<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
FOOD LION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
August 17, 1999
Dear Shareholder,
This week, I announced a series of initiatives that will prepare Food Lion for
the next stage of the Company's growth as we plan to expand locally and
nationally. We expect these proposals to help the Company achieve the aggressive
growth strategy outlined at the annual meeting of shareholders in May, and are
part of my pledge to increase shareholder value.
Among the steps Food Lion plans to take include:
- - Forming a holding company, to be called Delhaize America, to facilitate
future acquisitions as well as the expansion of the Company's existing
operations.
- - Listing Delhaize America, Inc. on the New York Stock Exchange beginning
September 9, 1999, which will enhance the Company's visibility within the
investment community. The Company's two classes of common stock will be
traded on the NYSE under the symbols "DZA" and "DZB." Simultaneously, Food
Lion, Inc. will delist from the Nasdaq National Market system.
- - Authorizing a one-for-three reverse stock split of the Company's outstanding
shares of common stock (Classes A and B).
- - Authorizing 500 million shares of a new class of "blank check" preferred
stock that could be issued in acquisitions, implementation of employee
benefit plans, and other uses as determined by the Company's Board of
Directors.
- - Increasing the maximum number of authorized directors of the Company from 10
to as many as 14.
We are fully committed to building shareholder value and making Delhaize America
one of the great brand names in the global supermarket industry. We expect these
initiatives to pave the way for the growth of our Company well into the next
century.
I urge you to support the Board's proposals. Please either attend our special
shareholder meeting on September 7, 1999 or mail your proxy card in the enclosed
envelope for our receipt before this meeting to vote on the proposals.
Accompanying this letter is a proxy statement further describing in detail our
proposed actions. If you have further questions, you can contact our proxy
solicitor, Georgeson Shareholder Communications, Inc., at (800) 223-2064 or the
Company's Investor Relations Manager, David Hogan, at (704) 633-8250, ext. 2529.
We look forward to beginning this new chapter in Food Lion's rich history and
value your continued support.
Best Regards,
/s/ Bill McCanless
Bill McCanless
President and Chief Executive Officer
<PAGE> 3
FOOD LION, INC.
2110 EXECUTIVE DRIVE
P.O. BOX 1330
SALISBURY, NORTH CAROLINA 28145-1330
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF FOOD LION, INC.
---------------------
Dear Shareholder:
A Special Meeting of Shareholders of Food Lion, Inc. ("Food Lion" or the
"Company") will be held at the New York Marriott Hotel, 3 World Trade Center,
New York, New York, on Tuesday, September 7, 1999, at 4:00 p.m. local time in
connection with the conversion of Food Lion into a holding company, as described
in more detail in the accompanying proxy statement. The Special Meeting will be
held for the following purposes:
1. To consider and vote on a proposal to convert Food Lion into a
holding company by transferring substantially all of the assets and
operations of Food Lion into a newly-formed, wholly-owned subsidiary,
with the result that Food Lion would become a holding company with
separate operating subsidiaries (the "Holding Company Proposal");
2. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to effect a one-for-three reverse stock
split of Food Lion's presently issued and outstanding shares of Class
A Common Stock and Class B Common Stock (the "Reverse Stock Split
Proposal");
3. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to change the name of Food Lion to
Delhaize America, Inc. (the "Name Change Proposal");
4. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to authorize 500,000,000 shares of a new
class of "blank check" Preferred Stock (the "Preferred Stock
Proposal");
5. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to restate the purpose clause to broaden
the corporate powers of Food Lion by authorizing Food Lion to engage
in any lawful act or activity for which a corporation may be formed
under North Carolina law (the "Purpose Clause Proposal");
6. To consider and vote on a proposal to amend the Bylaws of Food Lion
to provide that the number of directors of Food Lion shall be not
less than eight nor more than fourteen (the "Director Range
Proposal"); and
7. To act upon such other matters as may properly come before the
meeting, or any adjournments or postponements of the meeting.
The Board of Directors of Food Lion has fixed the close of business on July
26, 1999 as the Record Date for the determination of shareholders entitled to
vote at the Special Meeting. Holders of record as of such Record Date of the
outstanding shares of Food Lion's Class A Common Stock and the outstanding
shares of Food Lion's Class B Common Stock are entitled to vote on the Reverse
Stock Split Proposal and the Preferred Stock Proposal (one vote for each share
held, with each class voting separately) at the Special Meeting. In addition,
holders of record as of such Record Date of the outstanding shares of Food
Lion's Class B Common Stock are entitled to vote on the Holding Company
Proposal, the Name Change Proposal, the Purpose Clause Proposal and the Director
Range Proposal (one vote for each share held) at the Special Meeting.
<PAGE> 4
A Proxy Statement and a proxy card are enclosed herewith. To ensure that
your shares are voted at the meeting, please date, sign and return your proxy
card promptly in the enclosed postage-paid envelope. Approval of the Holding
Company Proposal will require the affirmative vote of the holders of a majority
of the outstanding shares of Class B Common Stock. Approval of the Reverse Stock
Split Proposal will require the affirmative vote of the holders of a majority of
the outstanding shares of each of the Class A Common Stock and the Class B
Common Stock. Approval of the Preferred Stock Proposal will require the
affirmative vote of the holders of a majority of the shares of each of the Class
A Common Stock and the Class B Common Stock voting on such proposal. Approval of
the Name Change Proposal, the Purpose Clause Proposal and the Director Range
Proposal will require the affirmative vote of the holders of a majority of the
shares of Class B Common Stock voting on each such proposal. Abstentions will be
counted in determining the existence of a quorum for the Special Meeting. An
abstention, a broker non-vote or a failure to return a signed proxy card will
have the same effect as a vote against the Holding Company Proposal and the
Reverse Stock Split Proposal. An abstention, a broker non-vote or a failure to
return a signed proxy card will not be counted as votes in favor of or against
the Preferred Stock Proposal, the Name Change Proposal, the Purpose Clause
Proposal or the Director Range Proposal.
ANY SHAREHOLDER WHO WOULD HAVE HIS OR HER SHARE INTEREST IN FOOD LION REDUCED TO
A FRACTION OF A SHARE AS A RESULT OF THE REVERSE STOCK SPLIT PROPOSAL MAY
DISSENT FROM THE REVERSE STOCK SPLIT PROPOSAL UPON COMPLIANCE WITH THE
PROCEDURES PRESCRIBED BY ARTICLE 13 OF THE NORTH CAROLINA BUSINESS CORPORATION
ACT, A COPY OF WHICH IS ATTACHED AS EXHIBIT B TO THIS PROXY STATEMENT.
SHAREHOLDERS MAY REVOKE A PROXY UPON DELIVERY TO THE SECRETARY OF FOOD LION OF A
WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE.
SHAREHOLDERS MAY ALSO REVOKE A PROXY BY ATTENDING THE SPECIAL MEETING AND VOTING
IN PERSON.
LESTER C. NAIL
Secretary
Dated: August 17, 1999
<PAGE> 5
FOOD LION, INC.
2110 EXECUTIVE DRIVE
P.O. BOX 1330
SALISBURY, NORTH CAROLINA 28145-1330
---------------------
AUGUST 17, 1999
---------------------
PROXY STATEMENT
The accompanying proxy is being solicited by and on behalf of the Board of
Directors of Food Lion, Inc. ("Food Lion" or the "Company") for use at the
Special Meeting of Shareholders to be held at 4:00 p.m. on Tuesday, September 7,
1999, at the New York Marriott Hotel, 3 World Trade Center, New York, New York,
or at any adjournment or postponement thereof (the "Special Meeting"). The
entire cost of such solicitation will be borne by Food Lion. In addition to
solicitation by mail, arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxy materials to their
principals, and Food Lion may reimburse them for their expenses in doing so.
Food Lion has retained Georgeson Shareholder Communications Inc., a professional
proxy solicitation firm, to assist in the solicitation of proxies, and will pay
a fee of $9,000 plus reimbursement for reasonable out-of-pocket expenses
thereto. Personal solicitations may also be conducted by directors, officers and
employees of Food Lion.
The shares represented by the accompanying proxy and entitled to vote will
be voted if the proxy card is properly signed and received by Food Lion prior to
the meeting. Where a choice is specified on any proxy card as to the vote on any
matter to come before the meeting, the proxy will be voted in accordance with
such specification. If the proxy card is properly signed and returned, but no
choice is specified, the proxy will be voted (i) for the Holding Company
Proposal, the Reverse Stock Split Proposal, the Name Change Proposal, the
Preferred Stock Proposal, the Purpose Clause Proposal and the Director Range
Proposal (as each term is defined herein) and (ii) in such manner as the persons
named on the enclosed proxy card in their discretion determine upon such other
business as may properly come before the Special Meeting.
SHAREHOLDERS MAY REVOKE A PROXY UPON DELIVERY TO THE SECRETARY OF FOOD LION OF A
WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE.
SHAREHOLDERS MAY ALSO REVOKE A PROXY BY ATTENDING THE SPECIAL MEETING AND VOTING
IN PERSON.
This Proxy Statement, dated August 17, 1999, is first being mailed to
shareholders on or about August 17, 1999. You should rely only on the
information contained in this Proxy Statement. We have not authorized anyone to
provide you with different information. Do not assume that the information
contained in this document is accurate as of any date other than its date, and
the mailing of this document shall not create any implication to the contrary.
