SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 22,1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........to...........
Commission File number 0-6080
FOOD LION, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0660192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1330, 2110 Executive Drive Salisbury, NC 28145-1330
(Address of principal executive office) (Zip Code)
(704) 633-8250
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Outstanding shares of common stock of the Registrant as of April 25, 1997.
Class A Common Stock 236,056,252
Class B Common Stock 232,727,364
Page 1 of 67
The Exhibit index is located on page 14.
FOOD LION, INC.
INDEX TO FORM 10-Q
March 22, 1997
PAGE
NUMBER
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the
12 weeks ended March 22, 1997 and March 23, 1996 3
Consolidated Balance sheets as of March 22, 1997,
December 28, 1996 and March 23, 1996 4
Consolidated Statements of Cash Flows for the
12 weeks ended March 22, 1997 and March 23, 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security 12
Holders
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 12 Weeks ended March 22, 1997 and March 23, 1996
(Dollars in thousands except per share data)
March 22, 1997 March 23, 1996 12 WEEKS
(A) (B) (A) (B)
% %
<S> <C> <C> <C> <C>
Net sales $2,276,746 $2,024,453 100.00 100.00
Cost of goods sold 1,779,885 1,612,830 78.18 79.67
Gross profit 496,861 411,623 21.82 20.33
Selling and administrative expenses 346,841 278,988 15.23 13.78
Depreciation and amortization 48,697 37,019 2.14 1.83
Asset impairment reserve - 9,640 0.00 0.47
Operating income 101,323 85,976 4.45 4.25
Interest expense 26,685 19,004 1.17 0.94
Income before income taxes 74,638 66,972 3.28 3.31
Provision for income taxes 29,109 26,119 1.28 1.29
Net income $ 45,529 $ 40,853 2.00 2.02
Earnings per share $ 0.10 $ 0.09
Dividends per share $ 0.03 $ 0.03
Weighted average number
of shares outstanding
Class A 236,195,448 237,202,480
Class B 233,902,364 235,935,114
Total 469,097,812 473,137,594
</TABLE>
-3-
<TABLE>
FOOD LION, INC.
CONSOLIDATED BALANCE SHEETS
Dollars in thousands)
(Unaudited)
March 22, 1997 December 28, 1996 March 23, 1996
Assets
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 101,205 $ 102,371 $ 135,119
Receivables 142,509 151,163 130,483
Inventories 974,861 1,065,743 875,719
Prepaid expenses and other 30,463 33,660 20,495
Deferred tax asset 75,807 75,807 50,018
Total current assets 1,324,845 1,428,744 1,211,834
Property, at cost, less accumulated
depreciation 1,783,552 1,772,503 1,502,978
Deferred tax asset 8,619 8,619 -
Intangible assets 276,754 278,726 10,033
Total assets $3,393,770 $3,488,592 $2,724,845
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable $ 300,000 $ 250,010 $ -
Accounts payable, trade 426,848 470,994 363,520
Accrued expenses 418,401 397,431 358,977
Capital lease obligations - current 21,452 21,970 16,220
Long term debt - current 988 973 40,000
Other liabilities - current 6,813 7,279 3,682
Income taxes payable 16,257 5,578 ____14,200
Total current liabilities 1,190,759 1,154,235 796,599
Long-term debt 334,085 495,111 315,300
Capital lease obligations 470,545 469,035 385,035
Deferred income taxes - - 44,120
Other liabilities 152,892 154,273 74,511
Total liabilities 2,148,281 2,272,654 1,615,565
Shareholders' Equity:
Class A non-voting common stock, $.50 par value 118,130 118,083 117,966
Class B voting common stock, $.50 par value 116,451 116,451 117,738
Additional capital 1,376 1,708 -
Retained earnings 1,009,532 979,696 873,576
Total shareholders' equity 1,245,489 1,215,938 1,109,280
Total liabilities and shareholders' equity $3,393,770 $3,488,592 $2,724,845
</TABLE>
-4-
FOOD LION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 12 Weeks ended March 22, 1997 and March 23, 1996
(Dollars in thousands)
12 Weeks
March 22, 1997 March 23, 1996
Cash flows from operating activities
Net income $45,529 $40,853
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,697 37,019
Gain on disposals of property 1,515 401
Asset impairment reserve - 9,640
Changes in operating assets and liabilities:
Receivables 8,654 (2,488)
Inventories 90,882 5,302
Prepaid expenses and other 3,197 2,849
Accounts payable and accrued expenses (23,176) 42,357
Income taxes payable 10,679 14,200
Other liabilities (1,847) 2,675
Total adjustments 138,601 111,955
Net cash provided by operating activities 184,130 152,808
Cash flows from investing activities
Capital expenditures (53,464) (50,992)
Proceeds from disposal of property 758 1,251
Net cash used in investing activities (52,706) (49,741)
Cash flows from financing activities
Net proceeds under short-term borrowings 49,990 -
Principal payments on long-term debt (161,011) -
Principal payments under capital lease obligations (5,591) (3,900)
Dividends paid (15,693) (13,141)
Repurchase of common stock (874) (20,944)
Proceeds from issuance of common stock 589 2
Net cash used in financing activities (132,590) (37,983)
Net (decrease)increase in cash and cash
equivalents (1,166) 65,084
Cash and cash equivalents at beginning
of period 102,371 70,035
Cash and cash equivalents at end of period $101,205 $135,119
-5-
Notes to Consolidated Financial Statements (Dollars in thousands)
1) Basis of Presentation:
The accompanying financial statements are presented in accordance with
the requirements of Form 10-Q and, consequently, do not include all the
disclosures normally required by generally accepted accounting principles or
those normally made in the Annual Report on Form 10-K of Food Lion, Inc.
(the "Company"). Accordingly, the reader of this Form 10-Q should refer
to the Company's Form 10-K for the year ended December 28, 1996 for further
information.
The financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In the
opinion of management, the financial information includes all
adjustments consisting of normal recurring adjustments necessary for
a fair presentation of interim results.
2) Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
March 22, 1997 March 23, 1996
Interest (net of amounts
capitalized)* $21,326 $16,189
Income taxes 18,144 11,522
*Interest capitalized 336 373
Capital lease obligations for stores of $18,092 and $20,488
were incurred in the 12 week period of 1997 and 1996,
respectively. Capital lease retirements of $11,509 and $3,010
were recorded in the 12 week period of 1997 and 1996,
respectively.
The Company considers all highly liquid investment instruments
purchased with an original maturity of three months or less to
be cash equivalents.
3) The Financial Accounting Standards Board has issued Statement No.128
"Earnings Per Share," FAS No.128 effective for financial statements
issued for periods ending after December 15, 1997. FAS No. 128 will be
implemented in the Company's 10K for the year ended January 3, 1998.
The Company does not expect that FAS No. 128 will have a material impact
on the earnings per share computation.
-6-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS (12 weeks ended March 22, 1997 compared to 12 weeks
ended March 23, 1996)
The Company's sales for the first quarter of 1997 were $2.3 billion, an increase
of 12.5% over the corresponding period of the prior year, with earnings
of $45.5 million or $.10 per share, an increase of 11% over the comparable
period last year. The quarterly sales increase of 12.5% for the 12 weeks
ended March 22, 1997 is primarily the result of additional sales from the
Company's Kash n' Karry Food Stores, Inc.("Kash n'Karry") subsidiary, which
Food Lion acquired in December 1996. Same store sales were flat for the
first quarter. First quarter same store sales comparisons were
impacted by the following:
Same store sales growth has been negatively impacted by the fact that some
of the initiatives that increased sales during the first quarter of 1996 have
now been implemented for one full year's cycle. As a result, the Company faces
more rigorous same store sales comparisons than it did when these
initiatives were introduced. These initiatives included the conversion to
24-hour store operations, expansion of the MVP program(Food Lion's customer
loyalty card program) and acceptance of debit and credit card transactions
in all stores.
Last year's first quarter sales were positively impacted by harsh winter
weather conditions throughout the Southeast that contributed to sales strength.
This year, weather conditions have been very mild across all of Food Lion's
market areas.
The grocery industry is experiencing minimal food price inflation. During
the first quarter of 1997, Food Lion's inflation rate was 0.5%.
Competitive initiatives in Food Lion's major markets have increased in the
first quarter of 1997 with the introduction of customer loyalty cards and
heavy advertising and promotional activity.
The Company's Southwest market is generating positive cash flow but
is not achieving the Company's standards for financial performance.
The Company continues to monitor sales and profits in the
Southwest market and to evaluate the performance of all corporated assets,
including those in the Southwest.
The Company's 1997 business plan includes the opening of 55 to 60 new stores
offset by the closing or relocation of approximately 33 stores and the
renovation of approximately 100 stores. During the first quarter, the Company
opened nine new stores, closed 19 stores(of which three were relocations),and
completed renovations of 13 existing stores.
-7-
Gross profit was 21.82% of sales for the first quarter this year compared to
20.33% of sales for the same period last year. The increase in gross profit is
due to continued category management initiatives across all merchandise
categories and an increase in private label sales.
For the first quarter of 1997, selling and administrative expenses were $346.8
million or 15.23% of sales as compared to 13.78% of sales in the
corresponding period of the prior year. Kash n'Karry stores incur a higher
level of selling and administrative expenses than do Food Lion stores due to
their larger square footage store format and emphasis on specialty food
departments. Kash n' Karry operations increased the Company's selling and
administrative expenses during the first quarter by 0.8% of sales compared to
the first quarter of 1996.
Selling and administrative expenses for the Food Lion stores were 14.4% of sales
which is an improvement over that experienced in the last three consecutive
quarters and comparable to that experienced in first quarter of 1995. First
quarter 1996 selling and administrative expenses were low at 13.8% of sales due
to high sales growth in the quarter.
Because of the consolidation of Kash n' Karry stores, the Company anticipates
that the selling, general and administrative ("SGA")ratio will continue to
exceed historical levels for some time. As the Company implements cost saving
strategies within the Kash n' Karry operation and integrates its administrative
functions with those of Food Lion, the Company should experience a downward
trend in the SGA ratio over time.
Depreciation and amortization of $48.7 million was 2.14% of sales compared to
1.83% of sales in the first quarter of 1996. The 0.31% increase is primarily
due to leasehold improvements and equipment purchases for new stores and
renovations since the first quarter last year. Additional increase resulted from
the amortization of the goodwill from the Kash n' Karry acquisition.
During the first quarter of 1996 Food Lion adopted Financial Accounting
Standards Board Statement no. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (FAS no. 121). The
implementation of FAS no. 121 created a non-cash charge against first quarter
1996 pre-tax net income of $9.6 million to reflect properly the carrying
value of the Company's assets, using a discounted cash flow valuation method.
Interest expense of $26.7 million or 1.17% of sales, increased 0.23% of sales
due to short-term borrowings used to fund the Kash n' Karry transaction and an
increase in interest expense on store capital leases resulting from new store
openings and renovations.
Net income for the quarter was $45.5 million or 2.00% of sales as compared to
2.02% of sales in the first quarter of the prior year. Earnings were $.10
per share as compared to $.09 per share last year.
-8-
Liquidity and Capital Resources
Cash provided by operating activities totaled $184.1 million for the 12 weeks
ended March 22, 1997 compared with $152.8 million for the same period last year.
