0001021408-01-508859.txt : 20011030
0001021408-01-508859.hdr.sgml : 20011030
ACCESSION NUMBER: 0001021408-01-508859
CONFORMED SUBMISSION TYPE: S-4/A
PUBLIC DOCUMENT COUNT: 14
FILED AS OF DATE: 20011026
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/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69520
FILM NUMBER: 1768164
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/A
1
ds4a.txt
AMENDMENT #1 TO FORM S-4
As filed with the Securities and Exchange Commission on October 26, 2001
Registration No. 333-69520
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
AMENDMENT NO. 1
TO
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. [_] ________________
* 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.
================================================================================
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.)
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 OCTOBER 26, 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 some
of our wholly-owned subsidiaries. We will pay interest on the exchange
securities semi-annually on April 15 and October 15 of each year. The exchange
securities will be general unsecured obligations of our company and our
subsidiaries that guarantee the exchange securities. 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. We may redeem the exchange securities at any time at the
redemption prices described on page 82 under "Description of the Exchange
Securities-Optional Redemption."
The exchange offer will expire at 5:00 p.m., New York City time, on ________,
2001, unless extended. Tenders of outstanding old securities may be withdrawn at
any time prior to expiration of the exchange offer.
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. The exchange of old securities for exchange securities will not be a
taxable event for U.S. federal income tax purposes.
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.
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
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
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 net income of approximately $80.4
million. Actual Adjusted EBITDA has increased from $603.4 million in fiscal 1996
to $956.5 million in fiscal 2000. 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.
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;
. Strong operating margins and cost control;
. Track record of reducing leverage;
. Diversification through multiple banners and multiple markets;
. Experienced management team;
. Attractive store base;
. Distribution efficiencies;
. High penetration of customer loyalty card programs;
. Significant investment in management information systems; and
. Operation as an integrated global group.
3
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:
4
. 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.
Additional Interest....................... If the registration statement that
contains this prospectus is not
declared effective by the
Securities and Exchange Commission
by November 16, 2001 or if we do
not complete the exchange offer by
December 17, 2001, a registration
default will occur and we will be
required to pay additional interest
equal to 0.25% per annum to each
holder of old securities until all
registration defaults are cured.
Any additional interest payable
will be paid to holders on the next
interest payment date for the old
securities.
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
5
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;
6
. 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
7
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.
8
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. Co. and Kash n' Karry Food Stores,
Inc. 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 unsecured general
obligations of our company. The guarantees of our
subsidiaries will be unsecured general
obligations of each subsidiary. The exchange
securities are pari passu, or equal in rank, to
our other indebtedness. As of June 30, 2001, we
had indebtedness of $642 million other than the
old securities.
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."
9
Our History
We were incorporated in 1957 and Delhaize Freres et Cie "Le Lion" S.A.,
which we refer to in this prospectus as 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 three 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 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 do not expect to implement any cross-guarantees
until at least the first quarter of 2002, 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 the date of this prospectus, 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, 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.
Regulatory Requirements
Other than the filing of the registration statement of which this
prospectus is a part and certain blue sky filings, there are no federal or state
regulatory requirements that must be complied with in connection with the
exchange offer.
10
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).................. 14,107 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.................... 120,311 172,111 256,439 476,642 588,394 523,316
Interest expense.................... 63,636 108,362 55,374 213,057 103,820 95,334
Income before income taxes.......... 56,675 63,749 201,065 263,585 484,574 427,982
Net income.......................... 29,397 34,198 124,657 155,486 300,435 272,585
Other Data:
Adjusted EBITDA (6)................. $ 228,479 $ 363,415 $ 401,580 $ 956,495 $ 866,295 $ 801,770
Cash flows from
operating activities............... 265,186 275,130 218,594 646,205 505,921 441,079
Cash flows provided by (used in)
investing activities............... (66,593) (119,163) (167,798) (2,964,000) (391,266) (246,208)
Cash flows provided by (used in)
financing activities............... (188,640) (175,814) (144,418) 2,259,710 (44,526) (164,619)
Depreciation and amortization....... $ 92,440 $ 162,259 $ 130,315 $ 372,541 $ 258,512 $ 236,021
Ratio of earnings to fixed charges.. 1.7x 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........................ 8,716,767 - 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................ 3,127,736 - 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 and compensation expense related to the exchange of our stock
options for Delhaize Le Lion options, with a corresponding increase in
stockholders' equity in the amount of approximately $783.4 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.
11
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, including a charge to compensation
expense related to the exchange of our stock options for Delhaize Le Lion
options.
(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) Adjusted 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
Adjusted 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 Adjusted 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.
12
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, which may make it difficult
for you to resell your exchange securities.
The exchange securities are new issues of securities with no active trading
markets. We do not intend to apply for listing or quotation of the exchange
securities on any exchange or automated quotation system. Therefore, 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.
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 because of restrictions on transfer.
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.
The holders of beneficial interests in the global securities representing the
exchange securities may be unable to transfer or pledge these interests if
physical delivery of securities in definitive form is required by applicable
law.
Ownership and transfer of beneficial interests in the global securities
representing the exchange securities are effected through the records of The
Depository Trust Company, or DTC. So long as DTC or its nominee is the
registered owner of a global security, DTC or its nominee, as the case may be,
will be considered the sole owner or holder of the securities represented by
that global security for all purposes under the indenture. Owners of beneficial
interests in a global security will not be entitled to have 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, the holders of
beneficial interests in the global securities may be unable to transfer or
pledge these interests if physical delivery of securities in definitive form is
required by applicable law.
13
The holders of beneficial interests in the global securities representing the
exchange securities may be unable to transfer or pledge these interests if
physical delivery of securities in definitive form is required by applicable
law.
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 beginning on page 32
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.
Our ability to generate positive cash flows depends on factors often beyond our
control and if we do not have sufficient cash flows, we may be unable to service
our debt, which could lead to a default.
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:
14
. 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.
If we fail to comply with covenants contained in agreements related to our
debt, we would commit an event of default and our borrowings might become
due.
Our debt requires us to comply with various covenants, which include
maintaining specified financial ratios and meeting 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.
The covenants contained in agreements related to our outstanding debt do not
restrict or limit our ability to enter into various transactions that could
adversely affect our capital structure or otherwise negatively affect holders of
exchange securities.
The covenants in the agreements governing our outstanding debt, including
the indenture governing the old securities and exchange securities, do not
restrict our ability to make dividend payments to our shareholders, enter into
acquisitions, asset dispositions, make capital expenditures or effect
recapitalizations or other highly leveraged transactions that could increase the
amount of our outstanding debt. As a result, transactions that we enter into in
the future could adversely affect our capital structure or otherwise negatively
affect holders of exchange securities.
We are a holding company and depend on the business of our subsidiaries to
satisfy our obligations under the exchange securities.
We are a holding company. Our subsidiaries conduct substantially all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to pay our debt, including the
exchange securities and amounts owing under our revolving credit facilities,
depends upon our subsidiaries' cash flow and their payment of funds to us. Our
subsidiaries are not obligated to make funds available to us for payment on the
exchange securities or otherwise. In addition, our subsidiaries' ability to make
any payments to us will depend on their earnings, the terms of their
indebtedness, business and tax considerations, legal and regulatory restrictions
and economic conditions. These payments may not be adequate to pay interest and
principal on the exchange securities upon any acceleration that may occur as a
result of an event of default or when the exchange securities otherwise come due
and payable.
If we commit an event of default under the agreements governing our indebtedness
and our indebtedness is accelerated, we may not be able to immediately pay all
principal amounts and accrued interest.
As of June 30, 2001, we had cash and cash equivalents of $125.7 million. As
a result, if we commit an event of default under the agreements governing our
indebtedness, which include the indenture related to the old securities and the
exchange securities, and our indebtedness is accelerated, we will not be able to
immediately pay all principal amounts and accrued interest.
If we and Delhaize Le Lion cross guarantee each other's indebtedness, we may be
required to use funds to satisfy our obligations under the cross guarantee.
As of June 30, 2001, Delhaize Le Lion reported that it had approximately
(Euro)5.3 billion of outstanding indebtedness. If we and Delhaize Le Lion cross
guarantee each other's indebtedness and Delhaize Le Lion's indebtedness is
subsequently accelerated and becomes due as a result of an event of default, we
may be required to use funds to satisfy our obligations under the cross
guarantee. If this occurs, we may have less funds available for making interest
payments on the exchange securities and our other indebtedness.
We currently pay and expect to continue paying significant dividends on the
shares of our common stock, which reduces the amount of funds available to
holders of our debt securities in the event of a default.
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 some of our direct and indirect wholly-owned subsidiaries.
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.
15
Risks Related to Operations
Delhaize Le Lion directly and indirectly beneficially owns all of our voting
stock, which allows it to exercise significant control over our operations and
board of directors.
Delhaize Le Lion, by itself and through 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.
Transactions between our company and Delhaize Le Lion or other affiliated
companies could raise conflict of interest issues, which could harm our
operations.
Some of our executive officers and directors, such as Pierre-Olivier
Beckers, Hugh G. Farrington and R. William McCanless, are also executive
officers of Delhaize Le Lion and our other affiliates. As a result, conflicts
of interest may arise between our company on one side of a transaction and
Delhaize Le Lion or another affiliate on the other side of a transaction. We
cannot assure you that our relationships with Delhaize Le Lion or our other
affiliates will be harmonious and successful and any disagreements with Delhaize
Le Lion or our other affiliates could negatively affect the execution of our
business plan. Due to the significance of our relationship with Delhaize Le
Lion, any event or circumstance that adversely affects Delhaize Le Lion or any
problem related to any of our agreements with Delhaize Le Lion could have an
adverse effect on our operations, operating results and financial condition.
In addition, although we have entered into agreements with Delhaize Le Lion
and our other affiliates on an arms-length basis, we cannot assure you that any
future agreements with Delhaize Le Lion or our other affiliates will be entered
into on such basis.
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.
16
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 and may experience increased labor
costs as a result of our hiring efforts.
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.
17
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.
Risk Related to the Delhaize Le Lion Share Exchange
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.
18
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.
19
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. We used the net proceeds
of the offering of old securities to repay in full the $2.4 billion outstanding
under our $2.5 billion loan facility that expired in July 2001. We used the
remaining net proceeds to repay other existing debt and other financial
obligations.
20
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.................................................. 2,385,595
Other comprehensive income/(loss), net of tax............................... (57,615)
Retained earnings........................................................... 708,962
----------
Total shareholder's equity............................................... $3,127,736
----------
Total capitalization..................................................... $6,369,562
==========
21
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).................... 14,107 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...................... 120,311 172,111 256,439 476,642 588,394 523,316
Interest expense...................... 63,636 108,362 55,374 213,057 103,820 95,334
Income before income taxes............ 56,675 63,749 201,065 263,585 484,574 427,982
Net income............................ 29,397 34,198 124,657 155,486 300,435 272,585
Adjusted Other data:
Adjusted EBITDA (6)................... $ 228,479 $ 363,415 $ 401,580 $ 956,495 $ 866,295 $ 801,770
Cash flows from
operating activities................. 265,186 275,130 218,594 646,205 505,921 441,079
Cash flows provided by (used in)
investing activities................. (66,593) (119,163) (167,798) (2,964,000) (391,266) (246,208)
Cash flows provided by (used in)
financing activities................. (188,640) (175,814) (144,418) 2,259,710 (44,526) (164,619)
Depreciation and amortization......... $ 92,440 $ 162,259 $ 130,315 $ 372,541 $ 258,512 $ 236,021
Ratio of earnings to fixed
charges (7)........................... 1.7x 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.......................... 8,716,767 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.................. 3,127,736 1,759,817 2,441,159 1,678,866 1,598,922
January 3, December 28,
1998(11)(12) 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:
Adjusted EBITDA (6)..................... $ 711,974 $ 603,414
Cash flows from operating activities.... 354,910 428,341
Cash flows provided by (used in)
investing activities.................. (313,562) (355,952)
Cash flows provided by (used in)
financing activities.................. (163,443) 73,011
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
22
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 $783.4 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, including a charge to compensation
expense related to the exchange of our stock options for Delhaize Le Lion
options.
(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) Adjusted 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
Adjusted 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 Adjusted 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.
(11) In the 3rd quarter of 1997, we recorded a charge of $84.4 million, pre-tax,
related to the divestiture of stores in the southwest market.
(12) Results of operations of Kash n' Karry, acquired in December 1996, are
included in our results of operations beginning in the first quarter of
fiscal 1997.
23
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
24
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.
25
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.
26
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
27
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.
28
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 was the most recent date that interest was 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
29
. 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
30
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.
31
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
32
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;
33
. 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.
34
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
35
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.
36
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, and
compensation expense related to the exchange of our stock options for Delhaize
Le Lion options, with a corresponding increase in stockholders' equity in the
amount of $783.4 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............................ 40,091 5,334 2,944
---------------------------------------------------------
37
Operating income.......................... 292,422 300,996 256,439
Interest expense.......................... 171,998 165,304 55,374
---------------------------------------------------------
Income before income taxes................ 120,424 135,692 201,065
Provision for income taxes................ 56,829 64,279 76,408
---------------------------------------------------------
Net income................................ $ 63,595 $ 71,413 $ 124,657
=========================================================
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 $63.6 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.
38
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........................... 0.55 0.06 0.30 0.01 --
------ ------- ---------- -------- ---------
Operating income......................... 3.98 5.00 3.76 5.40 5.12
Interest expense......................... 2.34 1.08 1.68 0.95 0.93
------ ------- ---------- -------- ---------
Income before income taxes............... 1.64 3.92 2.08 4.45 4.19
Provision for income taxes............... 0.78 1.49 0.85 1.69 1.52
------ ------- ---------- -------- ---------
Net income............................... 0.86% 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.
39
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 29 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 the six months ended June 30, 2001, we
also remodeled 85 stores including 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 66 new stores, including 55 Food Lion stores, two Hannaford
Bros. stores and nine Kash n' Karry stores. In fiscal 2000, we remodeled 173
stores, including 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, increasing our
retail square footage by approximately 4%. 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
40
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.
41
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
42
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.
The store closing reserve liabilities are paid over the lease term associated
with the closed store. 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
43
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.
44
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, including an
$11.4 million charge to compensation expense related to the exchange of our
stock options for Delhaize Le Lion options.
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 $56.8 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 47.2% 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
45
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.
We believe that cash flows from operations and borrowings will be sufficient to
pay principal and interest on the exchange securities and to satisfy our general
liquidity requirements.
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.
46
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.
Adjusted 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). Adjusted 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 Adjusted EBITDA to be a measurement of the financial
performance of our company that provides a relevant basis for comparison among
companies. Adjusted EBITDA is not a measurement of financial performance under
U.S. GAAP and should not be considered as a substitute for net income as a
measure of performance, or for cash flow as a measure of liquidity. Investors
should note that our calculation of Adjusted EBITDA might differ from similarly
titled measures for other companies. The following table sets forth, for the
periods indicated, a calculation of our Adjusted EBITDA:
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............................. $ 63.6 $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...................... 40.1 2.9 38.5 1.5 --
Interest expense.................... 172.0 55.4 213.1 103.8 95.3
Income taxes ....................... 56.8 76.4 108.1 184.1 155.4
------ ------ -------- -------- ---------
Adjusted EBITDA........................ $591.9 $401.6 $ 956.5 $ 866.3 $ 801.8
====== ====== ======== ======== =========
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.
47
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%. As noted throughout
this prospectus, the maturities for the exchange securities will be $600 million
due in 2006, $1.1 billion due in 2011 and $900 million due in 2031. Accordingly,
total long-term debt due in 2006 and thereafter is approximately $3
billion.
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%
48
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% -- -- -- --
We do not trade in foreign markets or in commodities, nor do we have
significant concentrations of credit risk. Accordingly, we do not believe that
foreign exchange risk, commodity risk or credit risk pose a significant threat
to our company.
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.
49
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.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The objectives of SFAS 144 are to
address significant issues relating to the implementation of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, and to develop a single accounting model, based on the framework
established in SFAS 121 for long-lived assets to be disposed of by sale, whether
previously held and used or newly acquired. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
We have not yet evaluated the impact of this SFAS on our financial
statements.
50
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 net income of approximately $80.4
million. Adjusted EBITDA has increased from $603.4 million in fiscal 1996 to
$956.5 million in fiscal 2000. 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.
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. These synergies represent
cost-saving initiatives between the Food Lion, Hannaford Bros. and Kash n'
Karry banners in the areas of private label procurement, reduction in supply
costs, reduction of routine and duplicative fees and expenses and common payment
terms with suppliers. 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
laverage 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 terms of annual sales 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. 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.
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.
51
. 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
52
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.
53
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
54
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.
55
Pricing
Each of our banners utilizes a different pricing strategy. Food Lion is a
low price operator, which means that good everyday prices are set on all
products in the store with special promotions on several products each week.
Hannaford Bros. is an ''every day low price'' operator, which means that prices
on all products are set at the same low rate for a set number of weeks without
using special promotions. Kash n' Karry is a "hi/lo" operator, which means that
higher prices are set on products with special promotions used to lower prices
on several products each week. 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.
56
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. We practice what is commonly referred to in the
supermarket industry as centralized buying. Specifically, all of our
negotiations and purchasing activity with suppliers is conducted out of two
central office locations - Salisbury, North Carolina for Food Lion and
Scarborough, Maine for Hannaford Bros. and Kash n' Karry. Centralized buying
allows us to establish long-term relationships with many suppliers, which
provides various alternatives for sources of product supply. Moreover,
centralized buying generally allows us greater leverage in negotiating with
suppliers since large volume increments of products are being negotiated for and
purchased out of one location. Our buyers create the purchase orders and manage
the inventory levels for all of the products that we buy. These buyers are
evaluated and given incentives based on their ability to maintain a high service
level with minimal inventory.
We believe that we are not dependent on any one supplier and consider our
relations with our suppliers to be good. In addition, 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
57
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. We believe that our properties are
adequate for our current needs and that additional space will be available as
needed.
58
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.
59
THE GUARANTEES
Our wholly-owned subsidiaries named below 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.
60
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
61
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 office of the law firm of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. from January 1996 through April 1999 and the Managing
Partner of that firm's London office from April 1999 through July 2000.
62
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 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.
63
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 and Executive Officers
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.
Our directors are elected annually to serve until the next annual meeting
of our stockholders or until their successors are duly elected and qualified.
Our board of directors elects our executive officers annually to serve until the
next annual meeting of our board of directors, or until their successors are
duly elected and qualified, or until their earlier death, resignation,
disqualification or removal from office.
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.
64
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
65
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 $3,347 of interest credited to such plan).
(6) Effective August 31, 2000, Joseph C. Hall, Jr. retired as President of Food
Lion.
Aggregated Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End
Option/SAR Values
The following table shows information for the named executive officers,
concerning: (i) exercises of stock options during fiscal 2000 and (ii) the
amount and value of unexercised "in-the-money" options to purchase our Class A
Common Stock, as of December 30, 2000. The value of stock options at the end
66
of fiscal 2000 was determined by calculating the spread between the exercise
price of these options and the closing price of shares of our Class A Common
Stock, as reported by The New York Stock Exchange on December 29, 2000, the last
trading day in fiscal 2000.
Value of Unexercised In-
Number of Securities the-Money
Underlying Unexercised Options/SARs at Fiscal
Shares Options/SARs at Fiscal Year End ($)
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
67
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
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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
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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.
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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
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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
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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
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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.
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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.
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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 material 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 indenture provides
that additional entities may guarantee the exchange securities by executing a
supplemental indenture.
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.
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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."
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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:
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. 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;
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. 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
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(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.
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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
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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;
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. 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;
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. 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
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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
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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:
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. 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 we must deliver a written statement to the
trustee, within 120 days of the end of each of our fiscal years, stating that:
. we have complied with all of the conditions and covenants imposed on
us by the indenture; and
. no event has occurred or is continuing which is an event of default
under the indenture.
