SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 1994. Commission File No. 0-6080
F O O D L I O N, INC.
(Exact name of registrant as specified in its charter)
Incorporated in North Carolina 56-0660192
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 1330, 2110 Executive Drive
Salisbury, North Carolina 28145-1330
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code--
(704) 633-8250
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.50 per share
Class B Common Stock, par value $.50 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant based on the price of such stock at the
close of business on March 24, 1994 was $1,642,348,284. For purposes
of this report and as used herein, the term "non-affiliate" includes
all shareholders of the Registrant other than Directors, executive
officers, and other senior management of the Registrant and persons
holding more than five per cent of the outstanding voting stock of the
Registrant.
Outstanding shares of common stock of the Registrant as of March
24, 1994.
Class A Common Stock - 244,135,824
Class B Common Stock - 239,571,114
Exhibit index is located on sequential page 20 hereof.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in
this Form 10-K:
1. Portions of the Annual Report to Shareholders for the year ended
January 1, 1994 are incorporated by reference in Part II hereof.
2. Portions of Proxy Statement for the 1994 Annual Meeting of
Shareholders of the Company to be held on May 5, 1994, are
incorporated by reference in Part III hereof.
-2-
PART I
Item 1. Business.
Food Lion, Inc. (the "Company") engages in one line of business,
the operation of retail food supermarkets principally in the
southeastern United States. The Company was incorporated in North
Carolina in 1957 and maintains its corporate headquarters in
Salisbury, North Carolina.
The Company's stores, which are operated under the name of "Food
Lion", sell a wide variety of groceries, produce, meats, dairy
products, seafood, frozen food, deli/bakery and non-food items such as
tobacco, health and beauty aids and other household and personal
products. The Company offers nationally and regionally advertised
brand name merchandise as well as products manufactured and packaged
for the Company under the private label of "Food Lion". The Company
offers over 18,000 Stock Keeping Units (SKU's) in its prototype 30,000
square foot model.
The products sold by the Company are purchased through a centralized
buying department at the Company's headquarters. The centralization of
the buying function allows the management of the Company to establish
long-term relationships with many vendors providing various alternatives
for sources of product supply.
Food Lion currently operates deli-bakery departments in approximately
50% of its stores. Deli-bakeries are included in approximately 80% of new
store openings. Deli-bakeries are added to existing stores after research
indicates a customer demand for such a product.
The business in which the Company is engaged is highly
competitive and characterized by low profit margins. The Company
competes with national, regional and local supermarket chains,
discount food stores, single unit stores, convenience stores and
warehouse clubs. The Company will continue to develop and evaluate
new retailing strategies that will challenge competitors. Seasonal
changes have no material effect on the operation of the Company's
supermarkets.
Since 1968, the Company has followed a policy of selling
merchandise at low item prices in order to increase volume without a
proportionate increase in fixed and operating expenses. Trading
stamps are not offered in any of the Company's supermarkets.
As of January 1, 1994, 1,096 supermarkets were in operation, of
which 365 were located in North Carolina, 101 in South Carolina, 213
in Virginia, 73 in Tennessee, 56 in Georgia, 121 in Florida, 21 in
Maryland, 6 in Delaware, 13 in West Virginia, 14 in Kentucky, 7 in
Pennsylvania, 82 in Texas, 19 in Oklahoma and 5 in Louisiana. On
January 7, 1994, Food Lion announced plans to close 88 unprofitable
store locations in 1994; 18 in Florida, 5 in Georgia, 2 in Kentucky; 6
in North Carolina, 11 in Oklahoma, 1 in Pennsylvania, 5 in South
Carolina, 3 in Tennessee, 36 in Texas and 1 in Virginia. As of March
24, 1994, the Company had opened 8 supermarkets since January 1, 1994,
closed 47 supermarkets and had signed leases for one supermarket which
is expected to open in either 1994 or 1995.
-3-
Warehousing and distribution facilities, including a truck fleet,
are owned and operated by the Company and are located in Salisbury and
Dunn, North Carolina; Petersburg, Virginia; Elloree, South Carolina;
Green Cove Springs and Plant City, Florida; Clinton, Tennessee;
Greencastle, Pennsylvania and Roanoke, Texas.
As of January 1, 1994, the Company employed 28,673 full-time and
36,821 part-time employees.
Item 2. Properties.
Supermarkets operated by the Company in the southeastern United
States average 26,500 square feet in size. The Company's current
prototype retail format is a 30,000 square foot model with a deli-
bakery department. All of the Company's supermarkets are self-
service, cash and carry stores which have off-street parking
facilities. With the exception of 134 supermarkets which it owns, the
Company occupies its various supermarket premises under lease
agreements providing for initial terms of up to 25 years, with options
generally ranging from ten to twenty years. All supermarkets are
located in modern, air-conditioned facilities.
The table below sets forth information with respect to the
expiration of leases on supermarkets and surrounding land in
operation by the Company on January 1, 1994.
Year of Number of Leases Year of Number of Leases
Expiration* which expire Expiration* which expire
1995 1 2020 7
1997 1 2021 7
1998 1 2022 9
1999 2 2023 25
2001 3 2024 17
2004 4 2025 32
2005 1 2026 63
2005 2 2027 98
2007 5 2028 104
2008 5 2029 117
2009 3 2030 135
2010 3 2031 79
2011 1 2032 71
2012 3 2033 69
2013 6 2034 2
2014 4 2035 6
2015 1 2036 6
2016 2 2037 23
2017 7 2038 24
2018 6 2043 1
2019 5 2045 1
*NOTE: Year of expiration includes renewal terms.
-4-
The following table identifies the location and square footage of
distribution centers and office space owned by the Company as of
January 1, 1994.
Location of
Property Square Footage
Distribution Center #1 Salisbury, NC 1,630,233
Distribution Center #2 Petersburg, VA 1,124,718
Distribution Center #3 Elloree, SC 1,093,252
Distribution Center #4 Dunn, NC 1,224,652
Distribution Center #5 Green Cove Springs, FL 832,109
Distribution Center #6 Clinton, TN 825,967
Distribution Center #7 Greencastle, PA 758,549
Distribution Center #8 Plant City, FL 758,549
Distribution Center #9 Roanoke, TX 1,254,169
Corporate Headquarters Salisbury, NC 262,672
9,764,870
Item 3. Legal Proceedings.
Longman et al. v. Food Lion, Inc. and Tom E. Smith, 4:92 CV 696
(M.D.N.C.) (complaint filed November 12, 1992, and amended January 23,
1993) ("Longman"); and Feinman et al. v. Food Lion, Inc. and Tom E.
Smith, 4:92 CV 705 (M.D.N.C.) (complaint filed November 13, 1992)
("Feinman").
The Longman and Feinman actions assert claims under Section 10(b) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
Rule 10b-5 for "securities fraud," and claims of common law fraud and
negligent misrepresentation, and purport to be class actions on behalf
of purchasers of Food Lion stock during certain "class periods".
Theses actions seek damages for such purported class members in
presently unknown amounts, the Plaintiffs' attorneys' fees and costs,
punitive damages, prejudgment interest and certain other relief. In
the Longman and Feinman Actions, Tom E. Smith, Chairman of the Board,
Chief Executive Officer and President of the Company, is also a
defendant. Motions to Dismiss filed in the cases were denied by order
dated March 16,1994, with class action discovery beginning March 22,
1994. Based on currently available information, the Company believes
that any resulting liability will not have a material adverse effect
on the financial condition or results of operations of the Company.
In re Food Lion, Inc., Fair Labor Standards Act "Effective Scheduling"
Litigation, MDL Docket No. 929, pursuant to which a number of actions
against the Company have been transferred by the Multi-District
Litigation Panel to the United States District Court for the Eastern
District of North Carolina for consolidated pre-trial proceedings (the
"Multi-District Action"). The Multi-District Action involves
approximately 432 claims by litigants in Florida, North Carolina,
Tennessee and Virginia for alleged violations of the Fair Labor
Standards Act. The Multi-District Action primarily involves claims
seeking payment under the Fair Labor Standards Act for alleged
uncompensated overtime hours, liquidated damages, additional
-5-
contributions to the Company's profit sharing plan, costs and
attorneys' fees. We understand that settlement of some individual
claims is in the process of finalization and settlement negotiations
are underway with respect to certain other claims. The Company will
vigorously defend each of the Actions that remain pending. Based on
currently available information, the Company believes that any
resulting liability will not have a material adverse effect on the
financial condition or results of operations of the Company.
On February 16, 1994, plaintiff Sarah Bullock, an African-American
female, filed a motion to amend her federal district court complaint
in Bullock v. Food Lion, Inc., No. 93-CV-51-ATH (M.D. Ga.), a pending
individual plaintiff suit in which Ms. Bullock alleges that she was
denied a promotion and discharged because of her race, by adding 10
named additional plaintiffs and company-wide class action allegations
of race discrimination in violation of title VII of the Civil Rights
Act of 1964. The amended complaint alleges a pattern and practice of
discrimination in promotions, discipline, discharge, allocation of
hours, awarding full-time status, and wages. The amended complaint
seeks certification of a class defined as all past and present black
employees at Food Lion and all black applicants for employment, broad
injunctive relief, monetary damages including compensatory and
punitive damages, reasonable attorneys' fees, and expenses.
The court has not yet ruled on the motion requesting that the case be
converted to a class action, no class has been certified and the
plaintiff has not yet specified an amount of monetary damages alleged
to have been suffered by the class. While at this time the Company
cannot evaluate the consequences of an adverse judgment, the Company
intends to vigorously defend this action.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The information pertaining to the Class A and Class B Common
Stock price range, dividends and record holders discussed beneath the
headings "Market Price of Common Stock" and "Dividends Declared Per
Share of Common Stock" in the Annual Report to Shareholders for the
year ended January 1, 1994, is hereby incorporated by reference.
Item 6. Selected Financial Data.
The information set forth beneath the heading "Ten Year Summary
of Operations" in the Annual Report to Shareholders for the year ended
January 1, 1994, is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-5a-
The information set forth beneath the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report to Shareholders for the year ended
January 1, 1994, is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements, including the accompanying notes and
results by quarter, set forth beneath the headings "Statements of
Income", "Balance Sheets", "Statements of Cash Flows", "Statements of
Shareholders' Equity", "Notes to Financial Statements" and "Results by
Quarter" in the Annual Report to Shareholders for the year ended
January 1, 1994, are hereby incorporated by reference.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information pertaining to nominees for election as directors
and the Company's executive officers set forth beneath the heading
"Election of Directors" and in the description of employment
agreements beneath the heading "Employment Plans and Agreements"
in the Proxy Statement for the 1994 Annual Meeting of Shareholders
to be held May 5, 1994, is hereby incorporated by reference.
Item 11. Executive Compensation.
The information pertaining to executive compensation set forth
beneath the heading "Report of the Senior Managment Compensation
Committee, Stock Option Committee and Board of Directors" in the
Proxy Statement for the 1994 Annual Meeting Shareholders to be held
on May 5, 1994, is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information pertaining to security ownership of certain
beneficial owners and management set forth beneath the heading
"Security Ownership of Certain Beneficial Owners and Management" in
the Proxy Statement for the 1994 Annual Meeting of Shareholders to be
held on May 5, 1994, is hereby incorporated by reference.
-5b-
Item 13. Certain Relationships and Related Transactions.
The information relating to certain relationships and related
transactions set forth beneath the headings "Employment Plans and
Agreements - Low Interest Loan Plan" and "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement for
the 1994 Annual Meeting of Shareholders to be held May 5, 1994,
is hereby incorporated by reference.
-6-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) The following documents are filed as part of this
report:
1. Financial Statements:
The following financial statements are incorporated
by reference in Item 8 hereof from the Annual Report
to Shareholders for the year ended January 1, 1994:
ANNUAL REPORT
PAGE NO.
Statements of Income for the years
ended January 1, 1994, January 2,
1993 and December 28, 1991 10
Balance Sheets, as of January 1,
1994 and January 2, 1993 11
Statements of Cash Flows for the
years ended January 1, 1994,
January 2, 1993 and December 28, 1991 12
Statements of Shareholders' Equity
for the years ended January 1, 1994,
January 2, 1993 and December 28, 1991 13
Notes to Financial Statements 14-18
Results by Quarter (unaudited) 19
10-K
PAGE NO.
2. Financial Statement Schedules:
Report of Independent Accountants 14
II. Amounts Receivable from Related
Parties and Underwriters,
Promoters and Employees Other
Than Related Parties 15
V. Property, Plant and Equipment 16-17
VI. Accumulated Depreciation and
Amortization of Property, Plant
and Equipment 18
VIII. Valuation and Qualifying Accounts 19
-7-
All other schedules are omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the financial statements and notes thereto.
With the exception of the financial statements listed in the
above index, the information referred to in Items 5, 6, 7 and the
supplementary quarterly financial information referred to in Item 8,
all of which is included in the 1993 Annual Report to Shareholders of
Food Lion, Inc. and incorporated by reference into this Form 10-K
Annual Report, the 1993 Annual Report to Shareholders is not to be
deemed "filed" as part of this report.
3. Exhibits:
Exhibit No.
3(a) Articles of Incorporation, together with all
amendments thereto (through May 5, 1988)
(incorporated by reference to Exhibit 3(a) of the
Company's Annual Report on Form 10-K dated March
24, 1992)
3(b) Bylaws of the Company effective July 1, 1990
(incorporated by reference to Exhibit 3(c) of
the Company's Annual Report on Form 10-K dated
March 25, 1991)
4(a) Indenture dated as of August 15, 1991 between
the Company and the Bank of New York, Trustee,
providing for the issuance of an unlimited amount
of Debt Securities in one or more series (incorpo-
rated by reference to Exhibit 4(a) of the Company's
Annual Report on Form 10-K dated March 24, 1992)
4(b) Form of Food Lion, Inc. Medium Term Note (Global
Fixed Rate) (incorporated by reference to Exhibit
4(b) of the Company's Annual Report on Form 10-K
dated March 24, 1992)
10(a) Low Interest Loan Plan (incorporated by reference
to Exhibit 19(a) of the Company's report on Form
8-K dated October 27, 1986)
10(b) Form of Deferred Compensation Agreement
(incorporated by reference to Exhibit 19(b) of
the Company's report on Form 8-K dated October 27,
1986)
10(c) Form of Salary Continuation Agreement (incorporated
by reference to Exhibit 19(c) of the Company's
report on Form 8-K dated October 27, 1986)
-8-
10(d) Shareholders Agreement dated September 22, 1988, by
and among Etablissements Delhaize Freres et Cie "Le
Lion" S.A., Delhaize The Lion America, Inc., Ralph
W. Ketner and Tom E. Smith (incorporated by
reference to Exhibit 10(d) of the Company's Annual
Report on Form 10-K dated March 20, 1989)
10(e) Proxy Agreement dated January 4, 1991 between
Etablissements Delhaize Freres et Cie "Le Lion"
S.A. and Delhaize the Lion, America, Inc.
(incorporated by reference to Exhibit 10(e) of
the Company's Annual Report on Form 10-K dated
March 25, 1991)
10(f) Annual Incentive Bonus Plan (incorporated by
reference to Exhibit 19(a) of the Company's
Annual Report on Form 10-K dated March 30, 1983)
10(g) Declaration of Amendment to the Company's Annual
Incentive Bonus Plan effective as of December 14,
1987 (incorporated by reference to Exhibit 10(h) of
the Company's Annual Report on Form 10-K dated
March 20, 1989)
10(h) Employment Agreement dated August 1, 1991 between
the Company and Tom E. Smith (incorporated by
reference to Exhibit 10(h) of the Company's Annual
Report on Form 10-K dated March 24, 1992)
10(i) Retirement and Consulting Agreement dated May 1,
1991 between the Company and Jerry W. Helms
(incorporated by reference to Exhibit 10(i) of the
Company's Annual Report on Form 10-K dated March
24, 1992)
10(j) Stock Purchase Agreement dated June 30, 1981
between the Company and Ralph W. Ketner
(incorporated by reference to Exhibit 10(j) of
the Company's Annual Report on Form 10-K dated
April 1, 1987)
10(k) Amended and Restated Food Lion, Inc. 1983
Employee Stock Option Plan (incorporated by
reference to Exhibit 10(k) of the Company's Annual
Report on Form 10-K dated March 24, 1992)
10(l) 1991 Employee Stock Option Plan of Food Lion,
Inc. (incorporated by reference to Exhibit 10(l) of
the Company's Annual Report on Form 10-K dated
March 24, 1992)
10(m) Split Dollar Life Insurance Agreement between the
Company and Tom E. Smith (incorporated by
reference to Exhibit 10(o) of the Company's
Annual Report on Form 10-K dated April 1, 1987)
-9-
10(n) Split Dollar Life Insurance Agreement between the
Company and Tom E. Smith issued May 25, 1988
incorporated by reference to Exhibit 10(w) of the
Company's Annual report on Form 10-K dated March
20, 1989)
10(o) Letter Agreement dated May 10, 1990 between the
Company and Ralph W. Ketner. (incorporated by
reference to Exhibit 10(q) of the Company's Annual
Report on Form 10-K dated March 25, 1991)
10(p) 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(q) $300,000,000 Credit Agreement dated June 4, 1993
between the Company and various banks and Wachovia
Bank of North Carolina, N.A. as agent
10(r) First Amendment to Credit Agreement dated August 2,
1993 effective as of June 4, 1993
10(s) Second Amendment to Credit Agreement dated February
1,1994 effective as of January 1, 1994
10(t) License Agreement between the Company and between
Etablissements Delhaize Freres Et Cie "Le Lion"
S.A. dated January 1, 1983
11 Computation of Earnings Per Share
13 Annual Report to Shareholders for the year
ended January 1, 1994
23 Consent of Independent Accountants
99 Undertaking of the Company to file exhibits
pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K
99(a) The complaint of an action entitled Longman v. Food
Lion, Inc. and Tom E. Smith, No. 4:92CV696.
(incorporated by reference to Exhibit 28(a) of the
Company's Annual Report on Form 10-K dated April
14, 1993)
99(b) The complaint of an action entitled Feinman et al
v. Food Lion, Inc. and Tom E. Smith, No. 4:92CV705.
(incorporated by reference to Exhibit 28(b) of
the Company's Annual Report on Form 10-K dated
April 14, 1993)
-10-
99(c) U.S. Department of Labor and Food Lion, Inc.
Settlement Agreement dated July 30, 1993
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K January 7, 1994
listing a)new director and b)various financial matters.
-11-
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: March 31,1994 By Tom E. Smith
Tom E. Smith
President, Chief Executive
Officer, Principal
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Date: March 31, 1994 By Tom E. Smith
Tom E. Smith
President, Chief Executive
Officer, Principal
Executive Officer and Director
Date: March 31, 1994 By Pierre-Olivier Beckers
Pierre-Olivier Beckers
Director
Date: March 31, 1994 By Raymond-Max Boon
Raymond-Max Boon
Director
Date: March 31, 1994 By Dan A. Boone
Dan A. Boone
Vice President of Finance,
Chief Financial Officer
Secretary, Principal
Financial Officer
Date:March 31, 1994 By Charles de Cooman
Charles de Cooman
d'Herlinckhove
Director
Date:March 31, 1994 By William G. Ferguson
William G. Ferguson
Director
Date:March 31, 1994 By Dr. Bernard Franklin
Dr. Bernard Franklin
Director
Date:March 31, 1994 By Carol Herndon
Carol Herndon
Corporate Financial
Controller and Director
of Financial Accounting
-12-
Date: March 31, 1994 By Jacques LeClercq
Jacques LeClercq
Director
Date:March 31,1994 By Gui de Vaucleroy
Gui de Vaucleroy
Director
Date:March 31, 1994 By John P. Watkins
John P. Watkins
Director
-13-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Food Lion, Inc.:
We have audited the financial statements of Food Lion, Inc. as of
January 1, 1994 and January 2, 1993, and for each of the three fiscal
years in the period ended January 1, 1994, which financial statements
are included on pages 10 through 18 of the 1993 Annual Report to
Shareholders of Food Lion, Inc. and incorporated by reference herein.
We have also audited the financial statement schedules listed in the
index on page 7 of this Form 10-K. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Food Lion, Inc. as of January 1, 1994 and January 2, 1993, and the
results of its operations and its cash flows for each of the three
fiscal years in the period ended January 1, 1994, in conformity with
generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information
required to be included therein.
Charlotte, North Carolina
February 9, 1994, except for
Note 14, as to which the date
is March 24, 1994 COOPERS & LYBRAND
-14-
<TABLE>
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
For the fiscal years ended January 1, 1994, January 2, 1993 and December 28, 1991
<CAPTION> Balance at
Deductions End of Period
Balance at Amounts
Beginning Amounts Written
Name of Debtor of Period Additions Collected off Current Not Current
<S> <C> <C> <C> <C> <C> <C>
1993
Eddie Benner $128,500 $128,500
Dan Boone 120,000 120,000
Chuck Buckley 135,975 11,000 146,975
Ken Harris 119,000 13,000 132,000
Gene McKinley 170,500 170,500
Tom E. Smith 226,460 (226,460) 0
John Watkins 160,875 160,875
Vince Watkins 124,500 124,500
1992
Eddie Benner $128,500 $128,500
Dan Boone 120,000 120,000
Chuck Buckley 135,975 135,975
Ken Harris 119,000 119,000
Gene McKinley 159,500 $ 11,000 170,500
Tom E. Smith 226,460 226,460
John Watkins __ 160,875 160,875
Vince Watkins 114,500 10,000 124,500
1991
Eddie Benner $128,500 $128,500
Dan Boone 94,750 $ 25,250 120,000
Chuck Buckley 72,375 63,600 135,975
Ken Harris 119,000 119,000
Jerry W. Helms 239,500 (239,500) --
Ralph W. Ketner 231,780 (231,780) --
Gene McKinley 145,000 14,500 159,500
Tom E. Smith 226,460 226,460
Vince Watkins 97,000 17,500 114,500
The Loans described above were made pursuant to the plan for low interest Loans to certain key employees which is
described beneath the heading "Low Interest Loan Plan" in the Proxy statement for the 1994 Annual Meeting of the
Shareholders to be held on May 5, 1994.
Interest is payable at a rate equal to one-half of the prime rate of NationsBank on the first business day of each
calendar quarter. All amounts are due on demand with interest payable monthly.
</TABLE>
-15-
<TABLE>
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
For the fiscal years ended January 1, 1994, January 2, 1993 and December 28, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Balance
Beginning Additions Other Changes At End
Classification of Period at Cost Retirements Add/Deduct Of Period
1993
<S> <C> <C> <S><C> <C> <C> <C> <C>
Land and improvements $ 135,264,357 $ 38,156,782 A $ 440,934 $ 0 $ 172,980,205
Buildings 395,968,888 35,420,031 B 59,809 12,356,496 382,185,602
(61,500,004) G
Furniture, Fixtures &
Equipment 842,038,973 101,681,489 C 11,902,007 (24,177,600) G 907,640,855
Vehicles 89,024,231 3,863,685 D 2,369,626 0 90,518,289
Leasehold improvements 75,589,235 8,089,130 604,571 4,041,052 85,697,839
( 1,417,007) G
Property under Capital
leases 268,718,820 62,367,336 E 3,096,551 0 327,989,606
Construction in Progress 66,091,397 ( 23,372,325) F 0 (16,397,548) 26,321,524
$1,872,695,901 $226,206,128 $ 18,473,498 $(87,094,611) $1,993,333,920
1992
Land and improvements $ 68,728,488 $ 66,535,869 H $ 135,264,357
Buildings 298,021,411 70,806,538 I 27,140,939 395,968,888
Furniture, Fixtures &
Equipment 677,400,188 173,648,183 J 9,120,717 111,319 842,038,973
Vehicles 78,467,968 12,021,709 K 1,465,446 89,024,231
Leasehold improvements 60,149,425 11,919,994 378,170 3,897,986 75,589,235
Property under Capital
leases 212,842,398 59,062,196 L 3,185,774 268,718,820
Construction in Progress 29,462,316 67,779,325 M (31,150,244) 66,091,397
$1,425,072,194 $461,773,814 $14,150,107 $ $1,872,695,901
1991
Land and improvements $ 14,147,054 $ 732,650 $ 81,490 $ 53,930,274 S $ 68,728,488
Buildings 172,686,403 40,882,075 N 84,452,933 S 298,021,411
Furniture, Fixtures &
Equipment 558,255,559 122,212,747 O 15,744,293 12,676,175 S 677,400,188
Vehicles 59,862,133 21,539,578 P 2,933,743 78,467,968
Leasehold improvements 51,932,018 9,208,102 968,510 ( 22,185) 60,149,425
Property under Capital
leases 167,466,347 47,900,378 Q 2,524,327 212,842,398
Construction in Progress 70,454,077 110,045,436 R (151,037,197) 29,462,316
$1,094,803,591 $352,520,966 $22,252,363 $ $1,425,072,194
(A) Completion of 31 additional owned stores.
(B) Completion of 31 additional owned stores.
(C) Equipped 101 additional stores.
(D) Purchased 187 additional vehicles.
-16-
(E) Added 53 store capital leases.
(F) Store remodels and future site expansion.
(G) Write down of assets related to 88 stores to close in 1994.
(H) Completion of Harrison Road Warehouse and 61 additional owned stores.
(I) Completion of Harrison Road Warehouse and 61 additional owned stores.
(J) Equipped 140 additional stores.
(K) Purchased 427 additional vehicles.
(L) Added 46 store capital leases.
(M) Added Phase II of Texas Warehouse, store remodels and future store
expansion.
(N) Completion of Phase I of Greencastle, Pennsylvania Warehouse, Phase I
of Plant City Warehouse, and Phase I of Roanoke Texas Warehouse.
(O) Equipped 111 additional stores.
(P) Purchased 506 additional vehicles.
(Q) Added 43 store capital leases.
(R) Added Phase II of Green Cove Springs, Florida Warehouse, Phase II of
Clinton, Tennessee Warehouse, Phase I of Harrison Road Warehouse,
and future store expansion.
(S) Completion of 41 Texas stores.
</TABLE>
-17-
<TABLE>
SCHEDULE VI. ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY, PLANT AND EQUIPMENT
For the fiscal years ended January 1, 1994, January 2, 1993 and December 28, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Additions Balance
Beginning Charged to Other Changes At End
Classification of Period Cost & Expenses Retirements Add/Deduct Of Period
1993
<S> <C> <C> <C> <C> <C> <C> <C>
Land and improvements $ 2,316,153 $ 3,503,305 0 0 $ 5,819,458
Buildings 31,605,919 10,735,559 $ 26,858 $( 38) 42,314,582
Furniture, Fixtures &
Equipment 341,437,647 93,969,451 8,653,638 0 426,753,460
Vehicles 45,273,088 10,917,805 2,270,863 0 53,920,030
Leasehold improvements 35,836,253 9,043,850 552,675 38 44,327,466
Property under Capital
leases 43,460,116 14,871,660 2,344,382 0 55,987,394
$ 499,929,176 $143,041,630 $14,459,617 $ $ 629,122,390
1992
Land and improvements $ 667,291 $ 1,648,862 $ 2,316,153
Buildings 23,303,206 8,304,051 $ 3,750 $ 2,412 31,605,919
Furniture, Fixtures &
Equipment 268,111,604 81,737,407 8,414,541 3,177 341,437,647
Vehicles 36,107,232 10,451,293 1,285,437 45,273,088
Leasehold improvements 28,497,066 7,714,923 370,147 ( 5,589) 35,836,253
Property under Capital
leases 32,847,772 11,759,089 1,146,745 43,460,116
$ 389,534,171 $121,615,625 $11,220,620 $ $ 499,929,176
1991
Land and improvements $ 484,136 $ 183,155 $ 667,291
Buildings 17,708,734 5,594,472 23,303,206
Furniture, Fixtures &
Equipment 207,181,592 74,357,883 $13,449,543 $ 21,672 268,111,604
Vehicles 29,841,702 9,008,787 2,743,257 36,107,232
Leasehold improvements 23,166,445 6,167,302 815,009 ( 21,672) 28,497,066
Property under Capital
leases 24,644,431 9,302,624 1,099,283 32,847,772
$ 303,027,040 $104,614,223 $18,107,092 $ $ 389,534,171
</TABLE>
-18-
<TABLE>
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
Balance at (1) Additions (2)
Beginning Charged to Charges to other Deductions- Balance at end
Description of Period Cost & Expenses accounts-describe describe of period
<S> <C> <C> <C> <C> <C>
Furniture, Fixtures &
Equipment $ 24,177,600 A $ 24,177,600
Leasehold improvements 1,417,007 A 1,417,007
Buildings 61,500,004 A 61,500,004
Other liabilities 55,100,000 A 55,100,000
Accrued expenses 28,305,389 A 28,305,389
$170,500,000 $170,500,000
(A) Represents the write-down of the assets of stores scheduled to close in 1994 to reflect the estimated realizable
value, the present value of remaining rent payments on leased stores and other costs associated with the store closings
such as legal expenses, relocation expenses and costs to store and transfer reusable equipment.
</TABLE>
-19-
EXHIBIT INDEX
to
ANNUAL REPORT ON FORM 10-K of
Food Lion, Inc.