The increase was primarily due to lower inventory levels, which were partially
offset by a decrease in trade payables.
Capital expenditures totaled $53.5 million for the 12 weeks ended March 22, 1997
compared with $51.0 million for the same period in 1996. The Company opened
nine new stores, including the relocation of three existing stores, and
completed the renovation of 13 existing stores during the first quarter of 1997.
Food Lion plans to open a total of 55 to 60 new stores and to renovate
approximately 100 stores in 1997. The Company anticipates that the majority of
the new stores will be opened under conventional leasing arrangements.
Significant cash capital expenditures currently estimated for the remainder of
1997 are as follows:
Store expansion and new store construction $ 71 million
Equip new and renovated stores $100 million
Land costs $ 9 million
Distribution equipment $ 33 million
Information technology $ 15 million
Other capital expenditures $ 15 million
In addition, the Company anticipates spending $150 million in capital
expenditures over the next two to three years for renovations in Kash n' Karry
stores.
Capital expenditures for 1997 will be financed through funds generated from
operations, existing bank and credit lines, and other debt, if necessary.
In the first quarter of 1997, cash flow from operations was used to reduce total
outstanding debt by $111 million from December 28, 1996.
On April 21, 1997, the Company issued $150 million in debt securities at 7.55%
due in 2007 and $150 million in debt securities at 8.05% due in 2027. Interest
on the notes is payable semiannually in arrears on April 15 and October 15 of
each year, commencing October 15, 1997. Proceeds from the issuance were used to
refinance amounts outstanding under the Company's revolving credit facility, as
noted below.
The Company maintains the following bank and credit lines:
$250 million commercial paper program under which no borrowings were
outstanding during the entire first quarter of 1997 or 1996.
-9-
A revolving credit facility with a syndicate of commercial banks providing
$700 million in committed lines of credit, of which $350 million will expire
in December, 1997 with the remaining $350 million to expire in December, 2001.
Outstanding borrowings were $300 million as of March 22, 1997, as compared
with no borrowings during the first quarter 1996. During the first quarter
1997, the Company had average borrowings of $244.9 million at a daily
weighted average interest rate of 5.73% with a maximum amount outstanding
of $410 million. In April 1997, the proceeds from the Company's issuance
of debt securities noted above was used to reduce amounts outstanding under
this credit facility.
Additional short-term committed lines of credit totaling $35 million which
are available when needed. The Company is not required to maintain
compensating balances related to these lines of credit, and borrowings may
occur periodically. There were no borrowings as of March 22, 1997 or
March 23, 1996. During the first quarter of 1997, the Company had average
borrowings of $0.9 million at a daily weighted average interest rate of
5.55% with a maximum amount outstanding of $20 million.
Periodic short-term borrowings may be placed under informal credit
arrangements, which are available to the Company at the discretion of the
lender. Borrowings for the first quarter were as follow (see table below):
Informal Credit Arrangements:
(dollars in millions) 1997 1996
Outstanding borrowings at end of first quarter $ 0 $0
Average borrowings $ 0.2 $0
Maximum amount outstanding $20.0 $0
Daily weighted average interest rate 5.46% NA
During the first quarter of 1997, the Company expended $0.9 million for the
purchase of Class A shares, as part of the Company's stock repurchase plan. The
Company purchased 110,000 shares of Class A stock during the quarter at an
average price of $7.94 per share. Additional purchases of Class A and/or Class
B Common Stock may be made in the open market under the current program which
began in May of 1996, as deemed in the best interest of shareholders. In May
of 1997, the Board of Directors voted to extend the stock repurchase program
for one year and approved the repurchase of up to $100 million worth of the
Company's common stock between May of 1997 and May of 1998.
The Company established a pre-tax charge against 1993 earnings of $170.5 million
(approximately $104 million after tax) to cover management's estimate of the
costs associated with the closing of 88 unprofitable store locations. As of the
end of first quarter 1997, the Company has charged $84.8 million against the
reserve, primarily as a
-10-
result of the payment of remaining rent obligations on leased stores and the
disposition of property. The Company believes the remaining reserve is adequate
to cover the costs associated with the disposition of the remaining properties.
Other
From time to time, information provided by the Company, including written or
oral statements made by its representatives, may contain forward-looking
information as defined in the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, which address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as expansion and growth of the
Company's business, future capital expenditures and the Company's business
strategy, are forward-looking statements. In reviewing such information, it
should be kept in mind that actual results may differ materially from those
projected or suggested in such forward-looking information. This forward-
looking information is based on various factors and was derived using numerous
assumptions. Many of these factors have previously been identified in filings
or statements made by or on behalf of the Company.
Important assumptions and other factors that could cause actual results to
differ materially from those set forth in the forward-looking information
include: changes in the general economy or in the Company's primary markets,
changes in consumer spending, competitive factors, changes in the rate of
inflation, changes in state or federal legislation or regulation, adverse
determinations with respect to litigation or other claims, inability to develop
new stores or complete remodels as rapidly as planned, stability of product
costs, and uncertainties detailed from time to time in the Company's filings
with the Securities and Exchange Commission.
-11-
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company has had no significant developments related
to legal matters since the Item 1 disclosure included in the
Company's Form 10K filed March 27,1997 for the year ended
December 28, 1996.
Item 2. Change in Securities
This item is not applicable.
Item 3. Defaults Upon Senior Securities
This item is not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
This item is not applicable.
Item 5. Other Information
This item is not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
10a. Food Lion, Inc. and The Bank of New York, Trustee, First
Supplemental Indenture dated as of April 21, 1997
10b. Underwriting Agreement dated as of April 16, 1997 between
Food Lion, Inc. and Salomon Brothers, Inc., for itself and as
representative for NationsBankc Capital Markets Inc
11 Computation of Earnings per Share
27 Financial Data Schedule
(b). The Company filed a report on Form 8-K pursuant to Item 5 on
April 7,1997 in regards to "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
-12-
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
FOOD LION, INC.
Registrant
DATE: May 5, 1997 BY: Laura Kendall
Laura Kendall
Vice President of Finance
Chief Financial Officer
Principal Financial Officer
-13-
EXHIBIT INDEX
SEQ. PAGE
EXHIBIT #
DESCRIPTION NO.
10a. Food Lion, Inc. and The Bank of New York,
Trustee, First Supplemental Indenture dated
as of April 21, 1997 15-44
10b. Underwriting Agreement dated as of April 16, 1997
between Food Lion, Inc. and Salomon Brothers, Inc.
for itself and as representative for NationsBankc
Capital Markets Inc 16-64
11 Computation of Earnings per Share 65
27 Financial Data Schedule 66-67
-14-
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except Periods Ended
per share amounts)
March 22,1997 March 23,1996
PRIMARY
NET INCOME $ 45,529 $40,853
WEIGHTED AVERAGE COMMON
SHARES AND OTHER COMMON
STOCK EQUIVALENTS:
COMMON STOCK OUTSTANDING 469,098 473,138
STOCK OPTIONS 591 -
469,689 473,138
PRIMARY EARNINGS PER SHARE (*) $ .10 $ .09
FULLY DILUTED
NET INCOME $45,529 $40,853
ELIMINATION OF INTEREST EXPENSE,
NET OF RELATED TAX EFFECT,
APPLICABLE TO 5% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2003 801 807
ADJUSTED INCOME APPLICABLE TO
COMMON STOCK $46,330 $41,660
WEIGHTED AVERAGE COMMON
SHARES AND OTHER COMMON
STOCK EQUIVALENTS:
COMMON STOCK OUTSTANDING 469,098 473,138
STOCK OPTIONS 591 -
SHARES ISSUABLE UPON
CONVERSION OF 5% CONVERTIBLE
SUBORDINATED DEBENTURES DUE
2003 14,440 14,557
484,129 487,695
FULLY DILUTED EARNINGS PER SHARE (*) $ .10 $ .09
(*) NOTE: Dilution is less than 3%. Therefore, common stock equivalents
have been excluded from the total weighted average common shares.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statements of Income and the
Consolidated Statement of Cash Flows and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-22-1997
<CASH> 101205
<SECURITIES> 0
<RECEIVABLES> 142509
<ALLOWANCES> 0
<INVENTORY> 974861
<CURRENT-ASSETS> 1324845
<PP&E> 2738693
<DEPRECIATION> 955141
<TOTAL-ASSETS> 3393770
<CURRENT-LIABILITIES> 1190759
<BONDS> 334085
0
0
<COMMON> 235957
<OTHER-SE> 1009532
<TOTAL-LIABILITY-AND-EQUITY> 3393770
<SALES> 2276746
<TOTAL-REVENUES> 2276746
<CGS> 1779885
<TOTAL-COSTS> 1779885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26685
<INCOME-PRETAX> 74638
<INCOME-TAX> 29109
<INCOME-CONTINUING> 45529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45529
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
FOOD LION, INC
and
THE BANK OF NEW YORK, Trustee
_____________
FIRST SUPPLEMENTAL INDENTURE
_____________
Dated as of April 21, 1997
_____________
Providing for the issuance of Debt Securities in series.
FIRST SUPPLEMENTAL INDENTURE dated as of April 21, 1997 (the
"First Supplemental Indenture"), between FOOD LION, INC., a North
Carolina corporation (the "Company"), and THE BANK OF NEW YORK, a
New York banking corporation, as trustee (the "Trustee").
RECITALS:
WHEREAS, the Company and the Trustee entered into an
Indenture, dated as of August 15, 1991 (the "Indenture") to
provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness to be
issued in one or more series (the "Debt Securities") (capitalized
terms used herein without definition shall have the respective
meanings ascribed to them in the Indenture);
WHEREAS, Section 10.01 of the Indenture provides that the
Company and the Trustee may supplement the Indenture without the
written consent of the Holders in certain situations;
WHEREAS, Sections 2.01 and 2.02 of the Indenture provides
that the Company may enter into an indenture supplement without
the consent of any Holders to establish the terms of one or more
series of the Debt Securities;
WHEREAS, all acts and things prescribed by the Indenture, by
law and by the Certificate of Incorporation and the Bylaws of the
Company and of the Trustee necessary to make this First
Supplemental Indenture a valid instrument legally binding on the
Company and the Trustee, in accordance with its terms, have been
duly done and performed; and
WHEREAS, all conditions precedent to amend or supplement the
Indenture have been met.; and
WHEREAS, all Debt Securities issued and outstanding as of
April 21, 1997 shall continue to be governed by the provisions of
the Indenture;
NOW, THEREFORE, each party agrees, for the benefit of the
other party and for the equal and ratable benefit of the Holders
of any series of Debt Securities, issued on or after April 21,
1997, including, without limitation, the Debt Securities
described in Article 2 hereof, to the amendments set forth below
(the "Amendments") which will become operative pursuant to the
terms hereof.
ARTICLE 1
Amendments
Section 1.01. Amendments and Modifications to Article One.
a. Insert the following as a new definition to Section 1.01.
The term "Attributable Debt" means in connection with a
Sale and Lease-Back Transaction the aggregate of
present values (discounted at a rate per annum equal to
the average interest borne by all outstanding Debt
Securities determined on a weighted average basis and
compounded semi-annually) of the obligations of the
Company or any Subsidiary for net rental payments
during the remaining term of the applicable lease
(including any period for which such lease has been
extended or may, at the option of the lessor, be
extended).
b. Insert the following as a new definition in
Section 1.01.
