------------- All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE x ------------------------------------------- --------------------- X ------------------------------------------- --------------------- Signature(s) of Owner(s) Date or Authorized Signatory 2 Area Code and Telephone Number: ---------------------------------------- This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on certificates for Old Securities or on a security position listing as the owner of Old Securities, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- Capacity: ------------------------------------------------------------------- Address(es): ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- 3 -------------------------------------------------------------------------------- THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Old Securities tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Old Securities into the Exchange Agent's account at the Book-Entry Transfer Facility described in the section of the Prospectus entitled "The Exchange Offer" and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the third business day following the Expiration Date. ------------------------------------ ------------------------------- Name of Firm Authorized Signature ------------------------------------ ------------------------------- Address Name (please print) ------------------------------------ ------------------------------- Zip Code Title (please print) Area Code and Telephone No. Dated: ------------------------- -------------------------------------------------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR OLD SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF OLD SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL. 4 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, it is recommended that the holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedure, see Instruction 1 of the Letter of Transmittal. 2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Old Securities referred to herein, the signature must correspond with the name(s) written on the face of the Old Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Old Securities, the signature must correspond with the name shown on the security position listing as the owner of the Old Securities. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Old Securities listed or a participant of the Book-Entry Transfer Facility, then this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Old Securities or signed as the name of the participant shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 5 EX-99.(C) 12 dex99c.txt EXCHANGE AGENT AGREEMENT EXHIBIT 99(c) ____________, 2001 EXCHANGE AGENT AGREEMENT ------------------------ The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Administration Ladies and Gentlemen: Delhaize America, Inc. a North Carolina corporation (the "Company") proposes to make an offer (the "Exchange Offer") to exchange all of its outstanding $600,000,000 aggregate principal amount of 7.375% notes due 2006, $1,100,000,000 aggregate principal amount of 8.125% notes due 2011 and $900,000,000 aggregate principal amount of 9.000% debentures due 2031 (collectively, the "Old Securities") for its $600,000,000 aggregate principal amount of 7.375% notes due 2006, $1,100,000,000 aggregate principal amount of 8.125% notes due 2011 and $900,000,000 aggregate principal amount of 9.000% debentures due 2031 (collectively, the "New Securities"). The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus included in the Company's registration statement of Form S-4, as it may be amended from time to time, filed with the Securities and Exchange Commission and proposed to be distributed to all record holders of the Old Securities, dated _________, 2001 (the "Prospectus"), proposed to be distributed to all record holders of the Old Securities. The Old Securities and the New Securities are collectively referred to herein as the "Securities". The Company hereby appoints The Bank of New York to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to The Bank of New York. The Exchange Offer is expected to be commenced by the Company on or about _____________, 2001. The Letter of Transmittal accompanying the Prospectus (or in the case of book-entry securities, the Automated Tender Offer Program ("ATOP") of the Book-Entry Transfer Facility (as defined below)) is to be used by the holders of the Old Securities to accept the Exchange Offer and contains instructions with respect to the delivery of certificates for Old Securities tendered in connection therewith. The Exchange Offer shall expire at 5:00 p.m., New York City time, on _________, 2001 or on such subsequent date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing) or written notice to you before 9:00 a.m., New York City time, on the business day following the previously scheduled Expiration Date. The Company expressly reserves the right, in its sole discretion, to amend or terminate the Exchange Offer, and not to accept for exchange any Old Securities not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption "The Exchange Offer--Conditions to the Exchange Offer." The Company will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "The Exchange Offer", in the Letter of Transmittal accompanying the Prospectus, or as specifically set forth herein; provided, however, that in no way will your general duty to act in -------- ------- good faith and without gross negligence or willful misconduct be discharged by the foregoing. 2. You will establish a book-entry account with respect to the Old Securities at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may, until the Expiration Date, make book-entry delivery of the Old Securities by causing the Book-Entry Transfer Facility to transfer such Old Securities into your account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates for Old Securities (or confirmations of book-entry transfer of Old Securities into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of the Old Securities to ascertain whether: (i) the Letters of Transmittal, certificates and any such other documents are duly executed and properly completed in accordance with instructions set forth therein (ii) the Old Securities have otherwise been properly tendered and (iii) the Old Securities tendered in part are tendered in denominations of $1,000 and integral multiples thereof. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Old Securities are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, 2 you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be reasonably necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the President, Senior Vice President, Executive Vice President, or any Vice President, Secretary or Assistant Secretary of the Company (such approval, if given orally, to be confirmed in writing) or any other party designated in writing, by such an officer, you are authorized to waive any irregularities in connection with any tender of Old Securities pursuant to the Exchange Offer. 5. Tenders of Old Securities may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer --Procedures for Tendering" and Old Securities shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this Section 5, Old Securities which the President, Senior Vice President, Executive Vice President, or any Vice President, Secretary or Assistant Secretary of the Company shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). New Securities are to be issued in exchange for Old Securities pursuant to the Exchange Offer only (i) against deposit with you prior to the Expiration Date or, in the case of a tender in accordance with the guaranteed delivery procedures outlined in the Letter of Transmittal, within three business days after the Expiration Date of the Exchange Offer, together with executed Letters of Transmittal and Notices of Guaranteed Delivery or (ii) in the event that the holder is a participant in the Book-Entry Transfer Facility's system, by the utilization of ATOP and receipt of any evidence required by the Exchange Offer. 6. You shall advise the Company with respect to any Old Securities received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Securities. 7. You shall accept tenders: (a) in cases where the Old Securities are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Securities, provided that customary transfer requirements, including payment of any applicable transfer taxes, are fulfilled. 3 You shall accept partial tenders of Old Securities where so indicated and as permitted in the Letter of Transmittal and deliver certificates for Old Securities to the registrar for the Old Securities for split-up and return any untendered Old Securities to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, to be promptly confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Securities properly tendered and you, on behalf of the Company, will exchange such Old Securities for New Securities and cause such Old Securities to be cancelled. Delivery of New Securities will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Securities for each $1,000 principal amount of the corresponding series of Old Securities tendered promptly after notice (such notice if given orally, to be promptly confirmed in writing) of acceptance of said Old Securities by the Company; provided, however, that in all cases, Old Securities tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Securities (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. Unless otherwise instructed by the Company in writing, you shall issue New Securities only in denominations of $1,000 or any integral multiple thereof. 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date in accordance with the terms of the Exchange Offer procedures for tendering. 10. The Company shall not be required to exchange any Old Securities tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Old Securities tendered shall be given (if given orally, to be promptly confirmed in writing) by the Company to you. 11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Securities tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer--Conditions to the Exchange Offer" or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Old Securities (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them (or effected such book-entry transfer). 4 12. All certificates for reissued Old Securities, unaccepted Old Securities or for New Securities shall be forwarded by first-class mail. 13. As soon as practicable after the Expiration Date, you shall arrange for cancellation of the Old Securities submitted to you or returned by the Book-Entry Transfer Facility in connection with ATOP. Such Old Securities shall be cancelled and disposed of by you in your customary manner. 14. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders. 15. As Exchange Agent hereunder you: (a) shall not be liable for any action or omission to act unless the same constitutes your own negligence, willful misconduct or bad faith, and in no event shall you be liable to a securityholder, the Company or any third party for special, indirect or consequential damages, or lost profits, arising in connection with this Agreement. (b) shall have no duties or obligations other than those specifically set forth herein or as may be subsequently agreed to in writing between you and the Company; (c) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Old Securities represented thereby deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; (d) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (e) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed or presented by the proper person or persons; (f) may reasonably act upon any tender, statement, request, document, agreement, certificate or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or presented by the proper person or persons; 5 (g) may rely upon and shall be protected in acting upon written or oral instructions from any authorized officer of the Company; (h) may consult with counsel of your selection with respect to any questions relating to your duties and responsibilities, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the advice or opinion of such counsel; and (i) shall not advise any person tendering Old Securities pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Old Securities or as to the market value of the New Securities; provided, however, that in no way will your general duty to act in good faith -------- ------- and without gross negligence or willful misconduct be limited by the foregoing. 16. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. All other requests for information relating to the Exchange Offer shall be directed to the Company, Attention: Michael R. Waller. 