<PAGE> 6
This Proxy Statement (and accompanying proxy card) addresses the following
proposals:
1. To consider and vote on a proposal to convert Food Lion into a
holding company by transferring substantially all of the assets and
operations of Food Lion to a newly-formed, wholly-owned subsidiary,
with the result that Food Lion would become a holding company with
separate operating subsidiaries (the "Holding Company Proposal");
2. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to effect a one-for-three reverse stock
split of Food Lion's presently issued and outstanding shares of Class
A Common Stock and Class B Common Stock (the "Reverse Stock Split
Proposal");
3. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to change the name of Food Lion to
Delhaize America, Inc. (the "Name Change Proposal");
4. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to authorize 500,000,000 shares of a new
class of "blank check" Preferred Stock (the "Preferred Stock
Proposal");
5. To consider and vote on a proposal to amend the Articles of
Incorporation of Food Lion to restate the purpose clause to broaden
the corporate powers of Food Lion by authorizing Food Lion to engage
in any lawful act or activity for which a corporation may be formed
under North Carolina law (the "Purpose Clause Proposal");
6. To consider and vote on a proposal to amend the Bylaws of Food Lion
to provide that the number of directors of Food Lion shall be not
less than eight nor more than fourteen (the "Director Range
Proposal"); and
7. To act upon such other matters as may properly come before the
meeting, or any adjournments or postponements of the meeting.
VOTING SECURITIES OF FOOD LION
Food Lion is authorized to issue and has outstanding (i) non-voting shares
of Food Lion Class A Common Stock, par value $.50 par share ("Class A Common
Stock"), and (ii) voting shares of Food Lion Class B Common Stock, par value
$.50 per share ("Class B Common Stock") (collectively, the "Common Stock").
Holders of record of Class A Common Stock and Class B Common Stock at the close
of business on July 26, 1999 (the "Record Date") are entitled to vote on the
Reverse Stock Split Proposal and the Preferred Stock Proposal (one vote for each
share held, with each class voting separately) at the Special Meeting. In
addition, holders of record of Class B Common Stock are entitled to vote on the
Holding Company Proposal, the Name Change Proposal, the Purpose Clause Proposal
and the Director Range Proposal (one vote for each share held) at the Special
Meeting.
The laws of North Carolina, under which Food Lion is incorporated, provide
that the affirmative vote of the holders of a majority of the outstanding shares
of each of the Class A Common Stock and the Class B Common Stock, regardless of
number of votes cast, will be required to approve the Reverse Stock Split
Proposal. Approval of the Holding Company Proposal will require the affirmative
vote of the holders of a majority of the outstanding shares of Class B Common
Stock. Approval of the Preferred Stock Proposal will require the affirmative
vote of the holders of a majority of the shares of each of the Class A Common
Stock and the Class B Common Stock voting on such proposal. Approval of the Name
Change Proposal, the Purpose Clause Proposal and the Director Range Proposal
will require the affirmative vote of the holders of a
2
<PAGE> 7
majority of the shares of Class B Common Stock voting on such proposals.
Abstentions will be counted in determining the existence of a quorum for the
Special Meeting. An abstention, a broker non-vote or a failure to return a
signed proxy card will have the same effect as a vote against the Reverse Stock
Split Proposal and the Holding Company Proposal. An abstention, a broker
non-vote or a failure to return a signed proxy card will not be counted as votes
in favor of or against the Preferred Stock Proposal, the Name Change Proposal,
the Purpose Clause Proposal or the Director Range Proposal.
At the close of business on the Record Date there were 243,405,175 shares
of Class A Common Stock issued and outstanding and 227,189,964 shares of Class B
Common Stock issued and outstanding.
Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize") and its
wholly owned subsidiary, Delhaize The Lion America, Inc., a Delaware corporation
("Detla"), own, in the aggregate, approximately 41.2% of the outstanding shares
of Class A Common Stock and approximately 54.6% of the outstanding shares of
Class B Common Stock. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Principal Shareholders." The affirmative vote by Delhaize and
Detla will guarantee the passage of the Holding Company Proposal, the Name
Change Proposal, the Purpose Clause Proposal and the Director Range Proposal
(and any other proposals that require a majority vote of the Class B Common
Stock for passage). Food Lion has been informed that Delhaize and Detla intend
to vote FOR the Holding Company Proposal, the Reverse Stock Split Proposal, the
Name Change Proposal, the Preferred Stock Proposal, the Purpose Clause Proposal
and the Director Range Proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following information is furnished for each person known by management
of Food Lion to be the beneficial owner of more than 5% of the outstanding
shares of each class of Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP AS OF PERCENT
NAME AND ADDRESS JULY 26, 1999 OF CLASS
- ---------------- ----------------- --------
<S> <C> <C>
CLASS A COMMON STOCK:
Etablissements Delhaize Freres et Cie
"Le Lion" S.A. ("Delhaize")
rue Osseghem, 53
1080 Brussels, Belgium................................... 100,200,863(1) 41.2%
Brinson Partners, Inc.
209 South LaSalle
Chicago, Illinois 60604-1295............................. 12,828,545(2) 5.3%
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP AS OF PERCENT
NAME AND ADDRESS JULY 26, 1999 OF CLASS
- ---------------- ----------------- --------
<S> <C> <C>
UBS AG
Bahnhofstrasse 45
8021, Zurich, Switzerland................................ 12,828,545(2) 5.3%
CLASS B COMMON STOCK:
Delhaize
rue Osseghem, 53
1080 Brussels, Belgium................................... 123,975,162(3) 54.6%
</TABLE>
- ---------------
(1) Includes 35,841,000 shares held of record by Delhaize's wholly-owned
subsidiary, Detla. Detla's address is Suite 2160, Atlanta Plaza, 950 East
Paces Ferry Road, Atlanta, Georgia 30326. Delhaize, Detla and Food Lion are
parties to a Shareholders Agreement dated September 15, 1994, which governs
the voting of the shares held by Delhaize and Detla in the election of
directors and other matters. See "Shareholders Agreement" below.
(2) According to a Schedule 13G/A filed with the Securities and Exchange
Commission on February 16, 1999, Brinson Partners, Inc. ("BPI") and UBS AG
("UBS") share voting power and dispositive power with respect to 12,828,545
shares of Class A Common Stock. According to the Schedule 13G/A, BPI is an
indirect wholly-owned subsidiary of UBS, and accounts managed on a
discretionary basis by BPI and/or UBS have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of,
the shares of Class A Common Stock reported. According to the Schedule
13G/A, no account managed by either BPI or UBS holds more than 5% of the
outstanding shares of Class A Common Stock.
(3) Includes 63,352,780 shares held of record by Delhaize's wholly-owned
subsidiary, Detla. Detla's address is Suite 2160, Atlanta Plaza, 950 East
Paces Ferry Road, Atlanta, Georgia 30326. Delhaize, Detla and Food Lion are
parties to a Shareholders Agreement dated September 15, 1994, which governs
the voting of the shares held by Delhaize and Detla in the election of
directors and other matters. See "Shareholders Agreement" below.
4
<PAGE> 9
OWNERSHIP OF MANAGEMENT
The following information with respect to beneficial ownership of shares of
Class A Common Stock and Class B Common Stock as of July 26, 1999, is furnished
for each director, the Chief Executive Officer and the four other most highly
compensated executive officers of Food Lion and for all directors and executive
officers of Food Lion as a group. The number of shares of Common Stock set forth
in the table below includes shares that may be acquired within 60 days of July
26, 1999, but does not include shares of Common Stock beneficially owned by
Delhaize, as to which Messrs. Beckers, Coppieters, Raquez and Dumont are
associated as further described herein. See "Principal Shareholders" above for
more information relating to the ownership of Common Stock by Delhaize. Unless
otherwise noted, each person has sole voting and investment power of the shares
beneficially owned by such person.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
--------------------- --------------------
AMOUNT AND AMOUNT AND
NAME OF INDIVIDUAL NATURE OF PERCENT NATURE OF PERCENT
OR NUMBER OF BENEFICIAL OF BENEFICIAL OF
PERSONS IN GROUP OWNERSHIP CLASS OWNERSHIP CLASS
------------------ ----------- ------- ---------- -------
<S> <C> <C> <C> <C>
Pierre-Olivier Beckers................................. -- -- -- --
A. Edward Benner....................................... 42,557(1) * 585 *
Jacqueline Kelly Collamore............................. 1,472 * 1,000 *
Jean-Claude Coppieters 't Wallant...................... -- -- -- --
Pierre Dumont.......................................... -- -- -- --
William G. Ferguson.................................... 1,472 * -- --
Bernard W. Franklin.................................... 1,897 * -- --
Joseph C. Hall, Jr..................................... 195,092(2) * 62,033(2) *
Margaret H. Kluttz..................................... 1,772 * 1,050 *
Pamela K. Kohn......................................... 33,997(3) * -- --
Bill McCanless......................................... 106,393(4) * -- --
Dominique Raquez....................................... -- -- -- --
Tom E. Smith........................................... 895,684(5) * 929,267(5) *
All directors, nominees for director, and executive
officers as a group (28 persons)..................... 1,568,249(6) * 1,019,074 *
</TABLE>
- ---------------
* Indicates less than 1%.
(1) Includes (a) 25,384 restricted shares of Class A Common Stock held pursuant
to the 1996 Employee Stock Incentive Plan of Food Lion, Inc.; and (b) 7,849
shares of Class A Common Stock that may be acquired upon exercise of options
granted under the 1996 Employee Stock Option Plan of Food Lion, Inc.