The term "Capital Lease" means any lease of property
which, in accordance with generally accepted accounting
principles, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and
liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet; and
"Capitalized Lease Obligation" means the amount of the
liability which should be so capitalized or disclosed.
c. Insert the following as a new definition in
Section 1.01.
The term "Funded Indebtedness" means any Indebtedness
maturing by its terms more than one year from the date
of the determination thereof, including any
Indebtedness renewable or extendible at the option of
the obligor to a date later than one year from the date
of the determination thereof.
d. Insert the following as a new definition in Section 1.01.
The term "Indebtedness" of any Person means all
obligations (other than the Debt Securities of such
series) of or guaranteed or assumed by, such Person or
any of such Person's Restricted Subsidiaries for
borrowed money or evidenced by bonds, debentures, notes
or other similar instruments.
e. Insert the following as a new definition in
Section 1.01.
The term "Restricted Subsidiaries" means all
Subsidiaries other than Non-Restricted Subsidiaries.
"Non-Restricted Subsidiary" means any Subsidiary that
the Company's Board of Directors has in good faith
declared pursuant to a written resolution not to be of
material importance, either singly or together with all
other Non-Restricted Subsidiaries, to the business of
the Company and its consolidated Subsidiaries taken as
a whole. Initially the Company will have no Non-
Restricted Subsidiaries.
f. Delete the definition of "Sale and Lease-back
Transaction" in Section 1.01.
g. Insert the following as a new definition in
Section 1.01.
The term "Significant Subsidiary" means, with respect
to the Company, any Subsidiary that is a significant
subsidiary within the meaning of Rule 1-02 of
Regulation S-X promulgated by the Securities and
Exchange Commission.
Section 1.02. Amendments and Modifications to Article Four
a. Section 4.10(D) of the Indenture is restated in its entirety
to read as follows:
D. Anything in this Section 4.10 to the contrary
notwithstanding, the agreement to hold sums in trust as provided
in this Section 4.10 is subject to the provisions of
Sections 12.03, 12.04 and 12.05.
d. Section 4.11(C) of the Indenture is replaced in its entirety
by new Section 4.11(C) that reads as follows:
C. If at any time the Company or any Subsidiary shall issue,
assume or guarantee any Indebtedness secured by any mortgage and
if subsection A of this Section 4.11 requires that the NotDebt
Securities be secured equally and ratably with such
Indebtedness, the Company will promptly execute, at its
expense, any instruments necessary to so equally and ratably
secure the Debt Securities and deliver the same to the Trustee.
1. an Officers' Certificate stating that the covenant of
the Company contained in subsection A of this Section
4.11 has been complied with; and
2. an Opinion of Counsel to the effect that such
covenant has been complied with, and that any
instruments executed by the Company in the
performance of such covenant comply with the
requirements of such covenant.
In the event that the Company shall hereafter
secure the Debt Securities equally and ratably with any
other obligation or Indebtedness pursuant to the
provisions of this Section 4.11, the Trustee is hereby
authorized to enter into an indenture or agreement
supplemental thereto and to take such action, if any,
as it may deem advisable to enable it to enforce
effectively the rights of the holders of the Debt
Securities so secured, equally and ratably with such
other obligation or Indebtedness.
Notwithstanding the above, any such indenture or
agreement supplemental thereto shall provide, by its
terms, that the mortgage shall be automatically and
unconditionally released and discharged upon the
release or discharge of the mortgage which resulted in
the creation of such mortgage, except a discharge or
release by, or as a result of, payment under such
iIndebtedness.
c.
Section 4.12 of the Indenture, entitled "Restrictions
on Sale and Lease-back Transactions" is replaced in
its entirety by new Section 4.12 that reads as
follows:
Section 4.12 Restrictions on Sale and Lease-Back.
So long as any Debt Securities are Outstanding,
the Company agrees that it will not, and will not
permit any Restricted Subsidiary to, enter into any
arrangement with any Person providing for the leasing
by the Company or a Restricted Subsidiary of any
Operating Property (other than any such arrangement
involving a lease for a term, including renewal rights,
for not more than three years and leases between the
Company and a Subsidiary or between Subsidiaries),
whereby such Operating Property has been or is to be
sold or transferred by the Company or a Restricted
Subsidiary to such Person (herein referred to as a
"Sale and Lease-Back Transaction"), unless:
A. the Company or such Restricted Subsidiary
would, at the time of entering into a Sale and
Lease-Back Transaction, be entitled to incur
Indebtedness secured by a lien on the Operating
Property to be leased in an amount at least equal
to the Attributable Debt in respect of such Sale
and Lease-Back Transaction without equally and
ratably securing the Debt Securities pursuant to
Section 4.121, or
B. the proceeds of the sale of the Operating
Property to be leased are at least equal to the
fair market value of such Operating Property (as
determined by the chief financial officer or chief
accounting officer of the Company) and an amount
in cash equal to the net proceeds is applied,
within 180 days of the effective date of such
transaction, to the purchase or acquisition (or,
in the case of Operating Property, the
construction), acquisition, or construction of
Operating Property or to the retirement (other
than at maturity or pursuant to a mandatory
sinking fund or redemption provision and other
than Indebtedness owned by the Company or any
Restricted Subsidiary) of Debt Securities or of
Funded Indebtedness of the Company tranking on a
parity with or senior to the Debt Securities, or
in the case of a Sale and Lease-Back Transaction
by a Restricted Subsidiary, or Funded Indebtedness
of such Restricted Subsidiary; provided that in
connection with any such retirement, any related
loan commitment or the like shall be reduced in an
amount equal to the principal amount so retired.
The foregoing restriction shall not apply to, in
the case of any Operating Property acquired or
constructed subsequent to the date 18 months prior to
the date of this Indenture, any Sale and Lease-Back
Transaction with respect to such Operating Property
(including presently owned real property upon which
such Operating Property is to be constructed) if a
binding commitment is entered into with respect to such
Sale and Lease-Back Transaction within 1836 months
after the later of the acquisition of the Operating
Property or the completion of improvements or
construction thereon or commencement of full operations
at such Operating Property (which, in the case of a
retail store, is the opening of the store for business
to the public).
Section 1.03. Amendments and Modifications to Article Six.
a. Section 6.01 of the Indenture, entitled "Definitions of
Event of Default; Acceleration; Waiver; and Restoration," is
restated in its entirety to read as follows:
Section 6.01 Definition of Event of Default;
Acceleration; Waiver; and Restoration
"Event of Default" with respect to Debt Securities
of any series wherever used herein, means each one of
the following events which shall have occurred and be
continuing (whatever the reason for such Event of
Default and whether it shall be voluntary or
involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court
or any order, rule or regulation of any administrative
governmental body):
A. default in the payment of any installment of interest upon
any of the Debt Securities of such series as and when the same
shall become due and payable, and continuance of such default for
a period of 30 days; or
B. default in the payment of all or any part of the principal
of (or premium, if any, on) any of the Debt Securities of such
series as and when the same shall become due and payable either
at maturity, upon a redemption or required repurchase, if any, by
declaration or otherwise (including any sinking fund payment); or
C. failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of
the Company in the Debt Securities of such series (other than a
covenant or agreement in respect of the Debt Securities of such
series a default in the performance or breach of which is
elsewhere in this Section specifically dealt with) or contained
in this Indenture (other than a covenant or agreement which is
not applicable to the Debt Securities of such series) for a
period of 60 days after the date on which written notice
specifying such failure, stating that such notice is a "Notice of
Default" hereunder and demanding that the Company remedy the
same, shall have been given by registered or certified mail,
return receipt requested, to the Company by the Trustee, or to
the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of
such series; or
D. a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, or a decree or order
adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, approving as properly filed a petition seeking
reorganization, assignment, adjustment or composition of, or in
respect of, the Company or any Significant Subsidiary under any
applicable federal; or state law or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or any Significant Subsidiary or
for any substantial part of its property or ordering the winding
up or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive
days; or
E. the Company or any Significant Subsidiary shall commence a
voluntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect,
or any other case or proceeding to be adjudicated a bankruptcy or
insolvent, or consent to the entry of an order tofor relief in an
involuntary case or proceeding under any such law or to the
commencement of any bankruptcy or insolvency proceeding against
it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable state or
federal law, or consent to the filing of such petition or, to the
appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee or sequestrator (or similar
official) of the Company or any Significant Subsidiary for any
substantial part of its property, or make any general assignment
for the benefit of creditors, or the admission by the Company or
any Significant Subsidiary in writing of its inability to pay its
debts generally as they become due, or the taking of corporate
action in furtherance of any such action; or
F. failure by the Company or any Significant Subsidiary to make
any payment at maturity, including any applicable grace period,
in respect of Indebtedness of the Company or any Significant
Subsidiary (other than the Debt Securities of such series or non-
recourse obligations) in an amount in excess of $25,000,000 or
the equivalent thereof in any other currency or composite
currency and such failure shall have continued without having
been cured, waived, rescinded or annulled for a period of 30 days
after written notice thereof shall have been given by registered
or certified mail, return receipt requested, to the Company by
the Trustee, or to the Company and the Trustee by the Holders of
not less than 25% in aggregate principal amount of the
Outstanding Securities of such series; or
G. a default with respect to any Indebtedness of the Company or
any Significant Subsidiary, which default results in the
acceleration of Indebtedness of the Company or any Significant
Subsidiary (other than the Debt Securities of such series or non-
recourse obligations) in an amount in excess of $25,000,000 or
the equivalent thereof in any other currency or composite
currency without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded or annulled for
a period of 30 days after written notice thereof shall have been
given by registered or certified mail, return receipt requested,
to the Company by the Trustee, or to the Company and the Trustee
by the Holders of not less than 125% in aggregate principal
amount of the Outstanding Debt Securities of such series; or
H. any other Event of Default provided in the supplemental
indenture or Board Resolutions under which such series of Debt
Securities is issued or in the form of Debt Security for such
series.
If any Event of Default occurs and is
continuing with respect to the Debt Securities of
any series, then, and in each and every such case
(other than an Event of Default specified in
clause (d) or (eD) or (E) of this Section relating
to the Company), except for any series of Debt
Securities the principal of which shall have
already become due and payable, either the Trustee
or the Holders of not less than 25% in aggregate
principal; amount of the Debt Securities of such
series then Outstanding hereunder (each such
series voting as a separate class) by notice in
writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire
principal (or, if the Securities of such series
are Original Issue Discount Securities, such
portion of the principal amount as may be
specified in the terms of such series) of all Debt
Securities of such series, premium (if any) and
the interest accrued thereon (if any), to be due
and payable immediately, and upon any such
declaration, the same shall become immediately due
and payable. If an Event of Default specified in
clause (d) or (eD) or (E) of this Section relating
to the Company occurs, such principal amount shall
ipso facto become and be immediately due and
payable without any declaration or other act on
the part of the Trustee or any Holder.