For Year Ended January 1, 1994
Sequential
Exhibit No. Description Page No.
3(a) Articles of Incorporation, together with
all amendments thereto (through May 5,
1988) (incorporated by reference to Exhibit
3(a) of the Company's Annual Report on Form
10-K dated March 24, 1992)
3(b) Bylaws of the Company effective July 1, 1990
(incorporated by reference to Exhibit 3(c)
of the Company's Annual Report on Form 10-K
dated March 25, 1991)
4(a) Indenture dated as of August 15, 1991 between
the Company and the Bank of New York, Trustee,
providing for the issuance of an unlimited
amount of Debt Securities in one or more
series (incorporated by reference to Exhibit
4(a) of the Company's Annual Report on Form
10-K dated March 24, 1992)
4(b) Form of Food Lion, Inc. Medium Term Note
(Global Fixed Rate) (incorporated by
reference to Exhibit 4(b) of the Company's
Annual Report on Form 10-K dated March 24,
1992)
10(a) Low Interest Loan Plan (incorporated by
reference to Exhibit 19(a) of the Company's
report on Form 8-K dated October 27, 1986)
10(b) Form of Deferred Compensation Agreement
(incorporated by reference to Exhibit 19(b)
of the Company's report on Form 8-K dated
October 27, 1986)
10(c) Form of Salary Continuation Agreement
(incorporated by reference to Exhibit 19(c)
of the Company's report on Form 8-K dated
October 27, 1986)
-1-
10(d) Shareholders Agreement dated September 22, 1988,
by and among Etablissements Delhaize Freres et Cie
"Le Lion" S.A., Delhaize The Lion America, Inc.,
Ralph W. Ketner and Tom E. Smith (incorporated by
reference to Exhibit 10(d) of the Company's Annual
Report on Form 10-K dated March 20, 1989)
10(e) Proxy Agreement dated January 4, 1991 between
Etablissements Delhaize Freres et Cie "Le Lion"
S.A. and Delhaize the Lion America, Inc.
(incorporated by reference to Exhibit 10(e) of the
Company's Annual Report on form 10-K dated March 25,
1991)
10(f) Annual Incentive Bonus Plan (incorporated by
reference to Exhibit 19(a) of the Company's
Annual Report on Form 10-K dated March 30, 1983)
10(g) Declaration of Amendment to the Company's Annual
Incentive Bonus Plan effective as of December 14,
1987 (incorporated by reference to Exhibit 10(h)
of the Company's Annual Report on Form 10-K dated
March 20, 1989)
10(h) Employment Agreement dated August 1, 1991 between
the Company and Tom E. Smith (incorporated by
reference to Exhibit 10(h) of the Company's Annual
Report on Form 10-K dated March 24, 1992)
10(i) Retirement and Consulting Agreement dated May 1,
1991 between the Company and Jerry W. Helms
(incorporated by reference to Exhibit 10(i) of
the Company's Annual Report on Form 10-K dated
March 24, 1992)
10(j) Stock Purchase Agreement dated June 30, 1981 between
the Company and Ralph W. Ketner (incorporated by
reference to Exhibit 10(j) of the Company's Annual
Report on Form 10-K dated April 1, 1987)
10(k) Amended and Restated Food Lion, Inc. 1983 Employment
Stock Option Plan (incorporated by reference to
Exhibit 10(k) of the Company's Annual Report on Form
10-K dated March 24, 1992)
10(l) 1991 Employee Stock Option Plan of Food Lion, Inc.
(incorporated by reference to Exhibit 10(l) of the
Company's Annual Report on Form 10-K dated March 24,
1992)
10(m) Split Dollar Life Insurance Agreement between the
Company and Tom E. Smith (incorporated by reference
to Exhibit 10(o) of the Company's Annual Report on
Form 10-K dated April 1, 1987)
-2-
10(n) Split Dollar Life Insurance Agreement between
the Company and Tom E. Smith issued May 25, 1988
(incorporated by reference to Exhibit 10(w) of
the Company's Annual report on Form 10-K dated
March 20, 1989)
10(o) Letter Agreement dated May 10, 1990 between the
Company and Ralph W. Ketner (incorporated by
reference to Exhibit 10(q) of the Company's
Annual Report on Form 10-K dated March 25, 1991)
10(p) 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 to 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(q) $300,000,000 Credit Agreement dated June 4, 1993
between the Company and various banks and Wachovia
Bank of North Carolina, N.A. as agent
10(r) First Amendment to Credit Agreement dated August 2,
1993 effective as of June 4, 1993
10(s) Second Amendment to Credit Agreement dated February
1, 1994 effective as of January 1, 1994
10(t) License Agreement between the Company and between
Etablissements Delhaize Freres Et Cie "Le Lion"
S.A. dated January 1, 1983
11 Computation of Earnings Per Share
13 Annual Report to Shareholders for the year ended
January 1, 1994
23 Consent of Independent Accountants
99 Undertaking of the Company to file exhibits
pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K
99(a) The complaint of an action entitled Longman v. Food
Lion, Inc. and Tom E. Smith, No. 4:92CV696. (incor-
porated by reference to Exhibit 28(a) of the Company's
Annual Report on Form 10-K dated April 14, 1993)
99(b) The complaint of an action entitled Feinman et
al v. Food Lion, Inc. andTom E.Smith, No. 4:92CV705.
(incorporated by reference to Exhibit 28(b) of
the Company's Annual Report on Form 10-K dated
April 14, 1993)
99(c) U.S. Department of Labor and Food Lion, Inc.
Settlement Agreement dated July 30, 1993
-3-
CREDIT AGREEMENT
AGREEMENT dated as of June 4, 1993, among FOOD LION,
INC., the BANKS listed on the signature pages hereof and WACHOVIA
BANK OF NORTH CAROLINA, N.A., as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any
amendment hereto (except as herein otherwise expressly provided or
unless the context otherwise requires), have the meanings set
forth herein:
"Adjusted London Interbank Offered Rate" has the meaning
set forth in Section 2.06(c).
"Affiliate" means (i) any Person that directly, or
indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person"), (ii) any Person (other than the
Borrower or a Subsidiary) which is controlled by or is under
common control with a Controlling Person, or (iii) any Person
(other than a Subsidiary) of which the Borrower owns, directly or
indirectly, 20% or more of the common stock or equivalent equity
interests. As used herein, the term "control" means possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Agent" means Wachovia Bank of North Carolina, N.A., a
national banking association, in its capacity as agent for the
Banks hereunder, and its successors and permitted assigns in such
capacity.
"Agent's Letter Agreement" means that certain letter
agreement, dated as of March 11, 1993 between the Borrower and the
Agent relating to the structure of the financial accommodations
set forth herein, and certain fees from time to time payable by
the Borrower to the Agent, together with all amendments and
supplements thereto.
"Aggregate Commitments" means the sum of all of the
Commitments.
"Agreement" means this Credit Agreement, together with
all amendments and supplements hereto.
"Applicable Margin" has the meaning set forth in Section
2.06(a).
"Asset Sale Prepayment Notice" shall have the meaning
set forth in Section 5.10(b).
"Asset Sale Prepayment Date" has the meaning set forth
in Section 5.10(b).
"Asset Sale Prepayment Notice Date" has the meaning set
forth in Section 5.10(a).
"Asset Sale Prepayment Notice" has the meaning set forth
in Section 5.10(b).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and
Acceptance executed in accordance with Section 9.08(c) in the form
attached hereto as Exhibit D.
"Attributable Indebtedness" shall mean in connection
with a Sale and Leaseback Transaction not satisfying the
conditions set forth in Section 5.23 (a), as of the date of any
determination thereof, an amount equal to the aggregate amount of
the Rentals due and to become due (discounted from the respective
due dates thereof to such date at the interest rate implicit in
such lease per annum, with all such discounts to be computed on
the basis on a 360-day year of twelve 30-day months, and otherwise
in accordance with GAAP) under the lease relating to such Sale and
Leaseback Transaction.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages
hereof as having a Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day,
the rate per annum equal to the higher as of such day of (i) the
Prime Rate, and (ii) 0.50% above the Federal Funds Rate. For
purposes of determining the Base Rate for any day, changes in the
Prime Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Syndicated Loan to be made as a
Base Rate Loan pursuant to the applicable Notice of Borrowing or
Article VIII, as applicable.
"Borrower" means FOOD LION, INC., a North Carolina
corporation, and its successors and its permitted assigns.
"Borrowing" means a borrowing hereunder consisting of
Loans made to the Borrower at the same time by the Banks pursuant
to Article II. A Borrowing is a "Base Rate Borrowing" if such
Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such
Loans are Euro-Dollar Loans. A Borrowing is a "Syndicated
Borrowing" if it is made pursuant to the procedure outlined in
Section 2.01. A Borrowing is a "Money Market Borrowing" if it is
made pursuant to the procedure outlined in Section 2.03.
"Capital Expenditures" means for any period the sum of
all capital expenditures incurred during such period by the
Borrower and its Consolidated Subsidiaries, as determined in
accordance with GAAP.
"Capital Stock" means any nonredeemable capital stock of
the Borrower or any Consolidated Subsidiary (to the extent issued
to a Person other than the Borrower), whether common or preferred.
"Capitalized Lease" shall mean any lease which is
required to be capitalized on a consolidated balance sheet of the
lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the
date of any determination thereof the amount at which the
aggregate Rentals due and to become due under all Capitalized
Leases under which such Person is a lessee would be reflected as a
liability on a consolidated balance sheet of such Person.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. 9601 et. seq. and its
implementing regulations and amendments.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant
to CERCLA.
"Change of Law" shall have the meaning set forth in
Section 8.02.
"Closing Certificate" has the meaning set forth in
Section 3.01(e).
"Closing Date" means June 4, 1993.
"Code" means the Internal Revenue Code of 1986, as
amended, or any successor Federal tax code.
"Commercial Paper Rating" means, as of any date of
determination, the rating assigned by Moody's and Standard &
Poor's to the commercial paper issued by the Borrower.
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the signature
pages hereof, as such amount may be reduced from time to time
pursuant to Sections 2.01, 2.08 and 2.09.
"Compliance Certificate" has the meaning set forth in
Section 5.01(d).
"Consolidated Attributable Indebtedness" means, for any
period, the Attributable Indebtedness of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Fixed Charges" for any period shall,
without duplication, mean on a consolidated basis the sum of (i)
all Rentals payable during such period by the Borrower and its
Consolidated Subsidiaries, and (ii) Consolidated Interest Expense
for such period of the Borrower and its Consolidated Subsidiaries.
"Consolidated Funded Debt" means, for any period, the
Funded Debt of the Borrower and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" for any period means
interest, whether expensed or capitalized, in respect of Debt of
the Borrower or any of its Consolidated Subsidiaries outstanding
during such period.
"Consolidated Net Income" for any period shall mean the
gross revenues of the Borrower and its Consolidated Subsidiaries
for such period less all expenses and other proper charges
(including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding
Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other
disposition of Investments or fixed or capital assets, and
any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Consolidated
Subsidiary accrued prior to the date it became a Consolidated
Subsidiary;
(d) net earnings and losses of any corporation (other
than a Consolidated Subsidiary), substantially all the assets
of which have been acquired in any manner by the Borrower or
any Consolidated Subsidiary, realized by such corporation
prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other
than a Consolidated Subsidiary) with which the Borrower or a
Consolidated Subsidiary shall have consolidated or which
shall have merged into or with the Borrower or a Consolidated
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Consolidated Subsidiary) in which the Borrower or any
Consolidated Subsidiary has an ownership interest unless such
net earnings shall have actually been received by the
Borrower or such Consolidated Subsidiary in the form of cash
distributions;
(g) any portion of the net earnings of any Consolidated
Subsidiary which for any reason is unavailable for payment of
dividends to the Borrower or any other Consolidated
Subsidiary;
(h) earnings resulting from any reappraisal,
revaluation or write-up of assets;
(i) any deferred or other credit representing any
excess of the equity in any Subsidiary at the date of
acquisition thereof over the amount invested in such
Subsidiary;
(j) any gain arising from the acquisition of any
Capital Stock;
(k) any reversal of any contingency reserve except to
the extent that provision for such contingency reserve shall
have been made from income arising during such period;
provided, however, that any reversal of a contingency reserve
from a prior period shall only be excluded from Consolidated
Net Income to the extent that the aggregate amount of such
reversals exceed $10,000,000 during the immediately preceding
4 Fiscal Quarters; and
(l) any other unusual or extraordinary gain or loss.
"Consolidated Net Tangible Assets" shall, without
duplication, mean as of the date of any determination thereof, the
total amount of all assets of the Borrower and its Consolidated
Subsidiaries less the sum of:
(a) the amount, if any, at which intangible assets
(including goodwill, trade names, trademarks, patents,
organization expense and other similar intangibles) and
unamortized debt discount and expense appear on a
consolidated balance sheet;
(b) any write-up of fixed assets after the Closing
Date; and
(c) all liabilities other than deferred taxes and
Consolidated Funded Debt.
"Consolidated Net Worth" shall mean, as of the date of
any determination thereof, the amount of the capital stock
accounts (net of treasury stock, at cost) plus (or minus in the
case of a deficit) cumulative currency translation adjustments
plus (or minus in the case of a deficit) the surplus and retained
earnings of the Borrower and its Consolidated Subsidiaries,
determined in accordance with GAAP.
"Consolidated Secured Debt" means, for any period, the
Secured Debt of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which, in accordance
with GAAP, would be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
"Consolidated Tangible Net Worth" means, at any time,
Stockholders' Equity, less the sum of the value, as set forth or
reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance
with GAAP, of:
(A) Any surplus resulting from any write-up of
assets subsequent to January 2, 1993;
(B) All assets which would be treated as
intangibles under GAAP, including without limitation goodwill
(whether representing the excess of cost over book value of assets
acquired, or otherwise), trademarks, tradenames, copyrights,
patents and technologies, and unamortized debt discount and
expense;
(C) To the extent not included in (B) of this
definition, any amount at which shares of Capital Stock of the
Borrower appear as an asset on the balance sheet of the Borrower
and its Consolidated Subsidiaries;
(D) Loans or advances to stockholders, directors,
officers or employees; and
(E) To the extent not included in (B) of this
definition, deferred expenses.
"Consolidated Total Assets" means, at any time, the
total assets of the Borrower and its Consolidated Subsidiaries,
determined on a consolidated basis, as set forth or reflected on
the most recent consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, prepared in accordance with GAAP.
"Consolidated Total Capitalization" shall mean as of the
date of any determination thereof, the sum of (a) Consolidated Net
Worth and (b) Consolidated Total Debt.
"Consolidated Total Debt" shall mean as of the date of
any determination thereof all (i) Consolidated Funded Debt, (ii)
the Debt-Equivalent Value of Operating Leases of the Borrower and
its Consolidated Subsidiaries and (iii) the least aggregate amount
of Current Debt of the Borrower and its Consolidated Subsidiaries
which was outstanding on any day during the six-month period
immediately preceding the date of any determination thereof.
"Controlled Group" means all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414 of
the Code.
"Current Debt" of any Person shall mean as of the date
of determination thereof (a) all Debt of such Person for borrowed
money other than Funded Debt of such Person and (b) Guaranties by
such Person of Current Debt of others.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the
ordinary course of business, (iv) all obligations of such Person
as lessee under Capitalized Leases, (v) all obligations of such
Person to reimburse any bank or other Person in respect of amounts
payable under a banker's acceptance, (vi) all Redeemable Preferred
Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit
or similar instrument, (viii) all Debt of others secured by a Lien
on any asset of such Person, whether or not such Debt is assumed
by such Person, and (ix) all Debt of others Guaranteed by such
Person.
"Debt-Equivalent Value of Operating Leases" shall mean
as of the date of any determination thereof, the amount determined
by calculating the sum of the present values (using a discount
rate of 10.0%, compounded annually) of minimum lease obligations
for each subsequent fiscal year under Operating Leases as reported
in the annual report of the Borrower filed with the Securities and
Exchange Commission on Form 10-K with respect to the fiscal year
then most recently ended and on the basis of the following
assumptions:
(i) the lease obligations shown as payable in each year
are payable on the last day of each year; and
(ii) the lease obligations payable in each year after
the fifth year are equal to the lease obligations payable in
the fifth year.
"Default" means any condition or event which constitutes
an Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Default Rate" means, with respect to any Loan, on any
day, the sum of (i) 2% plus (ii) the Base Rate.
"Delhaize" shall mean Etablissements Delhaize Freres et
Cie "Le Lion" S.A., a Belgian corporation.
"Detla" shall mean Delhaize The Lion America, Inc., a
Delaware corporation.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in North Carolina
are authorized by law to close.
"Environmental Authority" means any foreign, federal,
state, local or regional government that exercises any form of
jurisdiction or authority under any Environmental Requirement.
"Environmental Authorizations" means all licenses,
permits, orders, approvals, notices, registrations or other legal
prerequisites for conducting the business of the Borrower or any
Subsidiary required by any Environmental Requirement.
"Environmental Judgments and Orders" means all
judgments, decrees or orders arising from or in any way associated
with any Environmental Requirements, whether or not entered upon
consent or written agreements with an Environmental Authority or
other entity arising from or in any way associated with any
Environmental Requirement, whether or not incorporated in a
judgment, decree or order.
"Environmental Liabilities" means any liabilities,
whether accrued, contingent or otherwise, arising from and in any
way associated with any Environmental Requirements.
"Environmental Notices" means notice from any
Environmental Authority or by any other person or entity, of
possible or alleged noncompliance with or liability under any
Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental
Authority or from any other person or entity for correction of
any, violation of any Environmental Requirement or any
investigations concerning any violation of any Environmental
Requirement.
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated
with any Environmental Requirement.
"Environmental Releases" means releases as defined in
CERCLA or under any applicable state or local environmental law or
regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to
the Borrower, any Subsidiary or the Properties, including but not
limited to any such requirement under CERCLA or similar state
legislation and all federal, state and local laws, ordinances,
regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any successor law.
Any reference to any provision of ERISA shall also be deemed to be
a reference to any successor provision or provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business
Day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Euro-Dollar Loan" means a Syndicated Loan to be made as
a Euro-Dollar Loan pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set
forth in Section 2.06(c).
"Event of Default" has the meaning set forth in
Section 6.01.
"Excess Sale Proceeds" shall have the meaning set forth
in Section 5.10(a).
"Excluded Charges" means any non-recurring non-cash
charges taken by the Borrower as a result of either any (i) write-
down of assets or (ii) loss on the sale of assets.
"Excess Sale Date" has the meaning set forth in
Section 5.10(a).
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upward, if necessary, to the next higher 1/100th of
1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank of New York on the Domestic Business
Day next succeeding such day, provided that (i) if the day for
which such rate is to be determined is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as
so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate charged to the
Agent on such day on such transactions, as determined by the
Agent.
"Fiscal Quarter" means any fiscal quarter of the
Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Funded Debt" of any Person shall mean (i) all Debt of
such Person for borrowed money or which has been incurred in
connection with the acquisition of assets in each case having a
final maturity of one or more than one year from the date of
origin thereof (or which is renewable or extendible at the option
of the obligor for a period or periods more than one year from the
date of origination), including all payments in respect thereof
that are required to be made within one year from the date of any
determination of Funded Debt, whether or not the obligation to
make such payments shall constitute a current liability of the
obligor under GAAP, (ii) all Capitalized Rentals of such Person,
and (iii) all Guaranties by such Person of Funded Debt of others.
"GAAP" means generally accepted accounting principles
applied on a basis consistent with those which, in accordance
with Section 1.02, are to be used in making the calculations for
purposes of determining compliance with the terms of this
Agreement.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to
secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to
provide collateral security, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding
meaning.
"Hazardous Materials" includes, without limitation, (a)
solid or hazardous waste, as defined in the Resource Conservation
and Recovery Act of 1980, 42 U.S.C. 6901 et seq. and its
implementing regulations and amendments, or in any applicable
state or local law or regulation, (b) "hazardous substance",
"pollutant", or "contaminant" as defined in CERCLA, or in any
applicable state or local law or regulation, (c) gasoline, or any
other petroleum product or by-product, including, crude oil or any
fraction thereof (d) toxic substances, as defined in the Toxic
Substances Control Act of 1976, or in any applicable state or
local law or regulation or (e) insecticides, fungicides, or
rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local
law or regulation, as each such Act, statute or regulation may be
amended from time to time.
"HLT Classification" has the meaning set forth in
Section 8.06.
"Income Available for Fixed Charges" for any period
shall mean the sum of (i) Consolidated Net Income during such
period plus (to the extent deducted in determining Consolidated
Net Income), (ii) all provisions for any Federal, state or other
income taxes made by the Borrower and its Subsidiaries during such
period and (iii) Consolidated Fixed Charges of the Borrower and
its Consolidated Subsidiaries during such period.
"Interest Charges" for any period shall mean all
interest paid and all amortization of debt discount and expense on
any particular Debt for which such calculations are being made,
and shall include, without limitation, the interest component of
Rentals on Capitalized Leases. Computations of Interest Charges
on a pro forma basis for Debt having a variable interest rate
shall be calculated at the rate in effect on the date of any
determination.
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in the
first, second or third month thereafter, as the Borrower may elect
in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to paragraph (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall, subject to
paragraph (c) below, end on the last Euro-Dollar Business Day
of the appropriate subsequent calendar month; and
(c) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date; provided,
that no Borrowing shall be made if the proposed Interest
Period shall not end prior to the scheduled Termination Date.
(2) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days
thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to paragraph (b) below) which would
otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business
Day; and
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the
Termination Date shall end on the Termination Date.
"Investment" means any investment in any Person, whether
by means of purchase or acquisition of obligations or securities
of such Person, capital contribution to such Person, loan or
advance to such Person, making of a time deposit with such Person,
Guarantee or assumption of any obligation of such Person or
otherwise.
"Lending Office" means, as to each Bank, its office
located at its address set forth on the signature pages hereof (or
identified on the signature pages hereof as its Lending Office) or
such other office as such Bank may hereafter designate as its
Lending Office by notice to the Borrower and the Agent.
"Lien" means, with respect to any asset, any mortgage,
deed to secure debt, deed of trust, lien, pledge, charge, security
interest, security title, preferential arrangement which has the
practical effect of constituting a security interest or
encumbrance, or encumbrance or servitude of any kind in respect of
such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or
other law. For the purposes of this Agreement, the Borrower or
any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, Capitalized Lease
or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan, a Euro-Dollar Loan, a
Syndicated Loan, or a Money Market Loan and "Loans" means Base
Rate Loans, Euro-Dollar Loans, Syndicated Loans, or Money Market
Loans, or any of them.
"Loan Documents" means this Agreement, the Notes, any
other document evidencing, relating to or securing the Loans, and
any other document or instrument delivered from time to time in
connection with this Agreement, the Notes or the Loans, as such
documents and instruments may be amended or supplemented from time
to time.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.06(c).
"Majority Banks" means at any time Banks having at least
51% of the Aggregate Commitments or, if the Commitments are no
longer in effect, Banks holding at least 51% of the aggregate
outstanding principal amount of the Syndicated Loan Notes.
"Margin Stock" means "margin stock" as defined in
Regulations G, T, U or X.
"Material Adverse Effect" means, with respect to any
event, act, condition or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related,
a material adverse change in, or a material adverse effect upon,
any of (a) the financial condition, operations, business,
properties or prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole which could impair the Borrower's
ability to perform its obligations under the Loan Documents, or
(b) the rights and remedies of the Agent or the Banks under the
Loan Documents, or the ability of the Borrower to perform its
obligations under the Loan Documents to which it is a party, as
applicable.
"Minority Interests" shall mean any shares of stock of
any class of a Consolidated Subsidiary (other than directors'
qualifying shares as required by law) that are not owned by the
Borrower and/or one or more of its Consolidated Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of
capital and surplus applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in
preferred stock.
"Money Market Loan Notes" means the promissory notes of
the Borrower, substantially in the form of Exhibit A-2, evidencing
the obligation of the Borrower to repay the Money Market Loans,
together with all amendments, consolidations, modifications,
renewals and supplements thereto.
"Money Market Loans" means Loans made pursuant to the
terms and conditions set forth in Section 2.03.
"Money Market Quote" has the meaning specified in
Section 2.03.
"Money Market Quote Request" has the meaning specified
in Section 2.03.
"Money Market Rate" has the meaning specified in Section
2.03.
"Moody's" means Moody's Investors Service.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Notes" means, individually and collectively, as the
context shall require or permit, each of the Syndicated Loan Notes
and the Money Market Loan Notes.
"Notice of Borrowing" has the meaning set forth in
Section 2.02.
"Operating Lease" shall mean any lease other than a
Capitalized Lease.
"Participant" has the meaning set forth in Section
9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a
partnership (including, without limitation, a joint venture), an
unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or
political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit
plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and is
either (i) maintained by a member of the Controlled Group for
employees of any member of the Controlled Group or (ii) maintained
pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions
and to which a member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the
preceding 5 plan years made contributions.
"Prime Rate" refers to that interest rate so denominated
and set by Wachovia from time to time as an interest rate basis
for borrowings. The Prime Rate is but one of several interest
rate bases used by Wachovia. Wachovia lends at interest rates
above and below the Prime Rate.
"Pro Forma Fixed Charges" for any period shall mean, as
of the date of any determination thereof, the maximum aggregate
amount of Fixed Charges which would have become payable by the
Borrower and its Consolidated Subsidiaries in such period
determined on a pro forma basis giving effect as of the beginning
of such period to the incurrence of any Funded Debt of the
Borrower and its Consolidated Subsidiaries (including Capitalized
Rentals) and the concurrent retirement of outstanding Funded Debt
or termination of any Capitalized Lease of the Borrower and its
Consolidated Subsidiaries.
"Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary,
wherever located.
"Quarterly Date" means each March 31, June 30,
September 30, and December 31.
"Quotation Date" has the meaning ascribed thereto in
Section 2.03.
"Redeemable Preferred Stock" of any Person means any
preferred stock issued by such Person which is at any time prior
to the Termination Date either (i) mandatorily redeemable (by
sinking fund or similar payments or otherwise) or (ii) redeemable
at the option of the holder thereof.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations
issued thereunder.
"Regulation G" means Regulation G of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations
issued thereunder.
"Regulation T" means Regulation T of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations
issued thereunder.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations
issued thereunder.
"Regulation X" means Regulation X of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations
issued thereunder.
"Rentals" shall mean and include as of the date of any
determination thereof all fixed payments (including as such all
payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by
the Borrower or a Consolidated Subsidiary, as lessee or sublessee
under an Operating Lease or Capitalized Lease of real or personal
property, but shall be exclusive of any amounts required to be
paid by the Borrower or a Consolidated Subsidiary (whether or not
designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed
rents under any so-called "percentage leases" shall be computed
solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Required Banks" means at any time Banks having at least
66 2/3% of the Aggregate Commitments or, if the Commitments are no
longer in effect, Banks holding at least 66 2/3% of the aggregate
outstanding principal amount of the Syndicated Loan Notes.
"Sale and Leaseback Transaction" has the meaning set
forth in Section 5.23.
"Secured Debt" shall, without duplication, mean all
Funded Debt or Current Debt which is secured by a mortgage,
security interest, pledge, conditional sale or other title
retention agreement, or other Lien upon any assets of the Borrower
or a Consolidated Subsidiary but shall not include Capitalized
Rentals.
"Security" shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended.
"Senior Funded Debt" shall mean all Consolidated Funded
Debt which is not expressed to be subordinate to any other
Consolidated Funded Debt; provided, that, all Debt in favor of the
Banks under this Agreement shall be considered to be "Senior
Funded Debt" for purposes hereof.
"Senior Note Agreement" means any one, or more, or all,
as the context shall require of those certain Note Agreements,
dated as of May 1, 1993 among the Borrower and certain purchasers
of the Borrower's senior notes named therein and signatories
thereto.
"Shareholder Agreement" shall mean the 1988 Shareholder
Agreement dated as of September 22, 1988 among Delhaize, Detla,
Ralph W. Ketner and Tom E. Smith.
"Standard and Poor's" means Standard & Poor's
Corporation.
"Stated Maturity Date" means, with respect to any Money
Market Loan, the Stated Maturity Date therefor specified by the
Bank in the applicable Money Market Quote.
"Stockholder's Equity" means, at any time, the
shareholders' equity of the Borrower and its Consolidated
Subsidiaries, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding any
Redeemable Preferred Stock of the Borrower or any of its
Consolidated Subsidiaries. Shareholders' equity generally would
include, but not be limited to (i) the par or stated value of all
outstanding Capital Stock, (ii) capital surplus, (iii) retained
earnings, and (iv) various deductions such as (A) purchases of
treasury stock, (B) valuation allowances, (C) receivables due from
an employee stock ownership plan, (D) employee stock ownership
plan debt guarantees, and (E) translation adjustments for foreign
currency transactions.
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"Syndicated Loan Notes" means promissory notes of the
Borrower, substantially in the form of Exhibit A-1, evidencing the
obligation of the Borrower to repay the Syndicated Loans, together
with all amendments, consolidations, modifications, renewals, and
supplements thereto.
"Syndicated Loans" means Loans made pursuant to the
terms and conditions set forth in Section 2.02.