(2) Includes (a) 6,930 shares of Class A Common Stock and 1,080 shares of Class
B Common Stock held by Mr. Hall as custodian for his children; (b) 300
shares of Class A Common Stock held by Mr. Hall's wife as custodian for
their children; (c) 5,400 shares of Class A Common Stock and 5,400 shares of
Class B Common Stock held by Mr. Hall's children; (d) 65,309 restricted
shares of Class A Common Stock held pursuant to the 1996 Employee Stock
Incentive Plan of Food Lion, Inc.; and (e) 27,241 shares of Class A Common
Stock that may be acquired upon exercise of options granted under the 1996
Employee Stock Incentive Plan of Food Lion, Inc.
5
<PAGE> 10
(3) On April 14, 1999, Pamela K. Kohn resigned as Senior Vice President of
Merchandising of the Company.
(4) Includes (a) 1,799 shares of Class A Common Stock held by Mr. McCanless's
wife; (b) 72,782 restricted shares of Class A Common Stock held pursuant to
the 1996 Employee Stock Incentive Plan of Food Lion, Inc.; and (c) 21,216
shares of Class A Common Stock that may be acquired upon exercise of options
granted under the 1996 Employee Stock Incentive Plan of Food Lion, Inc.
(5) Includes (a) 480 shares of Class A Common Stock and 203 shares of Class B
Common Stock held by Mr. Smith's wife; (b) 120,281 restricted shares of
Class A Common Stock held pursuant to the 1996 Employee Stock Incentive Plan
of Food Lion, Inc.; and (c) 142,201 shares of Class A Common Stock that may
be acquired upon exercise of options granted under the 1996 Employee Stock
Incentive Plan of Food Lion, Inc.; and excludes 166,792 shares of Class A
Common Stock and 348,912 shares of Class B Common Stock owned by trusts
created by Mr. Smith for his children and over which Mr. Smith exercises no
voting or investment power. On April 7, 1999, Tom E. Smith retired as
President and Chief Executive Officer of the Company. On that date, Bill
McCanless was appointed President and Chief Executive Officer.
(6) Includes (a) 226,768 shares of Class A Common Stock that may be acquired
upon exercise of options granted under the 1996 Employee Stock Incentive
Plan of Food Lion, Inc.; (b) 441,460 restricted shares of Class A Common
Stock held pursuant to the 1996 Employee Stock Incentive Plan of Food Lion,
Inc.; and (c) shares represented by 27,501 units in the Profit Sharing
Retirement Plan of Food Lion, Inc. allocated to Class A Common Stock. The
number of shares per unit in such plan fluctuates based in part on the
allocation of cash to the fund. As of July 26, 1999, the 27,501 units held
by all directors and executive officers as a group represented 36,852 shares
of Class A Common Stock.
SHAREHOLDERS AGREEMENT
On September 15, 1994, Delhaize, Detla and Food Lion entered into an
agreement (the "1994 Shareholders Agreement" or "Shareholders Agreement")
containing provisions regarding, among other things, the nomination of
candidates for election to the Board of Directors, the voting of securities
beneficially owned by the parties to the Shareholders Agreement for the election
of directors, the role of the Chief Executive Officer in the management of Food
Lion and the voting requirements applicable to specified actions by the Board of
Directors. The 1994 Shareholders Agreement is effective until April 30, 2001,
unless Delhaize's and Detla's aggregate ownership of voting shares of Food Lion
is reduced below 10%, in which case the Shareholders Agreement would terminate
at that time. None of the proposals to be voted on at the Special Meeting are
within the scope of the shareholder voting requirements of the Shareholders
Agreement.
MARKET PRICE OF COMMON STOCK
The Company's Class A Common Stock and Class B Common Stock is presently
traded on the Nasdaq National Market under the symbols "FDLNA" and "FDLNB,"
respectively. The high and low sales prices for the Common Stock as of August
16, 1999, were as follows:
<TABLE>
<CAPTION>
HIGH LOW
----- -------
<S> <C> <C>
Class A Common Stock........................................ $11 1/2 $10 15/16
Class B Common Stock........................................ $11 5/8 $11
</TABLE>
6
<PAGE> 11
THE HOLDING COMPANY RESTRUCTURING
The Board of Directors of Food Lion has determined that it would be in the
best interests of Food Lion and its shareholders for Food Lion to transfer
substantially all of Food Lion's assets and operations to a direct wholly-owned
subsidiary of Food Lion, with the result that Food Lion would become a holding
company with separate operating subsidiaries (the "Holding Company
Restructuring"). In connection with the Holding Company Restructuring, the Board
of Directors has determined that it would be in the best interests of Food Lion
and its shareholders to implement the following six proposals to be voted on by
the shareholders of the Company: (i) to transfer substantially all of the assets
and operations of Food Lion to a wholly-owned subsidiary of Food Lion (the
"Holding Company Proposal"); (ii) to effectuate a one-for-three reverse stock
split of the shares of Class A Common Stock and Class B Common Stock (the
"Reverse Stock Split Proposal"); (iii) to change the name of Food Lion to
Delhaize America, Inc. (the "Name Change Proposal"); (iv) to authorize
500,000,000 shares of a new class of "blank check" Preferred Stock (the
"Preferred Stock Proposal"); (v) to restate the purpose clause to broaden the
corporate powers of Food Lion by authorizing Food Lion to engage in any lawful
act or activity for which a corporation may be formed under North Carolina law
(the "Purpose Clause Proposal"); and (vi) to amend the Bylaws of Food Lion to
provide that the number of directors of Food Lion shall be not less than eight
nor more than fourteen (the "Director Range Proposal").
In connection with the Holding Company Restructuring, the Board of
Directors also has determined that it would be in the best interests of Food
Lion and its shareholders to list the shares of Class A Common Stock and Class B
Common Stock on the New York Stock Exchange, Inc. (the "NYSE") and delist such
shares from the Nasdaq National Market (the "NNM").
The Board of Directors has determined that the Holding Company
Restructuring will better facilitate the management of multiple store formats
under different names, such as Food Lion and Kash n' Karry, that require
differentiation in daily operational management while preserving central control
and shared administrative functions. The Holding Company Restructuring also will
facilitate the development or purchase of new businesses. It will provide one
entity (Delhaize America, Inc.) as the corporate banner for recognition by the
Company's shareholders, financial institutions and other business partners. The
name Delhaize America, Inc. will receive enhanced recognition with the listing
of the Company on the NYSE, the stock exchange on which most other major grocery
store chains in the Company's peer group are traded.
7
<PAGE> 12
The following charts reflect the present structure and the proposed
structure after the Holding Company Restructuring:
PRESENT STRUCTURE
Food Lion, Inc.
|
|
--------------------------------------------------
| |
| |
FLI Holding Corp. Risk Management
| Services, Inc.
|
------------------------
| |
| |
Kash n' Karry FL Food Lion, Inc.
Food Stores, Inc.
PROPOSED STRUCTURE*
Delhaize America, Inc.
|
|
------------------------------------------------------------------
| | | |
| | | |
Food Lion, LLC Kash n' Karry Risk Management FL Food Lion, Inc.
Food Stores, Inc. Services, Inc.
* FLI Holding Corp. also owns all of the outstanding capital stock of Barnwell,
Inc., a Delaware corporation that operates one store in South Carolina. In
connection with the proposed structure, Barnwell, Inc. may be merged into one
of the other operating subsidiaries, and FLI Holding Corp. will be dissolved.
Delhaize America, Inc. and its subsidiaries may establish other subsidiaries
from time to time. Any new subsidiaries established before the Holding Company
Proposal is implemented will also become subsidiaries of Delhaize America,
Inc.
On August 17, 1999, the Company agreed to purchase all of the outstanding
common stock of Hannaford Bros. Co. ("Hannaford"), a retail supermarket chain,
in a cash and stock transaction valued at approximately $3.6 billion, including
the assumption of debt. The acquisition is subject to approval by the
shareholders of Hannaford as well as customary regulatory approvals and other
customary closing conditions. There are no other current agreements, agreements
in principle, understandings or arrangements with any person to acquire such
person or effect a material acquisition.
If the Holding Company Proposal, the Reverse Stock Split Proposal, the Name
Change Proposal, the Preferred Stock Proposal, the Purpose Clause Proposal and
the Director Range Proposal (collectively, the "Proposals") are approved, they
will be implemented in connection with the Holding Company Restructuring. If the
Holding Company Proposal is approved, the Holding Company Restructuring will be
implemented over a period of approximately twelve months through the execution
of transfer documents that effectuate the transfer of substantially all of the
assets and operations of Food Lion to a newly-formed, wholly-owned subsidiary of
Food Lion. If the Reverse Stock Split Proposal and the Preferred Stock Proposal
are approved,
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they will be effected by the filing of an amendment to the Articles of
Incorporation of Food Lion containing in substance the language set forth in
Item 1 of Exhibit A hereto. If the Name Change Proposal and the Purpose Clause
Proposal are approved, they will be effected by the filing of an amendment to
the Articles of Incorporation of Food Lion as described herein. (See "PROPOSAL
(3) -- THE NAME CHANGE PROPOSAL" and "PROPOSAL (5) -- THE PURPOSE CLAUSE
PROPOSAL".) If the Director Range Proposal is approved, it will be effected upon
such approval.
If the Reverse Stock Split Proposal is approved and implemented, fractional
shares of Common Stock will not be issued, but cash will be issued in lieu of
fractional shares. The Reverse Stock Split Proposal will entitle shareholders
whose share interest is reduced to a fraction of a share to statutory appraisal
rights as discussed below. (See "PROPOSAL (2) -- THE REVERSE STOCK SPLIT
PROPOSAL.")