The indenture also provides that we must notify the trustee 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, if prior to any judgment being obtained against
our company for such amount we deposit with the trustee a sum sufficient to pay
the principal, any premium and all interest due with respect to such series of
exchange securities, 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.
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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;
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. 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.
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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
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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
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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;
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. 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
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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
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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.
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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.
97
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
and the Hannaford Bros. Co. consolidated financial statements as of January 1,
2000 and January 2, 1999 and for each of the three years in the period ended
January 1, 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.
We are not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended, which we refer to below as the
Exchange Act. However, since we issued the old securities on April 19, 2001, the
indenture related to the old securities has required us to provide the trustee,
on behalf of the holders of the old securities, with the supplemental and
periodic information, documents and reports that are required to be filed with
the Securities and Exchange Commission under Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange.
Upon the effectiveness of the registration statement of which this prospectus is
a part, we will be required to file annual and quarterly reports and other
information and reports with the Securities and Exchange Commission under
Section 13 or Section 15(d) of the Exchange Act. While the exchange securities
remain outstanding, so long as the cross guarantees with Delhaize Le Lion are
not implemented, we will continue to provide copies of these reports and other
information to the trustee.
If Delhaize Le Lion guarantees the exchange securities and any old
securities not tendered in this exchange offer, we will not be required to file
separate periodic reports under the Exchange Act. If this occurs, Delhaize Le
Lion will file with the Securities and Exchange Commission and provide to the
trustee such reports and other information required by Section 13 or Section
15(d) of the Exchange Act. If we are no longer required to file separate reports
with the Securities and Exchange Commission and provide these reports to the
trustee, there will be less publicly available information about our company and
condensed, consolidating financial information about our company and the
subsidiary guarantors 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 office of the Securities and Exchange Commission located at 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.
98
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.
99
INDEX TO FINANCIAL STATEMENTS
Page
----
DELHAIZE AMERICA, INC.:
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......... F-2
Unaudited Consolidated Balance Sheets as of June 30, 2001 and December 30, 2000.................... F-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... F-5
Unaudited Consolidated Statements of Shareholders' Equity for the Period from December 30, 2000
to April 28, 2001 and for the Period from April 29, 2001 to June 30, 2001.......................... F-6
Notes to Unaudited Consolidated Financial Statements............................................... F-7
Report of Independent Accountants.................................................................. F-10
Consolidated Statements of Income for the Fiscal Years Ended December 30, 2000, January 1, 2000
and January 2, 1999................................................................................ F-11
Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000............................ F-12
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 30, 2000, January 1,
2000 and January 2, 1999........................................................................... F-13
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended December 30, 2000,
January 1, 2000 and January 2, 1999................................................................ F-14
Notes to Consolidated Financial Statements......................................................... F-15
HANNNFORD BROS. CO.:
Unaudited Consolidated Statements of Earnings for the Six Months Ended July 1, 2000
and July 3, 1999................................................................................... F-35
Unaudited Consolidated Statements of Earnings for the Three Months Ended July 1, 2000
and July 3, 1999................................................................................... F-36
Unaudited Consolidated Balance Sheets as of July 1, 2000 and January 1, 2000....................... F-37
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended July 1, 2000
and July 3, 1999................................................................................... F-38
Notes to Unaudited Consolidated Financial Statements............................................... F-39
Report of Independent Accountants.................................................................. F-41
Consolidated Balance Sheets as of January 1, 2000 and January 2, 1999.............................. F-42
Consolidated Statements of Earnings for the Fiscal Years Ended January 1, 2000 January 2, 1999
and January 3, 1998................................................................................ F-44
Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Years Ended
January 1, 2000, January 2, 1999 and January 3, 1998............................................... F-45
Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1, 2000,
January 2, 1999 and January 3, 1998................................................................ F-46
Notes To Consolidated Financial Statements......................................................... F-48
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 14,107 25,984 2,944
---------------------------------------------------------------------------
Operating income 120,311 172,111 256,439
Interest expense 63,636 108,362 55,374
---------------------------------------------------------------------------
Income before income taxes 56,675 63,749 201,065
Provision for income taxes 27,278 29,551 76,408
---------------------------------------------------------------------------
Net income $ 29,397 $ 34,198 $ 124,657
===========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
DELHAIZE AMERICA, INC.
UNAUDITED 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 21,319 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 1,698,969 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 $ 8,716,767 $ 7,926,796
=============================================
Liabilities and Shareholders' 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
---------------------------------------------
Shareholders' 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 2,385,595 841,961
Retained earnings 708,962 1,508,555
---------------------------------------------
F-3
Total shareholders' equity 3,127,736 2,441,159
--------------------------------------------
Total liabilities and shareholders' equity $ 8,716,767 $ 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 $ 29,397 $ 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 merger expense-parent acquisition 12,086 -- --
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 (8,966) 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 235,789 240,932 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- .00019
Class B- .15690
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
-----------------------------------------------------------
Adjustments in connection with the share
exchange 1,553,008
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)
-----------------------------------------------------------
Total comprehensive income (loss)
-----------------------------------------------------------
Balances, June 30, 2001 90,718,904 $ 53,149 75,290 $ 37,645 $ 2,402,952
===========================================================
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- .00019 (16,759) (16,759)
Class B- .15690 (11,813) (11,813)
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) (122,500)
Change in other comprehensive loss (9,900) (9,900)
-----------------------------------------------------------
Total comprehensive loss (98,397)
-----------------------------------------------------------
Balances, April 28, 2001 (132,511) (10,837) 1,514,181 2,317,693
-----------------------------------------------------------
Adjustments in connection with the share
exchange 72,979 (7,973) (834,616) 783,398
Sale of stock 3,598
Shares granted under restricted plan 372 115
Amortization of restricted stock 1,081 1,081
Unrealized loss on securities (123) (123)
Parent common stock repurchased (9,463)
Net income 29,397 29,397
Change in other comprehensive income (loss) 2,040 2,040
-----------------------------------------------------------
Total comprehensive income 104,293
-----------------------------------------------------------
Balances, June 30, 2001 $ (57,615) $ (17,357) $ 708,962 $ 3,127,736
===========================================================
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, and compensation expense related to the
exchange of our stock options for Delhaize Le Lion options, with a corresponding
increase in stockholders' equity in the amount of approximately $783.4 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 913,968 -- --
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, including an
$11.4 million charge to compensation expense related to the exchange of the
Company's stock options for Delhaize Le Lion options.
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. The
unrealized loss was reduced as of the date of the Delhaize Le Lion share
exchange (see Note 1) 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.
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.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The objectives of SFAS 144 are to
address significant issues relating to the implementation of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, and to develop a single accounting model, based on the framework
established in SFAS 121, for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. SFAS No. 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001. We have not yet evaluated the impact of SFAS No. 144 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, and compensation expense related to the
exchange of our stock options for Delhaize Le Lion options, with a corresponding
increase in stockholders' equity in the amount of approximately $783.4 million.
The preliminary allocation of the share exchange purchase price to the Company's
assets and liabilities was based on estimates of management, and 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.
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.
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.
F-34
Unaudited Consolidated Statement of Earnings of Hannaford Bros. Co.
(Dollars in thousands, except per share data)
(UNAUDITED) (UNAUDITED)
6 Months Ended 6 Months Ended
July 1, 2000 July 3, 1999
--------------- ---------------
Net sales $1,733,472 $1,693,449
Cost of goods sold 1,277,064 1,249,509
Selling and administrative expenses 470,293 358,470
---------- ----------
Operating (loss) income (13,885) 85,470
Interest expense, net 9,258 12,045
---------- ----------
(Loss) income before income taxes (23,143) 73,425
Provision for income taxes (8,404) 28,021
---------- ----------
Net (loss) income $ (14,739) $ 45,404
========== ==========
Earnings per share:
Basic (0.34) 1.08
Diluted (0.34) 1.06
Cash dividends $ 0.33 $ 0.33
Weighted average number of common
shares outstanding
Basic 42,992 42,223
Diluted 43,726 42,865
F-35
Unaudited Consolidated Statement of Earnings of Hannaford Bros. Co.
(Dollars in thousands, except per share data)
(UNAUDITED) (UNAUDITED)
3 Months Ended 3 Months Ended
July 1, 2000 July 3, 1999
--------------- ---------------
Net sales $886,626 $854,325
Cost of goods sold 655,468 628,109
Selling and administrative expenses 286,890 179,222
-------- --------
Operating (loss) income (55,732) 46,994
Interest expense, net 4,011 5,780
-------- --------
(Loss) income before income taxes (59,743) 41,214
Provision for income taxes (22,451) 15,800
-------- --------
Net (loss) income $(37,292) $ 25,414
======== ========
Earnings per share:
Basic (0.86) 0.60
Diluted (0.85) 0.59
Cash dividends $ 0.165 $ 0.165
Weighted average number of common
shares outstanding
Basic 43,434 42,208
Diluted 43,980 42,868
F-36
Unaudited Consolidated Balance Sheet of Hannaford Bros. Co.
(Dollars in thousands)
July 1, 2000 January 1, 2000
------------- ---------------
Current Assets
Cash and cash equivalents $ 130,463 $ 53,641
Receivables 26,694 26,633
Inventories 197,278 230,416
Prepaid expenses 4,705 5,817
Deferred tax asset 14,492 10,325
---------- ----------
Total current assets 373,632 326,832
---------- ----------
Property, at cost, less accumulated depreciation 845,305 892,871
Intangible assets, less accumulated amortization 50,088 58,154
Other assets 72,978 52,133
---------- ----------
Total assets $1,342,003 $1,329,990
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Short term borrowings $ 20,651 $ 20,391
Accounts payable 206,061 187,344
Accrued expenses 45,833 61,801
Capital lease obligations - current 2,430 2,462
Long term debt - current -- --
Other liabilities - current 141 1,256
---------- ----------
Total current liabilities 275,115 273,254
---------- ----------
Long-term debt 156,380 185,126
Capital lease obligations 59,107 71,464
Deferred income tax liabilities (1,016) 32,676
Other liabilities 84,951 40,282
---------- ----------
Total liabilities 574,538 602,802
---------- ----------
Shareholders' equity
Common stock, par value $.75 per share 32,819 31,754
Additional paid-in-capital 167,747 103,085
Preferred stock purchase rights 438 423
Retained earnings 566,461 595,478
Less common stock in treasury - 0 and 68 shares -- 3,552
---------- ----------
Total shareholders' equity 767,465 727,188
---------- ----------
Total liabilities and shareholders' equity $1,342,003 $1,329,990
========== ==========
F-37
Unaudited Consolidated Statements of Cash Flows of Hannaford Bros. Co.
(Dollars in thousands)
(UNAUDITED)
6 Months Ended 6 Months Ended
July 1, 2000 July 3, 1999
------------ ------------
Cash flows from operating activities :
Net Loss $(14,739) $ 45,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Closed store expenses 100,121 --
Depreciation and amortization 50,531 51,182
Decrease (increase) in inventories 29,872 (7,711)
Decrease in receivables/prepayments 842 3,846
(Increase) decrease in accounts payable
and accrued expenses (3,564) 14,981
(Increase) decrease in income taxes payable (1,174) 1,985
(Increase) decrease in deferred taxes (37,363) (1,234)
Other operating activities 2,900 (417)
-------- --------
Net cash provided by operating activities 127,426 $108,036
-------- --------
Cash flows from investing activities :
Acquisition of property, plant and equipment (66,705) (54,927)
Sale of property, plant and equipment, net 8,536 6,441
Increase in deferred charges (3,333) (1,249)
Increase in computer software costs (2,702) (3,928)
Purchase of Securities (available for sale) (7,765) --
-------- --------
Net cash used in investing activities (71,969) (53,663)
-------- --------
Cash flows from financing activities :
Principal payments under capital
lease obligations (1,198) (981)
Proceeds from issuance of long-term debt
Decrease in lines of credit (19,700) --
Payments of long-term debt (8,787) (34,690)
Dividends paid (14,265) (13,945)
Purchase of treasury stock (553) (19,912)
Issuance of treasury stock 2,530
Issuance of common stock 63,338 8,630
-------- --------
Net cash provided by financing activities 21,365 (60,898)
-------- --------
Net increase in cash and cash equivalents 76,822 (6,525)
Cash and cash equivalents at beginning of period 53,641 59,722
-------- --------
Cash and cash equivalents at end of period $130,463 $ 53,197
======== ========
F-38
HANNAFORD BROS. CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the are adequate to make the
information presented not misleading. In the opinion of management, the amounts
reflect all adjustments necessary to present fairly and financial position and
results of operations for the periods presented. All such adjustments are of a
normal recurring nature. The year-end consolidated balance sheet was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles.
It is suggested that the financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's latest annual
report.
The preparation of the Company's financial statements, in conformity with
generally accepted accounting principles, requires management to make estimated
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the period end of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from these estimates.
2. SALE OF HOMERUNS.COM
In February 2000, the Company sold a majority interest in HomeRuns.com, Inc.
(HomeRuns), its internet-based grocery delivery service through a $1000,000,000
investment and recapitalization on the part of The Cypress Group L.L.C., a New
York based private equity firm. The Company retained a minority interest and,
subsequent to the sale date, accounted for the results of this investment using
the cost method. The excess of the fair value of the Company's investment in the
recapitalized entity over its carrying value has been recorded as an increase to
paid-in capital due to the start-up nature of HomeRuns business. As a result of
this transaction, the Company has an investment position in HomeRuns of $16
million, which is recorded in other assets on the July 1, 2000 balance sheet.
F-39
HANNAFORD BROS. CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(continued)
3. EARNINGS PER COMMON SHARE
Basic earnings per share of common stock have been determined by dividing net
earnings by the weight average number of shares of common stock outstanding
during the periods presented. Diluted earnings per share reflect the potential
dilution that would occur if existing stock options were exercised.
4. INVENTORIES
Inventories consist primarily of groceries, meat, produce, general merchandise
and pharmaceuticals. The majority of grocery, pharmaceutical and general
merchandise inventories are valued at the lower of cost, determined on the
last-in, first-out (LIFO) method, or market. Net income reflects the application
of the LIFO method based upon estimated annual inflation. LIFO expense was $.5
million in the second quarter 2000 and $.4 million in the second quarter of
1999.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
(In thousands)
(Unaudited)
July 1, January 1,
2000 2000
---------- ----------
land and improvements $ 164,777 $ 164,068
Buildings 330,787 325,070
Furniture, fixtures & equipment 495,926 505,769
leasehold interest & improvements 310,166 328,250
Construction in process 18,478 12,726
---------- ----------
1,320,134 1,335,883
Less accumulated depreciation and
amortization 516,148 495,548
---------- ----------
$ 803,986 $ 841,335
========== ==========
6. LEASED PROPERTY
Leased property under capital leases consists of the following:
(In thousands)
(Unaudited)
July 1, January 1,
2000 2000
---------- ---------
Real property $ 70,368 $ 82,810
Less accumulated amortization 30,503 31,274
-------- ---------
$ 39,865 $ 51,536
======== =========
F-40
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of Hannaford Bros. Co.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, changes in stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Hannaford Bros. Co. and Subsidiaries at January 1, 2000 and January 2, 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended January 1, 2000, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers, LLP
Portland, Maine January 19, 2000 (except for Notes 2 and 3, as to which the date
is February 12, 2000)
F-41
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
January 1, January 2,
2000 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 53,641 $ 59,722
Accounts receivable, net 26,633 22,869
Inventories (Note 1C) 230,416 201,219
Prepaid expenses 5,817 6,116
Deferred income taxes (Note 10) 10,325 5,952
---------- ----------
Total current assets 326,832 295,878
---------- ----------
Property, plant and equipment, net
(Notes 1D, 4 and 6) 841,335 818,106
Leased property under capital leases, net
(Note 5) 51,536 54,911
Other assets:
Goodwill, net (Notes 1F and 6) 58,154 63,517
Deferred charges, net (Note 1H) 24,055 25,074
Computer software costs, net (Note 1I) 26,149 24,580
Miscellaneous assets 1,929 2,472
---------- ----------
Total other assets 110,287 115,643
---------- ----------
Total Assets $1,329,990 $1,284,538
========== ==========
See accompanying notes to consolidated financial statements.
F-42
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except per share amounts)
January 1, January 2,
2000 1999
---- ----
Current liabilities:
Current maturities of long-term debt (Note 4) $ 20,391 $ 19,296
Obligations under capital leases (Note 5) 2,462 2,108
Accounts payable 187,344 186,626
Accrued payroll 30,768 27,254
Other accrued expenses 31,033 23,873
Income taxes 1,256 442
---------- ----------
Total current liabilities 273,254 259,599
---------- ----------
Deferred income tax liabilities (Note 10) 32,676 28,859
Other liabilities 40,282 38,734
Long-term debt (Note 4) 185,126 220,130
Obligations under capital leases (Note 5) 71,464 73,866
---------- ----------
Total liabilities 602,802 621,188
========== ==========
Shareholders' equity (Notes 7 and 9):
Class A Serial Preferred stock, no par,
authorized 2,000 shares - -
Class B Serial Preferred stock, par value
$.01 per share, authorized 28,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000 shares;
42,338 and 42,338 shares
issued. 31,754 31,754
Additional paid-in capital 103,085 109,664
Preferred stock purchase rights 423 423
Retained earnings 595,478 525,344
---------- ----------
730,740 667,185
Less common stock in treasury
68 and 85 shares 3,552 3,835
---------- ----------
Total shareholders' equity 727,188 663,350
---------- ----------
Total liabilities and shareholders'
equity $1,329,990 $1,284,538
========== ==========
See accompanying notes to consolidated financial statements.
F-43
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
FISCAL YEAR
1999 1998 1997
---- ---- ----
Sales and other revenues $3,462,942 $3,323,588 $3,226,433
Cost of sales 2,544,623 2,480,346 2,427,287
---------- ---------- ----------
Gross margin 918,319 843,242 799,146
Selling, general and administrative
expenses 725,900 664,357 635,355
Merger related costs (Note 2) 9,453 - -
Impairment loss (Note 6) - - 39,950
---------- ---------- ----------
Operating profit 182,966 178,885 123,841
Interest expense, net (Notes 1J and 4) 23,468 26,577 26,425
---------- ---------- ----------
Earnings before income taxes 159,498 152,308 97,416
Income taxes (Note 10) 61,480 57,661 37,769
---------- ---------- ----------
Net earnings $ 98,018 $ 94,647 $ 59,647
========== ========== ==========
Earnings per share (Note 1K):
Basic $ 2.32 $ 2.24 $ 1.41
Diluted $ 2.28 $ 2.21 $ 1.40
Cash dividends per share $ .66 $ .60 $ .54
Weighted average number of common shares
outstanding Basic 42,224 42,277 42,287
Diluted 43,061 42,884 42,732
See accompanying notes to consolidated financial statements.
F-44
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Common Stock Additional Treasury Stock
------------ Paid-in Preferred Stock Retained --------------
Shares Amount Capital Purchase Rights Earnings Shares Amount
------ ------ ------- --------------- -------- ------ ------
Balance, December 28, 1996 42,338 31,754 119,399 423 419,459 ( 58) (1,879)
--------------------------------------------------------------------------
Net earnings 59,647
Cash dividends on common stock (23,043)
Shares issued under employee
benefit plans, net of tax benefits (4,269) 399 13,917
Treasury stock purchases (400) (14,379)
--------------------------------------------------------------------------
Balance, January 3, 1998 42,338 31,754 115,130 423 456,063 (59) (2,341)
--------------------------------------------------------------------------
Net earnings 94,647
Cash dividends on common stock (25,366)
Shares issued under employee
benefit plans, net of tax benefits (5,466) 392 16,514
Treasury stock purchases (418) (18,008)
--------------------------------------------------------------------------
Balance, January 2, 1999 42,338 31,754 109,664 423 525,344 (85) (3,835)
--------------------------------------------------------------------------
Net earnings 98,018
Cash dividends on common stock (27,884)
Shares issued under employee
benefit plans, net of tax benefits (6,579) 423 20,689
Treasury stock purchases (406) (20,406)
Balance, January 1, 2000 42,338 $31,754 $103,085 $ 423 $595,478 (68) $(3,552)
==========================================================================
See accompanying notes to consolidated financial statements.