"Termination Date" means June 3, 1994, unless such date
is otherwise extended by the Banks pursuant to Section 2.05(c), in
their sole and absolute discretion.
"Third Parties" means all lessees, sublessees, licensees
and other users of the Properties, excluding those users of the
Properties in the ordinary course of the Borrower's business and
on a temporary basis.
"Transferee" has the meaning set forth in Section
9.08(d).
"Unfunded Vested Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the present
value of all vested nonforfeitable benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.
"Unused Commitment" means at any date, with respect to
any Bank, an amount equal to its Commitment less the aggregate
outstanding principal amount of its Syndicated Loans.
"Wachovia" means Wachovia Bank of North Carolina, N.A.,
a national banking association, and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of
the shares of capital stock or other ownership interests of which
(except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations.
Unless otherwise specified herein, all terms of an accounting
character used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared,
in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Borrower's independent public
accountants or otherwise required by a change in GAAP) with the
most recent audited consolidated financial statements of the
Borrower and its Consolidated Subsidiaries delivered to the Banks
unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in
determining compliance with any of the provisions of this
Agreement or any of the other Loan Documents: (i) the Borrower
shall have objected to determining such compliance on such basis
at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the
delivery of such financial statements, in either of which events
such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection
is made in respect of the first financial statements delivered
under Section 5.01, shall mean the financial statements referred
to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits",
"Schedules", "Sections" and other Subdivisions are references to
articles, exhibits, schedules, sections and other subdivisions
hereof.
SECTION 1.04. Use of Defined Terms. All terms defined
in this Agreement shall have the same defined meanings when used
in any of the other Loan Documents, unless otherwise defined
therein or unless the context shall require otherwise.
SECTION 1.05. Terminology. All personal pronouns used
in this Agreement, whether used in the masculine, feminine or
neuter gender, shall include all other genders; the singular shall
include the plural, and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of
this Agreement.
SECTION 1.06. Subsidiary References. All references
contained in this Agreement or in any other Loan Document to
"Subsidiary", "Consolidated" or "consolidated" shall be without
meaning unless and until the Borrower shall have a Subsidiary.
These references remain in this Agreement for the purpose of
allowing the Borrower future operating flexibility with respect to
the creation of Subsidiaries.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally
agrees, on the terms and conditions set forth herein, to make
Syndicated Loans to the Borrower from time to time before the
Termination Date; provided that, immediately after each such
Syndicated Loan is made, the aggregate principal amount of
Syndicated Loans by such Bank shall not exceed the amount of its
Commitment. Each Syndicated Borrowing under this Section shall be
in an aggregate principal amount of $5,000,000 or any larger
multiple of $1,000,000 (except that any such Syndicated Borrowing
may be in the aggregate amount of the Unused Commitments) and
shall be made from the several Banks ratably in proportion to
their respective Commitments. The Unused Commitments available
for Syndicated Loans shall be reduced automatically by the
aggregate principal amount of all Money Market Loans outstanding
under Section 2.03. Within the foregoing limits, the Borrower may
borrow under this Section, repay or, to the extent permitted by
Section 2.10, prepay Syndicated Loans under this Section at any
time before the Termination Date.
SECTION 2.02. Method of Borrowing Syndicated Loans. (a)
The Borrower shall give the Agent notice (a "Notice of
Borrowing"), which shall be substantially in the form of Exhibit
E, on the same day for a Base Rate Borrowing, and at least
3 Euro-Dollar Business Days before each Euro-Dollar Borrowing (all
such Notices of Borrowing being effective on the day delivered so
long as the Agent shall have received same prior to 11:00 A.M.,
Winston-Salem, North Carolina time), specifying:
(i) the date of such Syndicated Borrowing, which shall
be a Domestic Business Day in the case of a Base Rate
Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,
(ii) the aggregate amount of such Syndicated Borrowing,
(iii) whether the Syndicated Loans comprising such
Syndicated Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, and
(iv) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest
Period.
(b) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(c) Not later than 2:00 P.M. (Winston-Salem, North
Carolina time) on the date of each Syndicated Borrowing, each Bank
shall (except as provided in paragraph (d) of this Section) make
available its ratable share of such Syndicated Borrowing, in
Federal or other funds immediately available in Winston-Salem
North Carolina, to the Agent at its address for payments referred
to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the
Banks available to the Borrower at the Agent's aforesaid address.
Unless the Agent receives notice from a Bank, at the Agent's
address for payments referred to in or specified pursuant to
Section 9.01, (i) in the case of a Base Rate Borrowing, no later
than 1:00 P.M. (local time at such address) on the same day as
such Base Rate Borrowing and (ii) in the case of a Euro-Dollar
Borrowing, no later than 1:00 P.M. (local time at such address) on
the Domestic Business Day before the date of a Syndicated
Borrowing, stating that such Bank will not make a Syndicated Loan
in connection with such Borrowing, the Agent shall be entitled to
assume that such Bank will make a Syndicated Loan in connection
with such Syndicated Borrowing and, in reliance on such
assumption, the Agent may (but shall not be obligated to) make
available such Bank's ratable share of such Syndicated Borrowing
to the Borrower for the account of such Bank. If the Agent makes
such Bank's ratable share available to the Borrower and such Bank
does not in fact make its ratable share of such Syndicated
Borrowing available on such date, the Agent shall be entitled to
recover such Bank's ratable share from such Bank or the Borrower
(and for such purpose shall be entitled to charge such amount to
any account of the Borrower maintained with the Agent), together
with interest thereon for each day during the period from the date
of such Syndicated Borrowing until such sum shall be paid in full
at a rate per annum equal to the rate at which the Agent
determines that it obtained (or could have obtained) overnight
Federal funds to cover such amount for each such day during such
period, provided that any such payment by the Borrower of such
Bank's ratable share and interest thereon shall be without
prejudice to any rights that the Borrower may have against such
Bank. If the Agent does not exercise its option to advance funds
for the account of such Bank, it shall forthwith notify the
Borrower of such decision. The failure of any Bank to advance its
ratable share of any Syndicated Borrowing (other than by reason of
a Default or Event of Default) shall not release, modify or
terminate the obligations of the Agent and the other Banks under
this Agreement.
(d) If any Bank makes a new Syndicated Loan hereunder on
a day on which the Borrower is to repay all or any part of an
outstanding Syndicated Loan from such Bank, such Bank shall apply
the proceeds of its new Syndicated Loan to make such repayment and
only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available
by such Bank to the Agent as provided in paragraph (c) of this
Section, or remitted by the Borrower to the Agent as provided in
Section 2.12, as the case may be.
(e) Notwithstanding anything to the contrary contained
in this Agreement, including, without limitation Section 2.01 and
Section 2.03, no Euro-Dollar Borrowing or Money Market Borrowing
may be made if there shall have occurred a Default, which Default
shall not have been cured or waived.
(f) In the event that a Notice of Borrowing fails to
specify whether the Syndicated Loans comprising such Syndicated
Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such
Syndicated Loans shall be made as Base Rate Loans. If the
Borrower is otherwise entitled under this Agreement to repay any
Syndicated Loans maturing at the end of an Interest Period
applicable thereto with the proceeds of a new Syndicated
Borrowing, and the Borrower fails to repay such Syndicated Loans
using its own moneys and fails to give a Notice of Borrowing in
connection with such new Syndicated Borrowing, a new Syndicated
Borrowing shall be deemed to be made on the date such Syndicated
Loans mature in an amount equal to the principal amount of the
Syndicated Loans so maturing, and the Syndicated Loans comprising
such new Syndicated Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained
herein, including, without limitation, Section 2.01 and Section
2.03, there shall not be more than 8 interest rates (including the
Applicable Margins or Money Market Rates, as applicable)
applicable to the Loans at any given time.
SECTION 2.03. Money Market Loans. (a) In addition to
making Syndicated Borrowings available to the Borrower, the
Borrower may, as set forth in this Section 2.03, request the Banks
to make offers to make Money Market Borrowings available to the
Borrower. The Banks may, but shall have no obligation to, make
such offers and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section
2.03, provided that:
(i) there may be no more than 8 interest rates
(including the Applicable Margins or Money Market Rates, as
applicable) applicable to the Loans at any given time;
(ii) the aggregate principal amount of all Money Market
Loans together with the aggregate principal amount of all
Syndicated Loans, at any one time outstanding shall not
exceed the Aggregate Commitments at such time; and
(iii) the aggregate principal amount of the Money Market
Loans may not exceed $50,000,000.00 at any time.
(b) When the Borrower wishes to request offers to make
Money Market Loans, the Borrower shall give the Agent (which shall
promptly notify the Banks) notice substantially in the form of
Exhibit H hereto (a "Money Market Quote Request") so as to be
received no later than 11:00 A.M. (Winston-Salem, North Carolina
time) at least 2 Domestic Business Days prior to the date of the
Money Market Borrowing proposed therein (or such other time and
date as the Borrower and the Agent, with the consent of the
Required Banks, may agree), specifying:
(i) the proposed date of such Money Market Borrowing,
which shall be a Domestic Business Day (the "Quotation
Date");
(ii) the maturity date (or dates) (each a "Stated
Maturity Date") for repayment of each Money Market Loan to be
made as part of such Money Market Borrowing (which Stated
Maturity Date shall be that date occurring either 14 days, 21
days, 30 days, or any other amount of days greater than 30
days but less than 180 days from the date of such Money
Market Borrowing); provided, that the Stated Maturity Date
for any Money Market Loan may not extend beyond the
Termination Date (as in effect on the date of such Money
Market Quote Request); and
(iii) the aggregate amount of principal to be received by
the Borrower as a result of such Money Market Borrowing,
which shall be at least $5,000,000 (and in larger integral
multiples of $1,000,000) but shall not cause the limits
specified in Section 2.03(a) to be violated.
The Borrower may request offers to make Money Market Loans having
up to 3 different Stated Maturity Dates in a single Money Market
Quote Request; provided that the request for each separate Stated
Maturity Date shall be deemed to be a separate Money Market Quote
Request for a separate Money Market Borrowing. Except as provided
in the immediately preceding sentence, the Borrower shall not
deliver a Money Market Quote Request more frequently than once
every 5 Domestic Business Days.
(c) (i) Each Bank may, but shall have no obligation
to, submit a response containing an offer to make a Money
Market Loan substantially in the form of Exhibit I hereto (a
"Money Market Quote") in response to any Money Market Quote
Request; provided, that, if the Borrower's request under
Section 2.03(b) specified more than 1 Stated Maturity Date,
such Bank may, but shall have no obligation to, make a single
submission containing a separate offer for each such Stated
Maturity Date and each such separate offer shall be deemed to
be a separate Money Market Quote. Each Money Market Quote
must be submitted to the Agent not later than 10:00 A.M.
(Winston-Salem, North Carolina time) on the Quotation Date
(or such other time and date as the Borrower and the Agent,
with the consent of the Required Banks, may agree); provided
that any Money Market Quote submitted by Wachovia may be
submitted, and may only be submitted, if Wachovia notifies
the Borrower of the terms of the offer contained therein not
later than 9:45 A.M. (Winston-Salem, North Carolina time) on
the Quotation Date (or 15 minutes prior to the time that the
other Banks must have submitted their respective Money Market
Quotes). Subject to Section 6.01, any Money Market Quote so
made shall be irrevocable except with the written consent of
the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall specify:
(A) the proposed date of the Money Market
Borrowing, the Stated Maturity Date therefor, and the
date (or dates) that interest shall be due and payable
if interest payments shall be required other than on the
relevant Stated Maturity Date;
(B) the minimum and maximum principal amounts, of
the Money Market Borrowing which the quoting Bank is
willing to make for the applicable Money Market Quote,
which principal amounts (x) may be greater than or less
than the Commitment of the quoting Bank, (y) shall be at
least $5,000,000 or a larger integral multiple of
$1,000,000, and (z) may not exceed the principal amount
of the Money Market Borrowing for which offers were
requested;
(C) the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%)
offered for each such Money Market Loan (the "Money
Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Agent and the Borrower, no
Money Market Quote shall contain qualifying, conditional or
similar language or propose terms other than or in addition
to those set forth in the applicable Money Market Quote
Request (other than setting forth the minimum and maximum
principal amounts of the Money Market Loan which the quoting
Bank is willing to make in connection with any relevant Money
Market Borrowing).
(d) The Agent shall as promptly as practicable after
the Money Market Quote is submitted (but in any event not later
than 11:00 A.M. (Winston-Salem, North Carolina time)) notify the
Borrower of the terms (i) of any Money Market Quote submitted by a
Bank that is in accordance with Section 2.03(c) and (ii) of any
Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such
Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market
Quote. The Agent's notice to the Borrower shall specify (A) the
minimum and maximum aggregate principal amounts of the Money
Market Borrowing for which offers have been received and (B) the
respective minimum and maximum principal amounts and Money Market
Rates so offered by each Bank (identifying the Bank that made each
Money Market Quote).
(e) Not later than 12:00 P.M. (Winston-Salem, North
Carolina time) on the Quotation Date (or such other time and date
as the Borrower and the Agent, with the consent of the Required
Banks, may agree), the Borrower shall notify the Agent of its
acceptance or nonacceptance of the offers so notified to it
pursuant to Section 2.03(d) and the Agent shall promptly notify
each affected Bank. In the case of acceptance, such notice shall
specify the aggregate principal amount of offers (for each Stated
Maturity Date) that are accepted. The Borrower may accept any
Money Market Quote in whole or in part (provided that any Money
Market Quote accepted in part from any Bank shall not be less than
the amount set forth in the Money Market Quote of such Bank as the
minimum principal amount of the Money Market Loan such Bank was
willing to make for the applicable Stated Maturity Date); provided
that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in
the related Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Borrowing shall be at least $5,000,000 (and in larger
multiples of $1,000,000) but shall not cause the limits
specified in Section 2.03(a) to be violated;
(iii) acceptance of offers may only be made in ascending
order of Money Market Rates; and
(iv) the Borrower may not accept any offer where the
Agent has advised the Borrower that such offer fails to
comply with Section 2.03(c)(ii) or otherwise fails to comply
with the requirements of this Agreement (including without
limitation, Section 2.03(a)).
If offers are made by 2 or more Banks with the same Money Market
Rates for a greater aggregate principal amount than the amount in
respect of which offers are accepted for the related Stated
Maturity Date, the principal amount of Money Market Loans in
respect of which such offers are accepted shall be allocated by
the Borrower among such Banks as nearly as possible (in multiples
of $100,000) in proportion to the aggregate principal amount of
such offers. Determinations by the Borrower of the amounts of
Money Market Loans shall be conclusive in the absence of manifest
error.
(f) Any Bank whose offer to make any Money Market Loan
has been accepted shall, not later than 1:30 P.M. (Winston-Salem,
North Carolina time) on the Quotation Date, make the appropriate
amount of such Money Market Loan available to the Agent at its
address referred to in Section 9.01 in immediately available
funds. The amount so received by the Agent shall, subject to the
terms and conditions of this Agreement, be made available to the
Borrower on such date by depositing the same, in immediately
available funds, in an account of the Borrower maintained with
Wachovia.
SECTION 2.04. Notes. (a) The Syndicated Loans of each
Bank shall be evidenced by a single Syndicated Note payable to the
order of such Bank for the account of its Lending Office in an
amount equal to the original principal amount of such Bank's
Commitment.
(b) The Money Market Loans made by any Bank to the
Borrower shall be evidenced by a single Money Market Note payable
to the order of such Bank for the account of its Lending Office in
the maximum principal amount of $50,000,000.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.01, the Agent shall deliver such Note to such Bank.
Each Bank shall record, and prior to any transfer of its Note
shall endorse on the schedule forming a part thereof appropriate
notations to evidence the date, amount and maturity of each Loan
made by it, the date and amount of each payment of principal made
by the Borrower with respect thereto and whether such Loan is a
Base Rate Loan (as provided in Article VIII) or Euro-Dollar Loan,
and such schedule shall constitute rebuttable presumptive evidence
of the principal amount owing and unpaid on such Bank's Note;
provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligation of the Borrower
hereunder or under the Notes. Within 10 Domestic Business Day's
of the Borrower's request, any Bank shall furnish to the Borrower
a copy of the schedule referred to in the immediately preceding
sentence. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Notes and to attach to and make a part
of any Note a continuation of any such schedule as and when
required.
SECTION 2.05. Maturity of Loans. (a) Each Syndicated
Loan included in any Syndicated Borrowing shall mature, and the
principal amount thereof shall be due and payable, on the last day
of the Interest Period applicable to such Syndicated Borrowing.
(b) Each Money Market Loan included in any Money Market
Borrowing shall mature, and the principal amount thereof shall be
due and payable upon the Stated Maturity Date therefor.
(c) Notwithstanding the foregoing, the outstanding
principal amount of the Loans together with all accrued but unpaid
interest thereon, if any, shall be due and payable on June 3,
1994, unless the Termination Date is otherwise extended by the
Banks, in their sole and absolute discretion. Upon the written
request of the Borrower, which request shall be delivered to the
Agent at least 120 days prior to the Termination Date, the Banks
shall have the option (without any obligation whatsoever so to do)
of extending the Termination Date for an additional 364-day
period, provided that, in no event shall the Termination Date be
extended beyond May 31, 1996. In connection with each such
extension request, (i) each Bank shall undertake a bona fide
credit analysis of the Borrower utilizing current information on
financial condition and trends; provided, that, no such credit
analysis shall be required of a Bank that elects not to extend the
Termination Date and (ii) the terms of any extension of the
Termination Date shall be independently negotiated among the
Borrower, the Banks and the Agent at the time of the extension;
provided, that, the terms of the extension may be the same as
those in effect prior to any extension should the Borrower, the
Banks and the Agent so agree; provided, further, that, should the
terms of the extension be other than those in effect prior to the
extension, then the Loan Documents will be amended to the extent
necessary to incorporate any such different terms. In the event
that a Bank chooses not to extend the Termination Date for such an
additional 364-day period, notice shall be given by such Bank to
the Borrower and the Agent at least 90 days prior to the relevant
Termination Date; provided, that should a Bank provide such notice
with respect to the first Termination Date, there shall be no need
for any future notices to be provided with respect to the Second
Termination Date by such Bank, and the Termination Date shall not
be extended with respect to any of the Banks unless the Required
Banks are willing to extend the Termination Date and either (x)
the remaining Banks shall purchase ratable assignments (without
any obligation so to do) from such terminating Bank (in the form
of an Assignment and Acceptance) in accordance with their
respective percentage of the remaining Aggregate Commitments;
provided, that, such Banks shall be provided such opportunity
(which opportunity shall allow such Banks at least 15 Domestic
Business Days in which to make a decision) prior to the Borrower
finding another bank pursuant to the immediately succeeding clause
(y); and, provided, further, that, should any of the remaining
Banks elect not to purchase such an assignment, then, such other
remaining Banks shall be entitled to purchase an assignment from
any terminating Bank which includes the ratable interest that was
otherwise available to such non-purchasing remaining Bank or
Banks, as the case may be, (y) the Borrower shall find another
bank, acceptable to the Agent, willing to accept an assignment
from such terminating Bank (in the form of an Assignment and
Acceptance) or (z) the Borrower shall reduce the Aggregate
Commitments in an amount equal to the Commitment of any such
terminating Bank.
SECTION 2.06. Interest Rates. (a) "Applicable Margin"
means (i) for any Base Rate Loan, 0%, and (ii) for any Euro-Dollar
Loan, at any time when the Commercial Paper Rating is (w) A1 by
Standard & Poor's and P1 by Moody's, 0.25%, (x) either (aa) A2 by
Standard & Poor's and P1 by Moody's, (bb) A1 by Standard & Poor's
and P2 by Moody's, or (cc) A2 by Standard & Poor's and P2 by
Moody's, 0.375%, (y) either (aa) A3 by Standard & Poor's and P2 by
Moody's or (bb) A2 by Standard & Poor's and P3 by Moody's, 0.625%,
and (z) A3 by Standard & Poor's and P3 by Moody's, 0.75%. Should
either (x) the Commercial Paper Rating be other than any of the
foregoing combinations or (y) Standard & Poor's or Moody's cease
to provide a Commercial Paper Rating, then interest on the Loans
shall accrue at the Default Rate. The Applicable Margin shall be
adjusted on the date on which any change in the Commercial Paper
Rating occurs.
(b) Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal
to the Base Rate for such day plus the Applicable Margin. Such
interest shall be payable for each Interest Period on the last day
thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin plus the applicable Adjusted London Interbank
Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof. Any
overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the
Default Rate.
The "Adjusted London Interbank Offered Rate" applicable
to any Interest Period means a rate per annum equal to the
quotient obtained (rounded upwards, if necessary, to the next
higher 1/100th of 1%) by dividing (i) the applicable London
Interbank Offered Rate for such Interest Period by (ii) 1.00 minus
the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar
Loan, the rate per annum determined on the basis of the offered
rate for deposits in Dollars of amounts equal or comparable to the
principal amount of such Euro-Dollar Loan offered for a term
comparable to such Interest Period, which rates appear on the
Reuters Screen LIBO Page as of 11:00 A.M., London time, 2
Euro-Dollar Business Days prior to the first day of such Interest
Period, provided that (i) if more than 1 such offered rate appears
on the Reuters Screen LIBO Page, the "London Interbank Offered
Rate" will be the arithmetic average (rounded upward, if
necessary, to the next higher 1/100th of 1%) of such offered
rates; (ii) if no such offered rates appear on such page, the
"London Interbank Offered Rate" for such Interest Period will be
the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of rates quoted by not less than 2 major
banks in New York City, selected by the Agent, at approximately
10:00 A.M., New York City time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, for deposits in Dollars
offered to leading European banks for a period comparable to such
Interest Period in an amount comparable to the principal amount of
such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement for a member bank of the Federal Reserve
System in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective
date of any change in the Euro-Dollar Reserve Percentage.
(d) Each Money Market Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date
such Money Market Loan is made until it becomes due, at a rate per
annum equal to the applicable Money Market Rate set forth in the
relevant Money Market Quote. Such interest shall be payable at
the time (or times) specified in the relevant Money Market Quote
for such Money Market Loan, or, if no such time is specified, on
the Stated Maturity Date thereof.
(e) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give prompt
notice to the Borrower and the Banks by telecopier or cable of
each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
SECTION 2.07. Fees. (a) The Borrower shall pay to the
Agent for the ratable account of each Bank an aggregate facility
fee (the "Facility Fee") equal to the product of (x) the highest
aggregate amount of the Commitments in existence during any
relevant period, irrespective of usage, times (y) the following
applicable percentage: at any time when the Commercial Paper
Rating is (i) A1 by Moody's and P1 by Standard & Poor's, 0.15%,
(ii) either (x) A2 by Moody's and P1 by Standard & Poor's or (y)
A1 by Moody's and P2 by Standard & Poor's, 0.175%, (iii) A2 by
Moody's and P2 by Standard & Poor's, 0.1875%, (iv) either (x) A3
by Moody's and P2 by Standard & Poor's or (y) A2 by Moody's and P3
by Standard & Poor's, 0.25%, and (v) A3 by Moody's and P3 by
Standard & Poor's, 0.35%. Should either (x) the Commercial Paper
Rating be other than any of the foregoing combinations or (y)
Standard & Poor's or Moody's cease to provide a Commercial Paper
Rating, then the Facility Fee shall be equal to 0.50%. The
facility fee shall be adjusted on the date on which any change in
the Commercial Paper Rating occurs. The Facility Fee shall accrue
at all times from and including the Closing Date to but excluding
the Termination Date and shall be payable in arrears, on each
Quarterly Date and on the Termination Date.
(b) On the Closing Date, the Borrower shall pay to the
Agent for the account of each Bank, a one-time upfront, fully
earned and non-refundable participation fee, in an amount equal to
(i) with respect to Banks having provided commitment letters to
the Agent in amounts equal to or greater than $25,000,000, the
product of (x) the amount of each such Bank's Commitment
multiplied by (y) 0.05%, and (ii) with respect to Banks having
provided commitment letters to the Agent in amounts less than
$25,000,000, the product of (x) the amount of each such Bank's
Commitment multiplied by (y) 0.025%.
(c) The Borrower shall pay to the Agent, for the
account and sole benefit of the Agent, such fees and other amounts
at such times as set forth in the Agent's Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least 3 Domestic Business
Days' notice to the Agent, terminate at any time, or
proportionately reduce the Unused Commitments from time to time by
an aggregate amount of at least $5,000,000 or any larger multiple
of $1,000,000. If the Commitments are terminated in their
entirety, all accrued fees (as provided under Section 2.07) shall
be due and payable on the effective date of such termination.
SECTION 2.09. Mandatory Reduction and Termination of
Commitments. (a) The Commitments shall terminate on the
Termination Date and any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on such date.
(b) The Commitments shall be reduced from time to time
in amounts equal to any mandatory prepayments required to be made
by the Borrower pursuant to Section 2.11(b).
SECTION 2.10. Optional Prepayments. (a) The Borrower
may, upon at least 1 Domestic Business Days' notice to the Agent,
prepay any Base Rate Borrowing in whole at any time, or from time
to time in part in amounts aggregating at least $5,000,000, or any
larger multiple of $1,000,000, by paying the principal amount to
be prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to
prepay ratably the Base Rate Loans of the several Banks included
in such Base Rate Borrowing.
(b) Except as provided in Section 8.02, the Borrower
may not prepay all or any portion of the principal amount of any
Euro-Dollar Loan or Money Market Loan prior to the maturity
thereof.
(c) Upon receipt of a notice of prepayment pursuant to
this Section 2.10, the Agent shall promptly notify each Bank of
the contents thereof and of such Bank's ratable share of such
prepayment and such notice shall not thereafter be revocable by
the Borrower.
SECTION 2.11. Mandatory Prepayments. (a) On each date
on which the Commitments are reduced pursuant to Section 2.08 or
Section 2.09, the Borrower shall repay or prepay such principal
amount of the outstanding Loans, if any (together with interest
accrued thereon), as may be necessary so that after such payment
the aggregate unpaid principal amount of the Loans does not exceed
the aggregate amount of the Commitments as then reduced.
(b) The Borrower shall immediately repay or prepay the
Loans in the amounts required by Section 5.10.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and
interest on, the Loans and of facility fees hereunder, not later
than 11:00 A.M. (Winston-Salem, North Carolina time) on the date
when due, in Federal or other funds immediately available in
Winston-Salem, North Carolina, to the Agent at its address for
payments referred to in Section 9.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks.
(b) Whenever any payment of principal of, or interest
on, the Base Rate Loans or of fees hereunder shall be due on a day
which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which
case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day.
SECTION 2.13. Computation of Interest and Fees.
Interest on the Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first
day thereof to but excluding the last day thereof. Facility fees
and any other fees from time to time payable hereunder shall be
computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but
excluding the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The
obligation of each Bank to make a Syndicated Loan on the occasion
of the first Syndicated Borrowing is subject to the satisfaction
of the conditions set forth in Section 3.02 and receipt by the
Agent of the following (in sufficient number of counterparts
(except as to the Notes) for delivery of a counterpart to each
Bank and retention of one counterpart by the Agent):
(a) from each of the parties hereto of either (i) a
duly executed counterpart of this Agreement signed by such
party or (ii) a facsimile transmission stating that such
party has duly executed a counterpart of this Agreement and
sent such counterpart to the Agent;
(b) a duly executed (i) Syndicated Loan Note and
(ii) Money Market Loan Note for the account of each Bank
complying with the provisions of Section 2.03;
(c) an opinion letter (together with any opinions of
local counsel relied on therein) of Womble Carlyle Sandridge
& Rice, counsel for the Borrower, dated the date of the first
Borrowing, substantially in the form of Exhibit B and
covering such additional matters relating to the transactions
contemplated hereby as the Agent or any Bank may reasonably
request;
(d) of an opinion of Jones, Day, Reavis & Pogue,
special counsel for the Banks and the Agent, dated the date
of the first Borrowing, substantially in the form of Exhibit
C and covering such additional matters relating to the
transactions contemplated hereby as the Agent or any Bank may
reasonably request;
(e) a certificate (the "Closing Certificate")
substantially in the form of Exhibit F), dated the date of
the first Borrowing, signed by a principal financial officer
of the Borrower, to the effect that (i) no Default has
occurred and is continuing on the date of the first
Borrowing, (ii) the representations and warranties of the
Borrower contained in Article IV are true on and as of the
date of the first Borrowing hereunder and (iii) the Borrower
has received (or will receive on even date herewith) proceeds
from a private placement of its senior notes in an amount not
less than $214,000,000;
(f) certified copies of all documentation executed by
the Borrower in connection with the private placement
transaction referred to in Section 3.01(e)(iii).
(g) all documents which the Agent or any Bank may
reasonably request relating to the existence of the Borrower,
the corporate authority for and the validity of this
Agreement and the Notes, and any other matters relevant
hereto, all in form and substance reasonably satisfactory to
the Agent, including, without limitation, a certificate of
incumbency of the Borrower, signed by the Secretary or an
Assistant Secretary of the Borrower, certifying as to the
names, true signatures and incumbency of the officer or
officers of the Borrower authorized to execute and deliver
the Loan Documents, and certified copies of the following
items: (i) the Borrower's Certificate of Incorporation, (ii)
the Borrower's Bylaws, (iii) a certificate of the Secretary
of State of the State of North Carolina as to the good
standing of the Borrower as a North Carolina corporation, and
(iv) the action taken by the Board of Directors of the
Borrower authorizing the Borrower's execution, delivery and
performance of this Agreement, the Notes and the other Loan
Documents to which the Borrower is a party; and
(h) a Notice of Borrowing.