PROPOSAL (1)
THE HOLDING COMPANY PROPOSAL
The Board of Directors has approved the transfer of substantially all of
Food Lion's assets and operations to a newly-formed, direct wholly-owned
subsidiary (formed as a North Carolina limited liability company) of Food Lion,
with the result that the Company (with the new name Delhaize America, Inc.)
would become a holding company with separate operating subsidiaries (the
"Holding Company Restructuring"). The Board of Directors has determined that
implementation of the Holding Company Proposal will better facilitate the
management of multiple store formats under different names, such as Food Lion
and Kash n' Karry, that require differentiation in daily operational management
while preserving central control and shared administrative functions. The
Holding Company Restructuring also will facilitate the development or purchase
of new businesses. It will provide one entity (Delhaize America, Inc.) as the
corporate banner for recognition by the Company's shareholders, financial
institutions and other business partners. The name Delhaize America, Inc. will
receive enhanced recognition with the listing of the name on the NYSE, the stock
exchange on which most other major grocery store chains in the Company's peer
group are traded.
Implementation of the Holding Company Proposal will have no effect on the
rights of the shareholders of the Company. Additionally, implementation of the
Holding Company Proposal will have no federal income tax consequences to the
shareholders of the Company. The Company is not in arrears with respect to the
payment of dividends or principal or interest in respect of any securities of
the Company. Certain federal, state, and local requirements must be complied
with and approvals obtained in order to implement the Holding Company Proposal.
Specifically, federal, state and local authorizations relating to the sale of
alcohol by the new operating subsidiary must be obtained prior to the transfer
of any store operations that include the sale of alcohol. Additionally, federal
and state requirements must be complied with and approvals obtained in
connection with the transfer of food stamp and related programs to the new
operating subsidiary. Finally, customary business and occupancy permits and
licenses must be obtained in the name of the new operating subsidiary for each
Food Lion store location.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE HOLDING COMPANY
PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
Please vote for the Holding Company Proposal and mail your proxy card to us
in the enclosed postage-paid envelope. The Holding Company Proposal must be
approved by the affirmative vote of the holders of a majority of the outstanding
shares of Food Lion Class B Common Stock. Abstentions will be counted in
determining the existence of a quorum for the Special Meeting, and an
abstention, a broker non-vote or a
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failure to return a signed proxy card will be counted as a vote against the
Holding Company Proposal. The affirmative vote by Delhaize and Detla will
guarantee the passage of the Holding Company Proposal. Food Lion has been
informed that Delhaize and Detla intend to vote FOR the Holding Company
Proposal.
PROPOSAL (2)
THE REVERSE STOCK SPLIT PROPOSAL
The Board of Directors has approved the Reverse Stock Split Proposal,
authorizing an amendment of the Articles of Incorporation to effect a
one-for-three reverse stock split of Food Lion's presently issued and
outstanding shares of Class A Common Stock and Class B Common Stock, and
directed that it be submitted to the shareholders of Food Lion for consideration
and action. If approved by the shareholders, the Reverse Stock Split Proposal
may be effected even if none of the other Proposals is adopted.
The intent of the Reverse Stock Split Proposal is to increase the
marketability of the Common Stock of Food Lion. If approved by the shareholders
of Food Lion, the one-for-three reverse stock split would become effective upon
the filing of an amendment to the Articles of Incorporation of Food Lion or such
later date as is specified in the amendment (the "Effective Date"), which will
occur promptly after the Special Meeting. The text of the amendment relating to
the Reverse Stock Split Proposal is included in Item 1 of Exhibit A hereto. The
procedures for consummation of the one-for-three reverse stock split are set
forth below in this Proposal (2).
VOTE REQUIRED
The Reverse Stock Split Proposal must be approved by the affirmative vote
of the holders of a majority of the outstanding shares of each of the Class A
Common Stock and the Class B Common Stock. Abstentions will be counted in
determining the existence of a quorum for the Special Meeting, and an
abstention, a broker non-vote or a failure to return a signed proxy card will
have the same effect as a vote against the Reverse Stock Split Proposal.
PURPOSE AND EFFECTS OF A REVERSE STOCK SPLIT
The purpose of the reverse stock split is to increase the marketability of
the shares of Class A Common Stock and Class B Common Stock.
Proportionate voting rights and other rights of shareholders will not be
altered by the Reverse Stock Split Proposal, except where a shareholder may own
a fractional interest after the reverse stock split, in which event the
shareholder will be paid for the fractional interest. Under the North Carolina
Business Corporation Act, a shareholder whose share interest is reduced to a
fraction of a share will be entitled to dissenter's rights if certain procedures
described below are followed.
The shares of Class A Common Stock and Class B Common Stock are listed for
trading on the NNM. On the Record Date, the reported closing price of the Class
A Common Stock was $11 3/8 per share and of the Class B Common Stock was $11 1/2
per share.
The Board of Directors believes that a decrease in the number of shares of
Class A Common Stock and Class B Common Stock outstanding without any material
alteration of the proportionate economic interest in Food Lion represented by
individual shareholdings may increase the trading price of such shares to a
price more appropriate for an exchange-listed security, although no assurance
can be given that the market price of
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the shares of Class A Common Stock and Class B Common Stock will increase in
proportion to the reduction in the number of outstanding shares resulting from a
reverse stock split.
The par value of each class of Common Stock will remain at $.50 per share
following the reverse stock split, and the number of shares of each class of
Common Stock outstanding will be reduced. As a consequence, the aggregate par
value of the outstanding Class A Common Stock and Class B Common Stock will be
reduced, while the aggregate capital in excess of par value attributable to the
outstanding Class A Common Stock and Class B Common Stock for accounting
purposes will be correspondingly increased.
The one-for-three reverse stock split would have the effect of (i) reducing
the number of shares of Class A Common Stock outstanding from 243,405,175 shares
(as of the Record Date) to 81,135,058 shares and (ii) reducing the number of
shares of Class B Common Stock outstanding from 227,189,964 shares (as of the
Record Date) to 75,729,988 shares, assuming in each case that no additional
shares of Common Stock are issued by Food Lion after the Record Date, and
without taking into account any reduction in the number of outstanding shares
resulting from the procedures for treatment of fractional shares described
below. With the limited exception of shareholders who own fractional share
interests after the reverse stock split, the proportionate ownership interests
of holders of Class A Common Stock and Class B Common Stock will not be
materially affected by the reverse stock split. Shareholders holding two or
fewer shares of Class A Common Stock or Class B Common Stock would have only a
fractional share interest after the reverse stock split. As a result, those
shareholders would receive payment for their fractional interests as set forth
below, and would cease to be holders of Food Lion's Common Stock.
A reverse stock split is likely to result in some shareholders owning
"odd-lots" of less than 100 shares of Common Stock. Brokerage commissions and
other costs of transactions in odd-lots are generally somewhat higher than the
costs of transactions on "round-lots" of even multiples of 100 shares.
EXCHANGE OF STOCK CERTIFICATES
At the Effective Date, each share of Class A Common Stock and Class B
Common Stock issued and outstanding immediately prior thereto (collectively, the
"Old Common Stock") will be reclassified as and exchanged into the appropriate
fraction of a share of Food Lion's Class A Common Stock, par value $.50 per
share, and Class B Common Stock, par value $.50 per share, respectively
(collectively, the "New Common Stock"), subject to the treatment of fractional
share interests as described below. When the reverse stock split is consummated,
shares of Common Stock held by shareholders who have their shares held
electronically by The Depository Trust Company ("DTC") will automatically be
converted with DTC to represent the appropriate number and class of shares of
New Common Stock resulting from the one-for-three reverse stock split. All other
shareholders of Common Stock will receive a letter of transmittal from the
registrar and transfer agent, First Chicago Trust Company of New York (the
"Exchange Agent"), with further instructions on how to exchange physical stock
certificates representing shares of Old Common Stock ("Old Certificates").
Shareholders holding Old Certificates are requested not to surrender such
certificates until they receive the transmittal letter and the instructions
therein. The letter of transmittal will contain instructions for the surrender
of certificates representing Old Common Stock to the Exchange Agent in exchange
for certificates representing the appropriate number of whole shares of New
Common Stock and cash in lieu of any fractional shares. Old Certificates will be
deemed to represent only the right to receive the appropriate number of shares
of the appropriate class of new certificates representing New Common Stock ("New
Certificates"). Upon surrender of an Old Certificate, pursuant to the
instructions in the transmittal letter, the person in whose name such shares of
Old Common Stock are held of record will receive a certificate representing the
appropriate number and class of shares of New Common Stock in the Company,
together
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with cash for any fractional shares, as described below, together with any
dividends or other distributions on such whole shares which have a record date
after the Effective Date and before the date of surrender and which have a
payment date before the date of surrender. Any such dividends or other
distributions which have a payment date after the date of surrender will be paid
on the payment date. No certificates representing New Common Stock will be
issued to a shareholder until such shareholder has surrendered all certificates
representing Old Common Stock together with a properly completed and executed
letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and its
return to the Exchange Agent, together with all certificates representing Old
Common Stock, shareholders will receive a new certificate or certificates
representing the number of whole shares of New Common Stock into which their
shares of Old Common Stock have been converted. Until their surrender, the
outstanding certificates representing Old Common Stock will be deemed for all
purposes to represent the number of whole shares of New Common Stock which such
shareholders are entitled to receive as a result of the reverse stock split.