F-45
HANNAFORD BROS. CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Net income $ 98,018 $ 94,647 $ 59,647
-------- -------- --------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Impairment loss - - 39,950
Depreciation and amortization 103,278 96,739 93,953
(Increase) decrease in inventories (29,197) (12,452) 2,891
(Increase) decrease in receivables and
prepayments (3,618) (6,202) 599
Increase in accounts payable and
accrued expenses 14,099 2,986 440
Increase (decrease) in income
taxes payable 814 (2 387) 297
Increase (decrease) in deferred taxes (556) 11,554 (7,815)
Other operating activities (1,494) (1,081) (446)
-------- -------- --------
Net cash provided by
operating activities 181,344 183,804 189,516
-------- -------- --------
Cash flows from investing activities:
Acquisition of property, plant
and equipment (114,917) (135,904) (152,862)
Sale of property, plant and equipment, net 12,762 9,156 6,143
Increase in computer software costs (8,562) (7,262) (6,205)
(Increase) decrease in deferred charges (1,627) 911 (4,054)
-------- -------- --------
Net cash used in investing
activities (112,344) (133,099) (156,978)
-------- -------- --------
Cash flows from financing activities:
Principal payments under capital
lease obligations (2,099) (1,740) (1,788)
Proceeds from issuance of long-term debt - 20,000 26,600
Payments of long-term debt (38,803) (34,580) (14,418)
Issuance of common stock 14,110 11,048 9,648
Purchase of treasury stock (20,406) (18,008) (14,379)
Dividends paid (27,883) (25,366) (23,043)
-------- -------- --------
Net cash used in
financing activities (75,081) (48,646) (17,380)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents (6,081) 2,059 15,158
Cash and cash equivalents at beginning
of year 59,722 57,663 42,505
-------- -------- --------
Cash and cash equivalents at end of year $ 53,641 $ 59,722 $ 57,663
======== ======== ========
See accompanying notes to consolidated financial statements.
F-46
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information
(In thousands)
1999 1998 1997
---- ---- ----
Cash paid during the year for: Interest
(net of amount capitalized, $1,870 in 1999,
$1,935 in 1998 and $3,463 in 1997) $24,807 $27,397 $26,396
Income taxes 59,022 47,658 41,202
Supplemental disclosure of non-cash investing and financing activities:
A non-cash debt obligation totaling $4,895,000 was assumed in 1999 when the
Company acquired land and building at a previously leased location.
Capital lease obligations totaling $2,663,000, $1,166,000 and $4,550,000 were
incurred during 1999, 1998 and 1997, respectively, when the Company entered into
real estate leases.
F-47
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company and its subsidiaries are principally involved in the distribution
retail sale of food, prescription drugs and related products through
supermarkets and combination stores. The Company's stores are located in Maine,
New Hampshire, Vermont, Massachusetts, upstate New York, Virginia, North
Carolina and South Carolina.
The Company's fiscal year ends on the Saturday closest to December 31. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries as of January 1, 2000, for fiscal year 1999 (52
weeks), January 2, 1999, for fiscal year 1998 (52 weeks) and January 3, 1998,
for fiscal year 1997 (53 weeks). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Inventories consist primarily of groceries, meat, produce, general merchandise
and pharmaceuticals. The majority of grocery, pharmaceutical and general
merchandise inventories are valued at the lower of cost, determined on the last-
in, first-out (LIFO) method, or market. Approximately 87% of inventories were
valued using the LIFO method in 1999 and 1998. Other inventories are stated at
the lower of cost (first-in, first-out) or market. The current cost of
groceries, general merchandise and pharmaceuticals exceeded the LIFO valuation
by $21,108,000 at January 1, 2000, $19,583,000 at January 2, 1999 and
$18,037,000 at January 3, 1998. LIFO expense charged to cost of goods sold was
$1,525,000 in 1999, $1,546,000 in 1998 and $961,000 in 1997
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
interests and improvements are amortized on the straight-line method over the
shorter of estimated useful life or lease term. The costs of repairs and
maintenance are expensed as incurred; renewals and betterments are capitalized.
Upon sale or retirement, the cost and related accumulated depreciation are
eliminated from the respective accounts and any resulting gain or loss is
included in the results of operations. Property, plant and equipment consists of
the following:
F-48
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
AVERAGE
DEPRECIATION (In thousands)
RATE 1999 1998
------------ ---- ----
3% Land and improvements $ 164,068 $ 141,706
3% Buildings 325,070 300,708
12% Furniture, fixtures and equipment 505,769 500,364
4% Leasehold interests and improvements 328,250 324,106
Construction in progress 12,726 8,790
---------- ----------
1,335,883 1,275,674
---------- ----------
Less accumulated depreciation
and amortization 494,548 457,568
---------- ----------
$ 841,335 $ 818,106
========== ==========
The noncapital expenditures incurred in opening new stores or remodeling
existing stores are expensed as they are incurred.
Goodwill, which represents the excess of costs of assets acquired over the fair
value of their net assets at dates of acquisition, is being amortized on the
straight-line method over various periods not exceeding 20 years. Goodwill
amortization expense charged to operations was $4,164,000 in 1999, $4,035,000 in
1998 and $5,534,000 in 1997.
The Company reviews and evaluates long-lived assets for impairment when events
or circumstances indicate costs may not be recoverable (Note 6). The net book
value of long-lived assets is compared to expected undiscounted future cash
flows. The Company performs this evaluation on each supermarket location. An
impairment loss would be recorded for the excess of net book value over the fair
value of the impaired asset. Based on management expectations of future cash
flows at January 1, 2000, no impairment charge was recognized for the non-
current asset base of the Company's supermarkets for the year ended January 1,
2000.
Deferred charges consist primarily of costs of obtaining new store sites,
covenants-not-to-compete, tradenames and initial direct lease costs. Costs of
obtaining new store sites, if ultimately developed, are capitalized and
depreciated over the estimated useful lives of the related assets. Other
intangible assets acquired in connection with acquisitions are amortized on the
straight-line method over periods ranging from five to ten years. Lease costs
are amortized on the straight-line method over the base lease term. Amortization
expense related to these deferred charges was $3,515,000 in 1999, $3,715,000 in
1998 and $3,599,000 in 1997.
Capitalized computer software costs consist of costs to purchase and develop
software. The Company capitalizes internally developed software costs based on
a project-by-project analysis of each project's significance to the Company and
its estimated useful life. The majority of capitalized software costs are
amortized on a
F-49
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
straight-line method over a period of five years. Amortization expense charged
to operations was $6,959,000 in 1999, $4,495,000 in 1998 and $3,312,000 in 1997.
In 1999, the Company implemented Statement of Position (SOP) 98-1, Accounting
For the Costs of Computer Software Developed For or Obtained For Internal Use.
SOP 98-1 requires the capitalization of certain costs incurred in connection
with developing or obtaining software for internal use. In 1999, the Company
made certain changes in its capitalization policy to conform to SOP 98-1, the
impact of which was not material to its results of operations or financial
position.
The Company capitalizes interest as part of the cost of acquiring and
constructing certain assets. Capitalized interest was $1,870,000 in 1999,
$1,935,000 in 1998 and $3,463,000 in 1997.
Basic earnings per share of common stock have been determined by dividing net
earnings by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per share reflect the potential dilution that
would occur if existing stock options were exercised and have been determined by
dividing net earnings by the weighted average number of diluted shares of common
stock outstanding during the year.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents, accounts receivable and notes receivable: The
carrying amounts reported in the balance sheet for these items approximate their
fair values.
Long-term debt: The fair values of the Company's long-term debt are estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying
amount of the Company's long-term debt, including current maturities, was
approximately $205,517,000 at January 1, 2000. The fair value of the long-term
debt is estimated to be $204,455,000 at January 1, 2000.
Certain reclassifications have been made in the prior year's balance sheet to
conform to classifications made in the current year.
F-50
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. MERGER AGREEMENT
In August 1999, the Company entered into an Agreement and Plan of Merger among
the Company, Food Lion, Inc. ("Food Lion") and FL Acquisition Sub, Inc. ("Merger
Sub"), a wholly-owned subsidiary of Food Lion, pursuant to which Merger Sub
would be merged with and into the Company and the Company would continue as the
surviving corporation (the "Merger"). In September 1999, the shareholders of
Food Lion approved a number of proposals, including (1) the conversion of Food
Lion into a holding company, (2) an amendment to its Articles of Incorporation
to change the company name to Delhaize America, Inc. (Delhaize), and (3) a one-
for-three reverse stock split of Food Lion's outstanding shares of common stock
(Classes A and B). Under the terms of the Merger Agreement and subject to
certain conditions, Delhaize will pay up to $79 per share through a combination
of cash and stock for all of the outstanding shares of the Company. In addition,
approximately $200 million of the Company's debt will remain outstanding after
the merger. Each share of common stock of the Company issued and outstanding
immediately prior to the effective time of the Merger (excluding shares owned by
Delhaize which will include the shares received by Delhaize from the Sobey
Parties pursuant to a separate Stock Exchange Agreement referred to below) will
be converted, subject to proration as described in the Merger Agreement, into a
right to receive (A) $79.00 in cash, without interest, or (B) the number of
shares of Class A common stock of Delhaize equal to $79.00 divided by the
greater of (i) the average of the per share last sales prices of Delhaize Class
A common stock for the ten consecutive trading days prior to the closing date of
the merger or (ii) $27.00. This merger will be accounted for under the purchase
method of accounting and will be a taxable transaction under the Internal
Revenue Code.
In connection with the execution of the Merger Agreement, certain shareholders
(the "Sobey Parties") entered into a Stock Exchange Agreement with Delhaize.
Pursuant to the Stock Exchange Agreement, the Sobey Parties agreed to exchange
their shares in the Company for a combination of Delhaize common stock and cash.
The Sobey Parties also entered into a Voting Agreement with Delhaize pursuant to
which, among other things, the Sobey Parties agreed to vote their shares of
Company common stock (representing approximately 24.7% of the outstanding
Company common stock) in favor of the Merger. In February 2000, the shareholders
of the Company voted to approve the terms of the merger agreement as outlined
above. Upon completion of the merger, which is pending FTC approval and is
expected to close in the second quarter of 2000, the Company will operate as a
wholly-owned subsidiary of Delhaize. Merger related costs of $9 million were
incurred in 1999. The majority of these costs represent fees for professional
services provided by outside parties.
F-51
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In February 2000, the Company sold a majority interest in HomeRuns.com, Inc.,
its internet-based grocery delivery service through a $100,000,000 investment
and recapitalization on the part of the Cypress Group L.L.C., a New York-based
private equity firm. The Company will retain a minority interest and will
account for the future results of this investment using the cost method. The
Company has also entered into a wholesale supply agreement with HomeRuns.com,
Inc.
At January 1, 2000, the Company had revolving credit lines with several banks
totalling $92,000,000 with interest rates determined by different borrowing
options including prime, quoted money market or LIBOR plus a premium. At January
1, 2000, there were $19,700,000 of outstanding borrowings under these credit
lines with a weighted-average interest rate of 6.5%. The agreements provide for
conversion of revolving credit loans to term loans with principal payments due
in quarterly installments over a period of one to four years. The loan
agreements contain certain restrictive covenants, which among other provisions,
require maintenance of certain levels of working capital, debt and tangible net
worth. The lines require a commitment fee of 0.21% on the unused portion of the
line. There are no compensating balances required during the commitment period.
In addition, the Company had an unused, uncommitted short-term bank line of
credit of $11,000,000 at January 1, 2000. Of this amount, approximately
$10,204,000 is reserved to support outstanding standby letters of credit which
guarantee payment of certain insurance claims and premiums.
In December 1999, the Company assumed a mortgage loan in the amount of
$4,895,000 in connection with its acquisition of the Hannaford Plaza Shopping
Center in Bennington, VT. This loan has a 16 year term and an interest rate of
8.25%.
At January 1, 2000, real estate and equipment with a net book value of
approximately $82,043,000 served as collateral for debt of approximately
$57,201,000.
F-52
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net interest expense was as follows:
(In thousands)
1999 1998 1997
---- ---- ----
Interest on debt $16,327 $19,012 $20,108
Capital lease interest 9,639 9,630 9,902
Capitalized interest (1,870) (1,935) (3,463)
Interest income (628) (130) (122)
------- ------- -------
$23,468 $26,577 $26,425
======= ======= =======
Long-term debt consists of the following:
(In thousands)
1999 1998
---- ----
Uncollateralized senior notes due in
varying annual installments through 2016
with interest from 6.2% to 9.0%. $125,350 $139,600
Collateralized by real estate, due in
varying installments through 2011 with
interest from 7.5% to 10.3% 57,201 59,619
Uncollateralized revolving credit loans
With interest from 5.6% to 6.5% 19,700 34,100
Other 3,266 6,107
-------- -------
205,517 239,426
Less current portion 20,391 19,296
-------- --------
$185,126 $220,130
======== ========
The uncollateralized senior note agreements contain certain restrictive
covenants, which among other provisions, limit total debt and require minimum
levels of tangible net worth.
F-53
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Maturities of long-term debt at January 1, 2000, are as follows:
(In thousands)
2000 $ 20,391
2001 40,151
2002 16,874
2003 17,310
2004 16,491
2005 and thereafter 94,300
--------
$205,517
========
The Company's financial structure includes leases of certain stores, office
facilities, and equipment. Initial lease terms range from 3 to 45 years with the
majority of lease terms between 20 and 25 years. Substantially all leases
contain renewal options. Certain leases contain a provision for the payment of
contingent rentals based on a percentage of sales in excess of stipulated
amounts. Most of the real estate leases provide that the Company pay taxes,
insurance and maintenance applicable to the leased premises.
The Company's investment in real property under capital leases was as follows:
(In thousands)
1999 1998
---- ----
Real property $ 82,810 $ 82,500
Less accumulated amortization 31,274 27,589
-------- --------
Net real property under capital leases $ 51,536 $ 54,911
======== ========
Amortization of property under capital leases was $4,282,595 in 1999, $4,217,342
in 1998 and $4,381,463 in 1997.
Future minimum rental payments under capital lease obligations and operating
leases at January 1, 2000, are as follows:
(In thousands)
Capital Operating
Leases Leases
------ ------
2000 $ 11,756 $ 21,257
2001 11,677 20,123
2002 11,906 19,516
2003 12,074 18,318
2004 12,003 17,767
2005 and thereafter 97,698 187,308
-------- --------
Total minimum lease payments $157,114 $284,289
======== ========
Less:
Imputed interest (at rates
from 8.50% to 21.13%) 83,188
--------
Present value of net mini-
mum lease payments 73,926
Less current portion 2,462
--------
Long-term portion of obligations $ 71,464
========
F-54
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Minimum payments for capital and operating leases have not been reduced by
minimum sublease rentals of $2,370,000 and $8,336,000, respectively, due in the
future under noncancellable subleases. They also do not include contingent
rentals that may be payable under certain leases.
Total rent expense, net of executory costs, was as follows:
(In thousands)
1999 1998 1997
---- ---- ----
Capital leases:
Contingent rentals $ 172 $ 123 $ 194
------- ------- -------
Operating leases:
Minimum rentals 22,526 21,439 20,584
Contingent rentals 198 2 714
Rentals from subleases (2,045) (1,843) (1,492)
------- ------- -------
Total operating leases 20,679 19,598 19,806
------- ------- -------
Total leases $20,851 $19,721 $20,000
======= ======= =======
In December 1997, the Company determined that certain of its supermarket assets
and identifiable intangibles, including goodwill, were impaired. Based on a
review of Company locations and considering the expected operating cash flows
along with the estimated market value of the assets as if they were to be sold
or disposed of, an impairment loss of $39,950,000 was recognized. Approximately
$24,000,000 of the asset impairment loss related to supermarket assets and
associated costs for stores that were closed in January 1998 and being held for
sale or disposal, and $15,950,000 related to supermarket assets which the
Company continued to use in its operations. In 1997 the operating losses of
these closed supermarkets were not material.
In May 1996, the Company amended and extended its existing standstill agreement
with certain shareholders ("the Sobey Parties"). The amendment extended the term
of the standstill agreement to December 31, 1998, subject to automatic renewal
for successive one-year periods
F-55
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(but not beyond December 31, 2000) unless by July 31 of a given year either the
Company or any of the Sobey Parties gave written notice of an intention not to
further extend the term of the standstill agreement. Under the agreement,
whenever the Company issued shares of voting stock to third parties, the Sobey
Parties generally had the right to purchase sufficient shares from the Company
to maintain a 25.6% level of ownership. Due to the Company's share repurchase
program to fund stock-based benefit plans no new shares were issued by the
Company, and so the Sobey Parties purchased no additional shares in 1997, 1998
or 1999. In May 1999, the Sobey Parties informed the Company of their intention
to not extend the terms of the standstill agreement beyond December 31, 1999 and
the agreement terminated in August 1999, upon the Board of Director's approval
of the Merger Agreement with Delhaize America, Inc.
In May 1997, the shareholders of the Company approved an amendment to the
Hannaford Bros. Co. Employee Stock Purchase Plan. This amendment increased the
total authorized shares for this Plan by an additional 750,000 shares thereby
permitting continued use of the Plan in future years. This plan was terminated,
pursuant to the Merger Agreement, effective January 1, 2000.
The Company 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.
The Company also maintains an unfunded supplemental executive retirement plan
that provides benefits in excess of those limited in the cash balance plan by
maximum compensation and benefit limitations.
The Company also provides a defined contribution 401(k) plan to substantially
all employees. Amounts charged to expense for this plan were $6,398,000 in 1999,
$6,561,000 in 1998 and $2,916,000 in 1997. Effective for 1998, the Company
increased the percentage of its matching contribution to this 401(k) plan.
In addition, the Company provides certain health care and life insurance
benefits for retired employees ("postretirement benefits"). Substantially all
employees may become eligible for these benefits if they reach early or normal
retirement age and accrue 10 years of service while working for the Company. The
postretirement health care plan is contributory for most participants with
retiree contributions adjusted annually. Life insurance benefits are not
available for employees who retired after January 1, 1996.
F-56
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following tables set 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 at January 1, 2000 (1999 plan year) and
January 2, 1999 (1998 plan year):
(In thousands)
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
Change in benefit obligation:
Benefit obligation at beginning of year $ 97,992 $84,201 $ 3,145 $ 3,118
Service cost 5,224 4,690 35 36
Interest expense 6,187 6,247 190 228
Amendments - - - (369)
Actuarial loss (gain) (7,832) 8,462 279 571
Benefits paid (9,333) (5,608) (421) (439)
-------- ------- ------- -------
Benefit obligation at end of year $ 92,238 $97,992 $ 3,228 $ 3,145
-------- ------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning
of year $ 90,718 $88,385 $ 0 $ 0
Actual return on plan assets 15,512 3,123 0 0
Employer contribution 3,305 4,818 421 439
Benefits paid (9,333) (5,608) (421) (439)
-------- ------- ------- -------
Fair value of plan assets at end of year $100,202 $90,718 $ 0 $ 0
-------- ------- ------- -------
Funded status $ 7,964 $(7,274) $(3,228) $(3,145)
Unrecognized transition obligation (ass (195) (227) 6,848 7,381
Unrecognized prior service cost 2,228 2,549 0 0
Unrecognized net actuarial loss (gain) (10,926) 3,192 (4,387) (5,149)
-------- ------- ------- -------
Accrued benefit cost $ (929) $(1,760) $ (767) $ (913)
======== ======= ======= =======
For measurement purposes, a 5.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999. The rate was assumed to
decrease to 5.0% for 2000 and remain at that level thereafter.