SECTION 3.02. Conditions to All Borrowings. The
obligation of each Bank to make a Syndicated Loan on the occasion
of each Syndicated Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing;
(b) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of
the Borrower contained in Article IV of this Agreement shall
be true on and as of the date of such Borrowing; and
(d) the fact that, immediately after such Syndicated
Borrowing, the aggregate outstanding principal amount of the
Syndicated Loans of each Bank will not exceed the amount of
its Commitment.
Each Borrowing (both Syndicated and Money Market) hereunder shall
be deemed to be a representation and warranty by the Borrower on
the date of such Borrowing as to the truth and accuracy of the
facts specified in paragraphs (b), (c) and (d) of this Section;
provided that such Borrowing shall not be deemed to be such a
representation and warranty to the effect set forth in Section
4.04(b) as to any event, act or condition having a Material
Adverse Effect which has theretofore been disclosed in writing by
the Borrower to the Banks if the aggregate outstanding principal
amount of the Loans immediately after such Borrowing will not
exceed the aggregate outstanding principal amount thereof
immediately before such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to transact business in every
jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization;
No Contravention. The execution, delivery and performance by the
Borrower of this Agreement, the Notes and the other Loan Documents
(i) are within the Borrower's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) require
no action by or in respect of or filing with, any governmental
body, agency or official, (iv) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of
any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any of its Subsidiaries,
and (v) do not result in the creation or imposition of any Lien on
any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower
enforceable in accordance with its terms, and the Notes and the
other Loan Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations
of the Borrower enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is
subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement
of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of January 2, 1993 and the related consolidated
statements of income, shareholders' equity and cash flows for the
Fiscal Year then ended, reported on by Coopers & Lybrand, copies
of which have been delivered to each of the Banks, fairly present,
in conformity with GAAP, the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of such dates
and their consolidated results of operations and cash flows for
such periods stated.
(b) Other than as previously disclosed to the Agent in
a certain letter from the Borrower to the Agent, dated as of
December 10, 1992, since September 5, 1992 there has been no
event, act, condition or occurrence having a Material Adverse
Effect.
SECTION 4.05. No Litigation. There is no action, suit
or proceeding pending, or to the knowledge of the Borrower
threatened, against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental
body, agency or official which creates a reasonable possibility of
having or causing a Material Adverse Effect or which in any manner
draws into question the validity of or creates a reasonable
possibility of impairing the ability of the Borrower to perform
its obligations under, this Agreement, the Notes or any of the
other Loan Documents.
SECTION 4.06. Compliance with ERISA. (a) The Borrower
and each member of the Controlled Group have fulfilled their
obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all
material respects with the presently applicable provisions of
ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the
Controlled Group has incurred any withdrawal liability with
respect to any Multiemployer Plan under Title IV of ERISA, and no
such liability is expected to be incurred.
SECTION 4.07. Taxes. There have been filed on behalf of
the Borrower and its Subsidiaries all Federal, state and local
income, excise, property and other tax returns which are required
to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of the
Borrower or any Subsidiary have been paid. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion
of the Borrower, adequate. United States income tax returns of
the Borrower and its Subsidiaries' have been examined and closed
through the Fiscal Year ended December 29, 1984.
SECTION 4.08. Subsidiaries. Each of the Borrower's
Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry
on its business as now conducted. The Borrower has no
Subsidiaries except for those Subsidiaries listed on Schedule
4.08, which accurately sets forth each such Subsidiary's complete
name and jurisdiction of incorporation.
SECTION 4.09. Not an Investment Company. The Borrower
is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10. Ownership of Property; Liens. Each of the
Borrower and its Consolidated Subsidiaries has title to its
properties sufficient for the conduct of its business, and none of
such property is subject to any Lien except as permitted in
Section 5.07.
SECTION 4.11. No Default. Neither the Borrower nor any
of its Consolidated Subsidiaries is in default under or with
respect to any agreement, instrument or undertaking to which it is
a party or by which it or any of its property is bound which could
have or cause a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
SECTION 4.12. Full Disclosure. All information
heretofore furnished by the Borrower to the Agent or any Bank for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information
hereafter furnished by the Borrower to the Agent or any Bank will
be, true, accurate and complete in every material respect or based
on reasonable estimates on the date as of which such information
is stated or certified. The Borrower has disclosed to the Banks
in writing any and all facts which could have or cause a Material
Adverse Effect.
SECTION 4.13. Environmental Matters. (a) Neither the
Borrower nor any Subsidiary is subject to any Environmental
Liability which could have or cause a Material Adverse Effect and
neither the Borrower nor any Subsidiary has been designated as a
potentially responsible party under CERCLA or under any state
statute similar to CERCLA, with respect to any matter or matters
which, individually, or in the aggregate, could have or cause a
Material Adverse Effect. None of the Properties has been
identified on any current or proposed (i) National Priorities List
under 40 C.F.R. 300, (ii) CERCLIS list or (iii) any list arising
from a state statute similar to CERCLA, relating to any matter or
matters which, individually or in the aggregate, could have or
cause a Material Adverse Effect.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled, generated,
stored, disposed of, managed or otherwise handled at, or shipped
or transported to or from the Properties or are otherwise present
at, on, in or under the Properties, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or
facility, except for Hazardous Materials, such as cleaning
solvents, pesticides, petroleum and chemical-based consumer
products, and other materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of,
managed, or otherwise handled in commercially reasonable amounts
in the ordinary course of business in compliance with all
applicable Environmental Requirements, and such other Hazardous
Materials the unlawful discharge of which could not have or cause
a Material Adverse Effect.
(c) The Borrower and each of its Subsidiaries is in
compliance with all Environmental Requirements in connection with
the operation of the Properties and the Borrower's and each of its
Subsidiary's respective businesses, except where the failure to
comply could not have or cause a Material Adverse Effect.
SECTION 4.14. Capital Stock. All Capital Stock,
debentures, bonds, notes and all other securities of the Borrower
and its Subsidiaries presently issued and outstanding are validly
and properly issued in accordance with all applicable laws,
including but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued
shares of Capital Stock of the Borrower's Wholly Owned
Subsidiaries is owned by the Borrower free and clear of any Lien
or adverse claim. At least a majority of the issued shares of
capital stock of each of the Borrower's other Subsidiaries (other
than Wholly Owned Subsidiaries) is owned by the Borrower free and
clear of any Lien or adverse claim.
SECTION 4.15. Margin Stock. Neither the Borrower nor
any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of purchasing or carrying
any Margin Stock, and no part of the proceeds of any Loan will be
used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock,
or be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulation X.
SECTION 4.16. Insolvency. After giving effect to the
execution and delivery of the Loan Documents and the making of the
Loans under this Agreement, the Borrower will not be "insolvent,"
within the meaning of such term as used in N.C. GEN. STAT. 23-3,
as amended from time to time, or as defined in 101 of Title 11
of the United States Code, as amended from time to time, or be
unable to pay its debts generally as such debts become due, or
have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
SECTION 4.17. Insurance. The Borrower maintains, with
financially sound and reputable insurance companies, insurance on
all of its property in at least such amounts and at least against
such risks as are usually insured against in the same general area
by companies of established repute engaged in the same or similar
business.
SECTION 4.18. Public Utility Holding Company Act.
Neither the Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of
a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable hereunder or under any
Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to
each of the Banks:
(a) as soon as available and in any event within 100
days after the end of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Year and the
related consolidated statements of income, shareholders'
equity and cash flows for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous
fiscal year, all certified by Coopers & Lybrand or other
independent public accountants of nationally recognized
standing, with such certification to be free of exceptions
and qualifications not acceptable to the Required Banks;
(b) as soon as available and in any event within 60
days after the end of each Fiscal Quarter, a consolidated
balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such quarter and the related
statement of income and statement of cash flows for such
quarter and for the portion of the Fiscal Year ended at the
end of such Fiscal Quarter, setting forth in each case in
comparative form the figures for the corresponding Fiscal
Quarter and the corresponding portion of the previous Fiscal
Year, all certified (subject to normal year-end adjustments)
as to fairness of presentation, GAAP and consistency by the
chief financial officer or the chief accounting officer of
the Borrower;
(c) simultaneously with the delivery of each set of
annual financial statements referred to in paragraph (a)
above, a statement of the firm of independent public
accountants which reported on such statements to the effect
that nothing has come to their attention to cause them to
believe that any Default existed on the date of such
financial statements;
(d) simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b)
above, a certificate, substantially in the form of Exhibit G
(a "Compliance Certificate"), of the chief financial officer
or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with the
requirements of Sections 5.04 through 5.07, inclusive, and
5.19 through 5.23, inclusive, on the date of such financial
statements and (ii) stating whether any Default exists on the
date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(e) within 5 Domestic Business Days after the Borrower
becomes aware of the occurrence of any Default, a certificate
of the chief financial officer or the chief accounting
officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent)
and annual, quarterly or monthly reports which the Borrower
shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy
of the notice of such reportable event given or required to
be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA, a copy
of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a
trustee to administer any Plan, a copy of such notice;
(i) contemporaneously with the mailing thereof, copies
of all notices delivered the Borrower under the Senior Note
Agreement; and
(j) from time to time such additional information
regarding the financial position or business of the Borrower
and its Subsidiaries as the Agent, at the request of any
Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records.
The Borrower will (i) keep, and cause each Subsidiary to keep,
proper books of record and account in which full, true and correct
entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities; and (ii)
permit, and cause each Subsidiary to permit, representatives of
any Bank at such Bank's expense prior to the occurrence of a
Default and at the Borrower's reasonable expense after the
occurrence of a Default to visit and inspect any of their
respective properties, to examine and make abstracts from any of
their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers,
employees and independent public accountants. The Borrower agrees
to cooperate and assist in such visits and inspections, in each
case at such reasonable times and as often as may reasonably be
desired.
SECTION 5.03. Pari Passu Status. Should the Borrower,
while this Agreement is in effect or any Note remains unpaid,
issue any Debt in an amount exceeding $10,000,000 in aggregate
amount to any lender or group of lenders acting in concert with
one another, pursuant to a loan agreement, credit agreement, note
purchase agreement, indenture or other similar instrument, which
instrument includes covenants, warranties, representations, or
defaults or events of default (or any other type of restriction
which would have the practical effect of any of the foregoing,
including, without limitation, any "put" or mandatory prepayment
of such Debt) other than those set forth herein or in any of the
other Loan Documents, the Borrower shall promptly so notify the
Agent and the Banks and, if the Agent shall so request by written
notice to the Borrower, the Borrower, the Agent and the Banks
shall promptly amend this Agreement to incorporate some or all of
such provisions, in the discretion of the Agent and the Required
Banks, into this Agreement and, to the extent necessary and
reasonably desirable to the Agent and the Required Banks, into any
of the other Loan Documents, all at the election of the Agent and
the Required Banks.
SECTION 5.04. Capital Expenditures. Capital
Expenditures will not exceed $350,000,000 in the aggregate during
any four consecutive Fiscal Quarters of the Borrower.
SECTION 5.05. Loans or Advances. Neither the Borrower
nor any of its Subsidiaries shall make loans or advances to any
Person except: (i) loans or advances to employees not exceeding
$10,000,000 in the aggregate principal amount outstanding at any
time, in each case made in the ordinary course of business and
consistent with practices existing on the Closing Date and (ii)
deposits required by government agencies or public utilities;
provided that after giving effect to the making of any loans,
advances or deposits permitted by clause (i) or (ii) of this
Section, the Borrower will be in full compliance with all the
provisions of this Agreement.
SECTION 5.06. Investments. Neither the Borrower nor any
of its Subsidiaries shall make Investments in any Person except as
permitted by Section 5.05 and except Investments in (i) direct
obligations of the United States Government maturing within one
year, (ii) certificates of deposit issued by a commercial bank
whose credit is satisfactory to the Agent, (iii) commercial paper
rated A1 or the equivalent thereof by Standard & Poor's or P1 or
the equivalent thereof by Moody's and in either case maturing
within 6 months after the date of acquisition, (iv) tender bonds
the payment of the principal of and interest on which is fully
supported by a letter of credit issued by a United States bank
whose long-term certificates of deposit are rated at least AA or
the equivalent thereof by Standard & Poor's and Aa or the
equivalent thereof by Moody's, (v) euro-dollar deposits in
financial institutions whose credit quality is satisfactory to the
Agent, and/or (vi) Persons in connection with the acquisition,
construction and ownership of stores and/or shopping centers in
which stores are located, provided that such investments shall not
in the aggregate exceed $25,000,000.00.
SECTION 5.07. Negative Pledge. Neither the Borrower nor
any Consolidated Subsidiary will create, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired by it,
except:
(a) Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement in an
aggregate principal amount not exceeding $10,000,000;
(b) any Lien existing on any asset of any corporation
at the time such corporation becomes a Consolidated
Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt (including,
without limitation, a capital lease) incurred or assumed for
the purpose of financing all or any part of the cost of
acquiring or constructing such asset, provided that such Lien
attaches to such asset concurrently with or within 18 months
after the acquisition or completion of construction thereof;
(d) any Lien on any asset of any corporation existing
at the time such corporation is merged or consolidated with
or into the Borrower or a Consolidated Subsidiary and not
created in contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Consolidated
Subsidiary and not created in contemplation of such
acquisition;
(f) Liens securing Debt owing by any Subsidiary to the
Borrower;
(g) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing paragraphs of this Section,
provided that (i) such Debt is not secured by any additional
assets, and (ii) the amount of such Debt secured by any such
Lien is not increased;
(h) Liens incidental to the conduct of its business or
the ownership of its assets which (i) do not secure Debt and
(ii) do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in
the operation of its business;
(i) any Lien on Margin Stock; and
(j) Liens incurred after the Closing Date on property,
plant or equipment given to secure Funded Debt, in addition
to the Liens permitted by the preceding clauses of this
Section 5.07, provided that all Debt secured by Liens
incurred pursuant to this Section 5.07(j) shall secure Debt
permitted by Section 5.19(iii)(c).
Provided, that at no time shall Debt secured by a Lien (excluding
any Lien securing lease obligations under a Capitalized Lease)
exceed an amount equal to 15.0% of Consolidated Tangible Net
Worth. For purposes of determining compliance with this Section,
Consolidated Tangible Net Worth shall be determined by reference
to the Borrower's most recent audited financial statements
provided to the Agent and the Banks pursuant to Section 5.01(a).
SECTION 5.08. Maintenance of Existence. The Borrower
shall, and shall cause each Subsidiary to, maintain its corporate
existence and carry on its business in substantially the same
manner and in substantially the same fields as such business is
now carried on and maintained.
SECTION 5.09. Dissolution. Neither the Borrower nor any
of its Subsidiaries shall suffer or permit dissolution or
liquidation either in whole or in part or redeem or retire any
shares of its own stock or that of any Subsidiary, except through
corporate reorganization to the extent permitted by Section 5.10.
SECTION 5.10. Consolidations, Mergers and Sales of
Assets. (a) The Borrower will not, nor will it permit any
Subsidiary to, consolidate or merge with or into, or sell, lease
or otherwise transfer all or any substantial part of its assets
to, any other Person, or discontinue or eliminate any business
line or segment, provided that (a) the Borrower may merge with
another Person if (i) such Person was organized under the laws of
the United States of America or one of its states, (ii) the
Borrower is the corporation surviving such merger and (iii)
immediately after giving effect to such merger, no Default shall
have occurred and be continuing, (b) Subsidiaries of the Borrower
may merge with one another, and (c) the foregoing limitation on
the sale, lease or other transfer of assets and on the
discontinuation or elimination of a business line or segment shall
not prohibit a transfer of assets or the discontinuance or
elimination of a business line or segment (in a single transaction
or in a series of related transactions) unless the aggregate
assets to be so transferred or utilized in a business line or
segment to be so discontinued, when combined with all other assets
transferred (including, without limitation, pursuant to a
transaction of the type contemplated by Section 5.23), and all
other assets utilized in all other business lines or segments
discontinued, during the period from the Closing Date through and
including the date of any such relevant sale or disposition would
exceed 15.0% of Consolidated Total Assets. The Borrower shall
immediately prepay the Loans and all other Senior Funded Debt (in
accordance with Section 5.10(b) below) in an amount equal to that
amount which is received by (or credited to) the Borrower as
consideration for the sale or transfer of any assets in excess of
5.0% of Consolidated Total Assets (the "Excess Sale Proceeds"; the
date upon which such 5.0% threshold is met shall be referred to as
the "Excess Sale Date"), in the aggregate, during the period from
the Closing Date to and including the Termination Date. For the
purpose of making any determination of "Excess Sale Proceeds", a
sale, lease or other disposition of assets shall be excluded from
any computation thereof to the extent that the proceeds of such
sale, lease or other disposition are applied, prior to that date
which is one year after such sale, lease or other disposition (any
such date, an "Asset Sale Prepayment Notice Date"), to the
purchase of other similar fixed assets which are useful and
intended to be used in carrying on the business of the Borrower or
a Consolidated Subsidiary and which are not then and thereafter
will not be subject to any Lien and, pending such application,
such proceeds are maintained by the Borrower or such Consolidated
Subsidiary in a segregated account (it being understood that no
prepayment of the Loans would occur by virtue of this provision
unless the Termination Date is extended, in the sole discretion of
the Required Banks). The Borrower will give notice to the Agent
and the Banks within 5 days of all sales, leases or other
dispositions of assets occurring on or after the Excess Sale Date,
which notice shall state that (i) as a result of any such sale,
the Borrower will be required to prepay the Loans in accordance
with Section 2.11 and this Section with any Excess Sale Proceeds
remaining on deposit in the aforementioned segregated account on
the Asset Sale Prepayment Notice Date and (ii) describe the assets
sold, leased or disposed of and the aggregate consideration
received by the Borrower therefor. For purposes of determining
compliance with this Section, Consolidated Total Assets shall be
determined by reference to the Borrower's most recent audited
financial statements provided to the Agent and the Banks pursuant
to Section 5.01(a).
(b) If the Borrower is required to prepay the Loans as
a result of an asset sale, as provided in Section 5.10(a), then
the Borrower, on the Asset Sale Prepayment Notice Date, shall
provide written notice to the Agent (the "Asset Sale Prepayment
Notice"), which Asset Sale Prepayment Notice shall (i) state that
as the result of an asset sale, the Banks are entitled to have a
pro rata portion of their Loans prepaid on the relevant "Asset
Sale Prepayment Date", as hereafter defined, (ii) specify the
amount of Excess Sale Proceeds available to be applied to the
prepayment of the Loans and the other Senior Funded Debt, (iii)
state that in order to have the Loans prepaid, the Agent, at the
direction of the Required Banks, must give written notice to the
Borrower requesting such prepayment, and specify the date, which
shall not be earlier than 15 days following any relevant Asset
Sale Notice, by which the Agent, at the direction of the Required
Banks, must give such notice requesting such prepayment, and the
Agent, at the direction of the Required Banks, may, but need not,
so notify the Borrower that it elects to accept a pro rata
prepayment of the unpaid principal amount of the Loans (for the
ratable benefit of the Banks); provided, that all Syndicated Loans
shall be prepaid prior to the prepayment of any Money Market
Loans. On a date (the "Asset Sale Prepayment Date") which is
within 60 days of each Asset Sale Prepayment Notice, the Borrower
shall pay and apply the Excess Sale Proceeds to the prepayment of
the principal amount of the Loans if the Agent, at the direction
of the Required Banks, has advised the Borrower that it will
accept a prepayment pursuant to this Section 5.10, in an amount
determined by multiplying the Excess Sale Proceeds by a fraction,
the numerator of which is the outstanding principal amount of the
Loans and the denominator of which is the outstanding amount of
Senior Funded Debt which the holders thereof have required to be
prepaid. Any such prepayment shall be made with interest accrued
on the principal amount prepaid to the date of prepayment. If the
Agent, at the direction of the Required Banks, elects not to
accept a prepayment of the Loans as hereinabove provided, then and
in such event the Borrower shall not be required to apply any of
the Excess Sale Proceeds to the prepayment of the Loans, and all
of such amount shall be applied to the prepayment of outstanding
Senior Funded Debt which the holders thereof have required to be
prepaid (unless the holders of such Senior Funded Debt shall
likewise elect not to receive any prepayments of the Senior Funded
Debt held by them).
SECTION 5.11. Use of Proceeds. No portion of the
proceeds of the Loans will be used by the Borrower or any
Subsidiary (i) in connection with, whether directly or indirectly,
any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other
corporation, (ii) directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any
Margin Stock, or (iii) for any purpose in violation of any
applicable law or regulation.
SECTION 5.12. Compliance with Laws; Payment of Taxes.
(a) The Borrower will, and will cause each of its Subsidiaries and
each member of the Controlled Group to, comply with applicable
laws (including but not limited to ERISA), regulations and similar
requirements of governmental authorities (including but not
limited to PBGC), except where the necessity of such compliance is
being contested in good faith through appropriate proceedings.
The Borrower will, and will cause each of its Subsidiaries to, pay
promptly when due all taxes, assessments, governmental charges,
claims for labor, supplies, rent and other obligations which, if
unpaid, might become a lien against the property of the Borrower
or any Subsidiary, except liabilities being contested in good
faith and against which, if requested by the Agent, the Borrower
will set up reserves in accordance with GAAP.
(b) The Borrower shall not permit the aggregate complete
or partial withdrawal liability under Title IV of ERISA with
respect to Multiemployer Plans incurred by the Borrower and
members of the Controlled Group to exceed $1,000,000 at any time.
For purposes of this Section 5.12(b), the amount of withdrawal
liability of the Borrower and members of the Controlled Group at
any date shall be the aggregate present value of the amount
claimed to have been incurred less any portion thereof which the
Borrower and members of the Controlled Group have paid or as to
which the Borrower reasonably believes, after appropriate
consideration of possible adjustments arising under Sections 4219
and 4221 of ERISA, it and members of the Controlled Group will
have no liability, provided that the Borrower shall obtain prompt
written advice from independent actuarial consultants supporting
such determination.
SECTION 5.13. Insurance. The Borrower will maintain,
and will cause each of its Subsidiaries to maintain (either in the
name of the Borrower or in such Subsidiary's own name), with
financially sound and reputable insurance companies, insurance on
all its property in at least such amounts and against at least
such risks as are usually insured against in the same general area
by companies of established repute engaged in the same or similar
business.
SECTION 5.14. Change in Fiscal Year. The Borrower will
not change its Fiscal Year without the consent of the Required
Banks.
SECTION 5.15. Maintenance of Property. The Borrower
shall, and shall cause each Subsidiary to, maintain all of its
properties and assets in good condition, repair and working order,
ordinary wear and tear excepted.
SECTION 5.16. Environmental Notices. Within 10 Domestic
Business Days after the Borrower becomes aware thereof, the
Borrower shall furnish to the Banks and the Agent written notice
of all Environmental Liabilities, pending, threatened or
anticipated Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at,
on, in, under or in any way affecting the Properties or any
adjacent property, and all facts, events, or conditions that could
lead to any of the foregoing; provided, however, that no such
notice shall be required if (x) the amount involved or asserted
does not exceed $200,000 and (y) no serious disruption of the use
or operation of the relevant Property is reasonably anticipated.
SECTION 5.17. Environmental Matters. The Borrower will
not, and will not permit any Third Party (to the extent that the
Borrower has the ability to control the actions or inactions of
such Third Party) to, use, produce, manufacture, process, treat,
recycle, generate, store, dispose of, manage at, or otherwise
handle, or ship or transport to or from the Properties any
Hazardous Materials except for Hazardous Materials such as
cleaning solvents, pesticides, petroleum and chemical based
consumer products, and other similar materials used, produced,
manufactured, processed, treated, recycled, generated, stored,
disposed, managed, or otherwise handled in commercially reasonable
amounts in the ordinary course of business in compliance with all
applicable Environmental Requirements.
SECTION 5.18. Environmental Release. The Borrower
agrees that upon the occurrence of an Environmental Release it
will act immediately to investigate the extent of, and to take
appropriate remedial action to eliminate, such Environmental
Release, whether or not ordered or otherwise directed to do so by
any Environmental Authority.
SECTION 5.19. Limitation on Incurrence of Funded Debt.
The Borrower will not, nor will it permit any Consolidated
Subsidiary to, create, assume or incur or in any manner be or
become liable in respect of any Funded Debt, except:
(i) Funded Debt arising under the Senior Note
Agreement;
(ii) Funded Debt outstanding on the Closing Date and
reflected on Schedule 5.19;
(iii) Funded Debt (in addition to Funded Debt permitted
in clauses (i) and (ii) of this Section 5.19), provided that
at the time of the creation, assumption or incurrence thereof
and after giving effect thereto and to the application of the
proceeds thereof:
(a) in the case of the creation, assumption or
incurrence of any Funded Debt at any time on or before
January 1, 1994, the ratio of Income Available for Fixed
Charges for the immediately preceding four Fiscal
Quarters to Pro Forma Fixed Charges for such four Fiscal
Quarters (treated as a single accounting period) shall
have been at least 1.75 to 1.00, and
(b) in the case of the creation, assumption or
incurrence of any Funded Debt at any time after January
1, 1994, the ratio of Income Available for Fixed Charges
for the immediately preceding four Fiscal Quarters to
Pro Forma Fixed Charges for such four Fiscal Quarters
(treated as a single accounting period) shall have been
at least 2.00 to 1.00, and
(c) in the case of the creation, assumption or
incurrence of any Funded Debt of the Borrower secured by
Liens permitted by Section 5.07(j) or the creation,
assumption or incurrence of any Funded Debt by a
Consolidated Subsidiary, the sum, without duplication,
of (A) Consolidated Attributable Indebtedness, (B)
Consolidated Secured Debt secured by Liens permitted and
incurred within the limitations of Section 5.07(j), and
(C) the aggregate amount of all Funded Debt of
Subsidiaries (other than Funded Debt owing to the
Borrower or to another Wholly Owned Subsidiary), would
not exceed 15% of Consolidated Tangible Net Worth, or
(iv) Funded Debt of a Subsidiary to the Borrower or to
a Wholly Owned Subsidiary.
Any corporation which becomes a Subsidiary after the date hereof
shall for all purposes of this Section be deemed to have created,
assumed or incurred at the time it becomes a Subsidiary all Funded
Debt of such corporation existing immediately after it becomes a
Subsidiary.
The Borrower agrees that the Capitalized Rentals attributable to a
Capitalized Lease shall be calculated as of, and deemed to be
incurred on, the date of execution and delivery of such
Capitalized Lease. The Borrower further agrees that if on the
date of execution and delivery of any lease the accounting
treatment of such lease has not been or cannot be definitively
determined, such lease will be deemed to be a Capitalized Lease
unless and until such lease shall have been determined not to be a
Capitalized Lease. During the period from the date of execution
and delivery of any such lease until the date on which the basic
term of such lease shall commence, the amount of Rentals payable
each month in respect of such lease shall be deemed to be an
amount equal to one-twelfth of the amount of the Rentals
reasonably estimated by the Borrower to be payable during the
first year of the basic term thereof.
SECTION 5.20. Fixed Charges Coverage. At the end of
each Fiscal Quarter, commencing with the Fiscal Quarter ending
June 19, 1993, the ratio of Income Available for Fixed Charges for
the immediately preceding 4 Fiscal Quarters then ended to
Consolidated Fixed Charges for the immediately preceding 4 Fiscal
Quarters then ended, shall not have been less than (i) 1.65 to 1.0
for the Fiscal Quarters ending on or before the earlier to occur
of (x) the Termination Date or (y) should the Termination Date be
extended (in the sole discretion of the Required Banks),
September 10, 1994 and (ii) 1.75 to 1.0 at all times thereafter
(should the Termination Date be extended by the Required Banks in
their sole and absolute discretion). In determining compliance
with this Section, Excluded Charges occurring prior to April 21,
1994 shall not be considered; provided, that, should the
Termination Date be extended, all Excluded Charges occurring on or
after April 21, 1994, shall be considered in determining
compliance with this Section.
SECTION 5.21. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than (i)
$706,575,475 plus (ii) 30.0% of the cumulative Consolidated Net
Income of the Borrower and its Consolidated Subsidiaries during
any period after January 2, 1993 (taken as one accounting period),
calculated quarterly but excluding from such calculations of
Consolidated Net Income for purposes of this clause (ii), any
quarter in which the Consolidated Net Income of the Borrower and
its Consolidated Subsidiaries is negative.
SECTION 5.22. Ratio of Consolidated Total Debt to
Consolidated Total Capitalization. The ratio of Consolidated
Total Debt to Consolidated Total Capitalization shall not at any
time exceed 0.75 to 1.0.