Shareholders should not send their certificates representing Old Common Stock to
the Exchange Agent until receiving the letter of transmittal. Shares not
presented for surrender as soon as practicable after the letter of transmittal
is sent shall be exchanged at the first time they are presented for transfer.
The Company will pay all of the expenses in connection with the exchange of
certificates. No service charges will be payable by holders of shares of the
Company's Common Stock.
FRACTIONAL SHARES
No certificates or scrip representing fractional share interests in the New
Common Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights as a shareholder of Food Lion. In
lieu of any such fractional share interests, each holder of Old Common Stock who
would otherwise be entitled to receive a fractional share of New Common Stock
will be paid cash upon surrender of certificates formerly representing Old
Common Stock held by such holder in an amount equal to the product of such
fraction multiplied by the closing price of the Old Common Stock on the NNM or
the NYSE on the trading day immediately prior to the Effective Date (or in the
event that Class A Common Stock or Class B Common Stock is not so traded on the
such day, such closing price on the next preceding day on which such stock is
traded on the NNM or the NYSE).
DISSENT AND APPRAISAL RIGHTS OF CERTAIN SHAREHOLDERS
Under Article 13 of the North Carolina Business Corporation Act (the
"NCBCA"), shareholders of the Company who have their shares of Common Stock
reduced to a fraction of a share as a result of the Reverse Stock Split Proposal
are permitted to dissent from the Reverse Stock Split Proposal and obtain the
fair value of their shares of Common Stock. Only shareholders who own fewer than
three shares of Class A Common Stock or Class B Common Stock and who receive
cash in lieu of the fractional share interest that otherwise would be issued as
a result of the Reverse Stock Split Proposal ("Eligible Shareholders") may
exercise dissenters' rights with respect to the Reverse Stock Split Proposal.
The following is a summary of the rights of Eligible Shareholders under Article
13 of the NCBCA. Any Eligible Shareholder who intends to dissent from the
Reverse Stock Split Proposal should carefully review the text and comply with
the requirements of Article 13 of the NCBCA, which is attached as Exhibit B to
this proxy statement, as well as consult with an attorney. FAILURE TO COMPLY
WITH THE PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL RESULT IN THE LOSS OF
DISSENTERS' RIGHTS.
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An Eligible Shareholder who intends to dissent from the Reverse Stock Split
Proposal must give the Company, and the Company must actually receive, before
the vote is taken, written notice of his intent to demand payment for his shares
if the Reverse Stock Split Proposal is effected. Notice should be mailed to Food
Lion, Inc., 2110 Executive Drive, P.O. Box 1330, Salisbury, North Carolina
28145-1330, Attention: Lester C. Nail, Secretary. In addition, an Eligible
Shareholder who wants to dissent must not vote his shares in favor of the
Reverse Stock Split Proposal. A record shareholder may assert dissenters' rights
as to fewer than all of the shares registered in his or her name only if such
shareholder dissents with respect to all shares beneficially owned by any one
person and notifies Food Lion in writing of the name and address of each person
on whose behalf such shareholder asserts dissenters' rights. A person who is the
beneficial owner of shares held in a voting trust or by a nominee as the record
shareholder may assert dissenters' rights as to shares held on his or her behalf
only if (i) he or she submits to Food Lion the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights and (ii) he or she does so with respect to all shares
of which he or she is the beneficial shareholder.
No later than ten days after the Reverse Stock Split Proposal is authorized
at the Special Meeting, the Company is required to send to dissenters a written
dissenters' notice that (a) states where the payment demand must be sent and
where and when certificates for certificated shares must be deposited, (b)
informs holders of uncertificated shares to what extent transfer of the shares
is to be restricted after the payment demand is received, (c) supplies a form
for demanding payment, (d) sets a date by which the Company is required to
receive the payment demand, which may not be fewer than 30 nor more than 60 days
after the date such notice is mailed, and (e) is accompanied with a copy of
Article 13 of the NCBCA. Dissenters receiving such notice must then demand
payment and deposit their certificates in accordance with the terms of such
notice. If dissenters after receiving such notice do not demand payment and
deposit their certificates in accordance with the terms of such notice, then
they will not be entitled to payment under Article 13 of the NCBCA.
As soon as the Reverse Stock Split Proposal is effected, or within 30 days
after receipt of a payment demand, the Company is required to pay each dissenter
the amount estimated to be the fair value of the dissenter's dissenting shares,
plus interest accrued to the date of payment. The payment must be accompanied by
(a) the Company's 1998 balance sheet, income statement and statement of cash
flows, (b) the latest available interim financial statements, if any, (c) an
explanation of how the fair value of the dissenting shares was estimated, (d) an
explanation of how the interest was calculated, (e) a statement of the
dissenter's rights to demand payment and (f) a copy of Article 13 of the NCBCA.
A dissenter may notify the Company in writing of his or her own estimate of
the fair value of his or her shares and amount of interest due and demand
payment of the amount in excess of amount paid by the Company if (a) the
dissenter believes that the amount paid is less than the fair value of his or
her shares or that the interest due is calculated incorrectly, (b) the Company
fails to make payment of its estimate of the fair value of the shares, as
described above, or (c) having failed to effect the Reverse Stock Split
Proposal, the Company does not return any deposited certificates or release any
transfer restrictions imposed on uncertificated shares within 60 days after the
date set for demanding payment. The notice must be given within 30 days after
the Company has made payment or failed to perform, as the case may be. A
dissenter who fails to notify the Company in writing of his or her demand for
payment within the 30-day period will be deemed to have withdrawn his or her
dissent and demand for payment.
If a demand for payment remains unsettled, the dissenter must commence,
within 60 days after the earlier of (i) the date payment is made by the Company
or (ii) the date the dissenter's payment demand is made, a proceeding by filing
a complaint with the Superior Court Division of the General Court of Justice to
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determine the fair value of the shares and accrued interest. A dissenter who
takes no action within the 60-day period will be deemed to have withdrawn his or
her dissent and demand for payment. The court will have the discretion to make
all dissenters (whether or not residents of North Carolina) whose demands remain
unsettled parties to the proceeding as in an action against their shares and all
parties must be served with a copy of the complaint. Nonresidents may be served
by registered or certified mail or publication. Each dissenter made a party to
the proceeding is entitled to judgment for the amount, if any, by which the
court finds the fair value of his or her shares plus interest exceeds the amount
paid by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material anticipated federal income
tax consequences of a reverse stock split to the shareholders of the Company who
hold shares of Common Stock as a capital asset. This summary is based on the
advice of the Company's tax counsel, Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
and is based on the federal income tax laws now in effect and as currently
interpreted. The summary does not take into account possible changes in such
laws or interpretations, including amendments to applicable statutes,
regulations and proposed regulations or changes in judicial or administrative
rulings, some of which may have retroactive effect, and does not address
consequences of a reverse stock split under state, local or foreign tax laws.
This summary is provided for general information only and does not address all
aspects of the possible federal income tax consequences of a reverse stock split
and is not intended as tax advice to any person. IN PARTICULAR, AND WITHOUT
LIMITATION, THIS SUMMARY DOES NOT CONSIDER THE FEDERAL INCOME TAX CONSEQUENCES
TO SHAREHOLDERS OF THE COMPANY IN LIGHT OF THEIR INDIVIDUAL INVESTMENT
CIRCUMSTANCES OR TO PARTICULAR SHAREHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER
THE FEDERAL INCOME TAX LAWS SUCH AS FOREIGN TAXPAYERS, LIFE INSURANCE COMPANIES,
REGULATED INVESTMENT COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES,
TRADERS THAT MARK TO MARKET, TAX-EXEMPT ORGANIZATIONS AND HOLDERS WHO ACQUIRED
COMMON STOCK THROUGH THE EXERCISE OF OPTIONS OR OTHERWISE AS COMPENSATION OR
THROUGH A TAX QUALIFIED RETIREMENT PLAN. YOU SHOULD CONSULT YOUR OWN TAX ADVISER
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT. The
Company is not obtaining an opinion of counsel or any ruling from the Internal
Revenue Service regarding the federal income tax consequences to the
shareholders of the Company as a result of the reverse stock split.
The Company believes that a reverse stock split will be tax free to the
Company and its shareholders. Accordingly, (i) no gain or loss will be
recognized by holders of the Company's Common Stock in connection with the
reverse stock split, except that holders of pre-reverse split Common Stock who
receive cash proceeds from the sale of fractional shares of Common Stock will
recognize gain or loss equal to the difference, if any, between such proceeds
and the basis of their Common Stock allocated to their fractional share
interests, and such gain or loss, if any, will constitute capital gain or loss;
(ii) the tax basis of the new, post-reverse split Common Stock received by
holders of old, pre-reverse split shares will be the same as the tax basis of
the old, pre-reverse split shares (reduced by any basis allocated to the
fractional share interests); and (iii) the holding period of the new
post-reverse split shares in the hands of the holders of such shares will
include the holding period of their old, pre-reverse split shares.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE REVERSE STOCK
SPLIT PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
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Please vote for the Reverse Stock Split Proposal and mail your proxy card
to us in the enclosed postage-paid envelope. The Reverse Stock Split Proposal
must be approved by the affirmative vote of the holders of a majority of the
outstanding shares of each of the Food Lion Class A Common Stock and Food Lion
Class B Common Stock. Abstentions will be counted in determining the existence
of a quorum for the Special Meeting, and an abstention, a broker non-vote or a
failure to return a signed proxy card will have the same effect as a vote
against the Reverse Stock Split Proposal.