The foregoing provisions, however, are
subject to the condition that if, at any time
after the principal (or, if the Debt Securities of
such series are Original Issue Discount
Securities, such portion of the principal as may
be specified in the terms thereof) of the Debt
Securities of any series shall have been so
declared due and payable, and before any judgment
or decree for the payment of the moneys due shall
have been obtained or entered as hereinafter
provided, the Company shall pay or shall deposit
with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debt
Securities of each such series and the principal
of all Debt Securities of such series which shall
have become due otherwise than by acceleration
(with interests upon such principal and, to the
extent that payment of such interest is
enforceable under applicable law, on overdue
installments of interest, at the same rate as the
rate of interest or Yield to Maturity (in the case
of Original Issue Discount Securities) specified
in the Debt Securities of such series to the date
of such payment or deposit) and such amount as
shall be sufficient to cover reasonable
compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and
counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of
negligence or bad faith, and if any and all Events
of Default under the Indenture, other than the non-
payment of the principal of Debt Securities which
shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as
provided herein - then and in every such case, the
Holders of a majority in aggregate principal
amount of all the Debt Securities of such series
then Outstanding (each series voting as a separate
class), by written notice to the Company and to
the Trustee, may waiver all defaults with respect
to each such series and rescind and annul such
declaration and its consequences, but no such
waiver or rescission and annulment shall extend to
or shall affect any subsequent default or shall
impair any right consequent thereon.
For all purposes under this Indenture, if a
portion of the principal of any Original Issue
Discount Securities shall have been accelerated
and declared due and payable pursuant to the
provisions hereof, then, from and after such
declaration, unless such declaration has been
rescinded and annulled, the principal amount of
such Original Issue Discount Securities shall be
deemed, for all purposes hereunder, to be such
portion of the principal thereof as shall be due
and payable as a result of such acceleration and
payment of such portion of the principal thereof
as shall be due and payable as a result of such
acceleration, together with accrued interest, if
any, thereon and all other amounts owing
thereunder, shall constitute payment in full of
such Original Issue Discount Securities.
In case the Trustee or any Securityholder
shall have proceeded to enforce any right under
this Indenture and such proceedings shall have
been discontinued or abandoned for any reason, or
shall have been determined adversely to the
Trustee or such Securityholder, then and in every
such case, subject to any determination in such
proceeding, the Company, the Trustee and the
Securityholders shall be restored severally and
respectively to their former positions and rights
hereunder, and all rights, remedies and poswers of
the Company, the Trustee and the Securityholders
shall continue as though no such proceedings had
been taken.
b. Section 6.07 of the Indenture entitled "Trustee's
Notice of Defaults," is restated in its entirety to
read as follows:
Section 6.07 Trustee's Notice of Defaults
The Trustee shall, within 90 days after the
occurrence of a default with respect to the Debt
Securities of any series, give to all Holders of
debt Securities of that series, in the manner and
to the extent provided in subsection C of Section
5.04, notice of all defaults with respect to that
series known to the Trustee, unless such defaults
shall have been cured before the giving of such
notice (the term "default" or "defaults" for the
purposes of this Section 6.07 being hereby defined
to be any event or events, as the case may be,
specified in subsections A, B, C, D, E, F, G and H
of Section 6.01, not including periods of grace,
if any, and irrespective of the giving of written
notice; provided, however, that, except in the
case of default in the payment of the principal of
(or premium, if any, on ) or interest on any of
the Debt Securities of such series or in the
payment or satisfaction of any sinking fund
obligation with respect to such series, the
Trustee shall be protected in withholding such
notice if and so long as the board of directors,
the executive committee, or a trust committee of
directors and/or responsible officers of the
Trustee in good faith determines that the
withholding of such notice is in the interests of
the Holders of the Debt Securities of such series.
Section 1.04. Amendments and Modifications to Article
Twelve
a. Section 12.01 of the Indenture, entitled "Satisfaction and
Discharge of Indenture," is restated in its entirety to read as
follows:
Section 12.01 Satisfaction and Discharge of Indenture.
When (i) the Company shall deliver to the
Trustee for cancellation all Debt Securities of a
series theretofore authenticated (other than any
Debt Securities of such series which shall have
been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section
2.07) and not theretofore canceled; or (ii) all
Debt Securities of such series not theretofore
canceled or delivered to the Trustee for
cancellation shall have become due and payable, or
are by their terms to become due and payable
within one year or are to be called for redemption
within one year under arrangements satisfactory to
the Trustee for the giving of notice of
redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay at
maturity or upon redemption all of the Debt
Securities of such series (other than any Debt
Securities of such series which shall have been
mutilated, destroyed, lost or stolen and which
shall have been replaced or paid as provided in
Section 2.07) not theretofore canceled or
delivered to the Trustee for cancellation,
including principal and premiums if any, and
interest, if any, due or to become due to such
date of maturity or redemption date, as the case
may be, but excluding, however, the amount of any
money for the payment of the principal of and
premium, if any, or interest, if any, on the Debt
Securities of such series (a) theretofore
deposited with the Trustee with respect to Debt
Securities of such series and repaid by the
Trustee to the Company in accordance with the
provisions of Section 12.04 or (b) paid with
respect to Debt Securities of such series to any
State or to the District of Columbia pursuant to
its unclaimed property or similar laws, and if in
either case the Company shall also pay or cause to
be paid all other sums payable hereunder by the
Company then this Indenture shall cease to be of
further effect with respect to the Debt Securities
of such series except as to (1) the rights of
Holders of Debt Securities of such series to
receive solely from funds deposited by the Company
with the Trustee, in trust as described above in
this Section 12.01, payment of the principal of,
premium, if any, and the interest, if any on such
Debt Securities when such payments are due; (2)
the Company's rights and obligations with respect
to such Debt Securities under Sections 2.05, 2.07,
3.01, 3.02, 3.04, 4.02, 12.03, 12.04 and 12.05;
and (3) the rights, powers, duties and immunities
of the Trustee hereunder, and the Trustee, on
demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel each stating
that all conditions precedent herein provided for
relating to the satisfaction and discharge of this
Indenture have been complied with and at the cost
and expense of the Company, shall execute such
instruments as may be requested by the Company
acknowledging satisfaction of and discharging this
Indenture with respect to such series of Debt
Securities. Notwithstanding the satisfaction and
discharge of this Indenture with respect to any
series of Debt Securities the obligations of the
Company to the Trustee under Section 7.06 shall
survive.
Section 1.05. Mutatis Mutandis Effect. The Indenture is
hereby amended mutatis mutandis to reflect the addition or
amendment of the definitional terms incorporated into the
Indenture pursuant to Section 1.01 hereof.
ARTICLE 2
New Series
Section 2.01. 7.55% Notes due 2007.
a. In accordance with Sections 2.01 and 2.02 of the Indenture,
there is created hereby a series of Debt Securities under the
Indenture with the following terms:
A. The title of the series of Debt Securities will be 7.55%
Notes due 2007 (the "Notes due 2007"). Such series will be
limited to an aggregate principal amount of $150,000,000 (except
for Debt Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of,
other such series pursuant to Sections 2.05, 2.06, 2.07, 3.04 or
10.04 of the Indenture) and will mature on April 15, 2007.
B. The Notes due 2007 will bear interest at the rate of 7.55%
per annum from April 21, 1997, payable semiannually in arrears
on April 15 and October 15 of each year, commencing October 15,
1997, to the persons in whose names the Notes due 2007 are
registered at the close of business on the preceding April 1 or
October 1, each a record date, as the case may be. Interest will
be computed based on a 360-day year consisting of twelve 30-day
months. Any interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on
such record date and may be paid to the person in whose name this
Note is registered at the close of business on a special record
date for the payment of such defaulted interest to be fixed by
the Trustee, notice of which shall be given to the holders of the
Notes in accordance with Section 14.05.
C. The Notes due 2007 will not be subject to any sinking fund.
D. The Notes due 2007 will be redeemable as a whole or in part,
at the option of the Company at any time, at a Redemption Price
equal to the greater of (i) 100% of the principal amount of each
such Note to be redeemed and (ii) the sum of the present values
of the Remaining Scheduled Payments (as hereinafter defined)
thereon discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus five basis points, plus, in either case,
accrued interest on the principal amount being redeemed to the
date of the redemption.
E. The Notes due 2007 initially will be represented by one or
more Global Securities deposited with the Depository Trust
Company in substantially the form attached as Exhibit 1. If
certificated Notes due 2007 are issued, definitive certificates
substantially in the form attached as Exhibit 2 shall be used.
F. Payment of the principal of and interest on the Notes due
2007 will be made at the office or agency of the Trustee
maintained for that purpose in New York, New York, in such coin
or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the
option of the Company by check mailed to the address of, or by
wire transfer to an account designated by, the person entitled
thereto as such address shall appear on the security register;
provided, further, that only holders of $1,000,000 or more in
aggregate principal amount of the Notes who have provided
appropriate written wire transfer instructions for the relevant
record date may receive wire transfer payments.
G. The Notes due 2007 shall be governed by the provisions of
the Indenture, as supplemented hereby.
Section 2.02. 8.05% Notes due 2027
a. In accordance with Sections 2.01 and 2.02 of the Indenture,
there is also created a series of Debt Securities under the
Indenture with the following terms:
A. The title of the series of Debt Securities will be 8.05%
Notes due 2027 (the "Notes due 2027"). Such series will be
limited to an aggregate principal amount of $150,000,000 (except
for Debt Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other such
series pursuant to Sections 2.05, 2.06, 2.07, 3.04 or 10.04 of
the Indenture) and will mature on April 15, 2027.
B. The Notes due 2027 will bear interest at the rate of 8.05%
per annum from April 21, 1997, payable semiannually in arrears on
April 15 and October 15 of each year, commencing October 15,
1997, to the persons in whose names the Notes due 2027 are
registered at the close of business on the preceding April 1 or
October 1, each a record date, as the case may be. Interest will
be computed based on a 360-day year consisting of twelve 30-day
months. Any interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on
such record date and may be paid to the person in whose name this
Note is registered at the close of business on a special record
date for the payment of such defaulted interest to be fixed by
the Trustee, notice of which shall be given to the holders of the
Notes in accordance with Section 14.05.
C. The Notes due 2027 will not be subject to any sinking fund.
D. The Notes due 2027 will be redeemable as a whole or in part,
at the option of the Company at any time, at a Redemption Price
equal to the greater of (i) 100% of the principal amount of each
such Note to be redeemed, and (ii) the sum of the present values
of the Remaining Scheduled Payments (as hereinafter defined)
thereon discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 20 basis points, plus, in either case,
accrued interest on the principal amount being redeemed to the
date of the redemption.
E. The Notes due 2027 initially will be represented by one or
more Global Securities deposited with the Depository Trust
Company in substantially the form attached as Exhibit 1. If
certificated Notes due 2027 are issued, definitive certificates
substantially in the form attached as Exhibit 2 shall be used.
F. Payment of the principal of and interest on the Notes due
2027 will be made at the office or agency of the Trustee
maintained for that purpose in New York, New York, in such coin
or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the
option of the Company by check mailed to the address of, or by
wire transfer to an account designated by, the person entitled
thereto as such address shall appear on the security register;
provided, further, that only holders of $1,000,000 or more in
aggregate principal amount of the Notes who have provided
appropriate written wire transfer instructions for the relevant
record date may receive wire transfer payments.
G. The Notes due 2027 shall be governed by the provisions of
the Indenture, as supplemented hereby.