SECTION 5.23. Limitations on Sale and Leasebacks. The
Borrower will not, and will not permit any Subsidiary to, enter
into any arrangements, directly or indirectly, whereby the
Borrower or such Subsidiary shall in one or more related
transactions sell, transfer or otherwise dispose of any property
owned by the Borrower or such Subsidiary more than 180 days after
the later of the date of initial acquisition of such property or
completion or occupancy thereof, as the case may be, by the
Borrower or such Subsidiary, and then rent or lease, as lessee,
such property or any part thereof for a period or periods which in
the aggregate would exceed thirty-six months from the date of
commencement of the lease term (a "Sale and Leaseback
Transaction"); provided, however, that the foregoing restriction
shall not apply to any Sale and Leaseback Transaction if
immediately after the consummation of such Sale and Leaseback
Transaction and after giving effect thereto, either of the
following conditions is satisfied:
(a) the sale of such property is for cash consideration
which (after deduction of any expenses incurred by the
Borrower or any Subsidiary in connection with such Sale and
Leaseback Transaction and any other applicable expenses)
equals or exceeds the fair market value of the property so
sold (as determined in good faith by the Board of Directors
of the Borrower) and the net proceeds from such sale are
applied within 90 days after such sale to (i) the purchase or
acquisition (and, in the case of real property, the
construction) of tangible assets useful and intended to be
used by the Borrower in the ordinary course of its business,
provided, however, that in any such event the Borrower and
its Subsidiaries shall not then or thereafter cause or permit
or agree or consent to cause or permit such tangible assets
to be subject to any Lien or (ii) the prepayment of Funded
Debt of the Borrower; or
(b) after giving effect to the consummation of such
Sale and Leaseback Transaction and to the application of the
proceeds therefrom, the sum, without duplication, of (i)
Consolidated Attributable Indebtedness (including the
Consolidated Attributable Indebtedness to be incurred in
connection with such Sale and Leaseback Transaction, (ii)
Consolidated Secured Debt secured by Liens permitted and
incurred within the limitations of Section 5.07 and (iii)
Funded Debt of Subsidiaries (other than Funded Debt owing to
the Borrower or to a Wholly Owned Subsidiary) shall not
exceed 15% of Consolidated Tangible Net Worth.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(a) the Borrower shall fail to pay (i) when due, any
principal hereunder or (ii) within 5 days of the date when
due, any interest or fees hereunder; or
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.01, 5.02(ii), 5.03 to 5.12,
inclusive, 5.14, or 5.19 through 5.23, inclusive; provided,
that, with respect to any failure under Section 5.12, if such
failure could not have or cause a Material Adverse Effect,
then no Event of Default will arise hereunder unless such
failure shall not have been cured within 30 days after the
earlier to occur of (i) written notice thereof has been given
to the Borrower by the Agent at the request of any Bank or
(ii) the Borrower otherwise becomes aware of any such
failure; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained or incorporated by reference
in this Agreement (other than those covered by paragraph (a)
or (b) above) and such failure shall not have been cured
within 30 days after the earlier to occur of (i) written
notice thereof has been given to the Borrower by the Agent at
the request of any Bank or (ii) the Borrower otherwise
becomes aware of any such failure; or
(d) any representation, warranty, certification or
statement made by the Borrower in Article IV of this
Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to
have been incorrect or misleading in any material respect
when made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make
any payment in respect of Debt having an outstanding
aggregate principal amount equal to or exceeding
$10,000,000.00 (other than the Notes) when due or within any
applicable grace period; or
(f) any event or condition shall occur which results in
the acceleration of the maturity of Debt outstanding in an
aggregate principal amount equal to or exceeding
$10,000,000.00 of the Borrower or any Subsidiary (including,
without limitation, any required mandatory prepayment or
"put" of such Debt to the Borrower or any Subsidiary) or
enables (or, with the giving of notice or lapse of time or
both, would enable) the holders of such Debt or any Person
acting on such holders' behalf to accelerate the maturity
thereof (including, without limitation, any required
mandatory prepayment or "put" of such Debt to the Borrower or
any Subsidiary); or
(g) the Borrower or any Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
or
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Subsidiary seeking
liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Borrower or
any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(i) the Borrower or any member of the Controlled Group
shall fail to pay when due any material amount which it shall
have become liable to pay to the PBGC or to a Plan under
Title IV of ERISA; or notice of intent to terminate a Plan or
Plans shall be filed under Title IV of ERISA by the Borrower,
any member of the Controlled Group, any plan administrator or
any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of
any such Plan or Plans to enforce Section 515 or 4219(c)(5)
of ERISA and such proceeding shall not have been dismissed
within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated;
or
(j) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $10,000,000.00
shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the
Borrower under Section 6323 of the Code or a lien of the PBGC
shall be filed against the Borrower under Section 4068 of
ERISA and in either case such lien shall remain undischarged
for a period of 25 days after the date of filing; or
(l) (i) any Person (other than Delhaize or Detla) or
two or more Persons acting in concert (other than Delhaize,
Detla, Ralph W. Ketner and Tom E. Smith acting pursuant to
the Shareholder Agreement) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of
1934) of 20% or more of the outstanding shares of the voting
stock of the Borrower; or (ii) as of any date a majority of
the Board of Directors of the Borrower consists of
individuals who were not either (A) directors of the Borrower
as of the corresponding date of the previous year, (B)
selected or nominated to become directors by the Board of
Directors of the Borrower of which a majority consisted of
individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of
the Borrower of which a majority consisted of individuals
described in clause (A) and individuals described in clause
(B);
then, and in every such event, the Agent shall (i) if requested by
the Required Banks, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate, (ii) any Bank may
terminate its obligation to fund a Money Market Loan in connection
with any relevant Money Market Quote, and (iii) if requested by
the Required Banks, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower together with interest at
the Default Rate accruing on the principal amount thereof from and
after the date of such Event of Default; provided that if any
Event of Default specified in paragraph (g) or (h) above occurs
with respect to the Borrower, without any notice to the Borrower
or any other act by the Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued interest
thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower together with interest
thereon at the Default Rate accruing on the principal amount
thereof from and after the date of such Event of Default.
Notwithstanding the foregoing, the Agent shall have available to
it all other remedies at law or equity, and shall exercise any one
or all of them at the request of the Required Banks.
SECTION 6.02. Notice of Default. The Agent shall give
notice to the Borrower of any Default under either Section 6.01(b)
or Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment; Powers and Immunities. Each
Bank hereby irrevocably appoints and authorizes the Agent to act
as its agent hereunder and under the other Loan Documents with
such powers as are specifically delegated to the Agent by the
terms hereof and thereof, together with such other powers as are
reasonably incidental thereto. The Agent: (a) shall have no
duties or responsibilities except as expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee for any
Bank; (b) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or
other document referred to or provided for in, or received by any
Bank under, this Agreement or any other Loan Document, or for the
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or any
other document referred to or provided for herein or therein or
for any failure by the Borrower to perform any of its obligations
hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or
under any other Loan Document except to the extent requested by
the Required Banks, and then only on terms and conditions
satisfactory to the Agent, and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under
any other Loan Document or any other document or instrument
referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or
wilful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence
or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. The provisions of this Article VII are
solely for the benefit of the Agent and the Banks, and the
Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and
duties under this Agreement and under the other Loan Documents,
the Agent shall act solely as agent of the Banks and does not
assume and shall not be deemed to have assumed any relationship of
agency or trust with or for the Borrower. The duties of the Agent
shall be ministerial and administrative in nature, and the Agent
shall not have by reason of this Agreement or any other Loan
Document a fiduciary relationship in respect of any Bank.
SECTION 7.02. Reliance by Agent. The Agent shall be
entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telefax,
telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Agent.
As to any matters not expressly provided for by this Agreement or
any other Loan Document, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action
taken or failure to act pursuant thereto shall be binding on all
of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed
to have knowledge of the occurrence of a Default or an Event of
Default (other than the nonpayment of principal of or interest on
the Loans) unless the Agent has received notice from a Bank or the
Borrower specifying such Default or Event of Default and stating
that such notice is a "Notice of Default". In the event that the
Agent receives such a notice of the occurrence of a Default or an
Event of Default, the Agent shall give prompt notice thereof to
the Banks. The Agent shall give each Bank prompt notice of each
nonpayment of principal of or interest on the Loans whether or not
it has received any notice of the occurrence of such nonpayment.
The Agent shall (subject to Section 9.06) take such action
hereunder with respect to such Default or Event of Default as
shall be directed by the Required Banks (except, that, with
respect to an Event of Default arising under Section 6.01(a), the
Agent shall act either at the (i) unanimous direction of all of
the Banks (other than Wachovia) or (ii) the direction of the
Required Banks), provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks.
SECTION 7.04. Rights of Agent as a Bank. With respect
to the Loans made by it, Wachovia in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any
other Bank and may exercise the same as though it were not acting
as the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include Wachovia in its individual
capacity. The Agent may (without having to account therefor to
any Bank) accept deposits from, lend money to and generally engage
in any other business with the Borrower (and any of its
Affiliates) as if it were not acting as the Agent, and the Agent
may accept fees and other consideration from the Borrower (in
addition to any agency fees and arrangement fees heretofore agreed
to between the Borrower and the Agent) for services in connection
with this Agreement or any other Loan Document or otherwise
without having to account for the same to the Banks.
SECTION 7.05. Indemnification. Each Bank severally
agrees to indemnify the Agent, to the extent the Agent shall not
have been reimbursed by the Borrower, ratably in accordance with
its Commitment, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or
disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is
continuing, the normal administrative costs and expenses incident
to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or any such
other documents; provided, however that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross
negligence or wilful misconduct of the Agent. If any indemnity
furnished to the Agent for any purpose shall, in the opinion of
the Agent, be insufficient or become impaired, the Agent may call
for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is
furnished.
SECTION 7.06. Payee of Note Treated as Owner. The Agent
may deem and treat the payee of any Note as the owner thereof for
all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the
Agent and the provisions of Section 9.08(c) have been satisfied.
Any requests, authority or consent of any Person who at the time
of making such request or giving such authority or consent is the
holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any
Note or Notes issued in exchange therefor or replacement thereof.
SECTION 7.07. Nonreliance on Agent and Other Banks.
Each Bank agrees that it has, independently and without reliance
on the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement
and that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents. The
Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any
of the other Loan Documents or any other document referred to or
provided for herein or therein or to inspect the properties or
books of the Borrower or any other Person. Except for notices,
reports and other documents and information expressly required to
be furnished to the Banks by the Agent hereunder or under the
other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of the Borrower or any other Person (or any of their
Affiliates) which may come into the possession of the Agent.
SECTION 7.08. Failure to Act. Except for action
expressly required of the Agent hereunder or under the other Loan
Documents, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction by the Banks
of their indemnification obligations under Section 7.05 against
any and all liability and expense which may be incurred by the
Agent by reason of taking, continuing to take, or failing to take
any such action.
SECTION 7.09. Resignation or Removal of Agent. Subject
to the appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice thereof
to the Banks and the Borrower and the Agent may be removed at any
time with or without cause by the Required Banks. Upon any such
resignation or removal, the Required Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been
so appointed by the Required Banks and shall have accepted such
appointment within 30 days after the retiring Agent's notice of
resignation or the Required Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent. Any successor Agent shall be a bank which has a
combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Article VII shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was acting
as the Agent hereunder.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any
Interest Period:
(a) the Agent determines that deposits in Dollars (in
the applicable amounts) are not being offered in the relevant
market for such Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of
funding the relevant Euro-Dollar Loan for such Interest
Period,
the Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks to make Euro-Dollar Loans shall be
suspended. Unless the Borrower notifies the Agent at least 2
Domestic Business Days before the date of any Borrowing of such
Euro-Dollar Loans for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, after the date hereof,
the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank
or comparable agency charged with the interpretation or
administration thereof (any such agency being referred to as an
"Authority" and any such event being referred to as a "Change of
Law"), or compliance by any Bank (or its Lending Office) with any
request or directive (whether or not having the force of law) of
any Authority shall make it unlawful or impossible for any Bank
(or its Lending Office) to make, maintain or fund its Euro-Dollar
Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Agent that
the circumstances giving rise to such suspension no longer exist,
the obligation of such Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Lending Office if
such designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that
it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Borrower shall immediately prepay in full the
then outstanding principal amount of each Euro-Dollar Loan of such
Bank, together with accrued interest thereon. Concurrently with
prepaying each such Euro-Dollar Loan, the Borrower shall borrow a
Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks), and such
Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If
after the date hereof, a Change of Law or compliance by any Bank
(or its Lending Office) with any request or directive (whether or
not having the force of law) of any Authority:
(i) shall subject any Bank (or its Lending Office) to
any tax, duty or other charge with respect to its Euro-Dollar
Loans, its Notes or its obligation to make Euro-Dollar Loans,
or shall change the basis of taxation of payments to any Bank
(or its Lending Office) of the principal of or interest on
its Euro-Dollar Loans or any other amounts due under this
Agreement in respect of its Euro-Dollar Loans or its
obligation to make Euro-Dollar Loans (except for changes in
the rate of tax on the overall net income of such Bank or its
Lending Office imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is
located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding any
such requirement included in an applicable Euro-Dollar
Reserve Percentage) against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its
Lending Office); or
(iii) shall impose on any Bank (or its Lending Office)
or on the London interbank market any other condition
affecting its Euro-Dollar Loans, its Notes or its obligation
to make Euro-Dollar Loans;
and the result of any of the foregoing is to increase the cost to
such Bank (or its Lending Office) of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Lending Office) under this
Agreement or under its Notes with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after
demand by such Bank (with a copy to the Agent), the Borrower shall
pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that after the
date hereof the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof, or compliance
(regardless of whether such compliance is required as of the date
hereof) by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the
force of law) of any Authority, has or would have the effect of
reducing the rate of return on such Bank's capital as a
consequence of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change
or compliance (taking into consideration such Bank's policies with
respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand
by such Bank, the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant
to this Section and will designate a different Lending Office or
take other reasonably available measures if such designation or
other measures will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall
constitute rebuttable presumptive evidence of the amount of
compensation owing to any relevant Bank. In determining such
amount, such Bank may use any reasonable averaging and attribution
methods.
(d) The provisions of this Section 8.03 shall be
applicable with respect to any Participant, Assignee or other
Transferee, and any calculations required by such provisions shall
be made based upon the circumstances of such Participant, Assignee
or other Transferee.
SECTION 8.04. Base Rate Loans Substituted for
Euro-Dollar Loans. If (i) the obligation of any Bank to make or
maintain Euro-Dollar Loans has been suspended pursuant to Section
8.02 or (ii) any Bank has demanded compensation under Section
8.03, and the Borrower shall, by at least 5 Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected
that the provisions of this Section shall apply to such Bank,
then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Loans which would otherwise be made by such
Bank as Euro-Dollar Loans shall be made instead as Base Rate
Loans, (in all cases interest and principal on such Loans
shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been
repaid, all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loans shall be applied to
repay its Base Rate Loans instead.
SECTION 8.05. Compensation. Upon the request of any
Bank, delivered to the Borrower and the Agent, the Borrower shall
pay to such Bank such amount or amounts as shall compensate such
Bank for any loss, cost or expense incurred by such Bank (after
taking into account any reasonably available measures to mitigate
such loss, cost or expense) as a result of:
(a) any payment or prepayment (pursuant to Section
2.11, 6.02, 8.02 or otherwise) of (i) a Euro-Dollar Loan or (ii) a
Money Market Loan, on a date other than the last day of an
Interest Period for any relevant Euro-Dollar Loan or the Stated
Maturity Date for any relevant Money Market Loan; or
(b) any failure by the Borrower to prepay a Euro-Dollar
Loan on the date for such prepayment specified in the relevant
notice of prepayment hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar
Loan on the date for the Euro-Dollar Borrowing of which such
Euro-Dollar Loan is a part specified in the applicable Notice of
Borrowing delivered pursuant to Section 2.02;
such compensation to include, without limitation, (i) in the case
of Euro-Dollar Loans, an amount equal to the excess, if any, of
(x) the amount of interest which would have accrued on the amount
so paid or prepaid or not prepaid or borrowed for the period from
the date of such payment, prepayment or failure to prepay or
borrow to the last day of the then current Interest Period for
such Euro-Dollar Loan (or, in the case of a failure to prepay or
borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at
the applicable rate of interest for such Euro-Dollar Loan provided
for herein over (y) the amount of interest (as reasonably
determined by such Bank) such Bank would have paid on deposits in
Dollars of comparable amounts having terms comparable to such
period placed with it by leading banks in the London interbank
market and (ii) in the case of Money Market Loans, an amount equal
to the interest that would have accrued on such Loan from the date
of prepayment through the Stated Maturity Date.
SECTION 8.06. HLT Classification. If, after the date
hereof, the Agent determines that, or the Agent is advised by any
Bank that such Bank (or if the Agent is so advised by any such
Authority) has received notice from any Authority (including,
without limitation, the Securities and Exchange Commission) having
jurisdiction over such Bank that Loans hereunder are classified as
a "highly leveraged transaction" (an "HLT Classification"), the
Agent shall promptly give notice of such HLT Classification to the
Borrower and the other Banks. The Agent, the Banks and the
Borrower shall commence negotiations in good faith to agree on the
extent to which fees, interest rates and/or margins hereunder
should be increased, and/or any other terms and conditions set
forth in this Agreement should be modified, so as to reflect such
HLT Classification. If the Borrower, the Agent, and the Majority
Banks agree on the amount of such increase or increases and on the
terms of any such modification, this Agreement and the other Loan
Documents may be amended to give effect to such increase or
increases, or modification, as provided in Section 9.06. If the
Borrower, the Agent, and the Majority Banks fail to so agree
within 60 days after notice is given by the Agent as provided
above, then the Agent shall, if requested by the Majority Banks,
by notice to the Borrower terminate the Commitments and they shall
thereupon terminate and the Borrower shall repay each outstanding
Syndicated Loan at the end of the Interest Period or, with respect
to Money Market Loans, Stated Maturity Date, applicable thereto.
The Banks acknowledge that an HLT Classification is not a Default.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including bank wire, telecopier or similar writing) and shall be
given to such party at its address or telecopier number set forth
on the signature pages hereof or such other address or telecopier
number as such party may hereafter specify for the purpose by
notice to each other party. Each such notice, request or other
communication shall be effective (i) if given by telecopier, when
such telecopy is transmitted to the telecopier number specified in
this Section and the appropriate confirmation is received, (ii) if
given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the
address specified in this Section; provided that notices to the
Agent under Article II or Article VIII shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the
Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note or other Loan Document shall operate
as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower
shall pay (i) all out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Banks and the
Agent, in connection with the preparation of this Agreement and
the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Default or
alleged Default hereunder or thereunder and (ii) if a Default
occurs, all out-of-pocket expenses incurred by the Agent and the
Banks, including fees and disbursements of counsel, in connection
with such Default and collection and other enforcement proceedings
resulting therefrom, including out-of-pocket expenses incurred in
enforcing this Agreement and the other Loan Documents. The
Borrower shall indemnify the Agent and each Bank against any
transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this
Agreement or the other Loan Documents.
SECTION 9.04. Indemnification. The Borrower shall
indemnify the Agent, the Banks and each affiliate thereof and
their respective directors, officers, employees and agents from,
and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become
subject, insofar as such losses, liabilities, claims or damages
arise out of or result from any actual or proposed use by the
Borrower of the proceeds of any extension of credit by any Bank
hereunder or breach by the Borrower of this Agreement or any other
Loan Document or from any investigation, litigation (including,
without limitation, any actions taken by the Agent or any of the
Banks to enforce this Agreement or any of the other Loan Documents
(except enforcement action on which the Borrower prevails on the
merits)) or other proceeding (including, without limitation, any
threatened investigation or proceeding) relating to the foregoing,
and the Borrower shall reimburse the Agent and each Bank, and each
affiliate thereof and their respective directors, officers,
employees and agents, upon demand for any reasonable expenses
(including, without limitation, legal fees) incurred in connection
with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or wilful misconduct of the Person
to be indemnified.
SECTION 9.05. Sharing of Setoffs. Each Bank agrees that
if it shall, by exercising any right of setoff or counterclaim or
otherwise, receive payment of a proportion of the aggregate amount
of principal and interest owing with respect to the Notes held by
it which is greater than the proportion received by any other Bank
in respect of the aggregate amount of all principal and interest
owing with respect to the Notes held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks owing to such
other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with
respect to the Notes held by the Banks owing to such other Banks
shall be shared by the Banks pro rata; provided that (i) nothing
in this Section shall impair the right of any Bank to exercise any
right of setoff or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Notes, and (ii)
if all or any portion of such payment received by the purchasing
Bank is thereafter recovered from such purchasing Bank, such
purchase from each other Bank shall be rescinded and such other
Bank shall repay to the purchasing Bank the purchase price of such
participation to the extent of such recovery together with an
amount equal to such other Bank's ratable share (according to the
proportion of (x) the amount of such other Bank's required
repayment to (y) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The
Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of setoff or counterclaim and
other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.06. Amendments and Waivers. (a) Any provision
of this Agreement, the Syndicated Loan Notes or any other Loan
Documents may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that, no such amendment
or waiver shall, unless signed by all Banks, (i) change the
Commitment of any Bank or subject any Bank to any additional
obligation, (ii) change the principal of or rate of interest on
any Loan or any fees hereunder, (iii) change the date fixed for
any payment of principal of or interest on any Loan or any fees
hereunder, (iv) change the amount of principal, interest or fees
due on any date fixed for the payment thereof, (v) change the
percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the percentage of Banks, which shall be
required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement, (vi) change
the manner of application of any payments made under this
Agreement or the Notes, (vii) release or substitute all or any
substantial part of the collateral (if any) held as security for
the Loans, (viii) release any Guarantee given to support payment
of the Loans or (ix) amend this Section 9.06; provided, further,
that this Agreement and any of the other Loan Documents may be
amended to give effect (x) to any increased fees, interest rates
and/or margins, and/or any modification of the other terms and
conditions set forth in this Agreement or in any of the other Loan
Documents, agreed upon pursuant to Section 8.06 or (y) to reduce
or rescind any such increases, or to rescind any such
modification, previously agreed upon pursuant to Section 8.06, if
such amendment is in writing and is signed by the Borrower, the
Agent, and the Majority Banks.
(b) The Borrower will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of
the provisions of this Agreement unless each Bank shall be
informed thereof by the Borrower and shall be afforded an
opportunity of considering the same and shall be supplied by the
Borrower with sufficient information to enable it to make an
informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to the
provisions of this Agreement shall be delivered by the Borrower to
each Bank forthwith following the date on which the same shall
have been executed and delivered by the requisite percentage of
Banks. The Borrower will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental
or additional interest, fee or otherwise, to any Bank (in its
capacity as such) as consideration for or as an inducement to the
entering into by such Bank of any waiver or amendment of any of
the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to
all such Banks.
SECTION 9.07. No Margin Stock Collateral. Each of the
Banks represents to the Agent and each of the other Banks that it
in good faith is not, directly or indirectly (by negative pledge
or otherwise), relying upon any Margin Stock as collateral in the
extension or maintenance of the credit provided for in this
Agreement.
SECTION 9.08. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns; provided that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more
Persons (each a "Participant") participating interests in any Loan
owing to such Bank, any Note held by such Bank, any Commitment
hereunder or any other interest of such Bank hereunder. In the
event of any such sale by a Bank of a participating interest to a
Participant, such Bank's obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for
the performance thereof, such Bank shall remain the holder of any
such Note for all purposes under this Agreement, and the Borrower
and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under
this Agreement. In no event shall a Bank that sells a
participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree
that it will not (except as provided below), without the consent
of the Participant, agree to (i) the change of any date fixed for
the payment of principal of or interest on the related loan or
loans, (ii) the change of the amount of any principal, interest or
fees due on any date fixed for the payment thereof with respect to
the related loan or loans, (iii) the change of the principal of
the related loan or loans, (iv) any change in the rate at which
either interest is payable thereon or (if the Participant is
entitled to any part thereof) fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or
commitment fee (as the case may be) in respect of such
participation, (v) the release or substitution of all or any
substantial part of the collateral (if any) held as security for
the Loans, or (vi) the release of any Guarantee given to support
payment of the Loans; provided that such Bank may agree (x) to any
increase in the fees, interest rates and/or margins, and/or to any
modification of the other terms and conditions set forth in this
Agreement, agreed upon pursuant to Section 8.06 hereof or (y) to
the reduction or rescission of any such increases, or the
rescission of any such modification, previously agreed upon
pursuant to Section 8.06. Each Bank selling a participating
interest in any Loan (other than a Money Market Loan), Note (other
than a Money Market Note), Commitment or other interest under this
Agreement shall, within 10 Domestic Business Days of such sale,
provide the Borrower and the Agent with written notification
stating that such sale has occurred and identifying the
Participant and the interest purchased by such Participant. The
Borrower agrees that each Participant shall be entitled to the
benefits of Article VIII with respect to its participation in
Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks
or financial institutions (each an "Assignee") all, or, in the
case of its Syndicated Loans and Commitments, a proportionate part
of all of its Syndicated Loans and Commitments, of its rights and
obligations under this Agreement, the Notes and the other Loan
Documents, and such Assignee shall assume all such rights and
obligations, pursuant to an Assignment and Acceptance in the form
attached hereto as Exhibit D, executed by such Assignee, such
transferor Bank and the Agent (and, in the case of an Assignee
that is not then a Bank or an affiliate of a Bank, by the
Borrower); provided that (i) no interest may be sold by a Bank
pursuant to this paragraph (c) unless the Assignee shall agree to
assume ratably equivalent portions of the transferor Bank's
Commitment, (ii) the amount of the Commitment of the assigning
Bank subject to such assignment (determined as of the effective
date of the assignment) shall be equal to $20,000,000 (or any
larger multiple of $1,000,000), (iii) except during the
continuance of a Default, no interest may be sold by a Bank
pursuant to this paragraph (c) to any Assignee that is not then a
Bank without the consent of the Borrower and the Agent, which
consent shall not be unreasonably withheld, and (iv) a Bank may
not have more than 2 Assignees that are not then Banks at any one
time. Upon (A) execution of the Assignment and Acceptance by such
transferor Bank, such Assignee, the Agent and (if applicable) the
Borrower, (B) delivery of an executed copy of the Assignment and
Acceptance to the Borrower and the Agent, (C) payment by such
Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such
Assignee, and (D) payment of a processing and recordation fee of
$2,000 to the Agent, such Assignee shall for all purposes be a
Bank party to this Agreement and shall have all the rights and
obligations of a Bank under this Agreement to the same extent as
if it were an original party hereto with a Commitment as set forth
in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent,
and no further consent or action by the Borrower, the Banks or the
Agent shall be required. Upon the consummation of any transfer to
an Assignee pursuant to this paragraph (c), the transferor Bank,
the Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note or Notes will be issued to such
Assignee.
(d) Subject to the provisions of Section 9.09, the
Borrower authorizes each Bank to disclose to any Participant,
Assignee or other transferee (each a "Transferee") and any
prospective Transferee any and all financial information in such
Bank's possession concerning the Borrower which has been delivered
to such Bank by the Borrower pursuant to this Agreement or which
has been delivered to such Bank by the Borrower in connection
with such Bank's credit evaluation prior to entering into this
Agreement.
(e) No Transferee shall be entitled to receive any
greater payment under Section 8.03 than the transferor Bank would
have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's
prior written consent or by reason of the provisions of Section
8.02 or 8.03 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion
of the Loans and/or obligations owing to it to any Federal Reserve
Bank or the United States Treasury as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve
System and any Operating Circular issued by such Federal Reserve
Bank, provided that any payment in respect of such assigned Loans
and/or obligations made by the Borrower to the assigning and/or
pledging Bank in accordance with the terms of this Agreement shall
satisfy the Borrower's obligations hereunder in respect of such
assigned Loans and/or obligations to the extent of such payment.
No such assignment shall release the assigning and/or pledging
Bank from its obligations hereunder.
SECTION 9.09. Confidentiality. Each Bank agrees to keep
any information disclosed by the Borrower to it confidential from
anyone other than persons employed or retained by such Bank who
are or are expected to become engaged in evaluating, approving,
structuring or administering the Loans, if such information has
not been publicly disclosed or is otherwise not in the public
domain and if it was disclosed to the Bank under circumstances
that would lead a reasonably prudent person to believe that such
information has not been publicly disclosed or is otherwise not in
the public domain; provided, however that nothing herein shall
prevent any Bank from disclosing such information (i) to any other
Bank, (ii) upon the order of any court or administrative agency
(provided, that, the Borrower shall be notified of any relevant
order and given an opportunity to seek a protective order with
respect to any such disclosure to the extent that any Bank may
provide such notice to the Borrower without violating the terms of
any relevant order), (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over such Bank,
(iv) which has been publicly disclosed by the Borrower or any of
its agents or advisors, (v) to the extent reasonably required in
connection with any litigation to which the Agent, any Bank or
their respective Affiliates may be a party, (vi) to the extent
reasonably required in connection with the exercise of any remedy
hereunder, (vii) to such Bank's legal counsel and independent
auditors and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights
hereunder which has agreed in writing to be bound by the
provisions of this Section 9.09.