PROPOSAL (3)
THE NAME CHANGE PROPOSAL
The Board of Directors has determined that, in connection with the Holding
Company Restructuring, it is in the best interests of Food Lion and its
shareholders to change the name of the Company to Delhaize America, Inc.
If the Name Change Proposal is approved, the Articles of Incorporation of
Food Lion will be amended to change the name from Food Lion, Inc. to Delhaize
America, Inc. Such name change will be effective upon the filing of an amendment
to the Articles of Incorporation of Food Lion or at such later date as is
specified in the amendment. The name Food Lion, LLC will be assumed by the new
wholly-owned subsidiary of the company that assumes the operations of the
Company. Delhaize America, Inc., will function as a holding company for its
various operating subsidiaries staffed by a smaller number of employees than are
currently at Food Lion to provide, among other things, corporate guidance,
financial management and certain administrative services for its subsidiaries.
There will be no change in the rights of holders of Common Stock.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE NAME CHANGE
PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
Please vote for the Name Change Proposal and mail your proxy card to us in
the enclosed postage-paid envelope. The Name Change Proposal must be approved by
the affirmative vote of the holders of a majority of the shares of Food Lion
Class B Common Stock voting on the Name Change Proposal. Abstentions will be
counted in determining the existence of a quorum for the Special Meeting, but an
abstention, a broker non-vote or a failure to return a signed proxy card will
not be counted as a vote for or against the Name Change Proposal. The
affirmative vote by Delhaize and Detla will guarantee the passage of the Name
Change Proposal. Food Lion has been informed that Delhaize and Detla intend to
vote FOR the Name Change Proposal.
PROPOSAL (4)
THE PREFERRED STOCK PROPOSAL
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's shareholders for their approval an
amendment to the Company's Articles of Incorporation to provide for the creation
of a new class of 500,000,000 shares of what is commonly known as "blank check"
Preferred Stock. If the Preferred Stock Proposal is approved by the
shareholders, it will be effected by the filing of an amendment to the Articles
of Incorporation of Food Lion, which will occur promptly after the Special
Meeting. The text of the proposed amendment is included in Item 1 of Exhibit A
attached hereto.
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The Board of Directors believes the creation of the Preferred Stock is in
the best interests of the Company and its shareholders and believes it advisable
to authorize such shares to have them available for, among other things,
possible issuance in connection with such activities as public or private
offerings of shares for cash, dividends payable in stock of the Company,
acquisitions of other companies, implementation of employee benefit plans and
otherwise.
The term "blank check" Preferred Stock refers to stock for which the
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the
"Limitations and Restrictions"), are determined by the board of directors of a
company. As such, the Board of Directors of the Company will in the event of the
approval of this Proposal by the Company's shareholders be entitled to authorize
the creation and issuance of 500,000,000 shares of Preferred Stock in one or
more series with such Limitations and Restrictions as may be determined in the
sole discretion of the Board of Directors, with no further authorization by
security holders required for the creation and issuance thereof.
Although the Board of Directors has no present intention of doing so, it
could issue shares of Preferred Stock that could, depending on the terms of such
series, make more difficult or discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or other means. When
in the judgment of the Board of Directors this action will be in the best
interests of the shareholders and the Company, such shares could be used to
create voting or other impediments or to discourage persons seeking to gain
control of the Company. Such shares could be privately placed with purchasers
favorable to the Board of Directors in opposing such action. In addition, the
Board of Directors could authorize holders of a series of Preferred Stock to
vote either separately as a class or with the holders of the Company's Common
Stock on any merger, sale or exchange of assets by the Company or any other
extraordinary corporate transaction. The existence of the additional authorized
shares could have the effect of discouraging unsolicited takeover attempts. The
issuance of new shares also could be used to dilute the stock ownership of a
person or entity seeking to obtain control of the Company.
While the Company may consider effecting an offering of Preferred Stock in
the near future for purposes of raising additional working capital or otherwise,
the Company, as of the date hereof, has no agreements or understanding with any
third party to effect any such offering, and no assurances are given that any
offering will in fact be effected. Therefore, the terms of any Preferred Stock
subject to this Proposal cannot be stated or estimated with respect to any or
all of the securities authorized.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PREFERRED STOCK
PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
Please vote for the Preferred Stock Proposal and mail your proxy card to us
in the enclosed postage-paid envelope. The Preferred Stock Proposal must be
approved by the affirmative vote of the holders of a majority of the shares of
each of the Food Lion Class A Common Stock and Food Lion Class B Common Stock
voting on such proposal. Abstentions will be counted in determining the
existence of a quorum for the special meeting, but an abstention, a broker
non-vote or a failure to return a signed proxy card will not be counted as a
vote for or against the Preferred Stock Proposal.
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PROPOSAL (5)
THE PURPOSE CLAUSE PROPOSAL
Article IV of the Company's Articles of Incorporation, which states the
purposes of the Company, has not been changed since the incorporation of the
Company in 1957. It provides, among other things, that the purposes of the
Company are to "buy, sell and deal in . . . groceries" of all types, to
"manufacture, preserve, treat and store foods" of all types and to "buy, sell
and deal in merchandise of all sorts and kinds usually handled in connection
with a grocery store and supermarket . . . ." A copy of the full text of Article
IV is set forth in Item 2 of Exhibit A.
Although the Company may retain certain assets used in the business of its
retail grocery or distribution operations, the Company intends to transfer
substantially all of its assets to a wholly-owned subsidiary in the Holding
Company Restructuring. The Board of Directors has recommended that the
shareholders amend Article IV to state that the Company has general business
purposes in order to make it clear that the Company may engage in any business
for which a corporation may be formed under the NCBCA, including the business of
being a holding company.
Therefore, the Board of Directors has approved and recommended that the
shareholders adopt the following resolution to amend Article IV of the Company's
Articles of Incorporation:
RESOLVED, that Article IV of the Articles of Incorporation of the
Company be and is hereby amended to read in its entirety as follows:
"The purposes for which this corporation is organized shall be to
engage in any lawful business."
If approved, the amendment to Article IV would be effective upon the filing
of an amendment to the Articles of Incorporation of Food Lion, which would occur
promptly after the Special Meeting.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PURPOSE CLAUSE
PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
Please vote for the Purpose Clause Proposal and mail your proxy card to us
in the enclosed postage-paid envelope. The Purpose Clause Proposal must be
approved by the affirmative vote of the holders of a majority of the shares of
Food Lion Class B Common Stock voting on the Purpose Clause Proposal.
Abstentions will be counted in determining the existence of a quorum for the
special meeting, but an abstention, a broker non-vote or a failure to return a
signed proxy card will not be counted as a vote for or against the Purpose
Clause Proposal. The affirmative vote by Delhaize and Detla will guarantee the
passage of the Purpose Clause Proposal. Food Lion has been informed that
Delhaize and Detla intend to vote FOR the Purpose Clause Proposal.
PROPOSAL (6)
THE DIRECTOR RANGE PROPOSAL
Article 3, Section 2 of Food Lion's Bylaws provides that the Board of
Directors shall consist of not less than eight nor more than 10 directors, with
the exact number fixed from time to time within those limits by the shareholders
or the Board of Directors of Food Lion. The exact number is presently fixed at
10 directors.
The Board of Directors of Food Lion has recommended that the shareholders
amend the Bylaws to increase the maximum authorized number of directors from 10
to 14. The Board of Directors has determined
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that it is in the best interests of the Company and its shareholders to increase
the maximum number of directors to have the flexibility to add qualified
candidates that may be identified from time to time.
Accordingly, the Board of Directors has approved and recommended that the
shareholders adopt the following resolution to amend Article 3, Section 2:
RESOLVED, that the first sentence of Article 3, Section 2 of the
Bylaws of the Company be and is hereby amended to read in its entirety as
follows:
"The number of directors of the corporation shall be not less than
eight persons nor more than 14 persons, with the exact number of directors
within the minimum and maximum to be established from time to time by the
shareholders or, unless the articles of incorporation or a valid
shareholders' agreement provides otherwise, the board of directors; but, in
the absence of such action, the number of directors elected at the annual
meeting shall constitute the number of directors of the corporation until
the next annual meeting of shareholders, unless the number is previously
changed by action of the shareholders or the board of directors."
If approved, the amendment to the Bylaws would be effective upon approval
by the shareholders of the Company.
FOOD LION'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE DIRECTOR RANGE
PROPOSAL, AND RECOMMENDS THAT YOU VOTE FOR SUCH PROPOSAL.
Please vote for the Director Range Proposal and mail your proxy card to us
in the enclosed postage-paid envelope. The Director Range Proposal must be
approved by the affirmative vote of the holders of a majority of the shares of
Food Lion Class B Common Stock voting on the Director Range Proposal.
Abstentions will be counted in determining the existence of a quorum for the
special meeting, but an abstention, a broker non-vote or a failure to return a
signed proxy card will not be counted as a vote for or against the Director
Range Proposal. The affirmative vote by Delhaize and Detla will guarantee the
passage of the Director Range Proposal. Food Lion has been informed that
Delhaize and Detla intend to vote FOR the Director Range Proposal.