17. You shall advise by facsimile transmission Michael R. Waller, the Company's Executive Vice President and General Counsel (telephone no. (704) 633-8250 x3209; facsimile no. (704) 637-3378), and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested) up to and including the Expiration Date, as to the number of Old Securities which have been tendered pursuant to the Exchange Offer and the items received by you pursuant to the Exchange Offer and this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons upon oral request made from time to time prior to the Expiration Date of such other information as they may reasonably request. Such cooperation shall include, without limitation, the granting by you to the Company and such persons as the Company may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange 6 Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Old Securities tendered, the aggregate principal amount of Old Securities accepted and the identity of any DTC Participant and their DTC number, and deliver said list to the Company. 18. Letters of Transmittal, Book-Entry Confirmations and Notices of Guaranteed Delivery shall be stamped by you as to the date and time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company. 19. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on Schedule I attached hereto. The provisions of this section shall survive the termination of this Agreement. 20. You hereby expressly waive any lien, encumbrance, or right of set-off whatsoever that you may have with respect to any funds deposited with you by reasons of amounts, if any, borrowed by the Company or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with you or for compensation owed to you hereunder or under any other agreement. 21. You hereby acknowledge receipt of the Prospectus and the form of Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to your duties, liabilities and indemnification as Exchange Agent, which shall be controlled by the agreement. 22. The Company covenants and agrees to fully indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any and all loss, liability, cost or expense, including reasonable attorneys' fees and expenses, incurred without gross negligence, willful misconduct or bad faith on your part, arising out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Securities reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Securities. In no case shall the Company be liable under this indemnity with respect to any claim against you unless the Company is notified by you, by letter or facsimile confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or written notice of commencement of action. The Company shall be entitled to participate, at its own 7 expense, in the defense of any such claim or other action and, if the Company so elects, the Company shall assume the defense of any suit brought to enforce any such claim. In the event that the Company shall assume the defense of any such suit, the Company shall not be liable for the fees and expenses of any additional counsel thereafter retained by you, so long as the Company shall retain counsel satisfactory to you to defend such suit, and so long as you have not determined, in your reasonable judgment, that a conflict of interest exists between you and the Company. 23. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. 24. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Securities, the Company's check in the amount of all transfer taxes so payable; provided, however, that you shall reimburse the Company for -------- ------- amounts refunded to you in respect of the payment of any such transfer taxes, at such time as such refund is received by you. 25. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Without limitation of the foregoing, the parties hereto expressly agree that no holder of Old Securities or New Securities shall have any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 26. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same agreement. 27. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 28. This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 29. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar 8 writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company: Delhaize America, Inc. 2100 Executive Drive, P.O. Box 1330 Salisbury, North Carolina 28145-1330 Facsimile: (704) 637-3378 Attention: Michael R. Waller, Executive Vice President and General Counsel If to the Exchange Agent: The Bank of New York 101 Barclay Street Floor 21 West New York, New York 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Administration 30. At the written request of the Company or its counsel you shall notify tendering holders of Old Securities in the event of any extension, termination or amendment of the Exchange Offer. In the event of any such termination, you will cause the return of all tendered Old Securities to the persons entitled thereto, at the request and expense of the Company, in accordance with the terms of this Agreement. 31. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Sections 18, 19, 22 and 24 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for Securities, funds or property then held by you as Exchange Agent under this Agreement. 32. This Agreement shall be binding and effective as of the date hereof. 9 Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. DELHAIZE AMERICA, INC. By: ----------------------------------- Name: Title: Accepted as of the date first above written: THE BANK OF NEW YORK, as Exchange Agent By: ----------------------------------------- Name: Title: 10 SCHEDULE I COMPENSATION OF EXCHANGE AGENT: [$5,000] PLUS $500 PER EXTENSION OF OFFER PLUS OUT-OF POCKET EXPENSES, INCLUDING, WITHOUT LIMITATION, REASONABLE LEGAL FEES AND EXPENSES. EX-99.(D) 13 dex99d.txt UNDERTAKING OF THE COMPANY EXHIBIT 99(d) UNDERTAKING TO FILE EXHIBITS PURSUANT TO ITEM 601(b)(4)(iii)(A) OF REGULATIONS S-K The undersigned registrant acknowledges that it has not filed with the Securities and Exchange Commission (the "Commission") copies of certain instruments with respect to long-term debt of the registrant representing obligations not exceeding 10% of the registrant's total assets as of January 1, 2000, pursuant to the provisions of Item 601(b)(4)(iii)(A) of Regulation S-K of the Commission (the "Regulation"). Pursuant to the Regulation, the undersigned registrant hereby undertakes to furnish to the Commission upon its request a copy of any such instrument. This is the 17th day of September, 2001. DELHAIZE AMERICA, INC. /s/ Laura C. Kendall -------------------------------- Laura C. Kendall Chief Financial Officer Principal Accounting Officer