SECTION 9.10. Representation by Banks. Each Bank hereby
represents that:
(i) it is a commercial lender or financial
institution which makes Loans in the ordinary course of its
business and that it will make its Loans hereunder for its own
account in the ordinary course of such business; provided, however
that, subject to Section 9.08, the disposition of the Note or
Notes held by that Bank shall at all times be within its exclusive
control;
(ii) the execution, delivery and performance by it
of this Agreement, (x) is within its corporate powers, (y) have
been duly authorized by all necessary corporate action, and
require no action by or in respect of or filing with, any
governmental body, agency or official; and
(iii) this Agreement constitutes a valid and binding
agreement enforceable against it in accordance with its terms,
provided that the enforceability hereof and thereof is subject in
each case to general principles of equity and to bankruptcy,
insolvency and similar laws affecting the enforcement of
creditors' rights generally.
SECTION 9.11. Obligations Several. The obligations of
each Bank hereunder are several, and no Bank shall be responsible
for the obligations or commitment of any other Bank hereunder.
Nothing contained in this Agreement and no action taken by the
Banks pursuant hereto shall be deemed to constitute the Banks to
be a partnership, an association, a joint venture or any other
kind of entity. The amounts payable at any time hereunder to each
Bank shall be a separate and independent debt, and each Bank shall
be entitled to protect and enforce its rights arising out of this
Agreement or any other Loan Document and it shall not be necessary
for any other Bank to be joined as an additional party in any
proceeding for such purpose.
SECTION 9.12. North Carolina Law. This Agreement and
each Note shall be construed in accordance with and governed by
the law of the State of North Carolina.
SECTION 9.13. Interpretation. No provision of this
Agreement or any of the other Loan Documents shall be construed
against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of
such party having or being deemed to have structured or dictated
such provision.
SECTION 9.14. Waiver of Jury Trial; Consent to
Jurisdiction. The Borrower (a) and each of the Banks and the
Agent irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of this Agreement, any of the other
Loan Documents, or any of the transactions contemplated hereby or
thereby, (b) submits to the nonexclusive personal jurisdiction in
the State of North Carolina, the courts thereof and the United
States District Courts sitting therein, for the enforcement of
this Agreement, the Notes and the other Loan Documents, (c) waives
any and all personal rights under the law of any jurisdiction to
object on any basis (including, without limitation, inconvenience
of forum) to jurisdiction or venue within the State of North
Carolina for the purpose of litigation to enforce this Agreement,
the Notes or the other Loan Documents, and (d) agrees that service
of process may be made upon it in the manner prescribed in Section
9.01 for the giving of notice to the Borrower. Nothing herein
contained, however, shall prevent the Agent from bringing any
action or exercising any rights against any security and against
the Borrower personally, and against any assets of the Borrower,
within any other state or jurisdiction.
SECTION 9.15. Counterparts. This Agreement 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, under seal, by their respective
authorized officers as of the day and year first above written.
FOOD LION, INC. (SEAL)
By:
Title: Treasurer
2110 Executive Drive
Salisbury, North Carolina 28145
Attention: Mr. Michael J. Price
Telecopier number: (704) 636-5024
Confirmation number: (704) 633-8250
COMMITMENTS WACHOVIA BANK OF NORTH CAROLINA,
N.A., as a Bank and as the Agent (SEAL)
$50,000,000.00
By:
Title:
Lending Office
130 South Main Street
Salisbury, North Carolina 28145
Attention: Mr. Bill A. Coleman
Telecopier number: (704) 633-1470
Confirmation number: (704) 638-5948
Address For Payments:
301 North Main Street
Winston-Salem, North Carolina 27102
Attention: Bobbie Clifton
Telecopier number: (704) 633-1470
Confirmation number: (704) 638-5946
Wiring Instructions:
ABA No. 053100494
Notification: For Attention of
Salisbury Office. Food Lion Credit
Facility. Account No. 6895 002 600.
Notify Bobbie Clifton.
Address For Notices Other Than
Payments:
130 South Main Street
Salisbury, North Carolina 28145
Attention: Mr. Bill A. Coleman
Telecopier number: (704) 633-1470
Confirmation number: (704) 638-5948
$20,000,000.00 ABN AMRO BANK N.V. (SEAL)
By:
Title:
Attest:
Title:
Lending Office
1 Ravinia Drive
Suite 1200
Atlanta, Georgia 30346
Attention: Mr. Patrick Thom
Telecopier number: (404) 395-9188
Confirmation number: (404) 396-0066
$30,000,000.00 BANK BRUSSELS LAMBERT,
NEW YORK BRANCH (SEAL)
By:
Title:
Lending Office
630 5th Avenue
New York, New York 10111
Attention: Mr. Andre Hermans
Telecopier number: (212) 333-5786
Confirmation number: (212) 632-5323
$30,000,000.00 CIBC, INC. (SEAL)
By:
Title:
Lending Office
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Mr. G. Mark Clegg, Jr.
Telecopier number: (404) 319-4954
Confirmation number: (404) 319-4904
$20,000,000.00 KREDIETBANK N.V. (SEAL)
By:
Title:
Lending Office
1360 Peachtree Street
Suite 1440
Atlanta, Georgia 30309
Attention: Ms. Linda L. Stanley
Telecopier number: (404) 876-3212
Confirmation number: (404) 876-2556
$20,000,000.00 THE SAKURA BANK, LTD. (SEAL)
By:
Title:
Lending Office
245 Peachtree Center Avenue, N.E.
Suite 2703
Atlanta, Georgia 30303
Attention: Mr. Thomas N. Meyer
Telecopier number: (404) 521-1133
Confirmation number: (404) 521-3111
$20,000,000.00 THE SUMITOMO BANK, LTD. (SEAL)
By:
Title:
Lending Office
133 Peachtree Street
Suite 3210
Atlanta, Georgia 30303
Attention: Mr. Gary P. Franke
Telecopier number: (404) 521-1187
Confirmation number: (404) 526-8500
$20,000,000.00 TRUST COMPANY BANK (SEAL)
By:
Title:
Attest:
Title:
Lending Office
One Park Plaza, N.E.
MC 120
Atlanta, Georgia 30302
Attention: Ms. Robin Geddes
Telecopier number: (404) 588-8833
Confirmation number: (404) 827-6118
$30,000,000.00 THE FIRST NATIONAL BANK OF CHICAGO (SEAL)
By:
Title:
Lending Office
One First National Plaza
Mail Suite 0374
Chicago, Illinois 60670
Attention: Mr. Steve Farley
Telecopier number: (312) 732-3885
Confirmation number: (312) 732-5995
$20,000,000.00 PNC BANK, NATIONAL ASSOCIATION (SEAL)
By:
Title:
Lending Office
Fifth Avenue and Wood Street
Pittsburgh, Pennsylvania 15222
Attention: Mr. Jim Fink
Telecopier number: (412) 762-6484
Confirmation number: (412) 762-8746
$20,000,000.00 NATIONSBANK OF NORTH CAROLINA, N.A. (SEAL)
By:
Title:
Lending Office
NationsBank Corporate Center
NC 1007-08-08
Charlotte, North Carolina 28255
Attention: Mr. Thold Gill
Telecopier number: (704) 386-1270
Confirmation number: (704) 386-8206
$20,000,000.00 GENERALE BANK (SEAL)
By:
Title:
Attest:
Title:
Lending Office
520 Madison Avenue
41st Floor
New York, New York 10022
Attention: Mr. Thierry Percy
Telecopier number: (212) 838-7492
Confirmation number: (212) 418-8779
TOTAL COMMITMENTS:
$300,000,000.00
EXHIBIT A-1
SYNDICATED LOAN NOTE
Salisbury, North Carolina
As of June 4, 1993
For value received, FOOD LION, INC., a North Carolina
corporation (the "Borrower"), promises to pay to the order of
, a
, (the "Bank"), for the account of its Lending Office, the
principal sum of
and No/100 Dollars ($ ), or such lesser amount as
shall equal the unpaid principal amount of each Syndicated Loan
made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of this Note on the dates and at the rate
or rates provided for in the Credit Agreement referred to below.
Interest on any overdue principal of and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit
Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other
immediately available funds at the office of Wachovia Bank of
North Carolina, N.A., 301 North Main Street, Winston-Salem, North
Carolina 27102, or such other address as may be specified from
time to time pursuant to the Credit Agreement.
All Syndicated Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time
applicable thereto, and all repayments of the principal thereof
shall be recorded by the Bank and, prior to any transfer hereof,
endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof;
provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This Note is one of the Syndicated Loan Notes referred
to in the Credit Agreement dated as of June 4, 1993, among the
Borrower, the Banks listed on the signature pages thereof and
Wachovia Bank of North Carolina, N.A., as Agent (as the same may
be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit
Agreement for provisions for the optional and mandatory
prepayment and the repayment hereof and the acceleration of the
maturity hereof.
IN WITNESS WHEREOF, the Borrower has caused this
Syndicated Loan Note to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
FOOD LION, INC. (SEAL)
By:
Title:
Syndicated Loan Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Base Rate or Amount Amount of
Euro-Dollar of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
EXHIBIT A-2
MONEY MARKET LOAN NOTE
Salisbury, North Carolina
As of June 4, 1993
For value received, FOOD LION, INC., a North Carolina
corporation (the "Borrower"), promises to pay to the order of
, a
, (the "Bank"), for the account of its Lending Office, the
principal sum of FIFTY MILLION and No/100 Dollars ($50,000,000),
or such lesser amount as shall equal the unpaid principal amount
of each Money Market Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below, on the dates
and in the amounts provided in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of this
Note on the dates and at the rate or rates provided for in the
Credit Agreement referred to below. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest
on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments
of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at
the office of Wachovia Bank of North Carolina, N.A., 301 North
Main Street, Winston-Salem, North Carolina 27102, or such other
address as may be specified from time to time pursuant to the
Credit Agreement.
All Money Market Loans made by the Bank, the respective
maturities thereof, the interest rates from time to time
applicable thereto, and all repayments of the principal thereof
shall be recorded by the Bank and, prior to any transfer hereof,
endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof;
provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This Note is one of the Money Market Loan Notes referred
to in the Credit Agreement dated as of June 4, 1993, among the
Borrower, the Banks listed on the signature pages thereof and
Wachovia Bank of North Carolina, N.A., as Agent (as the same may
be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit
Agreement for provisions for the optional and mandatory
prepayment and the repayment hereof and the acceleration of the
maturity hereof.
IN WITNESS WHEREOF, the Borrower has caused this Money
Market Loan Note to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
FOOD LION, INC. (SEAL)
By:
Title:
Money Market Loan Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Money Amount Amount of Stated
Market of Principal Maturity Notation
Date Rate Loan Repaid Date Made By
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment")
dated as of the 2nd day of August, 1993, and effective as of June
4, 1993, among FOOD LION, INC., a North Carolina corporation (the
"Borrower"), the banks (the "Banks") party to the Credit Agreement
referred to below, and WACHOVIA BANK OF NORTH CAROLINA, N.A., a
national banking association, acting in its capacity as agent for
itself and for the other Banks (the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent executed and
delivered that certain Credit Agreement, dated as of the 4th day
of June, 1993 (together with any amendments and supplements
thereto, the "Credit Agreement");
WHEREAS, the Borrower has requested and the Banks and the
Agent have agreed to certain amendments to the Credit Agreement,
subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above
premises and other good and valuable consideration, the receipt
and sufficiency of which hereby is acknowledged by the parties
hereto, the Borrower, the Banks and the Agent hereby covenant and
agree as follows:
1. 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.
2. Section 5.04 of the Credit Agreement hereby is amended
by deleting same in its entirety and substituting the following in
lieu thereof:
"SECTION 5.04 Capital Expenditures. Capital
Expenditures will not exceed (i) $175,000,000 in the aggregate,
for the two Fiscal Quarters ended June 19, 1993 and March 27,
1993, (ii) $262,500,000 in the aggregate, for the three Fiscal
Quarters ended September 11, 1993, June 19, 1993 and March 27,
1993, and (iii) beginning with the Fiscal Quarter ended January 1,
1994 and at all times thereafter, $350,000,000 in the aggregate
during any four consecutive Fiscal Quarters ended after January 2,
1993."
3. Restatement of Representations and Warranties. The
Borrower hereby restates and renews each and every representation
and warranty heretofore made by it in the Credit Agreement and the
other Loan Documents as fully as if made on the date hereof and
with specific reference to this Amendment and all other loan
documents executed and/or delivered in connection herewith.
4. Effect of Amendment. Except as set forth expressly
hereinabove, all terms of the Credit Agreement and other Loan
Documents shall be and remain in full force and effect, and shall
constitute the legal, valid, binding and enforceable obligations
of the Borrower. The amendments contained herein shall be deemed
to have prospective application only, unless otherwise
specifically stated herein.
5. Ratification. The Borrower hereby restates, ratifies
and reaffirms each and every term, covenant and condition set
forth in the Credit Agreement and the other Loan Documents
effective as of the date hereof.
6. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
7. Section References. Section titles and references used
in this Amendment shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreements among
the parties hereto evidenced hereby.
8. No Default. To induce the Banks and the Agent to enter
into this Amendment and to continue to make advances pursuant to
the Credit Agreement, the Borrower hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms
hereof, there exists (i) no Default or Event of Default and (ii)
no right of offset, defense, counterclaim, claim or objection in
favor of the Borrower arising out of or with respect to any of the
obligations arising under the Credit Agreement and other Loan
Documents.
9. Further Assurances. The Borrower agrees to take such
further actions as the Agent shall reasonably request in
connection herewith to evidence the amendments herein contained to
the Credit Agreement.
10. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the Borrower, the Banks and the Agent
have caused this Amendment to be duly executed, under seal, by
their respective duly authorized officers as of the day and year
first above written.
FOOD LION, INC.
By: Michael J. Price
Michael J. Price
Treasurer
WACHOVIA BANK OF NORTH CAROLINA, (SEAL)
N.A., in its capacity as a Bank
and as the agent
By:
Title:
ABN AMRO BANK N.V. (SEAL)
By:
Title:
Attest:
Title:
BANK BRUSSELS LAMBERT, (SEAL)
NEW YORK BRANCH
By:
Title:
CIBC, INC. (SEAL)
By:
Title:
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment")
dated as of the 1st day of February, 1994, and effective as of
January 1, 1994, among FOOD LION, INC., a North Carolina
corporation (the "Borrower"), the banks (the "Banks") party to the
Credit Agreement referred to below, and WACHOVIA BANK OF NORTH
CAROLINA, N.A., a national banking association, acting in its
capacity as agent for itself and for the other Banks (the
"Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent executed and
delivered that certain Credit Agreement, dated as of the 4th day
of June, 1993, as amended by a certain First Amendment to Credit
Agreement, dated August 2, 1993 (as so amended, the "Credit
Agreement");
WHEREAS, the Borrower has requested and the Banks and the
Agent have agreed to certain amendments to the Credit Agreement,
subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above
premises and other good and valuable consideration, the receipt
and sufficiency of which hereby is acknowledged by the parties
hereto, the Borrower, the Banks and the Agent hereby covenant and
agree as follows:
1. 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.
2. Section 1.01 of the Credit Agreement hereby is amended
by adding the following language after the word "loss" contained
in clause (1) of the definition of "Consolidated Net Income":
"including, without limitation, store closings that are
part of the Borrower's business and financing plans for
fiscal year 1994 described in the Borrower's 8-K dated
January 7, 1994"
3. Section 2.05(c) of the Credit Agreement is amended by
deleting same it its entirety and substituting the following in
lieu thereof:
"(c) Notwithstanding the foregoing, the outstanding
principal amount of the Loans together with all accrued but unpaid
interest thereon, if any, shall be due and payable on June 3,
1994, unless the Termination Date is otherwise extended by the
Banks, in their sole and absolute discretion. Upon the written
request of the Borrower, which request shall be delivered to the
Agent at least 60 days prior to the Termination Date, the Banks
shall have the option (without any obligation whatsoever so to do)
of extending the Termination Date for an additional 364-day
period, provided, that, in no event shall the Termination Date be
extended beyond May 31, 1996. In connection with each such
extension request, (i) each Bank shall undertake a bona fide
credit analysis of the Borrower utilizing current information on
financial condition and trends; provided, that, no such credit
analysis shall be required of a Bank that elects not to extend the
Termination Date and (ii) the terms of any extension of the
Termination Date and shall be independently negotiated among the
Borrower, the Banks and the Agent at the time of the extension;
provided, that, the terms of the extension may be the same as
those in effect prior to any extension should the Borrower, the
Banks and the Agent so agree; provided, further, that, should the
terms of the extension be other than those in effect prior to the
extension, then the Loan Documents will be amended to the extent
necessary to incorporate any such different terms. In the event
that a Bank chooses to extend the Termination Date for such an
additional 364-day period, notice shall be given by such Bank to
the Borrower and the Agent at least 15 days prior to the relevant
Termination Date, but such notice may not be given more than 30
days prior to such relevant Termination Date; provided, that, the
Termination Date shall not be extended with respect to any of the
Banks (regardless of whether any relevant Bank has delivered a
favorable extension notice) unless the Required Banks have
delivered favorable extension notices and are willing to extend
the Termination Date and either the (x) remaining Banks shall
purchase ratable assignments (without any obligation so to do)
from each bank that is unwilling to extend the Termination Date,
in accordance with their respective percentage of the remaining
Aggregate Commitments; provided, that, such remaining Banks shall
be provided such opportunity (which opportunity shall allow such
Banks at least 5 Domestic Business Days in which to make a
decision) prior to the Borrower finding another bank pursuant to
the immediately succeeding clause (y); provided, further, that,
should any of the remaining Banks elect not to purchase such an
assignment, then, such other remaining Banks shall be entitled to
purchase an assignment from any terminating Bank which includes
the ratable interest that was otherwise available to such non-
purchasing remaining Bank or Banks, as the case may be, (y)
Borrower shall find another bank, acceptable to the Agent, willing
to accept an assignment from such terminating Bank or (z) Borrower
shall reduce the Aggregate Commitments in an amount equal to the
sum of the Commitments of all such terminating Banks.
4. Section 5.19 (iii) of the Credit Agreement hereby is
amended by (i) deleting from clause (a) thereof the phrase "on or
before January 1, 1994" and inserting in lieu thereof the phrase
"on or before February 28, 1995" and (ii) deleting from clause (b)
thereof the phrase "after January 1, 1994" and inserting in lieu
thereof the phrase "after February 28, 1995".
5. Restatement of Representations and Warranties. The
Borrower hereby restates and renews each and every representation
and warranty heretofore made by it in the Credit Agreement and the
other Loan Documents as fully as if made on the date hereof and
with specific reference to this Amendment and all other
instruments and documents executed and/or delivered in connection
herewith.
6. Effect of Amendment. Except as set forth expressly
hereinabove, all terms of the Credit Agreement and other Loan
Documents shall be and remain in full force and effect, and shall
constitute the legal, valid, binding and enforceable obligations
of the Borrower. The amendments contained herein shall be deemed
to have prospective application only, unless otherwise
specifically stated herein.
7. Ratification. The Borrower hereby restates, ratifies
and reaffirms each and every term, covenant and condition set
forth in the Credit Agreement and the other Loan Documents
effective as of the date hereof.
8. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
9. Section References. Section titles and references used
in this Amendment shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreements among
the parties hereto evidenced hereby.
10. No Default. To induce the Banks and the Agent to enter
into this Amendment and to continue to make advances pursuant to
the Credit Agreement, the Borrower hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms
hereof, there exists (i) no Default or Event of Default and (ii)
no right of offset, defense, counterclaim, claim or objection in
favor of the Borrower arising out of or with respect to any of the
obligations arising under the Credit Agreement and other Loan
Documents.
11. Further Assurances. The Borrower agrees to take such
further actions as the Agent shall reasonably request in
connection herewith to evidence the amendments herein contained to
the Credit Agreement.
12. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the Borrower, the Banks and the Agent
have caused this Amendment to be duly executed by their respective
duly authorized officers as of the day and year first above
written.
FOOD LION, INC.
By: Michael J. Price
Michael J. Price
Treasurer
WACHOVIA BANK OF NORTH CAROLINA, (SEAL)
N.A., in its capacity as a Bank
and as the agent
By:
Title:
ABN AMRO BANK N.V. (SEAL)
By:
Title:
Attest:
Title:
LICENSE AGREEMENT made as of the first day of January, 1983
by and between ETABLISSEMENTS DELHAIZE FRERES ET CIE "LE LION"
S.A., a corporation organized under the laws of Belgium, having
its principal office at rue Osseghem 53, 1080 Brussels, Belgium
(hereinafter referred to as "Licensor") and FOOD TOWN STORES,
INC., a corporation organized and existing under the laws of the
State of North Carolina, United States of America, having its
principal offices at Harrison Road, Salisbury, North Carolina
(hereinafter referred to as "Licensee").
W I T N E S S E T H :
WHEREAS, Licensor is engaged primarily in the operation of
supermarkets in Belgium;
WHEREAS, Licensee is engaged primarily in the operation of
supermarkets in the United States of America;
WHEREAS, Licensor owns, directly or indirectly, 52% of the
stock of Licensee;
WHEREAS, Licensee is planning to change its corporate name
from "FOOD TOWN STORES, INC." to "FOOD LION, INC.";
WHEREAS, Licensor is the sole proprietor of a trademark
comprised of the name Delhaize and a lion logo registered in
Belgium, the Netherlands and Luxembourg, Benelux Trade Mark No.
086048 and registered in the United States of America, No.
1132312, together with the goodwill associated therewith
(hereinafter referred to as the "Trademark");
WHEREAS, Licensee is the sole proprietor of the trademarks
and service marks "Food Town," "Save-Rite" and "Food Lion,"
together with the goodwill associated therewith, and intends to
register the mark "Food Lion" with the United States Patent and
Trademark Office;
WHEREAS, Licensee desires to obtain from Licensor and
Licensor desires to grant to Licensee the right to import,
manufacture, use and sell products bearing the Trademark or the
lion logo, use the Trademark or the lion logo in displays, signs,
advertising and promotion of products, and to have manufactured
for it products bearing the Trademark or the lion logo to be used
or sold in the United States of America; and
WHEREAS, Licensor and Licensee entered into a License
Agreement dated June 28, 1978, which License Agreement was
extended and amended on July 7, 1980, relating to the Trademark
which they desire to extend and amend as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, Licensor and Licensee
agree as follows:
1. Licensor hereby grants to Licensee the non-exclusive
license and privilege in the United States of America to import,
manufacture, use, sell, distribute and advertise products bearing
the Trademark or the lion logo, use the use the Trademark or the
lion logo in displays, signs, advertising and promotion of
products, and to have manufactured for it products bearing the
Trademark or the lion logo to be used or sold in the United States
of America, subject to the terms of this License Agreement.
2. Licensee acknowledges that Licensor, by reason of its
maintenance of high standards of quality of product and service at
supermarkets and retail food outlets operated by it, has
established over a period of years a reputation which is of great
importance to Licensor. Accordingly, in the event that Licensee
shall not maintain and operate its supermarkets in accordance with
Licensor's standards or maintain the quality of products bearing
the Trademark or lion logo, Licensor may terminate this License
Agreement as hereinafter provided. Licensee agrees that all
advertising, publicity, and promotion of products bearing the
Trademark or lion logo shall be in good taste and comport with the
high standards established by Licensor. Licensee further agrees
that it will cause to appear whenever proper or necessary and in
the correct manner and position or place notices of registration
in connection with any and all uses of the Trademark.
3. Licensee shall permit Licensor or its authorized
representatives to inspect the products in conjunction with which
the Trademark or the lion logo is used and the methods of
manufacturing them upon the premises of Licensee or of any person,
firm, or corporation manufacturing any of the products for
Licensee, at all reasonable times in order to carry out the
purposes of inspection as part of appropriate quality control.
4. Licensee agrees to submit samples of the products in
conjunction with which the Trademark or the lion logo is used to
Licensor from time to time at Licensor's request.
5. The term of this License Agreement shall be ten (10)
years from the date hereof and shall be automatically extended for
successive additional terms of five (5) years each, except
Licensor may terminate this License Agreement pursuant to Sections
6 and 7 hereof.
6. Licensor shall have the right to terminate this License
Agreement effective thirty (30) days after giving written notice
to Licensee to such effect, whenever Licensee shall do anything,
or permit anything to be done, whether by action or inaction,
contrary to any covenant or agreement required to be performed by
Licensee under the terms of this License Agreement and shall fail
within said thirty (30) days after written notice by Licensor to
Licensee specifying the same to remedy the same.
7. In the case of bankruptcy or insolvency of Licensee or
the assignment of all its assets to a receiver or sequestrator,
Licensor shall have the right immediately to terminate this
Agreement upon written notice to Licensee.
8. For the term of this License Agreement, Licensee agrees
not to use a mark identical with or confusingly similar to the
Trademark or lion logo, except as provided in Sections 1 and 9
hereof.
9. It is understood that Licensee may use the lion logo in
conjunction with its trademarks and service marks "Food Town,"
"Save-Rite" and "Food Lion" in a manner identical to the Trademark
except that the words "Food Town," "Save-Rite" or "Food Lion" are
substituted for the word "Delhaize," and it is recognized by both
parties hereto that such use will constitute separate, additional
trademarks (herein called the "New Trademarks"). In order to
protect the rights of the Licensor in the Trademark and in the
lion logo, and the rights of the Licensee in the trademarks and
service marks "Food Town, "Save-Rite" and "Food Lion," it is
agreed as follows:
(a) Licensee alone shall have the right to register the
trademarks and service marks "Food Town," "Save-Rite"
and "Food Lion" in the United States.
(b) The New Trademarks may be used only by Licensee and only
for the term of this License Agreement and such use by
Licensee shall be subject to all the terms and
conditions of this Agreement applicable to the Trademark
and the lion logo, except that upon termination of this
Agreement, neither party shall thereafter have the right
to use the New Trademarks, Licensee retaining separately
its exclusive right to and ownership of the trademarks
and service marks "Food Town," "Save-Rite" and "Food
Lion" and Licensor retaining separately its exclusive
right to and ownership of the Trademark and the lion
logo.
10. It is the intent of Licensor and Licensee that nothing
contained in this License Agreement shall be deemed in any way to
confer on Licensee any proprietary interest in the Trademark or
the lion logo.
11. Licensee herewith acknowledges Licensor's exclusive
ownership of, the validity of, and Licensor's exclusive right to
use, the Trademark and the lion logo and agrees not to contest
during the term of this License Agreement, including any extension
thereof, or at any time thereafter Licensor's exclusive ownership
of, validity of, and Licensor's exclusive right (subject to
Licensee's rights hereunder) to use the Trademark or the lion
logo.
12. Licensor herewith acknowledges Licensee's exclusive
right to use the New Trademarks subject to all the terms and
conditions of this Agreement and agrees not to contest during the
term of this License Agreement, including any extension thereof,
Licensee's exclusive ownership of, validity of, and Licensee's
exclusive right to use the New Trademarks. Licensor further
acknowledges Licensee's exclusive ownership of, the validity of,
and Licensee's exclusive right to use the trademarks and service
marks "Food Town," "Save-Rite" and Food Lion" and agrees not to
contest during the term of this License Agreement, including any
extension thereof, or at any time thereafter, Licensee's exclusive
ownership of, validity of, and Licensee's exclusive right to use
said trademarks and service marks.
13. Licensee shall not have the right to sublicense any of
the rights herein granted to it by Licensor, nor, under any
condition, shall the Licensee sublicense the New Trademarks.
Licensee agrees that Licensor may license the Trademark or the
lion logo to other licensees in the United States but may not so
license the New Trademarks.
14. Licensee agrees, promptly upon learning thereof, to
notify Licensor in writing of the name, address, and to furnish
such other pertinent information as may be available, of any third
party who may be infringing or otherwise violating any of the
Licensor's rights in and to the Trademark, the lion logo or the
New Trademarks, or of any third party who makes a claim that use
of the Trademark, the lion logo or the New Trademarks infringes
upon or otherwise violates any property or rights of any nature of
said third party. Licensee agrees to cooperate in all necessary
respects as required by Licensor in any action which Licensor
deems advisable or necessary to protect Licensor's rights in the
Trademark, the lion logo or the New Trademarks or to contest a
claim by a third party that use of the Trademark, the lion logo or
the New Trademarks infringes upon or otherwise violates any
property or rights of any nature of said third party. However,
Licensor shall be under no obligation to prosecute infringers of
the Trademark, the lion logo or the New Trademarks. In any case
in which Licensor determines not to do so, Licensee may do so with
the prior written permission of and on behalf of Licensor but at
Licensee's own expense and subject to whatever conditions Licensor
may impose. Notwithstanding any of the above, Licensee retains
its sole right to prosecute infringers of its trademarks and
service marks "Food Town," "Save-Rite" and Food Lion" without
obtaining permission from Licensor.
15. Licensee hereby agrees to indemnify and hold Licensor
harmless from and against any liability, loss, damage, cost or
expense which it may at any time suffer, incur or be required to
pay by reason of any action, suit or proceeding based on a claim
of defects in the materials, manufacture, production, bottling or
packaging of any of the products manufactured, produced, bottled,
packaged, sold or distributed by or for Licensee under the
Trademark, lion logo or the New Trademarks. Licensor will give
Licensee immediate notice of any such action, suit or proceeding
and afford Licensee the opportunity to defend the same at
Licensee's expense.