LISTING OF SHARES ON THE NYSE
In connection with the Holding Company Restructuring and the Proposals,
Food Lion is applying to have, subject to issuance, its Class A Common Stock and
Class B Common Stock listed on the NYSE. Class A Common Stock will trade under
the symbol "DZA" and Class B Common Stock will trade under the symbol "DZB",
each at prices that will be reported in major newspapers. It is expected that
such listings will become effective when the Holding Company Restructuring is
implemented. Class A Common Stock is currently listed and traded on the NNM,
under the symbol "FDLNA," and Class B Common Stock is currently listed and
traded on the NNM under the symbol "FDLNB," each at prices that are reported in
major newspapers. The closing price of Class A Common Stock on the NNM on July
26, 1999 was $11 3/8 per share and the closing price of Class B Common Stock on
the NNM on July 26, 1999 was $11 1/2 per share. At the time of the
implementation of the Holding Company Restructuring, all outstanding Common
Stock will be delisted from the NNM.
SHAREHOLDER PROTECTION ACT
Article 9 of the North Carolina Business Corporation Act (the "Shareholder
Protection Act"), which requires a 95% vote for certain business combinations,
applies to all North Carolina corporations that have not
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opted out of its applicability, including Food Lion. North Carolina law allows
the North Carolina Attorney General to exempt from the provisions of the
Shareholder Protection Act any business combination that is solely an internal
corporate restructuring that does not effect any material change in the ultimate
ownership of the corporation and does not affect the ongoing applicability of
the Shareholder Protection Act to the corporation. Although Food Lion does not
believe that the Holding Company Restructuring is a "business combination" as
defined by the statute, Food Lion has nevertheless requested and received such
an exemption from the North Carolina Attorney General under the procedures
described above.
CERTAIN ANTITAKEOVER MATTERS
It is not the intention of Food Lion's Board of Directors to discourage
legitimate offers to enhance shareholder value. However, certain provisions of
the Company's Articles of Incorporation and Bylaws and North Carolina law may
have the effect of discouraging unilateral tender offers or other attempts to
acquire the Company. Since Delhaize owns a majority of the voting Food Lion
Class B Common Stock, these provisions currently have little practical effect.
If the Preferred Stock Proposal is approved and implemented, the Board of
Directors will have the authority, without further action by the shareholders,
to issue up to 500,000,000 shares of Preferred Stock in one or more series and
to fix the Limitations and Restrictions thereof and the number of shares
constituting any series. Because the Board of Directors has the power to
establish the preferences and rights of the shares of any series of Preferred
Stock, it may afford holders of any such Preferred Stock preferences, powers and
rights (including voting rights) senior to the rights of holders of the Common
Stock, which could adversely affect the holders of Common Stock.
INFORMATION REGARDING DELHAIZE
Delhaize is the beneficial owner of approximately 41.2% and 54.6%,
respectively, of the outstanding Class A Common Stock and Class B Common Stock
of Food Lion. Delhaize, a Belgian corporation founded in 1867, has its principal
executive offices at rue Osseghem, 53, 1080 Brussels, Belgium. Its shares are
listed on the Brussels Stock Exchange. Delhaize is engaged primarily in the
operation of supermarkets located in Belgium and supplied by its own warehouse
facilities, the operation of other retail food outlets and the packaging,
distribution and sale of wine, food and food products. Although a precise
determination cannot be made since its shares are not registered, its management
estimates that approximately 35% of the outstanding stock of Delhaize is held by
the descendants of the founders and their relatives, including Messrs. Beckers
and Raquez. Delhaize is the owner of the lion logo, which Food Lion uses with
its own trademarks pursuant to a nonexclusive license agreement.
PROPOSALS OF SHAREHOLDERS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, under
certain conditions, shareholders may request Food Lion to include a proposal for
action at a forthcoming meeting of the shareholders of Food Lion in the proxy
material of Food Lion for such meeting. All proposals of shareholders intended
to be presented at the 2000 Annual Meeting of Food Lion must be received by Food
Lion no later than December 17, 1999 for inclusion in the Proxy Statement and
proxy card relating to such meeting. Subject to any rights that a shareholder
has, pursuant to Rule 14a-8, to have a proposal included in the Proxy Statement,
if a shareholder wishes to raise a matter at a shareholders' meeting, or if a
shareholder wishes to nominate a
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person for election to the Board of Directors of Food Lion at an annual or
special meeting, the shareholder is required by Food Lion's Bylaws to give
written notice to the Secretary of Food Lion at least 10 but no more than 60
days before the meeting, unless fewer than 21 days' notice of the meeting is
given to shareholders. If fewer than 21 days' notice of the meeting is given to
shareholders, the notice by the shareholder must be received by the Secretary no
more than 10 days after the date on which the notice of the meeting is mailed to
shareholders. Food Lion's Bylaws should be consulted for the specific
requirements for raising matters at shareholders' meetings and for nominating
persons to the Board of Directors.
SAFE HARBOR STATEMENT
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 statements. This forward-looking information is based on
various factors and was derived utilizing numerous assumptions. Many of these
factors have previously been identified in filings or statements made by or on
behalf of the Company, including filings with the Securities and Exchange
Commission on Forms 10-Q, 10-K and 8-K.
Important assumptions and other important factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements include: changes in the general economy or in the Company's primary
markets, changes in consumer spending, competitive factors, the nature and
extent of continued consolidation in the industry, 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, supply or quality control problems with the Company's vendors and issues
and uncertainties related to Year 2000 detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
OTHER MATTERS
The management of Food Lion knows of no other business that will be
presented for consideration at the meeting. However, if other matters are
properly presented at the meeting, it is the intention of the proxy holders
named in the accompanying proxy card to vote such proxies in accordance with
their best judgment.
By order of the Board of Directors.
LESTER C. NAIL
Secretary
Dated August 17, 1999
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EXHIBIT A
ITEM 1:
If the Reverse Stock Split Proposal and the Preferred Stock Proposal are
approved, the following language in substance will be contained in an amendment
to Article V of the Company's Articles of Incorporation:
Relating to the Reverse Split Proposal and the Authorized Shares of the Company
The number of shares which the corporation shall have authority to issue is
(i) 1,500,000,000 shares of Class A common stock, par value $.50 per share
("Class A Common Stock"), (ii) 1,500,000,000 shares of Class B common
stock, par value $.50 per share ("Class B Common Stock"), and (iii)
500,000,000 shares of preferred stock, par value $.50 per share ("Preferred
Stock").
Relating to the Reverse Split Proposal and the Common Stock of the Company
Simultaneously with the effective date (the "Effective Date") of the
one-for-three reverse stock split approved by the shareholders of the
corporation at a special meeting of the shareholders held on September 7,
1999, (i) each share of Class A Common Stock issued and outstanding
immediately prior to the Effective Date (the "Old Class A Common Stock")
shall automatically and without any action on the part of the holder
thereof be reclassified as and changed into one-third ( 1/3) of a share of
Class A Common Stock (the "New Class A Common Stock"), subject to the
treatment of fractional share interests as described below, and (ii) each
share of Class B Common Stock issued and outstanding immediately prior to
the Effective Date (the "Old Class B Common Stock") shall automatically and
without any action on the part of the holder thereof be reclassified as and
changed into one-third ( 1/3) of a share of Class B Common Stock (the "New
Class B Common Stock"), subject to the treatment of fractional share
interests as described below. Each holder of a certificate or certificates
which immediately prior to the Effective Date represented outstanding
shares of Old Class A Common Stock or Old Class B Common Stock (the "Old
Certificates," whether one or more) shall be entitled to receive upon
surrender of such Old Certificates to the corporation's transfer agent for
cancellation a certificate or certificates (the "New Certificates," whether
one or more) representing the number of whole shares of the New Class A
Common Stock or the New Class B Common Stock, as the case may be, into
which and for which the shares of the Old Class A Common Stock or the Old
Class B Common Stock formerly represented by such Old Certificates so
surrendered are reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the number of shares
of New Class A Common Stock or New Class B Common Stock, as the case may
be, into which and for which the shares of Old Class A Common Stock or Old
Class B Common Stock formerly represented by such Old Certificate are
reclassified under the terms hereof and the right to receive New
Certificates (and, where applicable, cash in lieu of fractional shares, as
provided below) pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Class A Common Stock or New
Class B Common Stock shall be issued, and no such fractional share interest
will entitle the holder thereof to vote, or to any rights of a shareholder
of the corporation. A holder of Old Certificates shall receive, in lieu of
any fraction of a share of New Class A Common Stock or New Class B Common
Stock to which the holder otherwise would be entitled, a cash payment
therefor on the basis of the closing price of the Old Class A Common Stock
or the Old Class B Common Stock, as the case may be, on the Nasdaq National
Market (the "NNM") or the New York Stock Exchange, Inc. (the "NYSE")
(whichever is applicable) on the business day immediately preceding the
Effective Date (or in the event
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the Common Stock is not so traded on the such day, such closing price on
the next preceding day on which such stock was traded on the NNM or the
NYSE). If more than one Old Certificate shall be surrendered at one time
for the account of the same shareholder, the number of full shares of New
Class A Common Stock or New Class B Common Stock, as the case may be, for
which New Certificates shall be issued shall be computed on the basis of
the aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the corporation's transfer agent determines
that a holder of Old Certificates has not tendered all of his or her
certificates for exchange, the transfer agent shall carry forward any
fractional share until all certificates of that holder have been presented
for exchange such that payment for fractional shares to any one person
shall not exceed the value of two shares of Old Class A Common Stock or Old
Class B Common Stock, as the case may be.