(In thousands)
Pension Benefits Post-retirement Benefits
---------------- ------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Components of net periodic benefit cost:
Service cost $ 5,224 $ 4,690 $3,128 $ 35 $ 36 $ 35
Interest expense 6,187 6,247 5,793 190 228 248
Expected return on plan assets (9,236) (10,162) (7,062) 0 0 0
Amortization of transition
obligation (asset) (31) (31) (31) 533 533 552
Amortization of prior service cost 322 322 322 0 0 0
Recognized net actuarial loss (gain) 8 (318) 28 (483) (553) (612)
------- -------- ------ ----- ----- ------
$ 2,474 $ 748 $ 2,178 $ 275 $ 244 $ 223
======= ======== ======= ===== ===== ======
Weighted-average assumptions as of
September 30 (the plans measurement
date):
Discount rate 7.50% 6.50% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 10.50% 10.50% 10.50% - - -
Rate of compensation increase 4.50% 4.50% 4.50% - - -
F-57
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Non-qualified stock option activity was as follows:
(Share Amounts in Thousands)
1999 1998 1997
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ------ ------ ----- ------ -----
Outstanding at
beginning of year 534 $32.74 487 $30.07 378 $28.23
Granted 120 49.86 102 44.81 122 35.52
Exercised (25) 33.15 (52) 30.82 (13) 27.89
Cancelled (15) 48.82 (3) 41.07 - -
---------------------------------------------------------------------------------
Outstanding at end
of year 614 36.01 534 32.74 487 30.07
---------------------------------------------------------------------------------
Exercisable at end
of year 401 32.74 304 28.74 297 27.61
---------------------------------------------------------------------------------
Available for future
grants (all plans) 5,029 - 5,445 - 86 -
Exercise prices for options outstanding as of January 1, 2000 ranged from
$18.81 to $72.81. The weighted-average remaining contractual life of these
options is approximately 6.6 years.
The Employee Stock Purchase Plan enables participating employees to purchase
common stock through payroll deduction of up to 5% of eligible compensation.
The Company pays interest on the accumulated withholdings. These amounts may be
used to purchase shares of company stock at the option price (lesser of: (a)
85% of the fair market value at the date of grant or (b) the greater of the
market price at the close of business on the exercise date or $10.00 per share).
During 1998, employees purchased 112,000 shares, for which $2,941,000 was paid
to the Company. During 1999, employees purchased 99,000 shares, for which
$3,109,000 was paid to the Company. As of January 1, 2000, grants had been
exercised by employees for the purchase of 106,000 shares and 624,000 shares
remained available for issuance under the Plan. As of January 28, 2000,
$3,880,000 had been received by the Company upon issuance of these shares and
the balance of shares available for future issuance was reduced to 519,000.
This plan was terminated, pursuant to the Merger Agreement, effective January 1,
2000.
The Company applies the disclosure-only provisions of Statement of Accounting
Standards (SFAS) No. 123. Accordingly, no compensation cost has been recognized
for stock plans granting common shares at market value, as defined by SFAS No.
123, on the date of the grant. Had compensation cost for the Company's stock
plans been determined based on the fair value requirements of SFAS No. 123, the
Company's net income and basic earnings per share would have been reduced to the
proforma amounts indicated below:
F-58
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(In thousands except earnings per share)
1999 1998 1997
---- ---- ----
Net earnings As reported $98,018 $94,647 $59,647
Proforma 93,224 90,585 56,436
Basic earnings per share As reported $ 2.32 $ 2.24 $ 1.41
Proforma 2.21 2.14 1.33
The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
1999 1998 1997
---- ---- ----
Risk-free interest rate 5.54% 5.65% 6.85%
Dividend yield 1.30% 1.40% 1.55%
Expected volatility 20.00% 20.17% 19.42%
Expected life 4.1 yrs. 4.4 yrs. 4.5 yrs.
The weighted-average grant date fair values of options granted during 1999, 1998
and 1997 were $11.72, $10.33 and $8.84, respectively.
The components of the provision for income taxes were as follows:
(In thousands)
1999 1998 1997
---- ---- ----
Current
Federal $51,904 $39,944 $37,028
State 6,934 6,135 4,790
58,838 46,079 41,818
Deferred
Federal 2,392 10,514 (2,801)
State 250 1,068 (1,248)
2,642 11,582 (4,049)
Total income tax expense $61,480 $57,661 $37,769
The reconciliation of income tax computed at the United States Federal statutory
tax rate to income tax expense was as follows:
(In thousands)
1999 1998 1997
---- ---- ----
Tax at U.S.
statutory rate $55,825 35.00% $53,307 35.00% $34,096 35.00%
State income taxes,
net of federal tax
benefit 4,673 2.93 4,630 3.04 3,487 3.58
Other - net 982 .62 (276) (.18) 186 .19
$61,480 38.55% $57,661 37.86% $37,769 38.77%
F-59
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Deferred income taxes arise because of differences in the treatment of income
and expense items for financial reporting and income tax purposes. Significant
components of the Company's deferred tax assets and liabilities at the end of
the last two fiscal years were as follows:
(In thousands)
1999 1998
---- ----
Deferred Tax Liabilities:
Depreciation and amortization $ 48,524 $ 43,824
Other 3,999 2,880
-------- --------
Total Deferred Tax Liability 52,523 46,704
Deferred Tax Assets:
Capital leases (8,473) (8,027)
Insurance reserves (10,855) (10,314)
Associate benefit plans (5,730) (4,681)
Other (5,114) (775)
-------- --------
Total Deferred Tax Asset (30,172) (23,797)
Net Deferred Tax Liability 22,351 22,907
-------- --------
Net current deferred tax assets 10,325 5,952
-------- --------
Net non-current deferred tax liabilities $ 32,676 $ 28,859
======== ========
The Company expects to realize the deferred tax assets in the ordinary course of
business operations in subsequent years, and, accordingly, has not established a
valuation reserve relative to these amounts.
The following is a presentation of selected financial data for each of the four
quarters of fiscal years 1999, 1998 and 1997.
(In thousands except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1999
Sales and other revenues........ $839,124 $854,325 $881,934 $887,559
Gross margin.................... 217,725 226,216 235,644 238,734
Net earnings.................... 19,990 25,414 24,325 28,289
Earnings per share:
Basic...................... $ .47 $ .60 $ .58 $ .67
Diluted.................... $ .47 $ .59 $ .56 $ .65
1998
Sales and other revenues........ $788,296 $830,371 $854,675 $850,246
Gross margin.................... 198,317 207,614 217,649 219,662
Net earnings.................... 17,815 23,019 25,832 27,981
Earnings per share:
Basic...................... $ .42 $ .54 $ .61 $ .66
Diluted.................... $ .42 $ .54 $ .60 $ .65
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1997
Sales and other revenues........ $759,923 $775,687 $820,115 $870,708
Gross margin.................... 185,650 194,615 203,060 215,821
Net earnings.................... 15,590 19,878 22,797 1,382
Earnings per share:
Basic...................... $ .37 $ .47 $ .54 $ .03
Diluted.................... $ .37 $ .47 $ .53 $ .03
F-60
[PROSPECTUS BACK COVER PAGE]
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."
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, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Salisbury, North Carolina, on October 26, 2001.
DELHAIZE AMERICA, INC.
By: /s/ R. William McCanless
-----------------------------------------
R. William McCanless
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Name Title Date
---- ----- ----
/s/ R. William McCanless President, Chief Executive
------------------------------ Officer (principal executive officer) and
R. William McCanless Director October 26, 2001
/s/ Pierre-Olivier Beckers* Chairman of the Board, Director October 26, 2001
------------------------------
Pierre-Olivier Beckers
/s/ Hugh G. Farrington* Director October 26, 2001
------------------------------
Hugh G. Farrington
/s/ Laura C. Kendall* Chief Financial Officer and Vice October 26, 2001
------------------------------ President of Finance (principal
Laura C. Kendall financial and accounting officer)
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement pursuant to the Power of Attorney
executed by the above-named directors and officers of the registrant and
previously filed with the Securities and Exchange Commission on behalf of such
directors and officers.
*By: /s/ Michael R. Waller
-------------------------
Michael R. Waller
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Salisbury, North Carolina, on October 26, 2001.
FOOD LION, LLC
By: /s/ R. William McCanless
-----------------------------------
R. William McCanless
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Name Title Date
---- ----- ----
/s/ R. William McCanless Chief Executive
------------------------------ Officer (principal executive officer) and
R. William McCanless Manager October 26, 2001
/s/ Pierre-Olivier Beckers* Manager October 26, 2001
------------------------------
Pierre-Olivier Beckers
/s/ Hugh G. Farrington* Manager October 26, 2001
------------------------------
Hugh G. Farrington
/s/ Laura C. Kendall* Executive Vice President and Chief October 26, 2001
------------------------------ Financial Officer (principal financial
Laura C. Kendall and accounting officer)
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement pursuant to the Power of Attorney
executed by the above-named directors and officers of the registrant and
previously filed with the Securities and Exchange Commission on behalf of such
directors and officers.
*By: /s/ Michael R. Waller
-------------------------
Michael R. Waller
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Salisbury, North Carolina, on October 26, 2001.
HANNAFORD BROS. CO.
By: /s/ Ronald C. Hodge
-------------------------------
Ronald C. Hodge
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Name Title Date
---- ----- ----
/s/ Ronald C. Hodge President, Chief Executive
---------------------------- Officer (principal executive officer) and October 26, 2001
Ronald C. Hodge Director
/s/ Hugh G. Farrington* Director October 26, 2001
----------------------------
Hugh G. Farrington
/s/ R. William McCanless* Director October 26, 2001
----------------------------
R. William McCanless
/s/ Paul A. Fritzson* Executive Vice President and Chief October 26, 2001
---------------------------- Financial Officer (principal financial
Paul A. Fritzson and accounting officer)
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement pursuant to the Power of Attorney
executed by the above-named directors and officers of the registrant and
previously filed with the Securities and Exchange Commission on behalf of such
directors and officers.
*By: /s/ Michael R. Waller
-----------------------
Michael R. Waller
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Salisbury, North Carolina, on October 26, 2001.
KASH N' KARRY FOOD STORES, INC.
By: /s/ Michael D. Byars
---------------------------
Michael D. Byars
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Name Title Date
---- ----- ----
/s/ Michael D. Byars Chief Operating Officer (principal October 26, 2001
------------------------------- executive officer)
Michael D. Byars
/s/ Hugh G. Farrington* Director October 26, 2001
-------------------------------
Hugh G. Farrington
/s/ R. William McCanless* Director October 26, 2001
-------------------------------
R. William McCanless
/s/ Michael R. Waller Director October 26, 2001
------------------------------
Michael R. Waller
Executive Vice President and Chief
/s/ Laura C. Kendall* Financial Officer of Food Lion October 26, 2001
------------------------------ (principal financial and accounting officer)
Laura C. Kendall
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement pursuant to the Power of Attorney
executed by the above-named directors and officers of the registrant and
previously filed with the Securities and Exchange Commission on behalf of such
directors and officers.
*By: /s/ Michael R. Waller
-------------------------
Michael R. Waller
Attorney-in-Fact
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) Amended and Restated Credit Agreement dated as of November 17, 2000,
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).
10(an) Guaranty, dated as of April 19, 2001, by Food Lion, LLC in favor of
Morgan Guaranty Trust Company Of New York, as Administrative Agent,
relating to the $500,000,000 5-Year Credit Agreement dated as of
January 26, 2000.*
10(ao) Guaranty, dated as of April 19, 2001, by Food Lion, LLC in favor of
Morgan Guaranty Trust Company Of New York, as Administrative Agent,
relating to the Amended and Restated $500,000,000 364-Day Credit
Agreement dated as of November 17, 2000.*
10(ap) Amendment No. 1, dated as of April 19, 2001, to the $500,000,000 5-
Year 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.*
10(aq) Amendment No. 1, dated as of April 19, 2001, to the Amended and
Restated $500,000,000 364-Day Credit Agreement dated as of November
17, 2000, among the Company, the lenders party thereto and Morgan
Guaranty Trust Company Of New York, as Administrative Agent.*
10(ar) Guaranty, dated as of September 6, 2001, by Hannaford Bros. Co. in
favor of Morgan Guaranty Trust Company Of New York, as Administrative
Agent, relating to the Amended and Restated $500,000,000 364-Day
Credit Agreement dated as of November 17, 2000.*
10(as) Guaranty, dated as of September 6, 2001, by Hannaford Bros. Co. in
favor of Morgan Guaranty Trust Company Of New York, as Administrative
Agent, relating to the $500,000,000 5-Year Credit Agreement dated as
of January 26, 2000.*
10(at) Guaranty, dated as of September 6, 2001, by Kash N' Karry Food Stores,
Inc. in favor of Morgan Guaranty Trust Company Of New York, as
Administrative Agent, relating to the Amended and Restated
$500,000,000 364-Day Credit Agreement dated as of November 17, 2000.*
10(au) Guaranty, dated as of September 6, 2001, by Kash N' Karry Food Stores,
Inc. in favor of Morgan Guaranty Trust Company Of New York, as
Administrative Agent, relating to the $500,000,000 5-Year Credit
Agreement dated as of January 26, 2000.*
10(av) Amendment No. 2, dated as of September 6, 2001, to the Amended and
Restated $500,000,000 364-Day Credit Agreement dated as of November
17, 2000, among the Company, the Lenders party thereto and Morgan
Guaranty Trust Company Of New York, as Administrative Agent.*
10(aw) Amendment No. 2, dated as of September 6, 2001, to the $500,000,000 5-
Year 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.*
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
+ Previously filed
EX-5
3
dex5.txt
OPINION OF AKIN, GUMP, STRAUSS, HAUER & FELD LLP
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 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.AN
4
dex10an.txt
5 YEAR CREDIT AGREEMENT DATED JAN 26 2000
Exhibit 10(an)
FOOD LION GUARANTY
FOOD LION GUARANTY dated as of April 19, 2001 by FOOD LION, LLC, a North
Carolina limited liability company (with its successors, the "Guarantor") in
---------
favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
(with its successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
-------- -------
Administrative Agent are parties to a $500,000,000 5-Year Credit Agreement dated
as of January 26, 2000 (as the same may be amended from time to time, the
"Credit Agreement"); and
----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Governmental Authorization; No Contravention.
This Agreement (a) does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, (b) will not violate any applicable law or
regulation or the limited liability company agreement or other organizational
documents of the Guarantor or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or instrument
binding upon the Borrower or any of its Subsidiaries or its assets, other than
defaults or violations for which consents or waivers have been obtained, or
which individually or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect on the Borrower or the Guarantor, (d) will
not give rise to a right under any indenture, agreement or other instrument
binding upon the
2
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions, and (e) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay
punctually any Guaranteed Obligation, the Guarantor agrees that it shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement or the other relevant Loan Document, as the
case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
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(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Administrative Agent,
any Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower, any other Obligor or any other Person for any reason of the Credit
Agreement or any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower, of the principal
or the interest or any other amount payable by the Borrower under any Loan
Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
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provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
5
Section 4.04. Right of Set-Off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; Jurisdicition; Consent to Service of Prcess.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
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the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the "Process
-------
Agent"), to accept and acknowledge for and on behalf of the Guarantor service
-----
of any and all process, notices or other documents that may be served in any
suit, action or proceeding relating hereto in any New York State or Federal
court sitting in the State of New York. Such designation and appointment shall
be irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such suit,
action or proceeding and (ii) shall to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to the
Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
FOOD LION, LLC
By: /s/ Richard James
-------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By: /s/ B. J. Lillis
-------------------------------
Title: Managing Director
9
EX-10.AO
5
dex10ao.txt
364 DAY CREDIT AGREEMENT DATED NOV 17 2000
Exhibit 10(ao)
FOOD LION GUARANTY
FOOD LION GUARANTY dated as of April 19, 2001 by FOOD LION, LLC, a North
Carolina limited liability company (with its successors, the "Guarantor") in
---------
favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
(with its successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
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Administrative Agent are parties to an Amendment and Restated $500,000,000 364-
Day Credit Agreement dated as of November 17, 2000 (as the same may be amended
from time to time, the "Credit Agreement"); and
----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Governmental Authorization; No Contravention.
This Agreement (a) does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, (b) will not violate any applicable law or
regulation or the limited liability company agreement or other organizational
documents of the Guarantor or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or instrument
binding upon the Borrower or any of its Subsidiaries or its assets, other than
defaults or violations for which consents or waivers have been obtained, or
which individually or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect on the Borrower or the Guarantor, (d) will
not give rise to a right under any indenture, agreement or other instrument
binding upon the
2
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions, and will not result
in the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-Off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the Guaranteed Obligations. Upon failure by the
Borrower to pay punctually any Guaranteed Obligation, the Guarantor agrees that
it shall forthwith on demand pay the amount not so paid at the place and in the
manner specified in the Credit Agreement or the other relevant Loan Document, as
the case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
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(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Administrative Agent,
any Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower, any other Obligor or any other Person for any reason of the Credit
Agreement or any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower, of the principal
or the interest or any other amount payable by the Borrower under any Loan
Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
4
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
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Section 4.04. Right of Set-off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; Jurisdiction; Consent to Service of Process.
(a). This Agreement shall be construed in accordance with and governed by the
law of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
6
the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7
Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the
"Process Agent"), to accept and acknowledge for and on behalf of the Guarantor
-------------
service of any and all process, notices or other documents that may be served in
any suit, action or proceeding relating hereto in any New York State or Federal
court sitting in the State of New York. Such designation and appointment shall
be irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such
suit, action or proceeding and (ii) shall to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to the Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
8
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
FOOD LION, LLC
By: /s/ Richard James
-----------------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent
By: /s/ B. J. Lillis
-----------------------------------------
Title: Managing Director
9
EX-10.AP
6
dex10ap.txt
AMEND #1 TO CREDIT AGREEMENT DATED JAN 26 2000
Exhibit 10 (ap)
CONFORMED COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of April 19, 2001, amending the $500,000,000 5-Year
Credit Agreement dated as of January 26, 2000 (the "Credit Agreement"), among
DELHAIZE AMERICA, INC. (the "Borrower"), the LENDERS party hereto (the
"Lenders") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative
Agent (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement, as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date hereof
refer to the Credit Agreement as amended hereby.
Section 2. Additional Definitions. (a) The following definitions are added
in alphabetical order in Section 1.01 of the Credit Agreement (and, where
appropriate, amend and restate any prior definition in its entirety):
"Amendment No. 1 Effective Date" means the date of effectiveness of
------------------------------
Amendment No. 1 to this Agreement.
"Change in Control" means (a) the failure of the Parent or any wholly-
-----------------
owned subsidiary of the Parent to own, directly or indirectly,
beneficially or of record, shares representing more than a majority of
the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were not (i) nominated by the
board of directors of the Borrower, (ii) appointed by directors so
nominated or (iii) nominated by the Parent; or (c) the acquisition of
direct or indirect Control of the Borrower by any Person or group
other than the Parent or any wholly-owned subsidiary of the Parent.
"Food Lion" means Food Lion, LLC, a North Carolina limited liability
---------
company.
"Food Lion Guaranty" means the guaranty agreement between Food Lion
------------------
and the Administrative Agent for the benefit of the Lenders, substantially
in the form of Exhibit A to Amendment No.1 to this Agreement, as amended
from time to time.
"Guaranteed Parent Indebtedness" means any Indebtedness of the Parent
------------------------------
that is guaranteed by the Borrower.
"Loan Documents" means this Agreement and the Food Lion Guaranty.
--------------
"Parent" means Etablissements Delhaize Freres et Cie "Le Lion" S.A., a
------
Belgian corporation.
"Restricted Guaranty" means any Indebtedness of the Borrower
-------------------
constituting a Guarantee of Indebtedness of the Parent.
(b) The definition of "Consolidated Net Income"contained in Section 1.01 of
-----------------------
the Credit Agreement is amended by (i) deleting the phrase "and subject to
Section 1.04" from the second line of clause (d) thereof, (ii) deleting the
phrase "and subject to Section 1.04(b)" from the second line of clause (e)
thereof, (iii) replacing the word "or" in clause (h) thereof with a comma, and
(iv) inserting the phrase "or write-down" immediately following the phrase
"write-up" in clause (h) thereof.