16. Licensee agrees to use the Trademark in interstate
commerce during the term of this License Agreement, and any
extension thereof, sufficiently to preserve the Trademark as a
trademark registered under the laws of the United States.
17. Licensee agrees that, upon termination of this License
Agreement pursuant to Sections 6 or 7 hereof, Licensee will no
longer use in any manner whatsoever the Trademark, the lion logo,
the New Trademarks or any variations or combinations thereof
except the trademarks and service marks "Food Town," "Save-Rite"
and Food Lion," or use any trademark, word, symbol, label, design,
sign, package display, slogan or advertising matter similar to the
Trademark, the lion logo or the New Trademarks except as provided
in Section 9(b) hereof.
18. This License Agreement contains the entire understanding
of the parties with respect to the subject matter thereof and
there are no promises, warranties, covenants or understandings
other than those expressly set forth herein. Any alteration in
the stipulations of this License Agreement will only be valid
between the parties upon written confirmation by both parties
stating the commencement date for such alteration.
19. Each provision of this License Agreement is severable.
If any provision hereof is invalid under any applicable law, the
remaining provisions shall remain valid and binding provided that
such invalidity of any clause does not substantially adversely
affect the interest of either party.
20. All disputes arising in connection with the License
Agreement shall be finally settled by arbitration pursuant to the
rules of arbitration of the International Chamber of Commerce and
judgment upon the award rendered may be entered in any court
having jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as
the case may be.
21. This agreement may be assigned by Licensor but not by
Licensee except upon Licensor's prior written consent.
22. This License Agreement shall be construed and governed
in accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this
License Agreement as of the date and year first above written.
FOOD TOWN STORES, INC.
By
ETABLISSEMENTS DELHAIZE FRERES
ET CIE "LE LION" S.A.
By
By
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except Years Ended
per share amounts)
January 1, January 2, December 28,
1994 1993 1991
PRIMARY
NET INCOME $ 3,852 $178,005 $205,171
WEIGHTED AVERAGE COMMON
SHARES AND OTHER COMMON
STOCK EQUIVALENTS:
COMMON STOCK OUTSTANDING 483,701 483,663 483,516
STOCK OPTIONS 149 97 224
483,850 483,760 483,740
(*) SHARES USED IN COMPUTATION 483,701 483,663 483,516
PRIMARY EARNINGS PER SHARE $ .0080 $ .3680 $ .4243
FULLY DILUTED
NET INCOME $ 3,852 $178,005 $205,171
INTEREST (NET OF TAXES) 1,941
ADJUSTED INCOME $ 5,793
WEIGHTED AVERAGE COMMON
SHARES AND OTHER COMMON
STOCK EQUIVALENTS:
COMMON STOCK OUTSTANDING 483,701 483,663 483,516
STOCK OPTIONS 195 97 341
CONVERTIBLE SHARES 8,118
492,014 483,760 483,857
(*) SHARES USED IN COMPUTATION 483,701 483,663 483,516
FULLY DILUTED EARNINGS PER
SHARE $ .0120 $ .3680 $ .4243
(*) NOTE: Dilution is less than 3%. Therefore, common stock
equivalents have been excluded from the total weighted average common
shares.
Ten Year Summary of Operations
(Dollars in thousands 1993 1992 1991
except per share amounts) (53 Weeks)
1. Net sales $7,609,817 7,195,923 6,438,507
2. Income before taxes $ 6,352 290,605 340,671
3. Net income $ 3,852 178,005 205,171
4. Current assets $1,139,472 1,148,725 983,370
5. Non-current assets $1,364,211 1,372,767 1,035,922
6. Total assets $2,503,683 2,521,492 2,019,292
7. Current liabilities $ 619,271 986,274 676,768
8. Long-term debt $ 569,350 240,537 240,810
9. Capital lease obligations,
deferred taxes and other
liabilities $ 397,508 338,962 270,659
10. Shareholders' equity $ 917,554 955,719 831,055
11. Cash dividends
Class A $ 21,483 27,354 24,393
Class B $ 20,603 26,458 23,638
12. Depreciation $ 143,042 121,616 104,614
13. Number of stores
opened (net) # 84 131 103
14. Number of stores open # 1,096 1,012 881
15. Total store square
footage (000) # 28,950 26,428 22,480
16. Number of employees # 65,494 59,721 53,583
17. Weighted average shares
outstanding (000) # 483,701 483,663 483,516
18. Number of scanning stores # 1,096 1,012 801
19. Earnings per share (a) $ .01 .37 .42
20. Dividends per share (a) $ .087 .111 .099
21. Book value per share (a) $ 1.90 1.98 1.72
22. Asset turnover x 3.03 3.17 3.58
23. Return on sales % .05 2.47 3.19
24. Return on assets % .15 7.84 11.40
25. Return on equity % .41 19.92 27.28
26. Equity ratio % 36.65 37.90 41.16
27. Return on investment % 5.68 20.02 26.09
28. Current ratio x 1.84 1.16 1.45
29. Recapitalization and
stock splits 3 for 2
(Dollars in thousands 1990 1989 1988
except per share amounts)
1. Net sales $5,584,410 4,717,066 3,815,426
2. Income before taxes $ 284,471 230,475 182,241
3. Net income $ 172,571 139,775 112,541
4. Current assets $ 787,869 671,207 600,459
5. Non-current assets $ 791,996 610,470 488,253
6. Total assets $1,579,865 1,281,677 1,088,712
7. Current liabilities $ 597,392 510,838 462,739
8. Long-term debt $ 91,721 95,774 106,263
9. Capital lease obligations,
deferred taxes and other
liabilities $ 217,694 136,611 88,924
10. Shareholders' equity $ 673,058 538,454 430,786
11. Cash dividends
Class A $ 21,926 16,549 11,282
Class B $ 21,082 15,971 10,093
12. Depreciation $ 81,432 65,042 49,904
13. Number of stores
opened (net) # 115 96 92
14. Number of stores open # 778 663 567
15. Total store square
footage (000) # 19,424 16,326 13,695
16. Number of employees # 47,276 40,736 35,531
17. Weighted average shares
outstanding (000) # 483,210 482,964 482,744
18. Number of scanning stores # 508 315 130
19. Earnings per share (a) $ .36 .29 .23
20. Dividends per share (a) $ .089 .067 .044
21. Book value per share (a) $ 1.39 1.11 .89
22. Asset turnover x 3.90 3.98 4.03
23. Return on sales % 3.09 2.96 2.95
24. Return on assets % 12.06 11.79 11.88
25. Return on equity % 28.49 28.84 29.23
26. Equity ratio % 42.60 42.01 39.57
27. Return on investment % 29.33 28.85 28.43
28. Current ratio x 1.32 1.31 1.30
29. Recapitalization and
stock splits
(Dollars in thousands 1987 1986 1985
except per share amounts) (53 Weeks)
1. Net sales $2,953,807 2,406,582 1,865,632
2. Income before taxes $ 150,702 122,923 89,185
3. Net income $ 85,802 61,823 47,585
4. Current assets $ 443,918 311,403 220,827
5. Non-current assets $ 361,895 293,484 218,870
6. Total assets $ 805,813 604,887 439,697
7. Current liabilities $ 315,827 222,941 154,923
8. Long-term debt $ 65,419 36,629 17,900
9. Capital lease obligations,
deferred taxes and other
liabilities $ 85,343 80,453 59,495
10. Shareholders' equity $ 339,224 264,864 207,379
11. Cash dividends
Class A $ 6,551 3,154 2,544
Class B $ 5,800 2,546 1,979
12. Depreciation $ 37,433 29,585 21,381
13. Number of stores
opened (net) # 87 71 66
14. Number of stores open # 475 388 317
15. Total store square
footage (000) # 11,224 8,972 7,086
16. Number of employees # 27,033 20,871 17,089
17. Weighted average shares
outstanding (000) # 482,153 480,351 478,157
18. Number of scanning stores # 30 10 10
19. Earnings per share (a) $ .18 .13 .10
20. Dividends per share (a) $ .026 .012 .009
21. Book value per share (a) $ .70 .55 .43
22. Asset turnover x 4.19 4.61 4.84
23. Return on sales % 2.90 2.57 2.55
24. Return on assets % 12.16 11.84 12.35
25. Return on equity % 28.41 26.18 25.67
26. Equity ratio % 42.10 43.79 47.16
27. Return on investment % 28.20 26.97 27.05
28. Current ratio x 1.41 1.40 1.43
29. Recapitalization and
stock splits 2 for 1 3 for 1
(Dollars in thousands 1984
except per share amounts)
1. Net sales $1,469,564
2. Income before taxes $ 71,405
3. Net income $ 37,305
4. Current assets $ 178,031
5. Non-current assets $ 153,146
6. Total assets $ 331,177
7. Current liabilities $ 104,656
8. Long-term debt $ 16,615
9. Capital lease obligations,
deferred taxes and other
liabilities $ 46,486
10. Shareholders' equity $ 163,420
11. Cash dividends
Class A $ 1,784
Class B $ 1,249
12. Depreciation $ 16,702
13. Number of stores
opened (net) # 25
14. Number of stores open # 251
15. Total store square
footage (000) # 5,399
16. Number of employees # 12,784
17. Weighted average shares
outstanding (000) # 473,193
18. Number of scanning stores # 10
19. Earnings per share (a) $ .08
20. Dividends per share (a) $ .006
21. Book value per share (a) $ .35
22. Asset turnover x 4.86
23. Return on sales % 2.54
24. Return on assets % 12.32
25. Return on equity % 25.99
26. Equity ratio % 49.35
27. Return on investment % 26.41
28. Current ratio x 1.70
29. Recapitalization and
stock splits
Notes to Ten Year Summary of Operations
(a) Amounts are based upon the weighted average number of the Class A and
Class B common shares outstanding.
DEFINITIONS
Line
13. Number of stores opened (net) - Number of stores opened less stores
closed during the year.
14. Number of stores open - Number of stores operating at year-end.
16. Number of employees - Number of full-time and part-time employees at
year-end.
17. Weighted average shares outstanding - Weighted average shares outstanding
have been restated to reflect the stock splits in 1992, 1987 and 1986.
18. Number of scanning stores - Number of stores with scanning cash registers
at year-end.
19. Earnings per share - Net income per common share (line 3 / line 17).
20. Dividends per share - Cash dividends per common share (line 11 / line
17).
21. Book value per share - Book value of shareholders' equity per common
share (line 10 / line 17).
22. Asset turnover - The ratio of sales per dollar of assets employed during
the year. It is calculated by dividing sales by the average total assets
(line 1 / line 6).
23. Return on sales - The percentage of net income earned on each dollar of
sales (line 3 / line 1).
24. Return on assets - The percentage of net income earned on average total
assets (line 3 / line 6).
25. Return on equity - The percentage of net income earned on average
shareholders' equity (line 3 / line 10).
26. Equity ratio - Shows the share of total assets of the business owned by
the shareholders as opposed to outside sources. It is calculated by
dividing year-end shareholders' equity by year-end total assets
(line 10 / line 6).
27. Return on investment - The percentage of net income, excluding interest
expense,to invested capital. ([line 3 + interest] / [average line 8 +
average line 10]).
28. Current ratio - The ratio of current assets to current liabilities
(line 4 / line 7).
Statements of Income
Years Ended
January 1, January 2, December 28,
(Dollars in thousands 1994 1993 1991
except per share amounts)
Net sales $7,609,817 $7,195,923 $6,438,507
Cost of goods sold 6,121,274 5,759,534 5,102,977
Gross profit 1,488,543 1,436,389 1,335,530
Selling and administrative
expenses 1,096,306 975,111 855,809
Interest expense 72,343 49,057 34,436
Depreciation 143,042 121,616 104,614
Store closing charge
(Note 13) 170,500
1,482,191 1,145,784 994,859
Income before
income taxes 6,352 290,605 340,671
Provision for income taxes 2,500 112,600 135,500
Net income $ 3,852 $ 178,005 $ 205,171
Earnings per share $ .01 $ .37 $ .42
(Results as a percentage
of sales)
Net sales 100.00% 100.00% 100.00%
Cost of goods sold 80.44 80.04 79.26
Gross profit 19.56 19.96 20.74
Selling and administrative
expenses 14.41 13.56 13.29
Interest expense 0.95 0.68 0.54
Depreciation 1.88 1.69 1.62
Store closing charge
(Note 13) 2.24
19.48 15.93 15.45
Income before
income taxes 0.08 4.03 5.29
Provision for income taxes 0.03 1.56 2.10
Net income 0.05% 2.47% 3.19%
The accompanying notes are an integral part of the financial statements.
Balance Sheets
January 1, January 2,
(Dollars in thousands 1994 1993
except per share amounts)
Assets
Current assets:
Cash and cash equivalents $ 46,066 $ 105,123
Receivables 109,952 95,987
Inventories 929,138 896,385
Prepaid expenses and other 54,316 51,230
Total current assets 1,139,472 1,148,725
Property, at cost, less accumulated
depreciation 1,364,211 1,372,767
Total assets $2,503,683 $2,521,492
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 10,007 $ 459,750
Accounts payable, trade 346,799 324,063
Accrued expenses 241,187 196,781
Long-term debt - current 183 276
Capital lease obligations - current 7,108 5,090
Other liabilities - current 3,880 314
Income taxes payable 10,107
Total current liabilities 619,271 986,274
Long-term debt 569,350 240,537
Capital lease obligations 301,541 245,654
Deferred income taxes 36,587 84,068
Deferred compensation 571 1,724
Other liabilities 58,809 7,516
Total liabilities 1,586,129 1,565,773
Shareholders' equity:
Class A non-voting common stock,
$.50 par value; authorized 1,500,000,000
shares; issued and outstanding 244,132,000
shares - January 1, 1994 and 244,122,000
shares - January 2, 1993 122,066 122,061
Class B voting common stock, $.50
par value; authorized 1,500,000,000
shares; issued and outstanding 239,571,000 119,786 119,786
shares
Additional capital 289 225
Retained earnings 675,413 713,647
Total shareholders' equity 917,554 955,719
Total liabilities and
shareholders' equity $2,503,683 $2,521,492
The accompanying notes are an integral part of the financial statements.
Statements of Cash Flows
January 1, January 2,
1994 1993
(Dollars in thousands)
Cash flows from operating activities
Net income $ 3,852 $178,005
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 143,042 121,616
Loss (Gain) on disposals of property 529 ( 166)
Store closing charge (Note 13) 170,500
Deferred income taxes ( 55,500) 11,100
Changes in operating assets
and liabilities:
Receivables ( 13,965) 1,119
Inventories ( 32,753) ( 51,846)
Prepaid expenses and other 4,933 ( 8,289)
Accounts payable and accrued expenses 38,837 ( 6,336)
Income taxes payable 10,107 ( 21,960)
Deferred compensation ( 1,153) 37
Other liabilities ( 241) 1,391
Total adjustments 264,336 46,666
Net cash provided by operating
activities 268,188 224,671
Cash flows from investing activities
Proceeds from sale of property 2,382 471
Capital expenditures ( 159,857) ( 402,327)
Net cash used in investing
activities ( 157,475) ( 401,856)
Cash flows from financing activities
Net (payments) proceeds under short-term
borrowings ( 449,743) 337,250
Principal payments under capital
lease obligations ( 6,730) ( 4,976)
Principal payments on long-term debt ( 280) ( 970)
Proceeds from issuance of common stock 69 471
Proceeds from issuance of long-term debt 329,000
Dividends paid ( 42,086) ( 53,812)
Net cash (used in) provided by
financing activities ( 169,770) 277,963
Net (decrease) increase in cash and cash
equivalents ( 59,057) 100,778
Cash and cash equivalents at beginning
of year 105,123 4,345
Cash and cash equivalents at end of year $ 46,066 $105,123
The accompanying notes are an integral part of the financial statements
Statements of Cash Flows
December 28,
1991
(Dollars in thousands)
Cash flows from operating activities
Net income $205,171
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 104,614
Loss (Gain) on disposals of property 481
Deferred income taxes 4,700
Changes in operating assets
and liabilities:
Receivables ( 20,145)
Inventories (170,933)
Prepaid expenses and other ( 3,810)
Accounts payable and accrued expenses 88,195
Income taxes payable ( 2,410)
Deferred compensation ( 7)
Other liabilities 121
Total adjustments 806
Net cash provided by operating
activities 205,977
Cash flows from investing activities
Proceeds from sale of property 1,978
Capital expenditures (304,786)
Net cash used in investing
activities (302,808)
Cash flows from financing activities
Net (payments) proceeds under short-term
borrowings ( 5,000)
Principal payments under capital
lease obligations ( 3,898)
Principal payments on long-term debt ( 3,480)
Proceeds from issuance of common stock 857
Proceeds from issuance of long-term debt 150,300
Dividends paid ( 48,031)
Net cash provided by (used in)
financing activities 90,748
Net (decrease) increase in cash and cash
equivalents ( 6,083)
Cash and cash equivalents at beginning
of year 10,428
Cash and cash equivalents at end of year $ 4,345
The accompanying notes are an integral part of the financial statements
<TABLE>
Statements of Shareholders' Equity
<CAPTION>
Class A Class B
(Dollars and shares in thousands Common Stock Common Stock Additional Retained
except per share amounts) Shares Amount Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances December 29, 1990 162,520 $ 81,260 159,714 $79,857 $1,181 $510,760 $673,058
Cash dividends declared:
Class A - $.1000 per share ( 24,393) ( 24,393)
Class B - $.0987 per share ( 23,638) ( 23.638)
Sale of stock 172 86 771 857
Net income 205,171 205,171
Balances December 28, 1991 162,692 81,346 159,714 79,857 1,952 667,900 831,055
Cash dividends declared:
Class A - $.1120 per share ( 27,355) ( 27,355)
Class B - $.1104 per share ( 26,457) ( 26,457)
Sale of stock 66 33 438 471
Three-for two stock split 81,364 40,682 79,857 39,929 (2,165) ( 78,446)
Net income 178,005 178,005
Balances January 2, 1993 244,122 122,061 239,571 119,786 225 713,647 955,719
Cash dividends declared:
Class A - $.0880 per share ( 21,483) ( 21,483)
Class B - $.0860 per share ( 20,603) ( 20,603)
Sale of stock 10 5 64 69
Net income 3,852 3,852
Balances January 1, 1994 244,132 $122,066 239,571 $119,786 289 675,413 917,554
The accompanying notes are an integral part of the financial statements
</TABLE>
Notes to Financial Statements
(Dollars in thousands except per share amounts)
1. Summary of Significant Accounting Policies
Fiscal Year
The Company's fiscal year ends on the Saturday nearest to December 31. The
year ended January 2, 1993 was 53 weeks.
Single Industry Segment
The Company engages in one line of business, the operation of general food
supermarkets.
Merchandise Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
a last-in, first-out (LIFO) basis. If the first-in , first-out (FIFO) method
had been used, inventories would have been $60,246 and $49,485 greater in 1993
and 1992, respectively.
Statements of Cash Flows
The Company considers all highly liquid investment instruments purchased with
an original maturity of three months or less to be cash equivalents.
Cash paid during the years 1993, 1992 and 1991 was as follows:
1993 1992 1991
Interest (net of amounts capitalized) $ 67,319 $ 44,728 $ 32,095
Income taxes 53,288 125,634 133,228
Capital lease obligations of $62,760, $59,148 and $47,976 were incurred in
1993, 1992 and 1991, respectively. Capital lease retirements of $1,653,
$2,709 and $1,763 were recorded in 1993, 1992 and 1991, respectively.
During 1993, the Company acquired new equipment totaling $3,528 which was
financed with capital leases.
Depreciation
Depreciation is provided on a straight-line basis over the estimated service
lives of assets, generally as follows:
Buildings 40 years
Furniture, fixtures and equipment 3 - 10 years
Leasehold improvements 8 years
Vehicles 7 years
Property under capital leases Lease term
Cost of Goods Sold
Purchases are recorded net of cash discounts.
Pre-opening Costs
Costs associated with the opening of new stores are expensed as incurred.
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.
Earnings Per Share
Earnings per share are based on the weighted average number of shares
outstanding.
2. Property
Property consists of the following:
1993 1992
Land and improvements $ 172,980 $ 135,264
Buildings 382,186 395,969
Furniture, fixtures and equipment 907,640 842,040
Vehicles 90,518 89,024
Leasehold improvements 85,698 75,589
Construction in progress (estimated 26,322 66,091
costs to complete and equip at
January 1, 1994 are $11.7 million)
1,665,344 1,603,977
Less accumulated depreciation 573,135 456,469
1,092,209 1,147,508
Property under capital leases
(less accumulated depreciation
of $55,987 and $43,460 for 1993
and 1992, respectively) 272,002 225,259
$1,364,211 $1,372,767
3. Accrued Expenses
Accrued expenses consist of the following:
1993 1992
Employee profit sharing $ 62,241 $ 82,188
Payroll 42,253 25,203
Reserve for store closings
(Note 13) 28,305
Other 108,388 89,390
$241,187 $196,781
4. Employee Benefit Plan
The Company has a noncontributory profit sharing plan covering all employees.
The plan provides benefits to participants upon death, retirement or
termination of employment with the Company. Contributions to the profit
sharing plan are determined by the Company's Board of Directors.
Profit sharing expense totaled $62.2 million in 1993, $82.2 million in 1992
and $70.3 million in 1991.
5. Long-Term Debt
Long-term debt consists of the following:
1993 1992
Senior note agreement, due from 1998
to 2003. Interest ranges from 6.97%
to 8.00%. $214,000
Medium term notes, due from 1999 to
2006. Interest ranges from 8.32%
to 8.73%. 150,300 $150,300
Note purchase agreements, due 1998.
Interest is at 10.21%. 50,000 50,000
Note purchase agreements, due 1997.
Interest is at 8.25%. 40,000 40,000
Convertible subordinated debentures,
due 2003. Interest is at 5%. The
debentures are convertible at any time
after September 13, 1993 into shares
of the Company's Class A non-voting
common stock at a conversion price of
$7.90 per share, subject to adjustment
under certain circumstances. 115,000
Other 233 513
569,533 240,813
Less current portion 183 276
$569,350 $240,537
The senior note agreement contains restrictive covenants which require
maintenance of net worth, minimum ratio of net income available for fixed
charges to fixed charges, and consolidated debt to total capitalization ratio.
At January 1, 1994, the Company was in compliance with all of these covenants.
At January 1, 1994 property with a net book value of approximately $24.1
million was pledged as collateral for long-term debt.
At January 1, 1994 the Company estimated that the market value of its long-
term debt was approximately $610.0 million. The fair value of the Company's
long-term debt is estimated based on the current rates offered to the Company
for debt of the same remaining maturities.
Approximate maturities of long-term debt in the years 1994 through 1998 are
$.2, $0, $0, $40.0 and $134.0 million.
6. Credit Arrangements
The Company maintains a renewable 364-day credit facility with a syndicate of
commercial banks providing $300 million in formal lines of credit. This
facility will expire on June 3, 1994, however the Company plans to renew the
facility. There were no borrowings against these lines at January 1, 1994.
Additionally, the Company had short-term lines of credit with banks totaling
$43.0 million of which no borrowings were outstanding at January 1, 1994.
The Company has a $250.0 million commercial paper program, of which $0 was
outstanding at January 1, 1994 and $173.3 million was outstanding at January
2, 1993 at an average interest rate of 3.46%.
In addition, the Company has periodic short-term borrowings under informal
arrangements. Outstanding borrowings under these arrangements were $10.0
million at January 1, 1994 at an average interest rate of 3.50% and $171.0
million at January 2, 1993 at an average interest rate of 3.76%.
7. Leases
The Company's stores operate principally in leased premises. Lease terms
generally range from ten to twenty-five years with renewal options ranging
from ten to twenty years. The following schedule shows future minimum lease
payments under capital leases, together with the present value of net minimum
lease payments, and operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of January 1, 1994.
Capital Operating
Leases Leases
1994 $ 50,996 $ 104,984
1995 50,868 104,392
1996 50,805 103,966
1997 50,502 103,493
1998 50,416 103,461
Thereafter 610,062 1,032,944
Total minimum payments 863,649 $1,553,240
Less estimated executory
costs 121,617
Net minimum lease payments 742,032
Less amount representing
interest 433,383
Present value of net minimum
lease payments $ 308,649
Minimum payments have not been reduced by minimum sublease rentals of $5.4
million due in the future under noncancelable subleases or the remaining rent
payments on leased stores scheduled to close (Note 13).
Total rent expense for operating leases, excluding those with terms of one
year or less that were not renewed, is as follows:
1993 1992 1991
Minimum rents $102,390 $93,034 $86,065
Contingent rents,
based on sales 608 727 739
$102,998 $93,761 $86,804
In addition, the Company has signed lease agreements for additional store
facilities, the construction of which was not complete at January 1, 1994.
The leases expire on various dates extending to 2018 with renewal options
generally ranging from ten to twenty years. Total future minimum rents under
these agreements are approximately $141.0 million.
8. Income Taxes
Provisions for income taxes for 1993, 1992 and 1991 consist of the following:
Current Deferred Total
1993
Federal $ 48,400 $(46,300) $ 2,100
State 9,600 ( 9,200) 400
$ 58,000 $(55,500) $ 2,500
1992
Federal $ 84,200 $ 9,700 $ 93,900
State 17,300 1,400 18,700
$101,500 $ 11,100 $112,600
1991
Federal $108,300 $ 3,900 $112,200
State 22,500 800 23,300
$130,800 $ 4,700 $135,500
The Company's effective tax rate varied from the federal statutory rate as
follows:
1993 1992 1991
Federal statutory rate 35.0% 34.0% 34.0%
State income taxes, net of
federal tax benefit 4.1 4.4 4.5
Other 0.3 0.3 1.3
39.4% 38.7% 39.8%
Deferred income tax expense relates to the following:
1993 1992 1991
Excess tax depreciation $ 18,438 $ 19,824 $ 9,062
Excess interest and amortization
over rent on capital leases ( 3,537) ( 2,819) ( 2,260)
Inventory capitalization ( 283) ( 489) ( 1,586)
Restructuring (66,870)
Other ( 3,248) ( 5,416) ( 516)
$(55,500) $ 11,100 $ 4,700
The components of deferred income tax assets and liabilities at January 1,
1994 and January 2, 1993 are as follows:
1993 1992
Current assets:
Inventories $ 11,141 $ 12,427
Reserves 20,327 20,239
Restructuring 9,217
Total current assets included in prepaid
expenses and other 40,685 32,666
Noncurrent assets/(liabilities):
Depreciation (107,523) ( 94,178)
Leases 13,283 10,110
Restructuring 57,653
Total noncurrent assets ( 36,587) ( 84,068)
Net deferred taxes $ 4,098 $( 51,402)
9. Other Liabilities
Other liabilities consist of the following:
1993 1992
Present value of remaining rent payments
on leased stores scheduled to close
(Note 13) $55,100 $ 2,928
Other 3,709 4,588
$58,809 $ 7,516
10. Stock Option Plans
The Company has stock option plans under which options to purchase shares of
Class A common stock may be granted to officers and key employees at prices
not less than fair market value on the date of grant. Options become
exercisable at such time or times 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.
Transactions in stock options are summarized as follows:
Shares
Under
Option Price Per Share
Outstanding at 1990 753,860 $2.36 - 10.17
Granted 376,875 7.92 - 15.83
Exercised ( 276,539) 2.36 - 8.33
Cancelled ( 50,542) 2.36 - 12.67
Outstanding at 1991 803,654 $3.75 - 15.83
Granted 117,425 8.25 - 17.58
Exercised ( 92,675) 3.75 - 8.58
Cancelled ( 129,193) 4.71 - 16.67
Outstanding at 1992 699,211 $6.09 - 17.58
Granted 2,842,325 5.25 - 11.25
Exercised ( 9,826) 6.09 - 8.33
Cancelled ( 207,190) 5.25 - 16.17
Outstanding at 1993 3,324,520 $5.25 - 17.58
On January 1, 1994, options for the purchase of 151,495 shares of Class A
common stock were exercisable and 206,350 shares of Class A common stock were
available for future grants.
11. Common Stock
On January 1, 1994, approximately 23.5% and 14.7% of the Class A non-voting
common stock and 23.8% and 26.5% of the Class B voting common stock were held,
respectively, by Etablissements Delhaize Freres et Cie "Le Lion" S.A.
("Delhaize") and Delhaize the Lion America, Inc., a wholly owned subsidiary of
Delhaize ("Detla"). In the aggregate, Delhaize and Detla owned approximately
50.3% of the Class B voting common stock and 44.2% of the combined common
stock as of January 1, 1994.
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 in excess of dividends declared and paid with respect to
the Class B common stock or 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.
