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