(c) The definition of "Delhaize Belgium" contained in Section 1.01 of the
----------------
Credit Agreement is deleted.
Section 3. Additional Reporting Covenant Regarding Restricted Guarantees.
(a) Section 5.01(f) of the Credit Agreement is renamed Section 5.01(g)
thereof.
(b) A new Section 5.01(f) of the Credit Agreement is inserted immediately
following Section 5.01(e) thereof, to read in its entirety as follows:
"(f) (i) at least 90 days (subject to the parenthetical at the end of
the second paragraph in Section 6.02(a) hereof) prior to entering into
a Restricted Guaranty notice of its intent to do so, which notice
shall set forth the terms of the Guaranteed Parent Indebtedness
proposed to be Guaranteed pursuant to such Restricted Guaranty and
(ii) on the date of granting of such Restricted Guaranty, a
certificate of the chief financial
2
officer or the chief accounting officer of the Parent, stating whether
the Parent is in compliance with the covenants referred to in clause
(2) of Section 6.02(a) and with respect to any such covenants that are
financial covenants, setting forth reasonably detailed calculations of
compliance therewith; and"
(c) Section 5.01(e) of the Credit Agreement is amended by deleting the word
"and" immediately following the phrase "as the case may be;" in the sixth line
thereof.
Section 4. Amended Lien Covenant. (a) Section 6.01(b) of the Credit
Agreement is amended by (i) replacing the phrase "capital leases" in the third
line thereof with the phrase "Capitalized Leases" and (ii) inserting the
parenthetical "(subject to Section 6.02)" immediately following the phrase
"replacements thereof" in the eighth line thereof.
(b) Section 6.01(c) of the Credit Agreement is amended by inserting the
parenthetical "(subject to Section 6.02)" immediately following the phrase
"replacements thereof" in the eleventh line thereof.
(c) Section 6.01(d) of the Credit Agreement is amended by inserting the
phrase "and extensions, renewals and replacements thereof (subject to Section
6.02) that do not increase the outstanding principal amount thereof" immediately
following the phrase "or any Subsidiary" in the eighth line thereof.
Section 5. Amended Debt Covenant. Section 6.02 of the Credit Agreement is
amended to read in its entirety as follows:
"SECTION 6.02. Indebtedness. (a) Limitations on Indebtedness of the
Borrower. The Borrower will not incur, assume, become liable in
respect of or suffer to exist any Indebtedness constituting a
Restricted Guaranty except, to the extent otherwise permitted under
Section 6.08 hereof, the Borrower may Guarantee any Indebtedness of
the Parent, so long as (1) prior to or simultaneously with the
granting of such Guaranty, Parent shall have guaranteed all
Indebtedness under this Agreement on terms and conditions acceptable
to the Majority Lenders, (2) immediately after giving effect to the
granting of any such Guaranty, the Parent and its Consolidated
Subsidiaries shall be in compliance with certain financial,
affirmative and negative covenants to be agreed upon by Parent and the
Majority Lenders in good faith. Such financial covenants shall
include, in any event, compliance with a leverage covenant and a fixed
charges coverage covenant, in each case with levels to be agreed upon
by Parent and the Majority Lenders in good faith, and (3) after giving
effect to the
3
granting of any such Guaranty, the rating of the Index Debt is not
lowered by either S&P or Moody's.
In connection with each proposed Restricted Guaranty, the
Borrower will provide the notice and certificate set forth in Section
5.01(f) with respect thereto and, concurrently therewith, will provide
such notice to S&P and Moody's, together with any additional
information requested by S&P or Moody's. The Borrower will not enter
into such Restricted Guaranty for a period of at least 90 days after
such notice and certificate have been delivered to the Administrative
Agent, S&P and Moody's (or, if earlier, the date on which each of S&P
and Moody's shall have reaffirmed the rating of the Index Debt, after
giving effect to the granting of such Restricted Guaranty).
(b) Limitations on Indebtedness of Subsidiaries. The Borrower
will not permit any Subsidiary to create, incur, assume, become liable
in respect of or suffer to exist any Indebtedness, except any
Indebtedness that is listed in one of the clauses below and is
otherwise permitted under Section 6.08 hereof:
(1) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted under Section 6.01(b);
(2) (i) Indebtedness (including, without limitation, Capital
Lease Obligations) secured by Liens permitted under Section 6.01(c) in
an aggregate principal amount not to exceed $140,000,000, (ii)
Indebtedness (other than Indebtedness permitted by clause (i))
consisting of Capital Lease Obligations and (iii) Indebtedness of Bel-
Thai Supermarket Company Ltd. in an aggregate principal amount not
exceeding $60,000,000;
(3) Indebtedness of any Subsidiary owed to the Borrower or any
other Subsidiary;
(4) Indebtedness of Food Lion under the Food Lion Guaranty,
Indebtedness of Food Lion constituting a Guaranty of the Borrower's
obligations under the 364-Day Credit Agreement and Indebtedness of
Food Lion constituting a Guaranty of the Borrower's senior unsecured
$600,000,000 7.375% Notes due 2006, $1,100,000,000 8.125% Notes due
2011 and $900,000,000 9% Debentures due 2031, and
(5) additional Indebtedness of the Subsidiaries in an aggregate
principal amount (for all Subsidiaries) at no time exceeding (i)
$30,000,000 minus (ii) the aggregate principal amount of Indebtedness
-----
4
secured by Liens permitted solely by clause (e) of Section 6.01
outstanding at such time;
provided that at any date the aggregate amount of Capital Lease Obligations of
all Subsidiaries (other than any such Capital Lease Obligations incurred in
reliance on clause (2)(i) of subsection (b)) and the aggregate amount of Capital
Lease Obligations of the Borrower will not exceed $1,000,000,000."
Section 6. Amended Fundamental Changes Covenant. Section 6.03 of the Credit
Agreement is amended to read in its entirety as follows:
"SECTION 6.03 Fundamental Changes. (a) The Borrower will not, and will
not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of the assets of the
Borrower and its Subsidiaries taken as a whole (whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) the Borrower may merge into any other Person
in a transaction in which the Borrower is the surviving corporation, (ii)
any Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, (iii) any Subsidiary may merge into
any Subsidiary in a transaction in which the surviving entity is a
Subsidiary (and, if Food Lion is a party to such merger, the surviving
entity shall agree to be bound by the provisions of the Food Lion
Guaranty), (iv) (x) any Subsidiary may merge into any other Person in a
transaction in which the surviving entity is a Subsidiary (and, if Food
Lion is a party to such merger, the surviving entity shall agree to be
bound by the provisions of the Food Lion Guaranty) or (y) any Subsidiary
(other than Food Lion) may merge into any other Person in a transaction
permitted by Section 6.09 and in which the surviving Person is not a
Subsidiary, (v) subject to the last sentence of this subsection (a), any
Subsidiary may sell, transfer, lease or otherwise dispose of its assets to
the Borrower or to another Subsidiary or in a transaction not constituting
all or substantially all of the assets of the Borrower and its Subsidiaries
taken as a whole and which is permitted by Section 6.09 and (vi) any
Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders; provided
that any such merger involving a Person that is not a wholly owned
Subsidiary immediately prior to such merger shall not be permitted unless
also permitted by Section 6.04. In addition to the requirements set forth
in the immediately preceding sentence, the Borrower will not permit Food
Lion
5
to sell, transfer, lease or otherwise dispose of (in one transaction or a
series of transactions) all or substantially all of its assets to any
Person except to (1) the Borrower, (2) an entity that is a Subsidiary prior
to such sale, lease, transfer or other disposition or (3) any other Person
in a transaction not constituting a sale, lease, transfer or other
disposition of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole, and in which the surviving entity is a
Subsidiary so long as, in the case of clauses (2) or (3), such Subsidiary
or other Person shall agree to be bound by the provisions of the Food Lion
Guaranty.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on
the Amendment No.1 Effective Date and businesses reasonably related or
incidental thereto."
Section 7. Amendment Investment Covenant. (a) The introductory paragraph of
Section 6.04 of the Credit Agreement is amended by inserting the phrase ",
otherwise provide any credit support to" immediately following the phrase
"guarantee any obligations of" in the sixth line thereof.
(b) Clause (v) of Section 6.04(a) of the Credit Agreement is amended to
read in its entirety as follows:
"(v) (A) investments by the Borrower existing on the date hereof in
the capital stock of its Subsidiaries and (B) investments by the Borrower
or any Subsidiary consisting solely of the creation of one or more new
Subsidiaries (it being understood that the purchase or other acquisition
(in one transaction or a series of transactions) of any assets of any other
Person constituting a business unit shall not be permitted by this clause
(v)(B));"
(c) Clause (vii) of Section 6.04(a) of the Credit Agreement is amended to
read in its entirety as follows:
"(vii) (x) Guarantees by the Borrower or any of its Subsidiaries of
any Debt or Indebtedness of any Person (other than the Parent or any other
entity through which the Parent holds any Capital Stock of the Borrower),
so long as (1) in the case of any Debt, such Debt and Guarantee would be
permitted under Section 6.08 and (2) in the case of any Indebtedness, such
Indebtedness is permitted under Section 6.02 and (y) Restricted Guarantees
permitted under Section 6.02;"
6
(d) Clause (xi) of Section 6.04(a) of the Credit Agreement is renumbered
clause (xii) thereof.
(e) A new clause (xi) is added to Section 6.04(a) of the Credit Agreement
immediately following clause (x) thereof, to read in its entirety as follows:
"(xi) purchase of common stock or ADRs of the Parent, solely for the
purpose of providing such stock or ADRs as compensation to employees of the
Borrower and its Subsidiaries pursuant to compensation plans of the
Borrower in the ordinary course of business."
Section 8. Amended Transactions with Affiliates Covenant. Section 6.05 of
the Credit Agreement is amended to read in its entirety as follows:
"SECTION 6.05. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire
any property or assets from, or otherwise engage in any other transactions
with, any of its Affiliates, except (a) in the ordinary course of business
at prices and on terms and conditions not less favorable to the Borrower or
such Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties, (b) transactions between or among the Borrower and
its wholly owned Subsidiaries not involving any other Affiliate , and (c)
the granting by the Borrower of Restricted Guarantees permitted under
Section 6.02."
Section 9. Amended Fixed Charges Coverage Ratio. Section 6.07 is amended to
read in its entirety as follows:
"SECTION 6.07. Fixed Charges Coverage. At the end of each Fiscal
Quarter set forth below, the ratio of (i) Consolidated EBITDAR for the
period of four Fiscal Quarters then ended to (ii) Consolidated Fixed
Charges for such period, shall not have been less than the ratio set forth
below opposite such Fiscal Quarter:
----------------------------------------------------------------------
Fiscal Quarter Ratio
----------------------------------------------------------------------
First Fiscal Quarter ended on or immediately after the 2.00:1
Amendment No. 1 Effective Date - Third Fiscal Quarter 2001
----------------------------------------------------------------------
Fourth Fiscal Quarter 2001 - Third Fiscal Quarter 2002 2.15:1
----------------------------------------------------------------------
Fourth Fiscal Quarter 2002 - Third Fiscal Quarter 2003 2.40:1
----------------------------------------------------------------------
7
----------------------------------------------------------------------
Fourth Fiscal Quarter 2003 - Third Fiscal Quarter 2004 2.65:1
----------------------------------------------------------------------
Fourth Fiscal Quarter 2004 and thereafter 3.00:1
----------------------------------------------------------------------
Section 10. Amended Ratio of Consolidated Adjusted Debt to Consolidated
EBITDAR. Section 6.08 is amended to read in its entirety as follows:
"SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated
EBITDAR. At no date will the ratio of (i) Consolidated Adjusted Debt at
such date to (ii) Consolidated EBITDAR for the period of four consecutive
Fiscal Quarters ended on or most recently prior to such date exceed the
ratio set forth below opposite the period in which such date falls:
----------------------------------------------------------------------
Fiscal Quarter Ratio
----------------------------------------------------------------------
Amendment No. 1 Effective Date - day immediately preceding 4.50:1
last day of Fourth Fiscal Quarter 2001
----------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2001 - day immediately 4.25:1
preceding last day of Fourth Fiscal Quarter 2002
----------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2002 - day immediately 4.00:1
preceding last day of Fourth Fiscal Quarter 2003
----------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2003 and thereafter 3.50:1
----------------------------------------------------------------------
Section 11. Additional Events of Default. (a) Section 7.01(c) of the Credit
Agreement is amended by adding the phrase "or any Loan Document" immediately
after the word "Agreement" in the second line thereof.
(b) Section 7.01(l) of the Credit Agreement is amended by deleting the word
"or" at the end thereof.
(c) A new Section 7.01(n) is added to the Credit Agreement immediately
following Section 7.01(m) thereof, to read in its entirety as follows:
"(n) the Food Lion Guaranty shall cease to be enforceable, or Food
Lion or any of its Affiliates shall so assert in writing; or"
8
(d) A new Section 7.01(o) is added to the Credit Agreement immediately
following the new Section 7.01(n) thereof, to read in its entirety as follows:
"(o) the Parent (or any other entity through which the Parent holds
any capital stock of the Borrower) shall Guarantee any Indebtedness or
other obligation of the Borrower or any of its Subsidiaries (other than
Indebtedness incurred under this Agreement), unless prior to or
contemporaneously therewith, Parent shall have guaranteed all Indebtedness
under this Agreement on terms and conditions acceptable to the Majority
Lenders;"
Section 12. Changes to Article 8. (a) Clause (i) in the third paragraph of
Section 8.01 of the Credit Agreement is amended by replacing the phrase "this
Agreement" contained therein with the phrase "any Loan Document",
(b) Clause (ii) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the word "herewith" contained therein with the
word "therewith",
(c) Clause (iii) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the word "herein" contained therein with the
word "therein",
(d) Clause (iv) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the phrase "this Agreement" contained therein
with the phrase "any Loan Document",
(e) Clause (v) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by inserting the phrase "of this Agreement" immediately
following the phrase "Article IV" and replacing the word "herein" contained
therein with the word "therein".
Section 13. Changes to the Amendments and Waivers Section. A new paragraph
(c) is added at the end of Section 9.02 of the Credit Agreement, to read in its
entirety as follows:
"(c) Neither the Food Lion Guaranty nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by Food Lion and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall
release Food Lion from its obligations under the Food Lion Guaranty without
the consent of each Lender."
9
Section 14. Changes to the Assignments Section. (a) Section 9.04(b) of the
Credit Agreement is amended by (i) replacing the word "an" immediately following
the phrase "assignment to a Lender or" in the fourth line thereof with the
phrase "a Lender", (ii) deleting the phrase "of a Lender" immediately following
the word "Affiliate" in the fourth line thereof, (iii) replacing the word "an"
immediately following the phrase "assignment to a Lender or" in the seventh line
thereof with the phrase "a Lender", (iv) deleting the phrase "of a Lender"
immediately following the word "Affiliate" in the seventh line thereof, (v)
inserting the phrase "other than Section 9.12" immediately following the phrase
"under this Agreement" in the twenty-sixth line thereof, and (vi) inserting the
phrase "and subject to Section 9.12" immediately following the phrase "2.15 and
9.03" in the twenty-ninth line thereof.
(b) A new paragraph (h) is added at the end of Section 9.04 of the Credit
Agreement, to read in its entirety as follows:
"(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle
---------------
(an "SPC") of such Granting Lender, identified as such in writing from time
---
to time by the Granting Lender to the Administrative Agent and the
Borrower, the option to provide to the Borrower all or any part of any Loan
that such Granting Lender would otherwise be obligated to make to the
Borrower pursuant to this Agreement, provided that (i) nothing herein shall
constitute a commitment to make any Loan by any SPC and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and
as if, such Loan were made by the Granting Lender. Each party hereto hereby
agrees that no SPC shall be liable for any payment under this Agreement for
which a Lender would otherwise be liable, for so long as, and to the
extent, the related Granting Lender makes such payment. In furtherance of
the foregoing, each party hereto hereby agrees that, prior to the date that
is one year and one day after the payment in full of all outstanding senior
indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 9.04 any
SPC may (i) with notice to, but without the prior written consent of, the
Borrower or the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to its
Granting Lender or to any financial institutions (if consented to by the
Borrower and the Administrative
10
Agent) providing liquidity and/or credit facilities to or for the account
of such SPC to fund the Loans made by such SPC or to support the securities
(if any) issued by such SPC to fund such Loans and (ii) disclose on a
confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of a surety, guarantee
or credit or liquidity enhancement to such SPC. This Section may not be
amended without the written consent of each SPC that holds any Loans at the
time of such proposed amendment."
Section 15. Changes to the Survival Section. Section 9.05 of the Credit
Agreement is amended by replacing the phrase "2.15 and 9.03" in the thirteenth
line thereof with the phrase "2.15, 9.03 and 9.12".
Section 16. Representations and Warranties. The Borrower hereby represents
and warrants that as of the date hereof and after giving effect hereto:
(a) no Default or Event of Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in the
Credit Agreement after giving effect to this Amendment is true and correct as
though made on and as of such date, except for any such representation and
warranty made as of a specific date, which are true and correct as of such
specific date.
Section 17. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Section 18. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when each of the
following conditions shall have been satisfied:
(a) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and the Majority Lenders (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Agent shall have received telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent of duly executed counterparts of a
Food Lion Guaranty substantially in the form set forth on Exhibit A hereto;
11
(c) receipt by the Administrative Agent of an opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. in form and substance reasonably satisfactory to
the Administrative Agent; and
(d) receipt by the Administrative Agent of all documents it may reasonably
request relating to the existence of the Borrower, the corporate authority for
and the validity of the Credit Agreement as amended hereby, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the Lenders
of the effectiveness of this Amendment, and such notice shall be conclusive and
binding on all parties hereto.
12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
DELHAIZE AMERICA, INC.
By: /s/ Richard James
----------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually and as Administrative
Agent
By: /s/ B. J. Lillis
----------------------------------
Title: Managing Director
CITIBANK, N.A.
By: /s/ Marc Merlino
----------------------------------
Title: Vice President
BANK OF AMERICA, N.A.
By:__________________________________
Name:
Title:
WACHOVIA BANK, N.A.
By: /s/ Charles B. Morris, III
----------------------------------
Title: Assistant Vice President
BBL INTERNATIONAL (U.K.) LIMITED
By: /s/ C. F. Wright
----------------------------------
Title: Authorized Signatory
By: /s/ M-C Swinnen
----------------------------------
Title: Authorized Signatory
BNP PARIBAS (HOUSTON)
By: /s/ Henry F. Setina
----------------------------------
Title: Vice President
By: /s/ Lloyd G. Cox
----------------------------------
Title: Managing Director
DEUTSCHE BANK AG, NEW YORK BRANCH
and/or Cayman Islands Branch
By: /s/ Kamil Kaya
----------------------------------
Title: Director
By: /s/ Frank A. Raetzer
----------------------------------
Title: Vice President
FORTIS (USA) FINANCE LLC
By: /s/ Karel Louman
----------------------------------
Title: President
By: /s/ John T. Conners
----------------------------------
Title: Chief Operating Officer
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL", NEW YORK BRANCH
By: /s/ Theodore W. Cox
----------------------------------
Title: Vice President
By: /s/ James S. Cunningham
----------------------------------
Title: Managing Director, Chief
Risk Officer
THE BANK OF NEW YORK
By: /s/ William M. Barnum
----------------------------------
Title: Vice President
BANK ONE, NA
By:__________________________________
Name:
CREDIT AGRICOLE INDOSUEZ
By: /s/ Rene LeBlanc
----------------------------------
Title: Vice President
By: /s/ Michael Haggarty
----------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Margaret Gibbons
----------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Andrew J. Hines
----------------------------------
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ Mark R. Marron
----------------------------------
Title: Vice President
COBANK, ACB
By: /s/ Brian J. Klatt
----------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Ying Yang
----------------------------------
Title: Account Officer
THE FUJI BANK, LIMITED
By:__________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Akihiko Mabuchi
----------------------------------
Title: Senior Vice President
BNP PARIBAS (BRUSSELS)
By: /s/ Andre Boulanger
----------------------------------
Title: General Manager
BRANCH BANKING & TRUST COMPANY
By: /s/ Cory Boyte
----------------------------------
Title: Vice President
CREDIT COMMERCIALE DE FRANCE S.A.