Section 2.03. Definitions. For purposes of this
Section 2, the following terms have the meanings ascribed to them
as follows:
a. "Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
b. "Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of such Notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
c. "Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date,
(B) if the Trustee is able to obtain only one Reference Treasury
Dealer Quotation from the Reference Treasury Dealers, such
Quotation, or (C) if the Trustee is not able to obtain any
Reference Treasury Dealer Quotations from the Reference Treasury
Dealers, the average of Reference Treasury Dealer Quotations
obtained from two other Primary Treasury Dealers designated by
the Company as Reference Treasury Dealers for the purpose of
determining such Comparable Treasury Price. "Reference Treasury
Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding
such redemption date.
d. "Reference Treasury Dealer" means each of Salomon Brothers
Inc and NationsBanc Capital Markets, Inc. and their respective
successors; provided, however, that if either of the foregoing
shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor any other Primary Treasury Dealer.
e. "Remaining Scheduled Payments" means, with respect to any
such Note, the remaining scheduled payments of the principal
thereof to be redeemed and interest thereon that would be due
after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of
the next succeeding scheduled interest payment thereon will be
reduced by the amount of interest accrued thereon to such
redemption date.
ARTICLE 3
Miscellaneous
Section 3.01. Effect of This First Supplemental Indenture.
This First Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and
shall be construed in connection with and as part of, the
Indenture for any and all purposes, including, but not limited
to, discharge of the Indenture as provided in Article EightTwelve
of the Indenture. Except as specifically modified herein, the
Indenture and the Debt Securities are in all respects ratified
and confirmed and shall remain in full force and effect in
accordance with their terms. Notwithstanding anything to the
contrary above, Debt Securities outstanding as of April 21, 1997
continue to be governed by the provisions of the Indenture dated
as of August 15, 1991.
Section 3.02. Trustee. Except as otherwise expressly
provided herein, no duties, responsibilities or liabilities are
assumed, or shall be construed to be assumed, by the Trustee by
reason of this First Supplemental Indenture. This First
Supplemental Indenture is executed and accepted by the Trustee
subject to all the terms and conditions set forth in the
Indenture with the same force and effect as if those terms and
conditions were repeated at length herein and made applicable to
the Trustee with respect hereto. The Trustee assumes no
responsibility for the recitals contained herein, which shall be
taken as statements of the Company, and makes no representation
as to the validity or sufficiency of this First Supplemental
Indenture.
Section 3.03. Governing Law. The laws of the State of New
York shall govern this First Supplemental Indenture without
regard to principles of conflicts of law. The Trustee and the
Company agree to submit to the jurisdiction of the courts of the
State of New York in any action or proceeding arising out of or
relating to this First Supplemental Indenture.
Section 3.04. Counterparts. The parties may sign any
number of copies of this First Supplemental Indenture. Each
signed copy shall be an original, but all of such executed copies
together shall represent the same agreement.
Section 3.05. Severability. In case one or more of the
provisions in this First Supplemental Indenture shall be held
invalid, illegal or unenforceable, in any respect for any reason,
the validity, illegality and enforceability of any such provision
in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended
that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
Section 3.06. Effective Date of this First Supplemental
Indenture. This First Supplemental Indenture and the Amendments
to Sections 1.01, 4.10, 4.11, 4.12, 6.01, 6.037 and 12.01 shall
be effective pursuant to Section 10.01 of the Indenture
immediately upon execution by the Company and delivery to and
execution by the Trustee of this First Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed, all as of the
day and year first written above.
FOOD LION, INC.
Attest:
Laura Kendall
Name: Laura Kendall
Title:Vice President of Finance
By:Lester Nail
Assistant Secretary
Dated:
[SEAL] [CORPORATE SEAL]
THE BANK OF NEW YORK,
as Trustee
Attest:
By: Vivian Deorges
Name: Vivian Deorges
Title: Assistant Vice President
By:_______________________________
Dated:
[CORPORATE SEAL]
EXHIBIT 1
FORM OF GLOBAL NOTE
FOOD LION, INC.
_____% NOTES DUE ______
NO. *1* $150,000,000
CUSIP NO.
__________
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO FOOD LION, INC. OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
This Note is a Global Note within the meaning of the
Indenture hereinafter referred to.
Transfer of the Note shall be limited to transfers in whole,
and not in part, to nominees of the DTC or to a successor thereof
or such successor's nominee and transfers of interests in this
Note shall be limited to transfers made in accordance with
restrictions set forth in the Indenture, dated as of August 15,
1991, as supplemented as of April 21, 1997 and thereafter,
between Food Lion, Inc. and the Trustee named therein, pursuant
to which this Note was issued.
FOOD LION, Inc., a North Carolina corporation (the
"Company"), for value received, hereby promises to pay to CEDE &
CO., or its registered assigns, the principal sum of One Hundred
Fifty Million Dollars ($150,000,000) on April 15, _____. The
Notes will bear interest at the rate of _____% per annum from
April 21, 1997, payable semiannually in arrears on April 15 and
October 15 of each year, commencing October 15, 1997, to the
persons in whose name the Notes are registered at the close of
business on the preceding April 1 or October 1, each a record
date, as the case may be. Any interest not so punctually paid or
duly provided for shall forthwith cease to be payable to the
registered holder on such record date and may be paid to the
person in whose name this Note is registered at the close of
business on a special record date for the payment of such
defaulted interest to be fixed by the Trustee, notice of which
shall be given to the holders of the Notes in accordance with the
Indenture. Interest will be computed based on a 360-day year
consisting of twelve 30-day months. Payment of the principal of
and interest on this Note will be made at the office or agency of
the Trustee maintained for that purpose in New York, New York, in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts; provided, however, that payment of interest may be made at
the option of the Company by check mailed to the address of, or
by wire transfer to an account designated by, the person entitled
thereto as such address shall appear on the security register;
provided, further, that only holders of $1,000,000 or more in
aggregate principal amount of the Notes who have provided
appropriate written wire transfer instructions for the relevant
record date may receive wire transfer payments.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been
executed by manual signature by the Trustee referred to on the
reverse hereof, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory of any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal by the manual or
facsimile signatures of its officers thereunto duly authorized.
Dated: FOOD LION, INC.
Attest: By ___________________________
_____________________________
______________________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated
herein provided for in the within-mentioned Indenture.
Dated: THE BANK OF NEW YORK, as Trustee.
By............................................
Authorized Officer
FOOD LION, INC.
ATTACHMENT
______% NOTES DUE _______
This Note is one of a duly authorized issue of unsecured
debt securities of the Company (herein called the "Debt
Securities") of the series hereinafter specified, all issued and
to be issued under an Indenture, dated as of August 15, 1991 and
supplemented as of April 21, 1997 and thereafter (herein called
the "Indenture") between the Company and The Bank of New York, as
Trustee (herein called the "Trustee"), to which Indenture,
reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the
Debt Securities, and of the terms upon which the Debt Securities
are, and are to be, authenticated and delivered. The Debt
Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption
provisions (if any), and may otherwise vary as in the Indenture
provided. This Note is one of a series designated as the _____%
Notes due _____ of the Company, limited in aggregate principal
amount to $150,000,000 (herein called the "Notes").
As provided in the Indenture and subject to the limitations
set forth therein, a new Note or Notes of this series of
authorized denominations, for a like aggregate principal amount,
will be issued in exchange herefor.
The Company, the Trustee and any agent thereof may treat the
person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note is overdue, and
neither the Company or the Trustee nor such agent shall be
affected by notice to the contrary.
No reference herein to the Indenture and no provision of
this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal and
interest on this Note at the time and places and at the rate and
in the coin and currency herein prescribed.
The Notes will not be subject to any sinking fund. The
Notes will be redeemable as a whole or in part, at the option of
the Company at any time, at a Redemption Price equal to the
greater of (i) 100% of the principal amount of the Notes to be
redeemed and (ii) the sum of the present values of the Remaining
Scheduled Payments thereon discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-
day months) at the Treasury Rate plus ____ basis points plus, in
either case, accrued interest on the principal amount being
redeemed to the date of redemption. Notice of any redemption
will be mailed at least 30 days, but not more than 60 days,
before the redemption date to each holder of any Notes to be
redeemed, all as provided in the Indenture. Unless the Company
defaults in payment of the Redemption Price on and after the
redemption date, interest will cease to accrue after the
redemption date for such Notes or portions thereof called for
redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of such Notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date,
(B) if the Trustee is able to obtain only one Reference Treasury
Dealer Quotation from the Reference Treasury Dealers, such
Quotation, or (C) if the Trustee is not able to obtain any
Reference Treasury Dealer Quotations from the Reference Treasury
Dealers, the average of Reference Treasury Dealer Quotations
obtained from two other Primary Treasury Dealers designated by
the Company as Reference Treasury Dealers for the purpose of
determining such Comparable Treasury Price. "Reference Treasury
Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding
such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers
Inc and NationsBanc Capital Markets, Inc. and their respective
successors; provided, however, that if either of the foregoing
shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor any other Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any
such Note, the remaining scheduled payments of the principal
thereof to be redeemed and interest thereon that would be due
after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of
the next succeeding scheduled interest payment thereon will be
reduced by the amount of interest accrued thereon to such
redemption date.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Debt Securities under the Indenture at any time by
the Company with the consent of the Holders of more than 50% in
aggregate principal amount of the Debt Securities of all series
at the time Outstanding which are affected by the amendment or
modification (voting as a class) and also permits the Company and
the Trustee, in certain circumstances, to amend the Indenture
without notice to, or the consent of, the Holders of any of the
Debt Securities. Any such consent by the Holder of this Note
shall be conclusive and binding upon such holder and upon all
future Holders of this Note and of any Notes issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
The Indenture and the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.
All terms used in the Notes which are defined in the
Indenture, shall have the meanings assigned to them therein.
ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer This Note)
FOR VALUE RECEIVED ___________________________________
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFICATION NUMBER OF TRANSFEREE
_________________________________________________________________
(Please print name and address, including zip code, of
transferee)
this Note, together with all right, title and interest herein and
does hereby irrevocably constitute and appoint_________________
Attorney to transfer this on the Note Register, with full power
of substitution.
Dated: _______________________ _________________________
Signature
Signature Guaranteed:
Commercial Bank or Trust
Company of Member Firm of
the New York Stock
Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must
correspond to the Name as written upon the face of this Note in
every particular, without alterations or any change whatsoever.
EXHIBIT 2
FORM OF DEFINITIVE NOTE
FOOD LION, INC.
______% NOTES DUE ______
NO.*1* $150,000,000
CUSIP NO.
__________
This Note is issued pursuant to the Indenture, dated as of
August 15, 1991, as supplemented as of April 21, 1997 and
thereafter, between Food Lion, Inc. and the Trustee named
therein.