12. Interest Expense
Interest expense consists of the following:
1993 1992 1991
Interest on capital leases $34,905 $28,457 $22,699
Other interest (net of $4.6, $9.5
and $8.0 million capitalized in
1993, 1992, and 1991, respectively) 37,438 20,600 11,737
$72,343 $49,057 $34,436
13. Store Closing Charge
On January 7, 1994, Food Lion announced plans to close 88 unprofitable store
locations in 1994. The Company has established a pre-tax charge against 1993
earnings of $170.5 million (after tax $104 million, or 22 cents per share) to
cover management's best estimate of the costs associated with the store
closings. These costs include the write-down of store assets ($87.1 million)
to reflect estimated realizable values, the present value of remaining rent
payments on leased stores ($55.1 million), and other costs associated with the
store closings such as legal expenses, relocation expenses and costs to store
and transfer reusable equipment ($28.3 million).
14. Litigation
On February 16, 1994, plaintiff Sarah Bullock, an African-American female,
filed a motion to amend her federal district court complaint in Bullock v.
Food Lion, Inc., No. 93-CV-51-ATH (M.D. Ga.), a pending individual plaintiff
suit in which Ms. Bullock alleges that she was denied a promotion and
discharged because of her race, by adding 10 named additional plaintiffs and
company-wide class action allegations of race discrimination in violation of
title VII of the Civil Rights Act of 1964. The amended complaint alleges a
pattern and practice of discrimination in promotions, discipline, discharge,
allocation of hours, awarding full-time status, and wages. The amended
complaint seeks certification of a class defined as all past and present black
employees at Food Lion and all black applicants for employment, broad
injunctive relief, monetary damages including compensatory and punitive
damages, reasonable attorneys' fees, and expenses.
The court has not yet ruled on the motion requesting that the case be
converted to a class action; no class has been certified,and the plaintiff has
not yet specified an amount of monetary damages alleged to have been suffered
by the class. While at this time the Company cannot evaluate the consequences
of an adverse judgment, the Company intends to vigorously defend this action.
Report of Independent Accountants
To the Shareholders of Food Lion, Inc.:
We have audited the accompanying balance sheets of Food Lion, Inc. as of
January 1, 1994 and January 2, 1993 and the related statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 1, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Food Lion, Inc. as of January
1, 1994 and January 2, 1993 and the results of its operations and its cash
flows for each of the three fiscal years in the period ended January 1, 1994
in conformity with generally accepted accounting principles.
Coopers & Lybrand
Charlotte, North Carolina
February 9, 1994, except
for Note 14, as to which the
date is March 24, 1994.
Results by Quarter (Unaudited)
(Dollars in thousands except First Second Third Fourth
per share amounts) (12 Weeks) (12 Weeks) (12 Weeks) *(16 Weeks)
1993
Net sales $1,656,825 $1,749,923 $1,807,374 $2,395,695
Gross profit 316,075 343,836 361,058 467,574
Net income 21,918 30,693 24,686 ( 73,445)
Earnings per share .05 .06 .05 ( .15)
1992
Net sales $1,596,491 $1,643,910 $1,687,454 $2,268,068
Gross profit 326,238 340,545 342,894 426,712
Net income 49,644 52,576 48,533 27,252
Earnings per share .10 .11 .10 .06
*NOTE: The 1993 fourth quarter comprised 16 weeks; the 1992 fourth quarter
comprised 17 weeks. As a result of the store closing charge, net income
decreased $104 million (or 22 cents per share) in the fourth quarter of 1993.
Net income for the fourth quarter of 1992 increased by approximately $5.5
million due to year-end adjustments relating primarily to various insurance
accruals.
Market Price of Common Stock
Years Ended
January 1, 1994 January 2, 1993
Class A Class B Class A Class B
Quarter High Low High Low High Low High Low
First 8 6 5/8 8 1/4 6 5/8 18 1/8 14 3/8 18 1/8 14 7/8
Second 7 1/4 5 7/8 7 1/8 5 3/4 15 1/4 11 1/2 15 3/8 11 7/8
Third 7 5 1/4 7 5 3/8 11 7/8 10 1/8 12 10 1/2
Fourth 6 11/16 5 1/4 6 7/8 5 3/8 11 1/4 7 3/4 12 1/8 8 1/4
The Class A and the Class B common stock are traded in the over-the-counter
market. Price quotations are reported in the NASDAQ National Market System.
The closing market prices per share for the Class A and Class B common stock
at January 1, 1994 were $6.50 and $6.625, respectively, compared with $7.875
and $8.125, for Class A and Class B common stock respectively, at January 2,
1993. The over-the-counter quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions. On February 7, 1994, there were 33,392 holders of record
of Class A common stock and 19,477 holders of record of Class B common stock.
The closing market prices per share for the Class A and the Class B common
stock at February 7, 1994 were $6.50 and $6.625, respectively.
Dividends Declared Per Share of Common Stock
Years Ended
January 1, 1994 January 2, 1993
Quarter Class A Class B Class A Class B
First $.02200 $.02150 $.02800 $.02760
Second .02200 .02150 .02800 .02760
Third .02200 .02150 .02800 .02760
Fourth .02200 .02150 .02800 .02760
Total $.08800 $.08600 $.11200 $.11040
Market prices and dividend amounts for the first two quarters of 1992 have
been adjusted to reflect the three-for-two stock split in 1992.
Food Lion Management
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
At the end of the 1993 fiscal year, Food Lion operated 1,096 supermarkets
compared to 1,012 at the end of fiscal year 1992 and 881 at the end of the
1991 fiscal year. At the end of 1993, Food Lion operated in fourteen
states located primarily in the southeastern United States.
Sales
Sales for the 52 weeks ended January 1, 1994 were $7.6 billion, compared
with $7.2 billion in 1992 (53 weeks), and $6.4 billion in 1991 (52 weeks),
representing annual increases of 5.8%, 11.8% and 15.3%, respectively.
Restating 1992 sales to reflect a comparable 52 weeks, the percentage sales
increases were 7.7%, 9.7% and 15.3%, for fiscal 1993, 1992 and 1991,
respectively. Same store sales - sales for stores open in comparable
periods - improved sequentially throughout 1993, with decreases of 6.0%,
4.8% and 4.0% in the first, second and third quarters, respectively, and a
2.9% increase in the fourth quarter, for a decrease of 2.6% for the entire
fiscal year. Same store sales decreased .4% in 1992 and increased 2.7%
during 1991.
Food Lion, an innovator of everyday low pricing ("EDLP") in the late 1960s,
remains an EDLP leader, with current prices, on average 8% below those of
its competitors. During 1993, sales continued to be affected by changes in
customer purchasing habits, stiff competition and the effects of negative
media coverage in late 1992. Customers in the 1990s, after surviving
recessionary times in 1991 and 1992, have learned to shop for value and are
spending more shopping dollars on regional brand and private label products
as opposed to higher priced national brand name products. Food Lion has
responded to the desires of its customers by offering an increased variety
of regional brand products and by expanding its private label selection.
Currently, Food Lion offers approximately 1,000 private label products,
which represent approximately 10% of total company sales. Two years ago
the Company carried approximately 500 private label products, which
accounted for approximately 5% of total Food Lion sales.
Competition is intense in the supermarket industry as new store formats
enter the market...warehouse clubs, superstores, and combination stores.
Food Lion's supermarketing strategy is flexible and the Company will
continue to listen to its customers and revise its strategy accordingly in
an effort to provide quality products, service, convenience and variety,
while maintaining its low prices.
Gross Profit
Gross profit was 19.56% of sales in 1993, as compared to 19.96% and 20.74%
in 1992 and 1991, respectively. The decline in gross profit in 1992 and
1993, as compared to previous years, is due to an increase in the level of
promotional activity (featured special pricing on certain products, double
couponing, etc.) designed to increase customer traffic and sales, and a
change in the sales mix with lower sales in high margin departments such as
meat and deli.
Although 1993 gross profit has decreased as compared to the previous year,
the Company has experienced sequential FIFO gross profit improvement since
the fourth quarter of 1992, 18.68% - fourth quarter 1992, 19.14% - first
quarter 1993, 19.73% - second quarter 1993, 19.89% - third quarter 1993 and
19.92% - fourth quarter 1993. This improvement throughout 1993 is
partially the result of improvements in shrinkage in the meat and deli
departments as the Company adjusted purchases to allow for lower sales
volumes. In addition, during 1993, the Company began to experience
increased customer traffic into these more profitable departments.
Finally, the level of promotional activity has decreased from first quarter
1993 and fourth quarter 1992 levels and continues to be focused on specific
market areas as needed.
Selling and Administrative Expenses
Selling and administrative expenses as a percentage of sales were 14.41%,
13.56% and 13.29% in 1993, 1992, and 1991, respectively.
The increase in 1993 and 1992 over previous years is due to a lower sales
base available to absorb fixed costs and the extra expenses incurred to
enhance the Company's image. Food Lion continues to listen to its
customers and, in 1993, the Company conducted extensive market research to
identify Food Lion's strengths and weaknesses. Through this research, Food
Lion has identified and implemented steps to better serve the needs and
desires of its customers and to improve customers' perception of the
Company. During 1993, Food Lion accelerated some routine store maintenance
and repair efforts, based on suggestions received from customers, in order
better to ensure superior store conditions and excellent customer service.
In addition, during 1993, Food Lion implemented a new marketing strategy
that includes additional advertising which focuses on the Company's quality
products, customer service and "Extra Low Prices". Food Lion believes that
these short-term extra expenses, though they are affecting current
operating results, will help position the Company for continued success in
the future.
Expenses were also affected during 1993 and 1992 by Food Lion's dedication
to maintaining its existing store base through its store renovation
program. As the Company's store base begins to age, the number of
renovations, including store expansions and deli-bakery additions,
increases, resulting in increased store operating expenses such as rent and
utilities.
Finally, the Company has also incurred an increase in advertising, legal
and public relations costs associated with addressing continuing tactics
from the United Food and Commercial Workers Union International's
"corporate campaign" to discredit or damage Food Lion's credibility and for
ongoing strategic efforts to strengthen customer relations. The Company
expects such costs to continue in 1994.
Although the Company anticipates some continued pressure on expenses over
the next several months, Food Lion expects expenses as a percentage of
sales to decrease during 1994.
During the third quarter of 1993, the Company settled all outstanding
disputes with the U.S. Labor Department ("DOL") arising under the Fair
Labor Standards Act. The settlement required the Company to pay $16.2
million. As the Company had previously established reserves to cover
potential costs associated with the DOL investigation, the actual impact of
the settlement on 1993 selling and administrative expenses and pre-tax 1993
earnings is only $8.2 million.
Interest Expense
Interest expense as a percentage of sales increased to 0.95% in 1993
compared with 0.68% in 1992 and 0.54% in 1991. The increase in 1993 is due
to a higher interest rate on long-term financing that, in part, was used to
replace short-term balances outstanding during the second quarter of 1993.
This long-term financing was used to fund 1993 and 1992 capital
expenditures.
In addition, interest expense increased during 1993 due to a decrease in
the amount of interest capitalized, resulting from a decrease in
construction costs. (During 1992 61 company owned stores and a perishable
distribution center were constructed, while only 31 company owned stores
were constructed in 1993.) The construction of company owned stores was a
continuation of the decision in 1991 to build and own stores in markets
where leasing was not available due to depressed real estate conditions.
During 1992, interest expense increased due to increased short-term
borrowings to initially fund 1992 capital expenditures.
During 1994, the Company expects interest expense to increase as it will
experience a full year of higher interest rates on the long-term financing
that closed in the second quarter of 1993.
Depreciation
Depreciation expense as a percentage of sales was 1.88% in 1993, 1.69% in
1992 and 1.62% in 1991. Capitalized costs increased 11.0% in 1993 compared
to 31.4% in 1992 and 30.1% in 1991. During 1993 31 stores were constructed
and equipped and 69 leased stores were equipped. In 1992, a new perishable
distribution center and 61 stores were constructed and equipped and 79
leased stores were equipped. In 1991, three new distribution centers and
41 stores were constructed and equipped and 70 leased stores were equipped.
The Company will finance the majority of its store growth in 1994 with
conventional lease arrangements, but will continue to build and own some
stores in market areas where leasing is not economically advantageous.
Because of the planned store closings (see below) Food Lion expects 1994
depreciation as a percentage of sales to decrease slightly as compared to
1993.
Store Closing Charge
On January 7, 1994 Food Lion announced plans to close 88 unprofitable store
locations in 1994. Of the planned store closings, 47 stores are in the
Company's southwestern market, while 41 stores are located across eight
states in the Company's southeastern market area.
The decision to close stores comes as part of Food Lion's on-going review
of individual store profitability. By closing unprofitable stores, the
Company will eliminate the operating losses of these stores which will
enhance 1994 and future profits, and allow Food Lion to focus its resources
on profitable stores. Food Lion does not expect a significant impact on
liquidity resulting from these store closings. After the store closings,
Food Lion will continue to operate more than 1,000 stores in 14 states.
The Company has established a pre-tax reserve against 1993 earnings to
cover management's best estimate of the costs associated with these store
closings. These costs include the write down of store assets to reflect
estimated realizable values ($87.1 million), the present value of remaining
rent payments on leased stores scheduled to close ($55.1 million), and
other costs associated with the store closings (which represent future cash
outflows) such as legal expenses, relocation expenses and costs to store
and transfer reusable equipment ($28.3 million). The after tax impact of
this reserve on 1993 earnings was approximately $104 million or 22 cents a
share.
LIFO
In 1993, the LIFO reserve increased $10.8 million, as compared to a
decrease in 1992 of $.9 million and an increase in 1991 of $.6 million.
During the final months of 1993, the Company experienced cost increases on
certain products resulting primarily from inclement weather in the spring
and summer of 1993. Food Lion experienced deflation in food costs in 1992
and slight inflation in 1991, trends that were prevalent in the industry.
Income Taxes
The provision for income taxes was $2.5 million in 1993 as compared to
$112.6 million in 1992 and $135.5 million in 1991. The decrease in 1993
and 1992 resulted from a decrease in earnings. The Company's effective tax
rate was 39.4% in 1993 compared with 38.7% in 1992 and 39.8% in 1991. The
increase in the effective tax rate during 1993 is the result of the Omnibus
Budget Reconciliation Act of 1993 which increased the federal income tax
rate by 1% retroactive to the beginning of 1993. Assuming there are no
additional federal or state income tax rate increases, Food Lion expects
the effective rate for 1994 and forward to be 39.5%.
Liquidity and Capital Resources
Cash provided by operating activities was $268.2 million, $224.7 million
and $206.0 million in 1993, 1992 and 1991, respectively.
The increase in 1993 was partially due to continued improvement in
inventory management techniques, (inventory increased only 3.7%, while the
increase in the number of stores opened was 8.3%), as the Company continued
its just-in-time inventory system, expanded electronic data interchange
with its vendors and initiated a vendor management replenishment system.
An increase in year end accounts payable and accrued expenses also
contributed to the increase in cash provided by operations.
Cash capital expenditures totaled $159.9 million in 1993, compared to
$402.3 million in 1992 and $304.8 million in 1991. During 1993, the
Company equipped a total of 100 new stores, constructed 31 company owned
stores and continued its ongoing store renovation program, including 30
store additions and expansions. During 1992, Food Lion equipped a total of
140 new stores, constructed 61 company owned stores, completed construction
of a new perishable distribution center in Salisbury, North Carolina and
renovated a number of existing stores. In 1991, the Company equipped a
total of 111 stores, constructed 41 company owned stores and completed
construction on three new distribution centers.
The net addition of 84 stores in 1993 increased the total number of stores
to 1,096 at January 1, 1994, an increase of 8.3% over 1992. The total
distribution space owned by the Company increased to 9.5 million square
feet during 1993 compared to 8.9 million in 1992.
Food Lion plans to open 40 to 50 new stores in 1994, located primarily in
the southeast. The majority of these new stores will be opened under
conventional leasing arrangements and, as a result, the impact on liquidity
of owning stores will be insignificant in 1994. The Company also plans to
renovate 60 to 70 existing stores in 1994. Significant cash capital
expenditures currently estimated for 1994 include approximately $30 million
and $42 million to equip new and renovated stores, respectively,
approximately $11 million for additional land costs and approximately $17
million to expand an existing distribution center.
Cash capital expenditures for 1994 will be financed through funds generated
from operations, with existing bank and credit lines, along with other
debt, if necessary. Food Lion does not expect a significant impact on
liquidity resulting from the store closings discussed above.
The Company will consider the possibility of sale-leaseback transactions on
certain free-standing, company owned stores in the future if advantageous
development opportunities are presented by potential lessors.
Debt
During the second quarter of 1993, Food Lion finalized a financing strategy
to (1) repay outstanding short-term debt balances accumulated to fund 1992
capital expenditures, (2) obtain an alternative source of financing for the
Company's short-term financing needs and (3) fund, in part, its 1993 and
1994 capital expenditures.
As a result, the following financing transactions were completed during the
second quarter of 1993:
- a revolving credit facility ("credit agreement") with a syndicate of
commercial banks providing $300 million in formal lines of credit.
There were no borrowings against these lines as of January 1, 1994.
- three series of senior unsecured notes ("note agreement") totaling
$214 million, maturing from 1998 to 2003, with interest rates
ranging from 6.97% to 8.00%.
- the sale of 5% convertible subordinated debentures due 2003 and
totaling $115 million. The debentures are convertible, effective
September 13, 1993, into shares of the Company's Class A non-voting
stock at a conversion price of $7.90 per share.
The terms of the credit agreement and note agreement require the Company to
comply with certain financial and other covenants.
On January 7, 1994, Food Lion filed a Form 8-K announcing plans to seek a
modification to one of these covenants. This covenant originally
prohibited the Company from issuing additional Funded Debt unless the
Company's ratio of Net Income Available for Fixed Charges for the
immediately preceding four fiscal quarters to Pro Forma Fixed Charges
("Ratio") was at least 2.00 to 1.00. Food Lion recently received a
modification to this restriction that changes the Ratio to at least 1.75 to
1.00.
The Company also maintains additional formal lines of credit totaling $43
million. These lines of credit are available when needed. The Company is
not required to maintain compensating balances related to these lines of
credit and borrowings may occur periodically. The Company had no
borrowings under these lines at January 1, 1994.
The Company has a $250.0 million commercial paper program which is outlined
in the table below.
Commercial Paper Program
(Dollars in millions)
1993 1992 1991
Outstanding borrowings at
year end $0 $173.3 $62.5
Average borrowings 51.6 50.4 15.7
Maximum amount outstanding 183.0 173.3 69.0
Daily weighted average
interest rate 3.39% 3.54% 5.61%
Finally, Food Lion has periodic short-term borrowings under informal credit
arrangements which are available to the Company at the discretion of the
lender (see table below).
Informal Credit Arrangements
(Dollars in millions)
1993 1992 1991
Outstanding borrowings at
year end $10.0 $171.0 $60.0
Average borrowings 59.0 87.6 24.4
Maximum amount outstanding 203.6 206.0 131.7
Daily weighted average
2 interest rate 3.56% 3.84% 5.27%
Impact of Inflation
The inflation rate for food prices continues to be lower than the overall
increase in the Consumer Price Index. Inventory and labor, the Company's
primary costs, increase with inflation and where possible will be recovered
through operating efficiencies and gross profits.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Food Lion, Inc. on Form S-8 (File Nos. 33-18796 and 33-
18797) and Form S-3 (File No. 33-40457) of our report dated February
9, 1994, except for Note 14, as to which the date is March 24, 1994,
on our audits of the financial statements and financial statement
schedules of Food Lion, Inc. as of January 1, 1994, and January 2,
1993, and for the fiscal years ended January 1, 1994, January 2, 1993
and December 28, 1991, which report is included in this Annual Report
on Form 10-K.
COOPERS & LYBRAND
Charlotte, North Carolina
March 29, 1994
Exhibit 99
UNDERTAKING TO FILE EXHIBITS PURSUANT
TO ITEM 601(b)(4)(iii)(A) OF REGULATIONS S-K
The undersigned registrant acknowledges that it has not filed
with the Securities and Exchange Commission (the "Commission") copies
of certain instruments with respect to long-term debt of the
registrant representing obligations not exceeding 10% of the
registrant's total assets as of January 1, 1994, pursuant to the
provisions of Item 601(b)(4)(iii)(A) of Regulation S-K of the
Commission (the "Regulation").
Pursuant to the Regulation, the undersigned registrant hereby
undertakes to furnish to the Commission upon its request a copy of any
such instrument, including nine Note Purchase Agreements dated January
30, 1987 between the Company and various parties, in amounts ranging
from $500,000 to $18 million and totaling $40 million, nine Note
Purchase Agreements dated July 20, 1988 between the Company and
various parties, in amounts ranging from $1.5 million to $15 million
and totaling $50 million, three Senior Note Agreements dated June 4,
1993 between the Company and various parties, in amounts ranging from
$37 million to $93 million and totaling $214 million, and convertible
subordinated debentures dated June 15, 1993 totaling $115 million.
This is the day of , 1994.
FOOD LION, INC.
Dan Boone, Vice President of
Finance
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
SALISBURY DIVISION
ROBERT B. REICH, )
Secretary of Labor, ) FILE NO.
United States Department of Labor, )
) 4:93CV457
Plaintiff, )
v. )
)
Food Lion, Inc., )
) C O N S E N T
Defendant. ) J U D G M E N T
This cause came on for consideration upon plaintiff's motion, and
defendant, waiving service of process, and without admitting any
violation of the Fair Labor Standards Act, 29 U.S.C. 201, et
seq., consents to the entry of this Judgment, without further
contest. It is, therefore,
ORDERED, ADJUDGED, and DECREED that defendant, its agents,
servants, employees and all persons in active concert or
participation with them who receive actual notice hereof are
permanently enjoined from violating the provisions of the Fair
Labor Standards Act, in any of the following manners:
1. They shall not, contrary to 6 and 15(a)(2) of the Act,
29 U.S.C. 206 and 215(a)(2), pay any employee who is engaged in
commerce or in the production of goods for commerce, or who is
employed in an enterprise engaged in commerce or in the production
of goods for commerce, within the meaning of the Act, wages at a
rate less than the applicable minimum hourly rate prescribed by
said 6 as now in effect or which hereafter may be made applicable
by amendment thereto.
2. They shall not, contrary to 7 and 15(a)(2) of the Act,
29 U.S.C. 207 and 215(a)(2), employ any employee in commerce or in
the production of goods for commerce, or in an enterprise engaged
in commerce or in the production of goods for commerce, within the
meaning of the Act, for more than 40 hours in a workweek unless
such employee is compensated for such hours in excess of 40 at an
overtime rate of at least one and one-half times the regular rate
at which such employee is employed.
3. They shall not, contrary to 11(c) and 15(a)(5) of the
Act, 29 U.S.C. 211(c) and 215(a)(5), fail to make, keep and
preserve adequate and accurate employment records as prescribed by
the regulations found at 29 C.F.R. 516.
4. They shall not, contrary to 12(c) and 15(a)(4) of the
Act, 29 U.S.C. 212(c) and 215(a)(4), employ, suffer or permit
minors to work in commerce or in the production of goods for
commerce, or in an enterprise engaged in commerce or in the
production of goods for commerce, within the meaning of the Act,
under conditions constituting child labor as defined in 3(1) of
the Act, 29 U.S.C. 203(1), and the regulations found at 29 C.F.R.
570. Particularly, they shall not, contrary to the regulation
found at 29 C.F.R. 570.35, employ minors under the age of 16 years
for more hours than permitted or during hours not permitted
thereby, or contrary to regulations found at 29 C.F.R. 570.61-.63,
employ minors under the age of 18 years in occupations declared
therein to be hazardous.
5. They shall not discharge or in any other manner
discriminate against any employee in violation of 15(a)(3) of the
Act, 29 U.S.C. 215(a)(3).
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that defendant
hereby is restrained from withholding payment of back wages in the
total amount of $13,200,000 due employees for the periods of
employment and in the amounts indicated with respect to each, as
set forth in the attached settlement agreement.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that defendant
shall not solicit, accept or attempt to accept from any individual
who receives back wages pursuant to this Judgment, a return of any
portion of such back wages.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that defendant
shall pay $2,000,000 in Fair Labor Standards civil money penalties
and $1,000,000 in Child Labor civil money penalties pursuant to
16(e) of the Act, as set forth in the attached settlement
agreement.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that defendant
shall post copies of this Judgment and attached settlement
agreement in all of defendant's establishments in conspicuous
places on the premises where notices to employees and applicants
to employment are customarily posted. Such posting shall begin no
later than three days after entry of this Judgment and shall
remain posted for 60 days thereafter.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that court costs
of this action hereby are taxed to the defendant for which
execution may issue. Each party shall bear such other of its own
fees (including attorney's fees) and expenses as were incurred by
it in connection with any stage of this case.
This day of , 1993.
UNITED STATES DISTRICT JUDGE
Defendant consents to entry Plaintiff moves entry of
of the foregoing Judgment: the foregoing Judgment:
FOOD LION, INC. THOMAS S. WILLIAMSON, JR.
Solicitor of Labor
By: WILLIAM H. BERGER
GEORGE R. SALEM, P.C. Deputy Regional Solicitor
Akin, Gump, Strauss, Hauer,
& Feld, L.L.P. ROBERT L. WALTER
1333 New Hampshire Avenue, NW Attorney
Suite 400
Washington, DC 20036 By:
(202) 887-4140 ROBERT L. WALTER
(202) 887-4288 (FAX) Attorney
Office of the Solicitor
U.S. Department of Labor
1371 Peachtree St., N.E.
Room 339
Atlanta, GA 30367
(404) 347-4811
(404) 347-7716 (FAX)
Attorneys for Plaintiff
SETTLEMENT AGREEMENT
The following Settlement Agreement is entered into between
the U.S. Department of Labor ("the Department") and Food Lion,
Inc. ("the Company") (collectively "the Parties").
1. By entering into this Agreement, the Company does not
admit any violations of the Fair Labor Standards Act ("FLSA"), nor
is this agreement to be considered an admission by the Company of
violations of the FLSA. This agreement may not be introduced as
evidence in any proceeding without the consent of the Parties.
2. This Agreement will resolve all outstanding issues
between the Department of Labor and the Company relating to
minimum wage, overtime compensation, recordkeeping, child labor
and discrimination provisions of the FLSA up to the date of its
execution.
3. The Parties to this Agreement shall work cooperatively to
promote and assure compliance with the provisions of the FLSA. In
furtherance thereof, the Company has agreed to implement a
Compliance Plan to establish mechanisms to promote and assure
compliance with the provisions of the FLSA. The Wage-Hour
Division of the Department's Employment Standards Division ("Wage-
Hour") will provide materials and assistance for training of
company managers in the requirements of the law.
4. The Company will, on a quarterly basis for a period of
three years, prepare and maintain a report listing any problems or
complaints which have arisen concerning the FLSA, and information
regarding how those problems or issues have been resolved. The
first such report will be prepared on or before November 1, 1993,
and cover the period from the signing of this Agreement through
September 30, 1993. Thereafter, such reports covering quarterly
periods ending on December 31, March 31, June 30, and September 30
shall be prepared within 30 days after the end of the applicable
quarterly period. The Company will make these reports available
for Wage-Hour's review upon request.
5. Pursuant to the Consent Judgment, to which this
Settlement Agreement is attached, the Company shall pay a total of
$16.2 million, which includes $13.2 million in backwages for
current and former employees, $2 million for FLSA civil money
penalties, and $1 million for Child Labor civil money penalties.
The Company shall hold in an interest-bearing escrow account the
said amount of $16.2 million for distribution of the backwages to
current and former employees and payment to Wage-Hour of the civil
money penalties, $8.1 million of which is to be transferred to the
escrow account within 90 days of the date of the signing of this
Agreement, and $8.1 million of which is to be transferred by
January 5, 1994. All interest accrued in the escrow account shall
become a part of the fund for distribution to current and former
employees.
6. The Company shall compute backwages on the basis of
formula(s) to be supplied to the Company by Wage-Hour for each job
category listed in Attachment A, and prepare individual checks for
the backwages, less deductions for all applicable taxes and
employee contributions to FICA, for current and former employees
employed since December 7, 1989, in job categories listed in
Attachment A, excluding the current and former employees who are
plaintiffs as of August 2, 1993, in private FLSA Section 16(b)
litigation against the Company. Wage-Hour shall thereupon
distribute the checks to the employees due backwages under this
Agreement. Any amounts determined to be not distibutable, or
amounts not distributed by Wage-Hour within the period of three
(3) years after the receipt of the backwage checks by Wage-Hour
from the Company because of inability to locate the proper persons
or because of such person's refusal to accept such sums, shall be
deposited in the Treasury of the United States as miscellaneous
receipts.
7. Payment of the $2 million in FLSA civil money penalties
and $1 million in Child Labor civil money penalties shall be made
to the Department of January 7, 1994.
This 30th day of July, 1993.
FOOD LION, INC. UNITED STATES DEPARTMENT OF LABOR
By: By:
GEORGE R. SALEM, P.C. THOMAS S. WILLIAMSON, JR.
Akin, Gump, Strauss, Hauer, Solicitor
& Feld, L.L.P. U.S. Department of Labor
1333 New Hampshire Ave., NW 200 Constitution Avenue, NW
Suite 400 Washington, DC 20210
Washington, DC 20036
ATTACHMENT A
JOB CATEGORIES
Market Manager
Grocery Manager
Produce Manager
Customer Service Manager
Meat Wrapper
Meat Cutter
Stocker
Produce Clerk