By:__________________________________
Name:
Title:
DEXIA BANK S.A.
By:__________________________________
Name:
Title:
FLEET NATIONAL BANK
By:__________________________________
Name:
Title:
UNION BANK OF CALIFORNIA, NA
By:__________________________________
Name:
Title:
CIBC INC.
By: /s/ Carol Kizzia
----------------------------------
Title: Managing Director
BANCA DI ROMA - NEW YORK BRANCH
By:__________________________________
Name:
Title:
EX-10.AQ
7
dex10aq.txt
AMEND #1 CREDIT AGREEMENT DATED NOV 17 2000
Exhibit 10(aq)
CONFORMED COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of April 19, 2001, amending the Amended and Restated
$500,000,000 364-Day Credit Agreement dated as of November 17, 2000 (the "Credit
Agreement"), among DELHAIZE AMERICA, INC. (the "Borrower"), the LENDERS party
hereto (the "Lenders") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement, as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date hereof
refer to the Credit Agreement as amended hereby.
Section 2. Additional Definitions. (a) The following definitions are added
in alphabetical order in Section 1.01 of the Credit Agreement (and, where
appropriate, amend and restate any prior definition in its entirety):
"Amendment No. 1 Effective Date" means the date of effectiveness of
------------------------------
Amendment No. 1 to this Agreement.
"Change in Control" means (a) the failure of the Parent or any wholly-
-----------------
owned subsidiary of the Parent to own, directly or indirectly, beneficially
or of record, shares representing more than a majority of the aggregate
ordinary voting power represented by the issued and outstanding Capital
Stock of the Borrower; (b) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the Borrower by Persons who
were not (i) nominated by the board of directors of the Borrower, (ii)
appointed by directors so nominated or (iii) nominated by the Parent; or
(c) the acquisition of direct or indirect Control of the Borrower by any
Person or group other than the Parent or any wholly-owned subsidiary of the
Parent.
"Food Lion" means Food Lion, LLC, a North Carolina limited liability
---------
company.
"Food Lion Guaranty" means the guaranty agreement between Food Lion
------------------
and the Administrative Agent for the benefit of the Lenders, substantially
in the form of Exhibit A to Amendment No.1 to this Agreement, as amended
from time to time.
"Guaranteed Parent Indebtedness" means any Indebtedness of the Parent
------------------------------
that is guaranteed by the Borrower.
"Loan Documents" means this Agreement and the Food Lion Guaranty.
--------------
"Parent" means Etablissements Delhaize Freres et Cie "Le Lion" S.A., a
------
Belgian corporation.
"Restricted Guaranty" means any Indebtedness of the Borrower
-------------------
constituting a Guarantee of Indebtedness of the Parent.
(b) The definition of "Consolidated Net Income"contained in Section 1.01
-----------------------
of the Credit Agreement is amended by (i) deleting the phrase "and subject to
Section 1.04" from the second line of clause (d) thereof, (ii) deleting the
phrase "and subject to Section 1.04(b)" from the second line of clause (e)
thereof, (iii) replacing the word "or" in clause (h) thereof with a comma, and
(iv) inserting the phrase "or write-down" immediately following the phrase
"write-up" in clause (h) thereof.
(c) The definition of "Delhaize Belgium"contained in Section 1.01 of the
----------------
Credit Agreement is deleted.
Section 3. Additional Reporting Covenant Regarding Restricted Guarantees.
(a) Section 5.01(f) of the Credit Agreement is renamed Section 5.01(g) thereof.
(b) A new Section 5.01(f) of the Credit Agreement is inserted immediately
following Section 5.01(e) thereof, to read in its entirety as follows:
"(f) (i) at least 90 days (subject to the parenthetical at the end of
the second paragraph in Section 6.02(a) hereof) prior to entering into a
Restricted Guaranty notice of its intent to do so, which notice shall set
forth the terms of the Guaranteed Parent Indebtedness proposed to be
Guaranteed pursuant to such Restricted Guaranty and (ii) on the date of
granting of such Restricted Guaranty, a certificate of the chief financial
2
officer or the chief accounting officer of the Parent, stating whether the
Parent is in compliance with the covenants referred to in clause (2) of
Section 6.02(a) and with respect to any such covenants that are financial
covenants, setting forth reasonably detailed calculations of compliance
therewith; and"
(c) Section 5.01(e) of the Credit Agreement is amended by deleting the
word "and" immediately following the phrase "as the case may be;" in the sixth
line thereof.
Section 4. Amended Lien Covenant.(a) Section 6.01(b) of the Credit
Agreement is amended by (i) replacing the phrase "capital leases" in the third
line thereof with the phrase "Capitalized Leases" and (ii) inserting the
parenthetical "(subject to Section 6.02)" immediately following the phrase
"replacements thereof" in the eighth line thereof.
(b) Section 6.01(c) of the Credit Agreement is amended by inserting the
parenthetical "(subject to Section 6.02)" immediately following the phrase
"replacements thereof" in the eleventh line thereof.
(c) Section 6.01(d) of the Credit Agreement is amended by inserting the
phrase "and extensions, renewals and replacements thereof (subject to Section
6.02) that do not increase the outstanding principal amount thereof" immediately
following the phrase "or any Subsidiary" in the eighth line thereof.
Section 5. Amended Debt Covenant. Section 6.02 of the Credit Agreement is
amended to read in its entirety as follows:
"SECTION 6.02. Indebtedness. (a) Limitations on Indebtedness of the
Borrower. The Borrower will not incur, assume, become liable in respect of
or suffer to exist any Indebtedness constituting a Restricted Guaranty
except, to the extent otherwise permitted under Section 6.08 hereof, the
Borrower may Guarantee any Indebtedness of the Parent, so long as (1) prior
to or simultaneously with the granting of such Guaranty, Parent shall have
guaranteed all Indebtedness under this Agreement on terms and conditions
acceptable to the Majority Lenders, (2) immediately after giving effect to
the granting of any such Guaranty, the Parent and its Consolidated
Subsidiaries shall be in compliance with certain financial, affirmative and
negative covenants to be agreed upon by Parent and the Majority Lenders in
good faith. Such financial covenants shall include, in any event,
compliance with a leverage covenant and a fixed charges coverage covenant,
in each case with levels to be agreed upon by Parent and the Majority
Lenders in good faith, and (3) after giving effect to the
3
granting of any such Guaranty, the rating of the Index Debt is not lowered
by either S&P or Moody's.
In connection with each proposed Restricted Guaranty, the Borrower will
provide the notice and certificate set forth in Section 5.01(f) with
respect thereto and, concurrently therewith, will provide such notice to
S&P and Moody's, together with any additional information requested by S&P
or Moody's. The Borrower will not enter into such Restricted Guaranty for a
period of at least 90 days after such notice and certificate have been
delivered to the Administrative Agent, S&P and Moody's (or, if earlier, the
date on which each of S&P and Moody's shall have reaffirmed the rating of
the Index Debt, after giving effect to the granting of such Restricted
Guaranty).
(b) Limitations on Indebtedness of Subsidiaries. The Borrower will
not permit any Subsidiary to create, incur, assume, become liable in
respect of or suffer to exist any Indebtedness, except any Indebtedness
that is listed in one of the clauses below and is otherwise permitted under
Section 6.08 hereof:
(1) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted under Section 6.01(b);
(2) (i) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted under Section 6.01(c) in an
aggregate principal amount not to exceed $140,000,000, (ii) Indebtedness
(other than Indebtedness permitted by clause (i)) consisting of Capital
Lease Obligations and (iii) Indebtedness of Bel-Thai Supermarket Company
Ltd. in an aggregate principal amount not exceeding $60,000,000;
(3) Indebtedness of any Subsidiary owed to the Borrower or any other
Subsidiary;
(4) Indebtedness of Food Lion under the Food Lion Guaranty,
Indebtedness of Food Lion constituting a Guaranty of the Borrower's
obligations under the 5-Year Agreement and Indebtedness of Food Lion
constituting a Guaranty of the Borrower's senior unsecured $600,000,000
7.375% Notes due 2006, $1,100,000,000 8.125% Notes due 2011 and
$900,000,000 9% Debentures due 2031, and
(5) additional Indebtedness of the Subsidiaries in an aggregate
principal amount (for all Subsidiaries) at no time exceeding (i)
$30,000,000 minus (ii) the aggregate principal amount of Indebtedness
-----
4
secured by Liens permitted solely by clause (e) of Section 6.01 outstanding
at such time;
provided that at any date the aggregate amount of Capital Lease Obligations of
all Subsidiaries (other than any such Capital Lease Obligations incurred in
reliance on clause (2)(i) of subsection (b)) and the aggregate amount of Capital
Lease Obligations of the Borrower will not exceed $1,000,000,000."
Section 6. Amended Fundamental Changes. Section 6.03 of the Credit
Agreement is amended to read in its entirety as follows:
"SECTION 6.03 Fundamental Changes. (a) The Borrower will not, and will
not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of the assets of the
Borrower and its Subsidiaries taken as a whole (whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) the Borrower may merge into any other Person
in a transaction in which the Borrower is the surviving corporation, (ii)
any Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, (iii) any Subsidiary may merge into
any Subsidiary in a transaction in which the surviving entity is a
Subsidiary (and, if Food Lion is a party to such merger, the surviving
entity shall agree to be bound by the provisions of the Food Lion
Guaranty), (iv) (x) any Subsidiary may merge into any other Person in a
transaction in which the surviving entity is a Subsidiary (and, if Food
Lion is a party to such merger, the surviving entity shall agree to be
bound by the provisions of the Food Lion Guaranty) or (y) any Subsidiary
(other than Food Lion) may merge into any other Person in a transaction
permitted by Section 6.09 and in which the surviving Person is not a
Subsidiary, (v) subject to the last sentence of this subsection (a), any
Subsidiary may sell, transfer, lease or otherwise dispose of its assets to
the Borrower or to another Subsidiary or in a transaction not constituting
all or substantially all of the assets of the Borrower and its Subsidiaries
taken as a whole and which is permitted by Section 6.09 and (vi) any
Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders; provided
that any such merger involving a Person that is not a wholly owned
Subsidiary immediately prior to such merger shall not be permitted unless
also permitted by Section 6.04. In addition to the requirements set forth
in the immediately preceding sentence, the Borrower will not permit Food
Lion
5
to sell, transfer, lease or otherwise dispose of (in one transaction or a
series of transactions) all or substantially all of its assets to any
Person except to (1) the Borrower, (2) an entity that is a Subsidiary prior
to such sale, lease, transfer or other disposition or (3) any other Person
in a transaction not constituting a sale, lease, transfer or other
disposition of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole, and in which the surviving entity is a
Subsidiary so long as, in the case of clauses (2) or (3), such Subsidiary
or other Person shall agree to be bound by the provisions of the Food Lion
Guaranty.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on
the Amendment No.1 Effective Date and businesses reasonably related or
incidental thereto."
Section 7. Amended Investment Covenant. (a) The introductory paragraph of
Section 6.04 of the Credit Agreement is amended by inserting the phrase ",
otherwise provide any credit support to" immediately following the phrase
"guarantee any obligations of" in the sixth line thereof.
(b) Clause (v) of Section 6.04(a) of the Credit Agreement is amended to
read in its entirety as follows:
"(v) (A) investments by the Borrower existing on the date hereof in
the capital stock of its Subsidiaries and (B) investments by the Borrower
or any Subsidiary consisting solely of the creation of one or more new
Subsidiaries (it being understood that the purchase or other acquisition
(in one transaction or a series of transactions) of any assets of any other
Person constituting a business unit shall not be permitted by this clause
(v)(B));"
(c) Clause (vii) of Section 6.04(a) of the Credit Agreement is amended to
read in its entirety as follows:
"(vii) (x) Guarantees by the Borrower or any of its Subsidiaries of
any Debt or Indebtedness of any Person (other than the Parent or any other
entity through which the Parent holds any Capital Stock of the Borrower),
so long as (1) in the case of any Debt, such Debt and Guarantee would be
permitted under Section 6.08 and (2) in the case of any Indebtedness, such
Indebtedness is permitted under Section 6.02 and (y) Restricted Guarantees
permitted under Section 6.02;"
6
(d) Clause (xi) of Section 6.04(a) of the Credit Agreement is renumbered
clause (xii) thereof.
(e) A new clause (xi) is added to Section 6.04(a) of the Credit Agreement
immediately following clause (x) thereof, to read in its entirety as follows:
"(xi) purchase of common stock or ADRs of the Parent, solely for the
purpose of providing such stock or ADRs as compensation to employees of the
Borrower and its Subsidiaries pursuant to compensation plans of the
Borrower in the ordinary course of business."
Section 8. Amended Transactions with Affiliates Covenant. Section 6.05 of
the Credit Agreement is amended to read in its entirety as follows:
"SECTION 6.05. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire
any property or assets from, or otherwise engage in any other transactions
with, any of its Affiliates, except (a) in the ordinary course of business
at prices and on terms and conditions not less favorable to the Borrower or
such Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties, (b) transactions between or among the Borrower and
its wholly owned Subsidiaries not involving any other Affiliate , and (c)
the granting by the Borrower of Restricted Guarantees permitted under
Section 6.02."
Section 9. Amended Fixed Charges Coverage Ratio. Section 6.07 is amended
to read in its entirety as follows:
"SECTION 6.07. Fixed Charges Coverage. At the end of each Fiscal
Quarter set forth below, the ratio of (i) Consolidated EBITDAR for the
period of four Fiscal Quarters then ended to (ii) Consolidated Fixed
Charges for such period, shall not have been less than the ratio set forth
below opposite such Fiscal Quarter:
-------------------------------------------------------------------
Fiscal Quarter Ratio
-------------------------------------------------------------------
First Fiscal Quarter ended on or immediately after the 2.00:1
Amendment No. 1 Effective Date - Third Fiscal
Quarter 2001
-------------------------------------------------------------------
Fourth Fiscal Quarter 2001 - Third Fiscal Quarter 2002 2.15:1
-------------------------------------------------------------------
Fourth Fiscal Quarter 2002 - Third Fiscal Quarter 2003 2.40:1
-------------------------------------------------------------------
7
-------------------------------------------------------------------
Fourth Fiscal Quarter 2003 - Third Fiscal Quarter 2004 2.65:1
-------------------------------------------------------------------
Fourth Fiscal Quarter 2004 and thereafter 3.00:1
-------------------------------------------------------------------
Section 10. Amended Ratio of Consolidated Adjusted Debt to Consolidated
EBITDAR. Section 6.08 is amended to read in its entirety as follows:
" SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated
EBITDAR. At no date will the ratio of (i) Consolidated Adjusted Debt at
such date to (ii) Consolidated EBITDAR for the period of four consecutive
Fiscal Quarters ended on or most recently prior to such date exceed the
ratio set forth below opposite the period in which such date falls:
-------------------------------------------------------------------
Fiscal Quarter Ratio
-------------------------------------------------------------------
Amendment No. 1 Effective Date - day immediately 4.50:1
preceding last day of Fourth Fiscal Quarter 2001
-------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2001 - day 4.25:1
immediately preceding last day of Fourth Fiscal
Quarter 2002
-------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2002 - day 4.00:1
immediately preceding last day of Fourth Fiscal
Quarter 2003
-------------------------------------------------------------------
Last day of Fourth Fiscal Quarter 2003 and thereafter 3.50:1
-------------------------------------------------------------------
Section 11. Additional Events of Default. (a) Section 7.01(c) of the
Credit Agreement is amended by adding the phrase "or any Loan Document"
immediately after the word "Agreement" in the second line thereof.
(b) Section 7.01(1) of the Credit Agreement is amended by deleting the word
"or" at the end thereof.
(c) A new Section 7.01(n) is added to the Credit Agreement immediately
following Section 7.01(m) thereof, to read in its entirety as follows:
"(n) the Food Lion Guaranty shall cease to be enforceable, or Food
Lion or any of its Affiliates shall so assert in writing; or"
8
(d) A new Section 7.01(o) is added to the Credit Agreement immediately
following the new Section 7.01(n) thereof, to read in its entirety as follows:
"(o) the Parent (or any other entity through which the Parent holds
any capital stock of the Borrower) shall Guarantee any Indebtedness or
other obligation of the Borrower or any of its Subsidiaries (other than
Indebtedness incurred under this Agreement), unless prior to or
contemporaneously therewith, Parent shall have guaranteed all Indebtedness
under this Agreement on terms and conditions acceptable to the Majority
Lenders;"
Section 12. Changes to Article 8. (a) Clause (i) in the third paragraph of
Section 8.01 of the Credit Agreement is amended by replacing the phrase "this
Agreement" contained therein with the phrase "any Loan Document",
(b) Clause (ii) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the word "herewith" contained therein with the
word "therewith",
(c) Clause (iii) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the word "herein" contained therein with the
word "therein",
(d) Clause (iv) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by replacing the phrase "this Agreement" contained therein
with the phrase "any Loan Document",
(e) Clause (v) in the third paragraph of Section 8.01 of the Credit
Agreement is amended by inserting the phrase "of this Agreement" immediately
following the phrase "Article IV" and replacing the word "herein" contained
therein with the word "therein".
Section 13. Changes to the Amendments and Waivers Section . A new
paragraph (c) is added at the end of Section 9.02 of the Credit Agreement, to
read in its entirety as follows:
"(c) Neither the Food Lion Guaranty nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements
in writing entered into by Food Lion and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall
release Food Lion from its obligations under the Food Lion Guaranty without
the consent of each Lender."
9
Section 14. Changes to the Assignments Section. (a) Section 9.04(b) of the
Credit Agreement is amended by (i) replacing the word "an" immediately following
the phrase "assignment to a Lender or" in the fourth line thereof with the
phrase "a Lender", (ii) deleting the phrase "of a Lender" immediately following
the word "Affiliate" in the fourth line thereof, (iii) replacing the word "an"
immediately following the phrase "assignment to a Lender or" in the seventh line
thereof with the phrase "a Lender", (iv) deleting the phrase "of a Lender"
immediately following the word "Affiliate" in the seventh line thereof, (v)
inserting the phrase "other than Section 9.12" immediately following the phrase
"under this Agreement" in the twenty-sixth line thereof, and (vi) inserting the
phrase "and subject to Section 9.12" immediately following the phrase "2.15 and
9.03" in the twenty-ninth line thereof.
(b) A new paragraph (h) is added at the end of Section 9.04 of the Credit
Agreement, to read in its entirety as follows:
"(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle
---------------
(an "SPC") of such Granting Lender, identified as such in writing from time
---
to time by the Granting Lender to the Administrative Agent and the
Borrower, the option to provide to the Borrower all or any part of any Loan
that such Granting Lender would otherwise be obligated to make to the
Borrower pursuant to this Agreement, provided that (i) nothing herein shall
constitute a commitment to make any Loan by any SPC and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and
as if, such Loan were made by the Granting Lender. Each party hereto hereby
agrees that no SPC shall be liable for any payment under this Agreement for
which a Lender would otherwise be liable, for so long as, and to the
extent, the related Granting Lender makes such payment. In furtherance of
the foregoing, each party hereto hereby agrees that, prior to the date that
is one year and one day after the payment in full of all outstanding senior
indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or similar proceedings
under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 9.04 any
SPC may (i) with notice to, but without the prior written consent of, the
Borrower or the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to its
Granting Lender or to any financial institutions (if consented to by the
Borrower and the Administrative
10
Agent) providing liquidity and/or credit facilities to or for the account
of such SPC to fund the Loans made by such SPC or to support the securities
(if any) issued by such SPC to fund such Loans and (ii) disclose on a
confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of a surety, guarantee
or credit or liquidity enhancement to such SPC. This Section may not be
amended without the written consent of each SPC that holds any Loans at the
time of such proposed amendment."