FOOD LION, Inc., a North Carolina corporation (the
"Company"), for value received, hereby promises to pay to
__________________, or its registered assigns, the principal sum
__________________________ Dollars ($_______________) on
April 15, ______. The Notes will bear interest at the rate of
______% per annum from April 21, 1997, payable semiannually in
arrears on April 15 and October 15 of each year, commencing
October 15, 1997, to the persons in whose name the Notes are
registered at the close of business on the preceding April 1 or
October 1, each a record date, as the case may be. Any interest
not so punctually paid or duly provided for shall forthwith cease
to be payable to the registered holder on such record date and
may be paid to the person on whose name this Note is registered
at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Trustee, notice of
which shall be given to the holders of the Notes in accordance
with the Indenture. Interest will be computed based on a 360-day
year consisting of twelve 30-day months. Payment of the
principal of and interest on this Note will be made at the office
or agency of the Trustee maintained for that purpose in New York,
New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of
interest may be made at the option of the Company by check mailed
to the address of, or by wire transfer to an account designated
by, the person entitled thereto as such address shall appear on
the security register; provided, further, that only holders of
$1,000,000 or more in aggregate principal amount of the Notes who
have provided appropriate written wire transfer instructions for
the relevant record date may receive wire transfer payments.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been
executed by manual signature by the Trustee referred to on the
reverse hereof, this Note shall not be entitled to any benefit
under the Indenture, or be valid or obligatory of any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed by the manual or facsimile signatures of its
officers thereunto duly authorized.
Dated: FOOD LION, INC.
Attest: By ___________________________
_____________________________
______________________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated
herein provided for in the within-mentioned Indenture.
Dated: THE BANK OF NEW YORK, as Trustee.
By............................................
Authorized Officer
FOOD LION,INC.
ATTACHMENT
_____% NOTES DUE ________
This Note is one of a duly authorized issue of unsecured
debt securities of the Company (herein called the "Debt
Securities") of the series hereinafter specified, all issued and
to be issued under an Indenture, dated as of August 15, 1991 and
supplemented as of April 21, 1997 and thereafter (herein called
the "Indenture") between the Company and The Bank of New York, as
Trustee (herein called the "Trustee"), to which Indenture,
reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the
Debt Securities, and of the terms upon which the Debt Securities
are, and are to be, authenticated and delivered. The Debt
Securities may be issued in one or more series, which different
series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption
provisions (if any), and may otherwise vary as in the Indenture
provided. This Note is one of a series designated as the ______%
Notes due ______ of the Company, limited in aggregate principal
amount to $150,000,000 (herein called the "Notes").
As provided in the Indenture and subject to the limitations
set forth therein, a new Note or Notes of this series of
authorized denominations, for a like aggregate principal amount,
will be issued in exchange herefor.
The Company, the Trustee and any agent thereof may treat the
person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note is overdue, and
neither the Company or the Trustee nor such agent shall be
affected by notice to the contrary.
No reference herein to the Indenture and no provision of
this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal and
interest on this Note at the time and places and at the rate and
in the coin and currency herein prescribed.
The Notes will not be subject to any sinking fund. The
Notes will be redeemable as a whole or in part, at the option of
the Company at any time, at a Redemption Price equal to the
greater of (i) 100% of the principal amount of the Notes to be
redeemed and (ii) the sum of the present values of the Remaining
Scheduled Payments thereon discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-
day months) at the Treasury Rate plus ____ basis points plus, in
either case, accrued interest on the principal amount being
redeemed to the date of redemption. Notice of any redemption
will be mailed at least 30 days, but not more than 60 days,
before the redemption date to each holder of any Notes to be
redeemed, all as provided in the Indenture. Unless the Company
defaults in payment of the Redemption Price on and after the
redemption date, interest will cease to accrue after the
redemption date for such Notes or portions thereof called for
redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of such Notes to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date,
(B) if the Trustee is able to obtain only one Reference Treasury
Dealer Quotation from the Reference Treasury Dealers, such
Quotation, or (C) if the Trustee is not able to obtain any
Reference Treasury Dealer Quotations from the Reference Treasury
Dealers, the average of Reference Treasury Dealer Quotations
obtained from two other Primary Treasury Dealers designated by
the Company as Reference Treasury Dealers for the purpose of
determining such Comparable Treasury Price. "Reference Treasury
Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding
such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers
Inc and NationsBanc Capital Markets, Inc. and their respective
successors; provided, however, that if either of the foregoing
shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor any other Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any
such Note, the remaining scheduled payments of the principal
thereof to be redeemed and interest thereon that would be due
after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of
the next succeeding scheduled interest payment thereon will be
reduced by the amount of interest accrued thereon to such
redemption date.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Debt Securities under the Indenture at any time by
the Company with the consent of the Holders of more than 50% in
aggregate principal amount of the Debt Securities of all series
at the time Outstanding which are affected by the amendment or
modification (voting as a class) and also permits the Company and
the Trustee, in certain circumstances, to amend the Indenture
without notice to, or the consent of, the Holders of any of the
Debt Securities. Any such consent by the Holder of this Note
shall be conclusive and binding upon such holder and upon all
future Holders of this Note and of any Notes issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
The Indenture and the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.
All terms used in the Notes which are defined in the
Indenture, shall have the meanings assigned to them therein.
ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer This Note)
FOR VALUE RECEIVED ___________________________________
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFICATION NUMBER OF TRANSFEREE
_________________________________________________________________
(Please print name and address, including zip code, of
transferee)
this Note, together with all right, title and interest herein and
does hereby irrevocably constitute and appoint_________________
Attorney to transfer this on the Note Register, with full power
of substitution.
Dated: _______________________ _________________________
Signature
Signature Guaranteed:
Commercial Bank or Trust
Company of Member Firm of
the New York Stock
Exchange, Inc.
NOTICE: The signature to the foregoing Assignment must
correspond to the Name as written upon the face of this Note in
every particular, without alterations or any change whatsoever.
Food Lion, Inc.
Underwriting Agreement
New York, New York
April 16, 1997
To the Representative
named in Schedule I
hereto of the Underwriters
named in Schedule II
hereto
Ladies and Gentlemen:
Food Lion, Inc., a North Carolina corporation (the
"Company"), proposes to sell to the underwriters named in
Schedule II hereto (the "Underwriters"), for whom you (the
"Representative") are acting as representative, the principal
amount of its securities identified in Schedule I hereto (the
"Securities"), to be issued under an indenture dated as of August
15, 1991 and as supplemented from time to time (the "Indenture"),
between the Company and The Bank of New York, as trustee (the
"Trustee").
1. Representations and Warranties. The Company
represents and warrants to, and agrees with, each Underwriter as
set forth below in this Section 1. Certain terms used in this
Section 1 are defined in paragraph (c) hereof.
(a) The Company has met the requirements for the use
of Form S-3 under the Securities Act of 1933 (the "Act") and
has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the file number of
which is set forth in Schedule I hereto) on such Form,
including a basic prospectus, for registration under the Act
of the offering and sale of the Securities. The Company may
have filed one or more amendments thereto, and may have used
a Preliminary Final Prospectus, each of which has previously
been furnished to you. Such registration statement, as so
amended, has become effective. The offering of the
Securities is a Delayed Offering and, although the Basic
Prospectus may not include all the information with respect
to the Securities and the offering thereof required by the
Act and the rules thereunder to be included in the Final
Prospectus, the Basic Prospectus includes all such
information required by the Act and the rules thereunder to
be included therein as of the Execution Time. The Company
will next file with the Commission pursuant to Rules 415 and
424(b)(2) or (5) a final supplement to the form of
prospectus included in such registration statement relating
to the Securities and the offering thereof. As filed, such
final prospectus supplement shall include all required
information, with respect to the Securities and the offering
thereof and, except to the extent the Representative shall
agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the
Basic Prospectus and any Preliminary Final Prospectus) as
the Company has advised you, prior to the Execution Time,
will be included or made therein.
(b) At the Execution Time, the Registration Statement
did or will, and when the Final Prospectus is first filed in
accordance with Rule 424(b) and on the Closing Date, the
Final Prospectus (and any supplement thereto) will, comply
in all material respects with the applicable requirements of
the Act, the Securities Exchange Act of 1934 (the "Exchange
Act") and the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the respective rules thereunder; at the
Execution Time, the Registration Statement did not or will
not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein not
misleading; at the Execution Time and on the Closing Date
the Indenture did or will comply in all material respects
with the requirements of the Trust Indenture Act and the
rules thereunder; and on the date of any filing pursuant to
Rule 424(b) and on the Closing Date, the Final Prospectus
(together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the
Company makes no representations or warranties as to (i)
that part of the Registration Statement which shall
constitute the Statement of Eligibility and Qualification
(Form T-1) under the Trust Indenture Act of the Trustee or
(ii) the information contained in or omitted from the
Registration Statement or the Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company by or on
behalf of any Underwriter through the Representative
specifically for inclusion in the Registration Statement or
the Final Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this
Agreement, shall have the meanings indicated. The term "the
Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall
mean the date and time that this Agreement is executed and
delivered by the parties hereto. "Basic Prospectus" shall
mean the basic prospectus referred to in the first sentence
of paragraph (a) above contained in the Registration
Statement at the Effective Date or, if such basic prospectus
has been amended after the Effective Date, the basic
prospectus as most recently amended and filed pursuant to
Rule 424(b). "Preliminary Final Prospectus" shall mean any
preliminary prospectus supplement to the Basic Prospectus
which describes the Securities and the offering thereof and
is used prior to the filing of the Final Prospectus. "Final
Prospectus" shall mean the prospectus supplement relating to
the Securities that is first filed pursuant to Rule 424(b)
after the Execution Time, together with the Basic
Prospectus. "Registration Statement" shall mean the
registration statement referred to in the first sentence of
paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the
Execution Time and, in the event any post-effective
amendment thereto becomes effective prior to the Closing
Date (as hereinafter defined), shall also mean such
registration statement as so amended. Such term shall
include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A.
"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K"
refer to such rules or regulation under the Act. "Rule 430A
Information" means information with respect to the
Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective
pursuant to Rule 430A. Any reference herein to the
Registration Statement, the Basic Prospectus any Preliminary
Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed
under the Exchange Act on or before the Effective Date of
the Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be; and any reference herein to
the terms "amend", "amendment" or "supplement", with respect
to the Registration Statement, the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus, shall
be deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the
Registration Statement or the issue date of the Basic
Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated
therein by reference. A "Delayed Offering" shall mean an
offering of securities pursuant to Rule 415 which does not
commence promptly after the effective date of a registration
statement, with the result that only information required
pursuant to Rule 415 need be included in such registration
statement at the effective date thereof with respect to the
securities so offered.
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
warranties herein set forth, the Company agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company, at the purchase price set
forth in Schedule I hereto, the principal amount of the
Securities set forth opposite such Underwriter's name in Schedule
II.
3. Delivery and Payment. Delivery of and payment for
the Securities shall be made on the date and at the time
specified in Schedule I hereto (or such later date not later than
three business days after such specified date as the
Representative shall designate), which date and time may be
postponed by agreement between the Representative and the Company
or as provided in Section 8 hereof (such date and time of
delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made
through the facilities of the Depository Trust Company to the
respective accounts of the Underwriters against payment by each
of the Underwriters through the Representative of the purchase
price thereof to or upon the order of the Company by wire
transfer of same day funds to an account specified in writing by
the Company not less than two business days prior to the Closing
Date. Delivery of the Securities shall be made at such location
as the Representative shall reasonably designate at least one
business day in advance of the Closing Date and payment for the
Securities shall be made at the office specified in Schedule I
hereto. Certificates for the Securities shall be registered in
such names and in such denominations as the Representative may
request not less than three full business days in advance of the
Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the Representative in New
York, New York, not later than 1:00 PM on the business day prior
to the Closing Date.