Relating to the Preferred Stock Proposal
The Board of Directors is expressly authorized to establish one or more
classes of Preferred Stock or one or more series within a class of
Preferred Stock by fixing and determining the preferences, limitations and
relative rights (within the limits of Chapter 55 of the North Carolina
Business Corporation Act), including dividend, liquidation, conversion,
voting, redemption and other rights, preferences and limitations of the
class or series of shares so established, as shall be stated and expressed
in the resolution establishing such class or series and providing for the
issuance thereof adopted by the Board of Directors pursuant to the
authority to do so that is hereby expressly vested in it, including,
without limiting the generality of the foregoing, the following:
(i) the designation of such class or series;
(ii) the dividend rate, if any, thereof, the conditions and dates
upon which such dividends shall be payable, the preference or
relation of such dividends to dividends payable on any other
class or classes of capital stock of the corporation or series
within a class, and whether such dividends shall be cumulative
or noncumulative;
(iii) whether the shares of such class or series shall be subject to
redemption by the corporation, and, if made subject to such
redemption, the times, prices, rates, adjustments and other
terms and conditions of such redemption;
(iv) the terms and amount of any sinking or similar fund provided for
the purchase or redemption of the shares of such class or
series;
(v) providing that the shares of such class or series may be
convertible into or exchangeable for shares of capital stock or
other securities of the corporation or of any other corporation
and the times, prices, rates, adjustments and other terms and
conditions of such conversion or exchange;
(vi) the extent, if any, to which the holders of the shares of such
class or series shall be entitled to vote as a class, series or
otherwise with respect to the election of directors or
otherwise;
(vii) the restrictions and conditions, if any, upon the issue or
reissue of any additional Preferred Stock ranking on a parity
with or prior to such shares as to dividends or upon
dissolution;
(viii) the rights of the holders of the shares of such class or series
upon the dissolution of, or upon the distribution of assets of,
the corporation, which rights may be different in the case of
voluntary dissolution than in the case of involuntary
dissolution; and
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(ix) any other preferences, limitations or relative rights of shares
of such class or series consistent with this Article V and
applicable law.
ITEM 2:
Article IV of Food Lion's Articles of Incorporation currently reads in its
entirety as follows:
"The objects for which this corporation is formed are as follows:
(a) To buy, sell and deal in, directly or indirectly, at wholesale
or retail, groceries, staple and fancy, foods, fresh, canned and
preserved, meats, fish, fresh and preserved, eggs, butter, cheese and
dairy products, oils and fats, agricultural and horticultural products
and vegetables, candies, soft drinks, drink mixes, ice cream, juices,
coffee and tea, all paper products, school supplies, tobacco, drugs and
remedies, bakery, flour and corn products, shaving equipment, magazines,
cereals, electrical supplies, novelties, notions, thread, gloves, sox,
patent medicines, hardware and glassware, seed and feed, brooms, mops,
waxes and cleaners; to manufacture, preserve, treat and store foods,
meats, fish, eggs, butter, cheese and dairy products, and to sell and
market such articles, manufactured, grown, preserved or treated, at
wholesale or retail; to buy, sell and deal in merchandise of all sorts
and kinds usually handled in connection with a grocery store and
supermarket; and to exercise all powers of a corporation convenient or
necessary in the conduct of such business and operations aforesaid.
(b) As a means of accomplishing the foregoing purposes, the
corporation shall exercise all powers which now are or hereafter may be
conferred by law upon a corporation organized for the purposes
hereinabove set forth, or necessary or incidental to the powers so
conferred, or conducive to the attainment of the purposes of the
corporation, subject to such limitations as are or may be prescribed by
law."
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EXHIBIT B
CHAPTER 55. NORTH CAROLINA BUSINESS CORPORATION ACT
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
sec. 55-13-01. Definitions
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and
in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate currently
paid by the corporation on its principal bank loans, if any, but not less
than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
sec. 55-13-02. Right to dissent
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other than a
parent corporation in a merger under G.S. 55-11-04) is a party unless
(i) approval by the shareholders of that corporation is not required
under G.S. 55-11-03(g) or (ii) such shares are then redeemable by the
corporation at a price not greater than the cash to be received in
exchange for such shares;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than as permitted by G.S. 55-12-01,
including a sale in dissolution, but not including a sale pursuant to
court order or a sale pursuant to a plan by which all or substantially
all of the net
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proceeds of the sale will be distributed in cash to the shareholders
within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii)
creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right
of the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so created
is to be acquired for cash under G.S. 55-6-04; or (vi) changes the
corporation into a nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the shares
provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of the
class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation
which, at the record date fixed to determine the shareholders
entitled to receive notice of and vote at the meeting at which the
plan of merger or share exchange is to be acted on, were either
listed subject to notice of issuance on a national securities
exchange or held of record by at least 2,000 record shareholders;
or
c. A combination of cash and shares as set forth in sub-subdivisions
a. and b. of this subdivision.
sec. 55-13-03. Dissent by nominees and beneficial owners
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
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(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
sec. 55-13-20. Notice of dissenters' rights
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
sec. 55-13-21. Notice of intent to demand payment
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to
demand payment for his shares if the proposed action is effectuated;
and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
sec. 55-13-22. Dissenters' notice
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
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(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
sec. 55-13-23. Duty to demand payment
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
sec. 55-13-24. Share restrictions
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
sec. 55-13-25. Payment
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the end of
a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows
for that year, and the latest available interim financial statements,
if any;
(2) An explanation of how the corporation estimated the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
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sec. 55-13-26. Failure to take action
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
sec. 55-13-28. Procedure if shareholder dissatisfied with corporation's payment
or failure to perform
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is less
than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
PART 3. JUDICIAL APPRAISAL OF SHARES
sec. 55-13-30. Court action
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 by filing a complaint with the Superior Court
Division of the General Court of Justice to determine the fair value of the
shares and accrued interest. A dissenter who takes no action within the 60-day
period shall be deemed to have withdrawn his dissent and demand for payment.
(b) [Reserved for future codification purposes.]
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and
B-5
<PAGE> 33
recommend decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The parties
are entitled to the same discovery rights as parties in other civil proceedings.
The proceeding shall be tried as in other civil actions. However, in a
proceeding by a dissenter in a corporation that was a public corporation
immediately prior to consummation of the corporate action giving rise to the
right of dissent under G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
sec. 55-13-31. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) against either the corporation or a dissenter, in favor of either or
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
B-6
<PAGE> 34
APPENDIX A
PROXY FOR SHAREHOLDERS OF CLASS A COMMON STOCK
FOOD LION, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF FOOD LION, INC.
The undersigned, having received the Notice of Meeting and the Proxy
Statement, hereby appoints Bill McCanless and Joseph C. Hall, Jr., and each of
them, as proxies with full power of substitution, for and in the name of the
undersigned, to vote all shares of Class A Common Stock of Food Lion, Inc. owned
of record by the undersigned on the matters listed on the reverse side hereof
and, in their discretion, on such other matters as may properly come before the
Special Meeting of Shareholders to be held at the New York Marriott Hotel, 3
World Trade Center, New York, New York, on September 7, 1999, at 4:00 p.m., and
any adjournments or postponements thereof.
If you plan to attend the Special Meeting of Shareholders in person, please
mark the appropriate box on the reverse side of this card.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The proxies cannot vote
your shares unless you sign and return this card.
Please mark your votes as in this example [EXAMPLE]
This proxy when properly executed will be voted in the matter directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted "FOR" the Reverse Stock Split Proposal and the Preferred Stock Proposal.
The proxies are authorized to vote upon such other business as may properly come
before the meeting unless otherwise specified herein.
The Board of Directors recommends a vote FOR each of the Proposals.
The Reverse Stock Split Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Preferred Stock Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Do you plan to attend the Meeting of Shareholders in person?
[ ] YES [ ] NO
Date:
------------------------, 1999
------------------------------
SIGNATURE(S)
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
<PAGE> 35
PROXY FOR SHAREHOLDERS OF CLASS B COMMON STOCK
FOOD LION, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF FOOD LION, INC.
The undersigned, having received the Notice of Meeting and the Proxy
Statement, hereby appoints Bill McCanless and Joseph C. Hall, Jr., and each of
them, as proxies with full power of substitution, for and in the name of the
undersigned, to vote all shares of Class B Common Stock of Food Lion, Inc. owned
of record by the undersigned on the matters listed on the reverse side hereof
and, in their discretion, on such other matters as may properly come before the
Special Meeting of Shareholders to be held at the New York Marriott Hotel, 3
World Trade Center, New York, New York, on September 7, 1999, at 4:00 p.m., and
any adjournments or postponements thereof.
If you plan to attend the Special Meeting of Shareholders in person, please
mark the appropriate box on the reverse side of this card.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The proxies cannot vote
your shares unless you sign and return this card.
Please mark your votes as in this example [EXAMPLE]
This proxy when properly executed will be voted in the matter directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted "FOR" the Holding Company Proposal, the Reverse Stock Split Proposal, the
Name Change Proposal, the Preferred Stock Proposal, the Purpose Clause Proposal
and the Director Range Proposal. The proxies are authorized to vote upon such
other business as may properly come before the meeting unless otherwise
specified herein.
The Board of Directors recommends a vote FOR each of the Proposals.
The Holding Company Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Reverse Stock Split Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Name Change Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Preferred Stock Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Purpose Clause Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Director Range Proposal
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Do you plan to attend the Meeting of Shareholders in person?
[ ] YES [ ] NO
Date:
-------------------------, 1999
-------------------------------
SIGNATURE(S)
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