Section 15. Changes to the Survival Section. Section 9.05 of the Credit
Agreement is amended by replacing the phrase "2.15 and 9.03" in the thirteenth
line thereof with the phrase "2.15, 9.03 and 9.12".
Section 16. Representations and Warranties. The Borrower hereby represents
and warrants that as of the date hereof and after giving effect hereto:
(a) no Default or Event of Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in the
Credit Agreement after giving effect to this Amendment is true and correct as
though made on and as of such date, except for any such representation and
warranty made as of a specific date, which are true and correct as of such
specific date.
Section 17. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Section 18. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when each of the
following conditions shall have been satisfied:
(a) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and the Majority Lenders (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Agent shall have received telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent of duly executed counterparts of a
Food Lion Guaranty substantially in the form set forth on Exhibit A hereto;
11
(c) receipt by the Administrative Agent of an opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. in form and substance reasonably satisfactory to
the Administrative Agent; and
(d) receipt by the Administrative Agent of all documents it may reasonably
request relating to the existence of the Borrower, the corporate authority for
and the validity of the Credit Agreement as amended hereby, and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the Lenders
of the effectiveness of this Amendment, and such notice shall be conclusive and
binding on all parties hereto.
12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
DELHAIZE AMERICA, INC.
By: /s/ Richard James
------------------------------------------
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually and as Administrative
Agent
By: /s/ B. J. Lillis
------------------------------------------
Title: Managing Director
CITIBANK, N.A.
By: /s/ Marc Merlino
-------------------------------------
Title: Vice President
BANK OF AMERICA, N.A.
By:_____________________________________
Name:
Title:
WACHOVIA BANK, N.A.
By: /s/ Christopher L. Fincher
-------------------------------------
Title: Senior Vice President
BBL INTERNATIONAL (U.K.) LIMITED
By: /s/ C. F. Wright
-------------------------------------
Title: Authorized Signatory
By: /s/ M-C Swinnen
-------------------------------------
Title: Authorized Signatory
BNP PARIBAS (HOUSTON)
By: /s/ Henry F. Setina
-------------------------------------
Title: Vice President
By: /s/ Lloyd G. Cox
-------------------------------------
Title: Managing Director
DEUTSCHE BANK AG, NEW YORK BRANCH
and/or Cayman Islands Branch
By: /s/ Kamil Kaya
------------------------------------------
Title: Director
By: /s/ Frank A. Raetzer
------------------------------------------
Title: Vice President
FORTIS (USA) FINANCE LLC
By: /s/ Karel Louman
------------------------------------------
Title: President
By: /s/ John T. Conners
------------------------------------------
Title: Chief Operating Officer
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL", NEW YORK BRANCH
By: /s/ Theodore W. Cox
------------------------------------------
Title: Vice President
By: /s/ James S. Cunningham
------------------------------------------
Title: Managing Director, Chief Risk
Officer
THE BANK OF NEW YORK
By: /s/ William M. Barnum
------------------------------------------
Title: Vice President
BANK ONE, NA
By:__________________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By: /s/ Rene LeBlanc
-------------------------------------
Title: Vice President
By: /s/ Michael Haggarty
-------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Margaret Gibbons
-------------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Andrew J. Hines
-------------------------------------
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Mark R. Marron
-------------------------------------
Title: Vice President
COBANK, ACB
By: /s/ Brian J. Klatt
-------------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Ying Yang
-------------------------------------
Title: Account Officer
THE FUJI BANK, LIMITED
By:_____________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Akihiko Mabuchi
-------------------------------------
Title: Senior Vice President
BNP PARIBAS (BRUSSELS)
By: /s/ Andre Boulanger
-------------------------------------
Title: General Manager
BRANCH BANKING & TRUST COMPANY
By: /s/ Cory Boyte
-------------------------------------
Title: Vice President
CREDIT COMMERCIALE DE FRANCE S.A.
By:_____________________________________
Name:
Title:
DEXIA BANK S.A.
By:_____________________________________
Name:
Title:
FLEET NATIONAL BANK
By:_____________________________________
Name:
Title:
EX-10.AR
8
dex10ar.txt
GUARANTY DATED AS OF SEP 6, 2001 BY HANNAFORD BRO
Exhibit 10(ar)
EXHIBIT A
HANNAFORD GUARANTY
HANNAFORD GUARANTY dated as of September 6, 2001 by HANNAFORD BROS. CO., a
Maine corporation (with its successors, the "Guarantor") in favor of MORGAN
---------
GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (with its
successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
-------- -------
Administrative Agent are parties to an Amendment and Restated $500,000,000 364-
Day Credit Agreement dated as of November 17, 2000 (as the same may be amended
from time to time, the "Credit Agreement"); and
----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Govermental Authorization; No Contravention.
This Agreement (a) does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, (b) will not violate any applicable law or
regulation or the limited liability company agreement or other organizational
documents of the Guarantor or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or instrument
binding upon the Borrower or any of its Subsidiaries or its assets, other than
defaults or violations for which consents or waivers have been obtained, or
which individually or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect on the Borrower or the Guarantor, (d) will
not give rise to a right under any indenture, agreement or other instrument
binding upon the
2
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions and (e) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-Off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay
punctually any Guaranteed Obligation, the Guarantor agrees that it shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement or the other relevant Loan Document, as the
case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
3
(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the Guarantor
may have at any time against the Borrower, the Administrative Agent, any Lender
or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the Borrower,
any other Obligor or any other Person for any reason of the Credit Agreement or
any other Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower, of the principal or the
interest or any other amount payable by the Borrower under any Loan Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
4
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
5
Section 4.04. Right of Set-Off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
6
the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 4.02. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
Section 4.09. WAIVER OF JURY TRAIL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7
Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the "Process
-------
Agent"), to accept and acknowledge for and on behalf of the Guarantor service
-----
of any and all process, notices or other documents that may be served in any
suit, action or proceeding relating hereto in any New York State or Federal
court sitting in the State of New York. Such designation and appointment shall
be irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such
suit, action or proceeding and (ii) shall to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to the Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto
to serve process in any manner permitted by law, or limit any right that any
party hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
8
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
HANNAFORD BROS. CO.
By /s/ Emily Dickinson
------------------------------
Name: Emily Dickinson
Title: Vice president, General
Counsel and Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By /s/ Barry Bergman
------------------------------
Name: Barry Bergman
Title: Vice President
9
EX-10.AS
9
dex10as.txt
GUARANTY DATED SEP 6 2001 BY HANNAFORD BRO
EXHIBIT 10(as)
EXHIBIT A
HANNAFORD GUARANTY
HANNAFORD GUARANTY dated as of September 6, 2001 by HANNAFORD BROS. CO., a
Maine corporation (with its successors, the "Guarantor") in favor of MORGAN
---------
GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (with its
successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
-------- -------
Administrative Agent are parties to a $500,000,000 5-Year Credit Agreement dated
as of January 26, 2000 (as the same may be amended from time to time, the
"Credit Agreement"); and
-----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.101. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Governmental Authorization; No Contravention.
This Agreement does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, will not violate any applicable law or regulation
or the limited liability company agreement or other organizational documents of
the Guarantor or any order of any Governmental Authority, will not violate or
result in a default under any indenture, agreement or instrument binding upon
the
2
Borrower or any of its Subsidiaries or its assets, other than defaults or
violations for which consents or waivers have been obtained, or which
individually or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect on the Borrower or the Guarantor, will not give rise to
a right under any indenture, agreement or other instrument binding upon the
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions and will not result
in the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-Off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay
punctually any Guaranteed Obligation, the Guarantor agrees that it shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement or the other relevant Loan Document, as the
case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
3
(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Administrative Agent,
any Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower, any other Obligor or any other Person for any reason of the Credit
Agreement or any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower, of the principal
or the interest or any other amount payable by the Borrower under any Loan
Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
4
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
5
Section 4.04. Right of Set-off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
6
the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7
Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the "Process
-------
Agent"), to accept and acknowledge for and on behalf of the Guarantor service of
-----
any and all process, notices or other documents that may be served in any suit,
action or proceeding relating hereto in any New York State or Federal court
sitting in the State of New York. Such designation and appointment shall be
irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such
suit, action or proceeding and (ii) shall to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to the Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto
to serve process in any manner permitted by law, or limit any right that any
party hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
8
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
HANNAFORD BROS. CO.
By /s/ Emily Dickinson
-----------------------------
Name: Emily Dickinson
Title: Vice President, General
Counsel and Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By /s/ Barry Bergman
-----------------------------
Name: Barry Bergman
Title: Vice President
9
EX-10.AT
10
dex10at.txt
GUARNATY DATED SEP 6 2001 BY KASH N'KARRY
Exhibit 10(at)
EXHIBIT B
KASH N' KARRY GUARANTY
KASH N' KARRY GUARANTY dated as of September 6, 2001 by KASH N' KARRY FOOD
STORES, INC., a Delaware corporation (with its successors, the "Guarantor") in
---------
favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
(with its successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
-------- -------
Administrative Agent are parties to an Amendment and Restated $500,000,000 364-
Day Credit Agreement dated as of November 17, 2000 (as the same may be amended
from time to time, the "Credit Agreement"); and
----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Governmental Authorization; No Contravention.
This Agreement (a) does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, (b) will not violate any applicable law or
regulation or the limited liability company agreement or other organizational
documents of the Guarantor or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or instrument
binding upon the Borrower or any of its Subsidiaries or its assets, other than
defaults or violations for which consents or waivers have been obtained, or
which individually or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect on the Borrower or the Guarantor, (d) will
not give rise to a right under any indenture, agreement or other instrument
binding upon the
2
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions and (e) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-Off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay
punctually any Guaranteed Obligation, the Guarantor agrees that it shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement or the other relevant Loan Document, as the
case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
3
(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Administrative Agent,
any Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower, any other Obligor or any other Person for any reason of the Credit
Agreement or any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower, of the principal
or the interest or any other amount payable by the Borrower under any Loan
Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
4
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
5
Section 4.04. Right of Set-off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
6
the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7
Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the "Process
-------
Agent"), to accept and acknowledge for and on behalf of the Guarantor service of
-----
any and all process, notices or other documents that may be served in any suit,
action or proceeding relating hereto in any New York State or Federal court
sitting in the State of New York. Such designation and appointment shall be
irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such suit,
action or proceeding and (ii) shall to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to the
Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
8
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
KASH N' KARRY FOOD STORES, INC.
By /s/ G. Linn Evans
-------------------------------------
Name: G. Linn Evans
Title: Assistant Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By /s/ Barry Bergman
-------------------------------------
Name: Barry Bergman
Title: Vice President
9
EX-10.AU
11
dex10au.txt
GUARANTY DATED SEP 6 2001 BY KASH N'KARRY
Exhibit 10(au)
EXHIBIT B
KASH N' KARRY GUARANTY
KASH N' KARRY GUARANTY dated as of September 6, 2001 by KASH N' KARRY FOOD
STORES, INC., a Delaware corporation (with its successors, the "Guarantor") in
---------
favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent
(with its successors, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Delhaize America Inc., a North Carolina corporation (with its
successors, the "Borrower"), certain lenders (the "Lenders") and the
-------- -------
Administrative Agent are parties to a $500,000,000 5-Year Credit Agreement dated
as of January 26, 2000 (as the same may be amended from time to time, the
"Credit Agreement"); and
-----------------
WHEREAS, the Borrower holds 100% of the voting equity of the Guarantor;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Guaranteed Obligations" means: (i) all principal of and interest
----------------------
(including, without limitation, any interest which accrues after or would accrue
but for the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed
or allowable as a claim in any such proceeding) on any loan under, or any note
issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the
Borrower under the Loan Documents and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Obligor" means any party to any Loan Document, other than the
-------
Administrative Agent or any Lender.
ARTICLE 2
Representations and Warranties
The Guarantor represents and warrants that:
Section 2.01. Organization; Powers. The Guarantor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Guarantor, is qualified to do business in, and is in good standing
in, every jurisdiction where such qualification is required.
Section 2.02. Authorization; Enforceability. This Agreement is within the
Guarantor's powers and has been duly authorized by all necessary limited
liability company action and, if required, action on the part of its members.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 2.03. Corporate and Governmental Authorization; No Contravention.
This Agreement (a) does not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except
consents, approvals, registrations or filings as have been obtained or made and
are in full force and effect, (b) will not violate any applicable law or
regulation or the limited liability company agreement or other organizational
documents of the Guarantor or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or instrument
binding upon the Borrower or any of its Subsidiaries or its assets, other than
defaults or violations for which consents or waivers have been obtained, or
which individually or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect on the Borrower or the Guarantor, (d) will
not give rise to a right under any indenture, agreement or other instrument
binding upon the
2
Borrower or any of its Subsidiaries or its assets to require any payment to be
made by the Borrower or any of its Subsidiaries other than any payments
contemplated to be made in connection with the Transactions and (e) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
Section 2.04. Rank of Debt. The obligations of the Guarantor under this
Agreement to pay the Guaranteed Obligations constitute direct and unconditional
obligations of the Guarantor and rank at least pari passu in right of payment
with all other unsecured, unsubordinated Debt of the Guarantor.
Section 2.05. No Set-Off. The obligations of the Guarantor under this
Agreement are not subject to any defense, set-off or counterclaim by the
Guarantor or any other Person or any circumstance whatsoever which might
constitute a legal or equitable discharge from its obligations thereunder.
ARTICLE 3
The Guaranty
Section 3.01. The Guaranty. The Guarantor hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay
punctually any Guaranteed Obligation, the Guarantor agrees that it shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement or the other relevant Loan Document, as the
case may be.
Section 3.02. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any other Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Credit Agreement
or any other Loan Document;
(c) any release, impairment, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
Person under any Loan Document;
3
(d) any change in the corporate existence, structure or ownership of the
Borrower, the Guarantor or any other Person or any of their respective
Subsidiaries, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, the Guarantor or any other Person or any of
their assets or any resulting release or discharge of any obligation of the
Borrower, the Guarantor or any other Person contained in any Loan Document;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Administrative Agent,
any Lender or any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion of any
such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Borrower, any other Obligor or any other Person for any reason of the Credit
Agreement or any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrower, of the principal
or the interest or any other amount payable by the Borrower under any Loan
Document; or
(g) any other act or omission to act or delay of any kind by the Borrower,
the Administrative Agent, any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of or defense to obligations of the Guarantor hereunder.
Section 3.03. Effectiveness of Guaranty; Reinstatement in Certain
Circumstances; Release of the Guarantor. (a) The Guarantor's obligations
hereunder shall remain in full force and effect until the repayment in full of
all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement. If at any time any payment of Guaranteed Obligations payable
by the Borrower is rescinded or must be otherwise restored or returned upon the
insolvency or receivership of the Borrower or otherwise, the Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) At any time prior to the termination of the Guarantor's obligations
hereunder, in accordance with subsection (a), the Administrative Agent may
release the Guarantor from its obligations hereunder in accordance with Section
9.02(c) of the Credit Agreement.
Section 3.04. Waiver of the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
4
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against the Borrower or any other Person.
Section 3.05. Subrogation. Upon making any payment with respect to the
Borrower hereunder, the Guarantor shall be subrogated to the rights of the payee
against the Borrower with respect to such payment; provided that the Guarantor
shall not enforce any payment by way of subrogation until the repayment in full
of all Guaranteed Obligations and the termination of the Commitments under the
Credit Agreement.
Section 3.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any Guaranteed Obligation is stayed upon insolvency or
receivership of the Borrower or otherwise, all such Guaranteed Obligations
otherwise subject to acceleration under the terms of any Loan Document shall
nonetheless be payable by the Guarantor hereunder forthwith on demand.
Section 3.07. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
ARTICLE 4
Miscellaneous
Section 4.01. Amendments. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only in writing in
accordance with Section 9.02(c) of the Credit Agreement.
Section 4.02. Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered in accordance with Section
9.01 of the Credit Agreement.
Section 4.03. No Waiver; Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
5
Section 4.04. Right of Set-Off. If the Guarantor fails to pay any
Guaranteed Obligation when due, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under the Loan Documents held by such Lender or any of its
Affiliates, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
Section 4.05. Continuing Guaranty. This Guaranty is a continuing Guaranty
and shall be binding upon the Guarantor and its respective successors and
assigns, and inure to the benefit of and be enforceable by the Administrative
Agent or each Lender and its successors, transferees and assigns. This Guaranty
is for the benefit of each Lender and its successors and assigns, and in the
event of an assignment of all or any of any Lender's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 4.06. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 4.07. Taxes. The Guarantor agrees to comply with the provisions of
Section 2.15 of the Credit Agreement and such provisions, and all related
defined terms, are incorporated by reference into this Guaranty as if fully set
forth herein, except that (i) any references to "the Borrower" shall be deemed
to be references to the Guarantor, and (ii) any references to any obligation
under the Credit Agreement shall be deemed to be references to obligations
hereunder.
Section 4.08. Governing Law; Jurisdiction; Consent to Service of
Process.(a) This Agreement shall be construed in accordance with and governed by
the law of the State of New York.
(b) The Guarantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of
6
the State of New York sitting in New York County and of the United States
District Court for the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Guarantor or its
properties in the courts of any jurisdiction.
(c) The Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 4.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7
Section 4.10. Appointment of Agent for Service of Process. (a) the
Guarantor hereby irrevocably designates, appoints, authorizes and empowers as
its agent for service of process, CT Corporation System, at its offices
currently located at 1633 Broadway, New York, New York 10019 (the "Process
-------
Agent"), to accept and acknowledge for and on behalf of the Guarantor service of
-----
any and all process, notices or other documents that may be served in any suit,
action or proceeding relating hereto in any New York State or Federal court
sitting in the State of New York. Such designation and appointment shall be
irrevocable until all Guaranteed Obligations shall have been paid in full in
accordance with the provisions thereof. the Guarantor covenants and agrees that
it shall take any and all reasonable action, including the execution and filing
of any and all documents, that may be necessary to continue the foregoing
designations and appointments in full force and effect and to cause the Process
Agent to continue to act in such capacity.
(b) The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by serving a copy thereof
upon the Process Agent. Without prejudice to the foregoing, the Lenders and the
Administrative Agent agree that to the extent lawful and possible, written
notice of said service upon the Process Agent shall also be mailed by registered
or certified airmail, postage prepaid, return receipt requested, to the
Guarantor at its address specified in or pursuant to Section 4.02 or to any
other address of which the Guarantor shall have given written notice to the
Administrative Agent. If said service upon the Process Agent shall not be
possible or shall otherwise be impractical after reasonable efforts to effect
the same, the Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in Section 4.09 by the mailing of a copy
thereof by registered or certified airmail, postage prepaid, return receipt
requested, to the address of the Guarantor specified in or pursuant to Section
4.02, which service shall be effective 5 days after deposit in the United States
Postal Service. The Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such suit,
action or proceeding and (ii) shall to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to the
Guarantor.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
8
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed by their respective authorized officers as of the day and year first
above written.
KASH N' KARRY FOOD STORES, INC.
By /s/ G. Linn Evans
--------------------------------
Name: G. Linn Evans
Title: Assistant Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By /s/ Barry Bergman
--------------------------------
Name: Barry Bergman
Title: Vice President
9
EX-10.AV
12
dex10av.txt
AMENDMENT #2 DATED SEP 6 2001
Exhibit 10(av)
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of September 6, 2001, amending the Amended and Restated
$500,000,000 364-Day Credit Agreement dated as of November 17, 2000, as
heretofore amended (the "Credit Agreement"), among DELHAIZE AMERICA, INC. (the
"Borrower"), the LENDERS party hereto (the "Lenders") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, Kash n' Karry Food Stores, Inc., a Delaware corporation ("Kash n'
Karry"), is a wholly-owned subsidiary of the Borrower; and
WHEREAS, Hannaford Bros. Co., a Maine corporation ("Target") is a wholly-
owned subsidiary of the Borrower; and
WHEREAS, the parties hereto desire to amend the Credit Agreement, as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date hereof
refer to the Credit Agreement as amended hereby.