4. Agreements. The Company agrees with each of the
Underwriters that:
(a) Prior to the termination of the offering of the
Securities, the Company will not file any amendment of the
Registration Statement or supplement (including the Final
Prospectus or any Preliminary Final Prospectus) to the Basic
Prospectus unless the Company has furnished you a copy for
your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, the Company will
cause the Final Prospectus, properly completed, and any
supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to
the Representative of such timely filing. The Company will
promptly advise the Representative (i) when the Final
Prospectus, and any supplement thereto, shall have been
filed with the Commission pursuant to Rule 424(b), (ii)
when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement
shall have been filed or become effective, (iii) of any
request by the Commission for any amendment of the
Registration Statement or supplement to the Final Prospectus
or for any additional information, (iv) of the issuance by
the Commission of any stop order suspending the
effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that
purpose and (v) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent
the issuance of any such stop order and, if issued, to
obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any
event occurs as a result of which the Final Prospectus as
then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary
to make the statements therein in the light of the
circumstances under which they were made not misleading, or
if it shall be necessary to amend the Registration Statement
or supplement the Final Prospectus to comply with the Act or
the Exchange Act or the respective rules thereunder, the
Company promptly will prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this
Section 4, an amendment or supplement which will correct
such statement or omission or effect such compliance.
(c) As soon as practicable, the Company will make
generally available to its security holders and to the
Representative an earnings statement or statements of the
Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) The Company will furnish to the Representative and
counsel for the Underwriters, without charge, copies of the
Registration Statement (including exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer
may be required by the Act, as many copies of any
Preliminary Final Prospectus and the Final Prospectus and
any supplement thereto as the Representative may reasonably
request. The Company will pay the expenses of printing or
other production of all documents relating to the offering.
(e) Until the business date set forth on Schedule I
hereto, the Company will not, without the consent of the
Representative, offer, sell or contract to sell, or announce
the offering of, any debt securities issued or guaranteed by
the Company (other than the Securities).
5. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Securities
shall be subject to the accuracy of the representations and
warranties on the part of the Company contained herein as of the
Execution Time and the Closing Date, to the accuracy of the
statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) The Final Prospectus, and any such supplement,
shall have been filed in the manner and within the time
period required by Rule 424(b); and no stop order suspending
the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have
been instituted or threatened.
(b) The Company shall have furnished to the
Representative the opinion of Glenn Dixon, Assistant General
Counsel of the Company, dated the Closing Date, to the
effect that:
(i) each of the Company and Kash n' Karry Food
Stores, Inc. (the "Subsidiary") has been duly
incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate
power and authority to own its properties and conduct
its business as described in the Final Prospectus, and
is duly qualified to do business as a foreign
corporation and is in good standing under the laws of
each jurisdiction which requires such qualification
wherein it owns or leases material properties or
conducts material business;
(ii) all the outstanding shares of capital stock
of the Subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable, and,
except as otherwise set forth in the Final Prospectus,
all outstanding shares of capital stock of the
Subsidiary are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of
such counsel, after due inquiry, any other security
interests, claims, liens or encumbrances;
(iii) the Company's authorized equity
capitalization is as set forth in the Final Prospectus;
and the Securities conform to the description thereof
contained in the Final Prospectus;
(iv) the Indenture has been duly authorized,
executed and delivered and constitutes a legal, valid
and binding instrument enforceable against the Company
in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time
in effect); and the Securities have been duly
authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters pursuant
to this Agreement, will constitute legal, valid and
binding obligations of the Company entitled to the
benefits of the Indenture;
(v) to the best knowledge of such counsel, there
is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of
its subsidiaries, of a character required to be
disclosed in the Registration Statement which is not
adequately disclosed in the Final Prospectus, and there
is no franchise, contract or other document of a
character required to be described in the Registration
Statement or Final Prospectus, or to be filed as an
exhibit, which is not described or filed as required;
and the statements included or incorporated in the
Final Prospectus describing any legal proceedings or
material contracts or agreements relating to the
Company fairly summarize such matters;
(vi) such counsel has no reason to believe that
at the Execution Time the Registration Statement
contained any untrue statement of a material fact or
omitted to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading or that on the date of any
filing pursuant to Rule 424(b) and on the Closing Date
the Final Prospectus included or includes any untrue
statement of a material fact or omits to state a
material fact necessary to make the statements therein,
in the light of the circumstances under which they were
made, not misleading;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) no consent, approval, authorization or
order of any court or governmental agency or body is
required for the consummation of the transactions
contemplated herein, except such as have been obtained
under the Act and such as may be required under the
blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the
Underwriters and such other approvals (specified in
such opinion) as have been obtained; and
(ix) neither the issue and sale of the
Securities, nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach
of, or constitute a default under the charter or
by-laws of the Company or the terms of any indenture or
other agreement or instrument known to such counsel and
to which the Company or any of its subsidiaries is a
party or bound, or any order or decree known to such
counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of its
subsidiaries.
In rendering such opinion, such counsel may rely (A) as
to matters involving the application of laws of any
jurisdiction other than the State of North Carolina or the
United States, to the extent deemed proper and specified in
such opinion, upon the opinion of other counsel of good
standing believed to be reliable and who are satisfactory to
counsel for the Underwriters and (B) as to matters of fact,
to the extent deemed proper, on certificates of responsible
officers of the Company and public officials. References to
the Final Prospectus in this paragraph (b) include any
supplements thereto at the Closing Date.
(c) The Company shall have furnished to the
Representative the opinion of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., counsel to the Company, dated the Closing
Date, to the effect that:
(i) each of the Company and the Subsidiary has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its
properties and conduct its business as described in the
Final Prospectus.
(ii) the Indenture has been duly authorized,
executed and delivered, has been duly qualified under
the Trust Indenture Act, and constitutes a legal, valid
and binding instrument enforceable against the Company
in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time
in effect); and the Securities have been duly
authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters pursuant
to this Agreement, will constitute legal, valid and
binding obligations of the Company entitled to the
benefits of the Indenture;
(iii) to the knowledge of such counsel, there is
no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of
its subsidiaries, of a character required to be
disclosed in the Registration Statement which is not
adequately disclosed in the Final Prospectus; and the
statements included or incorporated in the Final
Prospectus describing any legal proceedings known to
such counsel or material contracts or agreements
relating to the Company and known to such counsel
fairly summarize such matters;
(iv) the Registration Statement has become
effective under the Act; any required filing of the
Basic Prospectus, any Preliminary Final Prospectus and
the Final Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the
best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that
purpose have been instituted or threatened, and the
Registration Statement and the Final Prospectus (other
than the financial statements and other financial and
statistical information contained therein as to which
such counsel need express no opinion) comply as to form
in all material respects with the applicable
requirements of the Act, the Exchange Act and the Trust
Indenture Act and the respective rules thereunder; and
such counsel has no reason to believe that at the
Execution Time the Registration Statement contained any
untrue statement of a material fact or omitted to state
any material fact required to be stated therein or
necessary to make the statements therein not misleading
or that on the date of any filing pursuant to Rule
424(b) and on the Closing Date the Final Prospectus
included or includes any untrue statement of a material
fact or omits to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) neither the issue and sale of the
Securities, nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach
of, or constitute a default under the charter or
by-laws of the Company or the terms of any indenture or
other agreement or instrument known to such counsel and
to which the Company or any of its subsidiaries is a
party or bound or any order or decree known to such
counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of its
subsidiaries; and
(vii) no consent, approval, authorization or
order of any court or governmental agency or body is
required for the consummation of the transactions
contemplated herein, except such as have been obtained
under the Act and such as may be required under the
blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the
Underwriters and such other approvals (specified in
such opinion) as have been obtained.
In rendering such opinion, such counsel may rely (A) as
to matters involving the application of laws of any
jurisdiction other than the State of New York or the United
States, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing
believed to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the
extent deemed proper, on certificates of responsible
officers of the Company and public officials. References to
the Final Prospectus in this paragraph (c) include any
supplements thereto at the Closing Date.
(d) The Representative shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters,
such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the
Indenture, the Registration Statement, the Final Prospectus
(together with any supplement thereto) and other related
matters as the Representative may reasonably require, and
the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them
to pass upon such matters.
(e) The Company shall have furnished to the
Representative a certificate of the Company, signed by the
Chief Financial Officer, Vice President and the Director of
Accounting, Treasurer, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined
the Registration Statement, the Final Prospectus, any
supplement to the Final Prospectus and this Agreement and
that:
(i) the representations and warranties of the
Company in this Agreement are true and correct in all
material respects on and as of the Closing Date with
the same effect as if made on the Closing Date and the
Company has complied with all the agreements and
satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness
of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or,
to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Final Prospectus (exclusive
of any supplement thereto), there has been no material
adverse change in the condition (financial or other),
earnings, business or properties of the Company and its
subsidiaries, whether or not arising from transactions
in the ordinary course of business, except as set forth
in or contemplated in the Final Prospectus (exclusive
of any supplement thereto).
(f) At the Execution Time, Coopers & Lybrand L.L.P.
shall have furnished to the Representative a letter or
letters (which may refer to letters previously delivered to
the Representative), dated as of the date of the Execution
Time, in form and substance satisfactory to the
Representative, confirming that they are independent
accountants within the meaning of the Act and the Exchange
Act and the respective applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial
statements and financial statement schedules included
or incorporated in the Registration Statement and the
Final Prospectus and reported on by them comply in form
in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the
related published rules and regulations;
(ii) on the basis of a reading, and limited
review in accordance with standards established by the
American Institute of Certified Public Accountants, of
the latest unaudited financial statements made
available by the Company and its subsidiaries; carrying
out certain specified procedures (but not an
examination in accordance with generally accepted
auditing standards) which would not necessarily reveal
matters of significance with respect to the comments
set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and the
audit, profit sharing, stock option, senior management
compensation and management succession plan committees
of the Company and the Subsidiary; and inquiries of
certain officials of the Company who have
responsibility for financial and accounting matters of
the Company and its subsidiaries as to transactions and
events subsequent to the date of the most recent
audited financial statements in or incorporated in the
Final Prospectus, nothing came to their attention which
caused them to believe that:
(1) any unaudited financial statements
included or incorporated in the Registration
Statement and the Final Prospectus do not comply
in form in all material respects with applicable
accounting requirements and with the published
rules and regulations of the Commission with
respect to financial statements included or
incorporated in quarterly reports on Form 10-Q
under the Exchange Act; and said unaudited
financial statements are not in conformity with
generally accepted accounting principles applied
on a basis substantially consistent with that of
the audited financial statements included or
incorporated in the Registration Statement and the
Final Prospectus;
(2) with respect to the period subsequent to
the date of the most recent financial statements
(other than any capsule information), audited or
unaudited, in or incorporated in the Registration
Statement and the Final Prospectus, there were any
changes, at a specified date not more than five
business days prior to the date of the letter, in
the long-term debt, working capital or
shareholders equity of the Company and its
subsidiaries as compared with the amounts shown on
the most recent consolidated balance sheet
included or incorporated in the Registration
Statement and the Final Prospectus, or for the
period from the date of the most recent financial
statements included or incorporated in the
Registration Statement and the Final Prospectus to
such specified date there were any decreases, as
compared with the corresponding period in the
preceding year, in net sales, income before income
taxes, or net income, except in all instances for
changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance
thereof unless said explanation is not deemed
necessary by the Representative; or
(3) the amounts included in any unaudited
"capsule" information included or incorporated in
the Registration Statement and the Final
Prospectus do not agree with the amounts set forth
in the unaudited financial statements for the same
periods or were not determined on a basis
substantially consistent with that of the
corresponding amounts in the audited financial
statements included or incorporated in the
Registration Statement and the Final Prospectus
and in conformity with generally accepted
accounting principles; and
(iii) they have performed certain other specified
procedures as a result of which they determined that
certain information of an accounting, financial or
statistical nature (which is limited to accounting,
financial or statistical information derived from the
general accounting records of the Company and its
subsidiaries) set forth in the Registration Statement
and the Final Prospectus and in Exhibit 12 to the
Registration Statement, including the information
included or incorporated in Items 1, 5, 6, 7, 8, 9,
and 11 of the Company's 1996 Annual Report on
Form 10-K, incorporated in the Registration Statement
and the Final Prospectus, and the information included
in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included
or incorporated in the Registration Statement and the
Final Prospectus, agrees with the accounting records of
the Company and its subsidiaries, excluding any
questions of legal interpretation.