Section 2. Additional Definitions. The following definitions are added in
alphabetical order in Section 1.01 of the Credit Agreement (and, where
appropriate, amend and restate any prior definition in its entirety):
"Hannaford Guaranty" means the guaranty agreement between Target and the
Administrative Agent for the benefit of the Lenders, substantially in the form
of Exhibit A to Amendment No. 2 to this Agreement, as amended from time to time.
"Kash n' Karry" means Kash n' Karry Food Stores, Inc. a Delaware
corporation.
"Kash n' Karry Guaranty" means the guaranty agreement between Kash n' Karry
and the Administrative Agent for the benefit of the Lenders, substantially in
the form of Exhibit B to Amendment No. 2 to this Agreement, as amended from time
to time.
"Loan Documents" means this Agreement, the Food Lion Guaranty, the Kash n'
Karry Guaranty and the Hannaford Guaranty.
"Subsidiary Guarantees" means any of the Food Lion Guaranty, the Kash n'
Karry Guaranty or the Hannaford Guaranty.
"Subsidiary Guarantors" means any of Food Lion, Kash n' Karry or Target.
Section 3. Amended Subsidiary Debt Covenant. (a) Section 6.02(b)(4) of the
Credit Agreement is amended by deleting the word "and" at the end thereof.
(b) Section 6.02(b)(5) of the Credit Agreement is renamed Section
6.02(b)(7).
(c) New Sections 6.02(b)(5) and 6.02(b)(6) of the Credit Agreement are
inserted immediately following Section 6.02(b)(4) thereof, to read in their
entirety as follows:
"(5) Indebtedness of Kash n' Karry under the Kash n' Karry Guaranty,
Indebtedness of Kash n' Karry constituting a Guaranty of the Borrower's
obligations under the 5-Year Agreement and Indebtedness of Kash n' Karry
constituting a Guaranty of the Borrower's senior unsecured $600,000,000
7.375% Notes due 2006, $1,100,000,000 8.125% Notes due 2011 and
$900,000,000 9% Debentures due 2031;"
"(6) Indebtedness of Target under the Hannaford Guaranty,
Indebtedness of Target constituting a Guaranty of the Borrower's
obligations under the 5-Year Agreement and Indebtedness of Target
constituting a Guaranty of the Borrower's senior unsecured $600,000,000
7.375% Notes due 2006, $1,100,000,000 8.125% Notes due 2011 and
$900,000,000 9% Debentures due 2031; and"
Section 4. Amended Fundamental Changes. (a) Clauses (iii) and (iv) of
Section 6.03(a) of the Credit Agreement are amended to read in its entirety as
follows:
2
"(iii) any Subsidiary may merge into any Subsidiary in a transaction
in which the surviving entity is a Subsidiary (and, if any Subsidiary
Guarantor is a party to such merger, the surviving entity shall agree to be
bound by the provisions of the Subsidiary Guarantee to which such
Subsidiary Guarantor is a party), (iv) (x) any Subsidiary may merge into
any other Person in a transaction in which the surviving entity is a
Subsidiary (and, if any Subsidiary Guarantor is a party to such merger, the
surviving entity shall agree to be bound by the provisions of the
Subsidiary Guarantee to which such Subsidiary Guarantor is a party) or (y)
any Subsidiary (other than any Subsidiary Guarantor) may merge into any
other Person in a transaction permitted by Section 6.09 and in which the
surviving Person is not a Subsidiary;"
The last sentence of Section 6.03(a) of the Credit Agreement is amended to
read in its entirety as follows:
"In addition to the requirements set forth in the immediately
preceding sentence, the Borrower will not permit any Subsidiary Guarantor
to sell, transfer, lease or otherwise dispose of (in one transaction or a
series of transactions) all or substantially all of its assets to any
Person except to (1) the Borrower, (2) an entity that is a Subsidiary prior
to such sale, lease, transfer or other disposition or (3) any other Person
in a transaction not constituting a sale, lease, transfer or other
disposition of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole, and in which the surviving entity is a
Subsidiary so long as, in the case of clauses (2) or (3), such Subsidiary
or other Person shall agree to be bound by the provisions of the Subsidiary
Guarantee to which such Subsidiary Guarantor is a party."
Section 5. Amended Events of Default. Section 7.01(n) of the Credit
Agreement is amended to read in its entirety as follows:
"(n) Any Subsidiary Guarantee shall cease to be enforceable, or any
Subsidiary Guarantor or any of its Affiliates shall so assert in writing;
or"
Section 6. Amended Waivers; Amended Amendments. (a) Section 9.02(c) of the
Credit Agreement is amended to read in its entirety as follows:
"(c) None of the Subsidiary Guarantees nor any provision thereof may
be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Subsidiary Guarantor party
thereto and the Administrative Agent with the consent of the Majority
Lenders; provided that no such agreement
3
shall release any Subsidiary Guarantor from its obligations under the
Subsidiary Guarantee to which such Subsidiary Guarantor is a party without
the consent of each Lender."
Section 7. Representations and Warranties. The Borrower hereby represents
and warrants that as of the date hereof and after giving effect hereto:
(a) no Default or Event of Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower, Kash n' Karry and
Target set forth in the Loan Documents after giving effect to this Amendment is
true and correct as though made on and as of such date, except for any such
representation and warranty made as of a specific date, which are true and
correct as of such specific date.
Section 8. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
Section 9. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date hereof when each of the
following conditions shall have been satisfied:
(a) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and the Majority Lenders (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Agent shall have received telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent of duly executed counterparts of a
Hannaford Guaranty substantially in the form set forth on Exhibit A hereto;
(c) receipt by the Administrative Agent of duly executed counterparts of a
Kash n' Karry Guaranty substantially in the form set forth on Exhibit B
hereto;
(d) receipt by the Administrative Agent of an opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. in form and substance reasonably satisfactory to
the Administrative Agent; and
(e) receipt by the Administrative Agent of all documents it may reasonably
request relating to the existence of the Borrower, Kash n' Karry and Target, the
corporate authority for and the validity of the Credit Agreement as amended
hereby and the Kash n' Karry Guaranty and the Hannaford Guaranty referred to
above, and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agent.
4
The Administrative Agent shall promptly notify the Borrower and the Lenders
of the effectiveness of this Amendment, and such notice shall be conclusive and
binding on all parties hereto.
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
DELHAIZE AMERICA, INC.
By: /s/ G. Linn Evans
-----------------------------------
Title: Asst. Secretary
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
individually and as Administrative Agent
By: /s/ Barry Bergman
-----------------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Marc Merlino
-----------------------------------
Title: Director
BANK OF AMERICA, N.A.
By: /s/ Timothy H. Spanos
-----------------------------------
Title: Managing Director
WACHOVIA BANK, N.A.
By: /s/ Christopher L. Fincher
-----------------------------------
Title: Senior Vice President
BBL INTERNATIONAL (U.K.) LIMITED
By: ___________________________________
Name:
Title:
BNP PARIBAS (HOUSTON)
By: /s/ Henry F. Setina
-----------------------------------
Title: Vice President
By: /s/ Lloyd G. Cox
-----------------------------------
Title: Managing Director
DEUTSCHE BANK AG, NEW YORK BRANCH and/or
Cayman Islands Branch
By: /s/ Harold Mildner
-----------------------------------
Title: Vice President
By: /s/ Frank A. Raetzer
-----------------------------------
Title: Vice President
FORTIS (USA) FINANCE LLC
By: /s/ Eddie Matthews
-----------------------------------
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL", NEW YORK BRANCH
By: /s/ Theodore W. Cox
-----------------------------------
Title: Vice President
By: /s/ James S. Cunningham
-----------------------------------
Title: Managing Director
Chief Risk Officer
THE BANK OF NEW YORK
By: /s/ Howard F. Bascom, Jr.
-----------------------------------
Title: Vice President
BANK ONE, NA
By: ____________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By: /s/ Rene LeBlanc
------------------------------------
Title: Vice President
By: /s/ Phillip J. Salter
------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Margaret Gibbons
------------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Andrew J. Hines
------------------------------------
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Heather Zimmerman
------------------------------------
Title: Vice President
COBANK, ACB
By: /s/ S. Richard Dill
------------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Kenneth Biegen
------------------------------------
Title: Senior Vice President
THE FUJI BANK, LIMITED
By: ____________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Kotaro Suzuki
------------------------------------
Title: Vice President
BNP PARIBAS (BRUSSELS)
By: /s/ Andre Boulanger
------------------------------------
Title: General Manager
BRANCH BANKING & TRUST COMPANY
By: /s/ Cory Boyte
------------------------------------
Title: Vice President
CREDIT COMMERCIALE DE FRANCE S.A.
By: ___________________________________
Name:
Title:
DEXIA BANK S.A
By: ___________________________________
Name:
Title:
FLEET NATIONAL BANK
By: /s/ Thomas J. Bullard
-----------------------------------
Title: Director
Acknowledged and Agreed to by:
FOOD LION, LLC
By: /s/ G. Linn Evans
--------------------------------
Title: Asst. Secretary
EX-10.AW
13
dex10aw.txt
AMENDMENT #2 DATED SEP 6, 2001
Exhibit 10(aw)
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of September 6, 2001, amending the $500,000,000 5-Year
Credit Agreement dated as of January 26, 2000, as heretofore amended (the
"Credit Agreement"), among DELHAIZE AMERICA, INC. (the "Borrower"), the LENDERS
party hereto (the "Lenders") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, Kash n' Karry Food Stores, Inc., a Delaware corporation ("Kash n'
Karry"), is a wholly-owned subsidiary of the Borrower; and
WHEREAS, Hannaford Bros. Co., a Maine corporation ("Target") is a wholly-
owned subsidiary of the Borrower; and
WHEREAS, the parties hereto desire to amend the Credit Agreement, as set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall from and after the date hereof
refer to the Credit Agreement as amended hereby.
Section 2. Additional Definitions. The following definitions are added in
alphabetical order in Section 1.01 of the Credit Agreement (and, where
appropriate, amend and restate any prior definition in its entirety):
"Hannaford Guaranty" means the guaranty agreement between Target and the
Administrative Agent for the benefit of the Lenders, substantially in the form
of Exhibit A to Amendment No. 2 to this Agreement, as amended from time to time.
"Kash n' Karry" means Kash n' Karry Food Stores, Inc. a Delaware
corporation.
"Kash n' Karry Guaranty" means the guaranty agreement between Kash n' Karry
and the Administrative Agent for the benefit of the Lenders, substantially in
the form of Exhibit B to Amendment No. 2 to this Agreement, as amended from time
to time.
"Loan Documents" means this Agreement, the Food Lion Guaranty, the Kash n'
Karry Guaranty and the Hannaford Guaranty.
"Subsidiary Guarantees" means any of the Food Lion Guaranty, the Kash n'
Karry Guaranty or the Hannaford Guaranty.
"Subsidiary Guarantors" means any of Food Lion, Kash n' Karry or Target.
Section 3. Amended Subsidiary Debt Covenant. (a) Section 6.02(b)(4) of the
Credit Agreement is amended by deleting the word "and" at the end thereof.
(b) Section 6.02(b)(5) of the Credit Agreement is renamed Section
6.02(b)(7).
(c) New Sections 6.02(b)(5) and 6.02(b)(6) of the Credit Agreement are
inserted immediately following Section 6.02(b)(4) thereof, to read in their
entirety as follows:
"(5) Indebtedness of Kash n' Karry under the Kash n' Karry Guaranty,
Indebtedness of Kash n' Karry constituting a Guaranty of the Borrower's
obligations under the 364-Day Agreement and Indebtedness of Kash n' Karry
constituting a Guaranty of the Borrower's senior unsecured $600,000,000
7.375% Notes due 2006, $1,100,000,000 8.125% Notes due 2011 and
$900,000,000 9% Debentures due 2031;"
"(6) Indebtedness of Target under the Hannaford Guaranty,
Indebtedness of Target constituting a Guaranty of the Borrower's
obligations under the 364-Day Agreement and Indebtedness of Target
constituting a Guaranty of the Borrower's senior unsecured $600,000,000
7.375% Notes due 2006, $1,100,000,000 8.125% Notes due 2011 and
$900,000,000 9% Debentures due 2031; and"
Section 4. Amended Fundamental Changes. (a) Clauses (iii) and (iv) of
Section 6.03(a) of the Credit Agreement are amended to read in its entirety as
follows:
2
"(iii) any Subsidiary may merge into any Subsidiary in a transaction
in which the surviving entity is a Subsidiary (and, if any Subsidiary
Guarantor is a party to such merger, the surviving entity shall agree to be
bound by the provisions of the Subsidiary Guarantee to which such
Subsidiary Guarantor is a party), (iv) (x) any Subsidiary may merge into
any other Person in a transaction in which the surviving entity is a
Subsidiary (and, if any Subsidiary Guarantor is a party to such merger, the
surviving entity shall agree to be bound by the provisions of the
Subsidiary Guarantee to which such Subsidiary Guarantor is a party) or (y)
any Subsidiary (other than any Subsidiary Guarantor) may merge into any
other Person in a transaction permitted by Section 6.09 and in which the
surviving Person is not a Subsidiary;"
The last sentence of Section 6.03(a) of the Credit Agreement is amended to
read in its entirety as follows:
"In addition to the requirements set forth in the immediately
preceding sentence, the Borrower will not permit any Subsidiary Guarantor
to sell, transfer, lease or otherwise dispose of (in one transaction or a
series of transactions) all or substantially all of its assets to any
Person except to (1) the Borrower, (2) an entity that is a Subsidiary prior
to such sale, lease, transfer or other disposition or (3) any other Person
in a transaction not constituting a sale, lease, transfer or other
disposition of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole, and in which the surviving entity is a
Subsidiary so long as, in the case of clauses (2) or (3), such Subsidiary
or other Person shall agree to be bound by the provisions of the Subsidiary
Guarantee to which such Subsidiary Guarantor is a party."
Section 5. Amendment Events of Default. Section 7.01(n) of the Credit
Agreement is amended to read in its entirety as follows:
"(n) Any Subsidiary Guarantee shall cease to be enforceable, or any
Subsidiary Guarantor or any of its Affiliates shall so assert in writing;
or "
Section 6. Amended Waivers; Amended Amendments. (a) Section 9.02(c) of the
Credit Agreement is amended to read in its entirety as follows:
"(c) None of the Subsidiary Guarantees nor any provision thereof may
be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Subsidiary Guarantor party
thereto and the Administrative Agent with the consent of the Majority
Lenders; provided that no such agreement
3
shall release any Subsidiary Guarantor from its obligations under the
Subsidiary Guarantee to which such Subsidiary Guarantor is a party without
the consent of each Lender."
Section 7. Representations and Warranties. The Borrower hereby represents
and warrants that as of the date hereof and after giving effect hereto:
(a) no Default or Event of Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower, Kash n' Karry and
Target set forth in the Loan Documents after giving effect to this Amendment is
true and correct as though made on and as of such date, except for any such
representation and warranty made as of a specific date, which are true and
correct as of such specific date.
Section 8. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
Section 9. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date hereof when each of the
following conditions shall have been satisfied:
(a) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and the Majority Lenders (or, in the case of any
party as to which an executed counterpart shall not have been received, the
Agent shall have received telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent of duly executed counterparts of a
Hannaford Guaranty substantially in the form set forth on Exhibit A hereto;
(c) receipt by the Administrative Agent of duly executed counterparts of a
Kash n' Karry Guaranty substantially in the form set forth on Exhibit B hereto;
(d) receipt by the Administrative Agent of an opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. in form and substance reasonably satisfactory to
the Administrative Agent; and
(e) receipt by the Administrative Agent of all documents it may reasonably
request relating to the existence of the Borrower, Kash n' Karry and Target, the
corporate authority for and the validity of the Credit Agreement as amended
hereby and the Kash n' Karry Guaranty and the Hannaford Guaranty
4
referred to above, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the Lenders
of the effectiveness of this Amendment, and such notice shall be conclusive and
binding on all parties hereto.
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
DELHAIZE AMERICA, INC.
By: /s/ G. Linn Evans
-------------------------------------
Title: Asst. Secretary
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
individually and as Administrative Agent
By: /s/ Barry Bergman
-------------------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Marc Merlino
-------------------------------------
Title: Director
BANK OF AMERICA, N.A.
By: /s/ Timothy H. Spanos
-------------------------------------
Title: Managing Director
WACHOVIA BANK, N.A.
By: /s/ Christopher L. Fincher
-------------------------------------
Title: Senior Vice President
BBL INTERNATIONAL (U.K.) LIMITED
By: _____________________________________
Name:
Title:
BNP PARIBAS (HOUSTON)
By: /s/ Henry F. Setina
-------------------------------------
Title: Vice President
By: /s/ Lloyd G. Cox
-------------------------------------
Title: Managing Director
DEUTSCHE BANK, AG, BRUSSELS BRANCH
By: /s/ Marc LePage
-------------------------------------
Title: Director
FORTIS (USA) FINANCE LLC
By: /s/ Eddie Matthews
-------------------------------------
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH
By: /s/ Theodore W. Cox
-------------------------------------
Title: Vice President
By: /s/ James S. Cunningham
-------------------------------------
Title: Managing Director
Chief Risk Officer
THE BANK OF NEW YORK
By: /s/ Howard F. Bascom, Jr.
-------------------------------------
Title: Vice President
BANK ONE, NA
By: _____________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By: /s/ Rene LeBlanc
-------------------------------------
Title: Vice President
By: /s/ Philip J. Salter
-------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Margaret Gibbons
-------------------------------------
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Andrew J. Hines
-------------------------------------
Title: Director
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Heather Zimmermann
-------------------------------------
Title: Vice President
COBANK, ACB
By: /s/ S. Richard Dill
-------------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Kenneth Biegen
-------------------------------------
Title: Senior Vice President
THE FUJI BANK, LIMITED
By: _____________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Kotaro Suzuki
-------------------------------------
Title: Vice President
BNP PARIBAS (BRUSSELS)
By: /s/ Andre Boulanger
-------------------------------------
Title: General Manager
BRANCH BANKING & TRUST COMPANY
By: /s/ Cory Boyte
-------------------------------------
Title: Vice President
CREDIT COMMERCIALE DE FRANCE S.A.
By: _____________________________________
Name:
Title:
DEXIA BANK S.A
By: _____________________________________
Name:
Title:
FLEET NATIONAL BANK
By: /s/ Thomas J. Bullard
-------------------------------------
Title: Director
UNION BANK OF CALIFORNIA, NA
By: /s/ J. Scott Jessup
-------------------------------------
Title: Vice President
CIBC INC.
By: ______________________________________
Name:
Title:
BANCA DI ROMA -- NEW YORK BRANCH
By: /s/ A. Paoli
-------------------------------------
Title: Asst. Treasurer
By: /s/ C. Strike
-------------------------------------
Title: Asst. Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: _____________________________________
Name:
Title:
Acknowledged and Agreed to by:
FOOD LION, LLC
By: /s/ G. Linn Evans
--------------------------
Title: Asst. Secretary
EX-12
14
dex12.txt
COMPUTATION OF RATIO EARNINGS
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 56,675 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) 1133,204 197,010 288,680 1,542,139 645,361 582,695
Ratio 1.73 1.47 3.24 1.92 3.95 3.71
EX-23
15
dex23.txt
CONSENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-4
("Registration Statement") of Delhaize America, Inc. of our report dated
February 6, 2001, except for 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 use in this Registration
Statement of our report for Hannaford Bros. Co. dated January 19, 2000, except
for Notes 2 and 3, for which the date is February 12, 2000. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
October 26, 2001