References to the Final Prospectus in this
paragraph (f) include any supplement thereto at the date of the
letter.
In addition at the Closing Date, Coopers & Lybrand
L.L.P. shall have furnished to the Representative a letter or
letters, dated as of the Closing Date, in form and substance
satisfactory to the Representative, to the effect set forth
above.
(g) Subsequent to the Execution Time or, if earlier,
the dates as of which information is given in the
Registration Statement (exclusive of any amendment thereof)
and the Final Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in
paragraph (f) of this Section 5 or (ii) any change, or any
development involving a prospective change, in or affecting
the business or properties of the Company and its
subsidiaries, the effect of which, in any case referred to
in clause (i) or (ii) above, is, in the judgment of the
Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or
the delivery of the Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof)
and the Final Prospectus (exclusive of any supplement
thereto).
(h) Subsequent to the Execution Time, there shall not
have been any decrease in the ratings of any of the
Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of
Rule 436(g) under the Act) or any notice given of any
intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate
the direction of the possible change.
(i) Prior to the Closing Date, the Company shall have
furnished to the Representative such further information,
certificates and documents as the Representative may
reasonably request.
If any of the conditions specified in this Section 5
shall not have been fulfilled in all material respects when and
as provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall
not be in all material respects reasonably satisfactory in form
and substance to the Representative and counsel for the
Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior
to, the Closing Date by the Representative. Notice of such
cancellation shall be given to the Company in writing or by
telephone or telecopy confirmed in writing.
6. Reimbursement of Underwriters' Expenses. If the
sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set
forth in Section 5 hereof is not satisfied, because of any
termination pursuant to Section 9 hereof or because of any
refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the
Company will reimburse the Underwriters severally upon demand for
all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them
in connection with the proposed purchase and sale of the
Securities.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless
each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any
Underwriter within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement for the registration of the Securities as
originally filed or in any amendment thereof, or in the
Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) this
indemnity with respect to any Preliminary Final Prospectus
or Basic Prospectus shall not inure to the benefit of any
Underwriter (or any director, officer, employee or agent of
such Underwriter or any person controlling such Underwriter)
from whom the person asserting any such loss, claim, damage
or liability purchased the Securities which are the subject
thereof if there was not sent or given to such person a copy
of the Final Prospectus (or the Final Prospectus as then
amended or supplemented) (exclusive of material incorporated
therein by reference) at or prior to the confirmation of the
sale of such Securities to such person in any case where
such delivery is required by the Act, and the untrue
statement or omission of a material fact contained in the
Preliminary Final Prospectus or Basic Prospectus was
corrected in such Final Prospectus (or Final Prospectus as
so amended or supplemented) and the Company previously
furnished copies thereof to such Underwriter and (ii) the
Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of
or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter
through the Representative specifically for inclusion
therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, each of its directors, each of
its officers who signs the Registration Statement, and each
person who controls the Company within the meaning of either
the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter,
but only with reference to written information relating to
such Underwriter furnished to the Company by or on behalf of
such Underwriter through the Representative specifically for
inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have. The
Company acknowledges that the statements set forth in the
last paragraph of the cover page and under the heading
"Underwriting", respectively, in the Preliminary Final
Prospectus and the Final Prospectus constitute the only
information furnished in writing by or on behalf of any of
the Underwriters for inclusion in the documents referred to
in the foregoing indemnity, and you, as the Representative,
confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under
this Section 7, notify the indemnifying party in writing of
the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability
under paragraph (a) or (b) above unless and to the extent it
did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for
which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory
to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel
if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party,
(iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party.
An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless
such settlement, compromise or consent includes an
unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 7 is unavailable to or
insufficient to hold harmless an indemnified party for any
reason, the Company and the Underwriters agree to contribute
to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more
of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the
Company and by the Underwriters from the offering of the
Securities; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement
among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the
underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriters
shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the
relative fault of the Company and of the Underwriters in
connection with the statements or omissions which resulted
in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the
offering (before deducting expenses), and benefits received
by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set
forth on the cover page of the Final Prospectus. Relative
fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information
provided by the Company or the Underwriters. The Company
and the Underwriters agree that it would not be just and
equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not
take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph
(d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls an Underwriter within
the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of an Underwriter
shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within
the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the
Registration Statement and each director of the Company
shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions
of this paragraph (d).
8. Default by an Underwriter. If any Underwriter
shall fail to purchase and pay for any of the Securities agreed
to be purchased by such Underwriter hereunder and such failure to
purchase shall constitute a default in the performance of its
obligations under this Agreement, the other Underwriter shall be
obligated to take up and pay for the Securities which the
defaulting Underwriter agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities
set forth in Schedule II hereto, the other Underwriter shall have
the right to purchase all, but shall not be under any obligation
to purchase any, of the Securities, and if such nondefaulting
Underwriter does not purchase all the Securities, this Agreement
will terminate without liability to any nondefaulting Underwriter
or the Company. In the event of a default by any Underwriter as
set forth in this Section 8, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Representative
shall determine in order that the required changes in the
Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to the Company and any nondefaulting
Underwriter for damages occasioned by its default hereunder.
9. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representative, by
notice given to the Company prior to delivery of and payment for
the Securities, if prior to such time (i) trading in the
Company's Class A Common Stock or Class B Common Stock shall have
been suspended by the Commission or the National Association of
Securities Dealers Automated Quotation National Market System or
trading in securities generally on the New York Stock Exchange or
the National Association of Securities Dealers Automated
Quotation National Market System shall have been suspended or
limited or minimum prices shall have been established on such
Exchange or Market System, (ii) a banking moratorium shall have
been declared either by Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which
on financial markets is such as to make it, in the judgment of
the Representative, impracticable or inadvisable to proceed with
the offering or delivery of the Securities as contemplated by the
Final Prospectus (exclusive of any supplement thereto).
10. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities
and other statements of the Company or its officers and of the
Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in
Section 7 hereof, and will survive delivery of and payment for
the Securities. The provisions of Sections 6 and 7 hereof shall
survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the
Representative, will be mailed, delivered or telecopied and
confirmed to them, at the address specified in Schedule I hereto;
or, if sent to the Company, will be mailed, delivered or
telecopied and confirmed to it at 2110 Executive Drive, P.O. Box
1330, Salisbury, North Carolina, telecopy (704) 639-1353
attention of the legal department.
12. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 7 hereof, and no other
person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed
by and construed in accordance with the laws of the State of New
York.
14. Counterparts. This agreement may be signed in one
or more counterparts, each of which shall be an original, and
together shall constitute one and the same instrument.
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us the
enclosed duplicate hereof, whereupon this letter and your
acceptance shall represent a binding agreement among the Company
and each of the Underwriters.
Very truly yours,
Food Lion, Inc.
By: Laura Kendall
Name:Laura Kendall
Title: Vice President of Finance
The foregoing Agreement is
hereby confirmed and accepted
as of the date specified in
Schedule I hereto.
Salomon Brothers Inc
By: Salomon Brothers Inc
By: Kimberly M. Bernstein
Name:Kimberly M. Bernstein
Title:Vice President of Salomon Brothers Inc
For itself and the other
Underwriter named
in Schedule II to the
foregoing Agreement.
SCHEDULE I
Underwriting Agreement dated as of April 16, 1997
Registration Statement No. (33-49620)
Representative: Salomon Brothers Inc
Seven World Trade Center
New York, NY
Telecopy: (212) 783-6972
Attn: Legal Department
Title, Purchase Price and Description of Securities:
Title: 7.55% Notes due 2007
8.05% Notes due 2027
Principal amount: $150,000,000 7.55% Notes due 2007
$150,000,000 8.05% Notes due 2027
Purchase price for 7.55% Notes due 2007: 99.677% of the
principal amount being
purchased, plus accrued
interest, if any, from April
21, 1997 to the Closing Date,
less an underwriting discount
of .650% of the principal
amount being purchased
Purchase price for 8.05% Notes due 2027: 99.632% of the
principal amount being
purchased, plus accrued
interest, if any, from
April 21, 1997 to the Closing
Date, less an underwriting
discount of .875% of the
principal amount being
purchased.
Sinking fund provisions: None
Redemption provisions:
The 7.55% Notes due 2007 will be redeemable as a whole or in
part, at the option of the Company at any time, at a
redemption price equal to the greater of (i) 100% of the
principal amount of each such Note to be redeemed and (ii)
the sum of the present values of the Remaining Scheduled
Payments (as defined in the Final Prospectus) thereon
discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined in the Final Prospectus)
plus 5 basis points, plus, in either case, accrued interest
on the principal amount being redeemed to the date of
redemption.
The 8.05% Notes due 2027 will be redeemable as a whole or in
part, at the option of the Company at any time, at a
redemption price equal to the greater of (i) 100% of the
principal amount of each such Note to be redeemed and (ii)
the sum of the present values of the Remaining Scheduled
Payments (as defined in the Final Prospectus) thereon
discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined in the Final Prospectus)
plus 20 basis points, plus, in either case, accrued interest
on the principal amount being redeemed to the date of
redemption.
Notice of any redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each
holder of any such Notes to be redeemed.
Unless the Company defaults in payment of the redemption
price, on and after the redemption date interest will cease
to accrue on such Notes or portions thereof called for
redemption.
Closing Date, Time and Location: April 21, 1997, 10:00 AM, New
York City time, at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006
Type of Offering: Delayed Offering
Date referred to in Section 4(e) after which the Company may
offer or sell debt securities issued or guaranteed by the Company
without the consent of the Representative: the first business
day occurring on or after the tenth day after the Closing Date.
SCHEDULE II
Principal Amount of
7.55% Notes due 2007
Underwriters to be Purchased
Salomon Brothers Inc $75,000,000
NationsBanc Capital Markets, $75,000,000
Inc.
Total $150,000,000
Principal Amount of
8.05% Notes due 2027
Underwriters to be Purchased
Salomon Brothers Inc $75,000,000
NationsBanc Capital Markets, $75,000,000
Inc.
Total $150,000,000
