<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
DELHAIZE AMERICA, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 5411 56-0660192
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Number) Identification No.)
</TABLE>
--------------------------
DELHAIZE AMERICA, INC.
P.O. BOX 1330
2110 EXECUTIVE DRIVE
SALISBURY, NORTH CAROLINA 28145
(704) 633-8250
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
------------------------------
R. WILLIAM MCCANLESS
DELHAIZE AMERICA, INC.
P.O. BOX 1330
2110 EXECUTIVE DRIVE
SALISBURY, NORTH CAROLINA 28145
(704) 633-8250
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
COPIES TO:
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<S> <C>
STEPHEN E. OLDER STEPHEN E. JACOBS, P.C.
FORD LACY, P.C. RAYMOND O. GIETZ
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Weil, Gotshal & Manges LLP
590 Madison Avenue 767 Fifth Avenue
New York, New York 10022 New York, New York 10153
(212) 872-1000 (212) 310-8000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective and the
conditions to consummation of the offer described herein have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Class A common stock, par value $0.50 per
share 14,030,331 Not applicable $124,076,366 $34,493
</TABLE>
(1) Calculated as the product of (a) 4,795,219, which is the sum of
(i) 4,446,902 shares of common stock, par value $0.75 per share, of
Hannaford, being the number of shares of Hannaford common stock outstanding
on August 17, 1999 to be converted into Delhaize America Class A common
stock in the merger and (ii) 348,317 shares of Hannaford common stock that
may be issued pursuant to outstanding options between August 17, 1999 and
consummation of the merger and that would be converted into Delhaize America
Class A common stock in the merger, and (b) the maximum exchange ratio for
the merger of 2.9259 shares of Delhaize America Class A common stock for
each outstanding share of Hannaford common stock to be converted into
Delhaize Class A common stock in the merger.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(f)(1), 457(f)(3) and 457(c), by subtracting
(a) $2,327,051,571, the product of (i) 29,456,349, the maximum number of
Hannaford shares to be converted into cash and (ii) $79.00, the price per
share paid by Delhaize America pursuant to the terms of the Merger Agreement
from (b) $2,451,127,907, the product of (i) $71.5625, the average of the
high and low prices of a Hannaford share on the New York Stock Exchange,
Inc. (the "NYSE") on November 12, 1999, as reported in published financial
sources and (ii) 34,251,569, the total number of Hannaford shares to be
converted in the merger. This amount was then multiplied by .000278.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PRELIMINARY PROXY STATEMENT--SUBJECT TO COMPLETION
[HANNAFORD LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
The boards of directors of Hannaford Bros. Co. and Delhaize America, Inc.
(formerly Food Lion, Inc.) have agreed on a merger of the two companies.
Following the merger, Hannaford will be a wholly-owned subsidiary of Delhaize
America.
If the merger is completed, Hannaford shareholders will be entitled to elect
to receive for each share of Hannaford common stock they own, either (i) $79.00
in cash, without interest, or (ii) the number of shares of Delhaize America
Class A common stock equal to $79.00 divided by the greater of (a) the average
of the per share last sales prices of Delhaize America Class A common stock as
reported on the NYSE for the ten consecutive trading days prior to the merger
(the "DZA Price") and (b) $27.00. Each shareholder's election may be subject to
proration depending on the consideration other shareholders elect to receive in
the merger. The proration will ensure that 86% of the shares of Hannaford common
stock outstanding and not owned by Delhaize America at the time of the merger
will be converted into the right to receive cash and the remaining shares will
be converted into the right to receive Delhaize America Class A common stock. If
too many Hannaford shareholders elect cash, those holders will receive Delhaize
America shares for some of their Hannaford shares notwithstanding their
election. If too many Hannaford shareholders elect Delhaize America shares,
those holders will receive cash for some of their Hannaford shares
notwithstanding their election.
On , 2000, the last trading day before the date of this document, the
Delhaize America Class A common stock, which is listed on the NYSE under the
trading symbol "DZA," closed at $ per share and the DZA Price as of
that date would have been $ . If the merger occurred on that date, assuming
full proration, each Hannaford share to be converted in the merger would be
converted into $67.94 in cash and 0.4096 of a share of Delhaize America Class A
common stock, having a value at that time of $ (valued at the
closing price), for an aggregate value per share of Hannaford common stock of
$ . The chart on page I-41 of this document describes the value of
the merger consideration at varying DZA Prices. On , 1999 the Hannaford
common stock, which is listed on the NYSE under the trading symbol "HRD," closed
at $ per share.
We cannot complete the merger without the approval of Hannaford shareholders
who hold a majority of the outstanding Hannaford common stock. Holders of
approximately 24.7% of Hannaford's common stock already have agreed to vote for
the merger.
We have scheduled a special meeting to vote on the merger. If you were a
shareholder of record on , 2000, you may vote at the meeting. Whether or
not you plan to attend, please take the time to complete and mail the enclosed
proxy form to us.
The date, time and place of the special meeting are as follows:
, 2000
9:30 a.m., Local Time
The Hannaford Communication Center
145 Pleasant Hill Road
Scarborough, Maine 04074
This document provides you with detailed information about the merger. This
document also is the prospectus of Delhaize America for the Delhaize America
Class A common stock that will be issued in the merger. We encourage you to read
this entire document carefully.
Hugh G. Farrington
Chief Executive Officer
See "Risk Factors" beginning on page I-18 for a discussion of risks that
should be considered by shareholders before voting on the merger. Neither the
Securities and Exchange Commission nor any state securities regulator has
approved or disapproved of the Delhaize America Class A common stock to be
issued in the merger or determined whether this document is accurate or
adequate. Any representation to the contrary is a criminal offense. The
information in this document is not complete and may be changed. We may not sell
the Delhaize America Class A common stock or accept an offer to buy those
securities until this document is delivered in final form. This document is not
an offer to sell any securities and we are not soliciting offers to buy in any
jurisdiction where the offer or sale would be illegal.
This document is dated , 2000, and is first being mailed to
shareholders on or about , 2000.
<PAGE>
NOTICE OF SPECIAL MEETING
[HANNAFORD LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2000
To the Shareholders of Hannaford Bros. Co.
We invite you to attend the Hannaford Bros. Co. special meeting of
shareholders, to be held on , 2000 at 9:30 a.m., local time, at the
Hannaford Communication Center, 145 Pleasant Hill Road, Scarborough, Maine
04074. At the meeting, we will ask you to consider and vote upon a proposal to
approve the merger agreement among Hannaford, Delhaize America, Inc. and FL
Acquisition Sub, Inc. as we describe in the attached proxy statement/prospectus.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
The close of business on , 2000 is the record date for this
meeting. Holders of Hannaford common stock on the record date are entitled to
notice of and to vote at the meeting. Approval of the merger agreement requires
the affirmative vote of a majority of the outstanding shares of Hannaford common
stock.
A list of shareholders will be available for examination at 145 Pleasant
Hill Road, Scarborough, Maine 04074 by any holder of Hannaford common stock for
any purpose relevant to the special meeting for a period of days prior to
the special meeting.
HOLDERS OF HANNAFORD COMMON STOCK DISSENTING TO THE PROPOSAL ARE ENTITLED,
UPON COMPLIANCE WITH SECTION 909 OF THE MAINE BUSINESS CORPORATION ACT, TO BE
PAID THE FAIR VALUE OF THEIR SHARES.
The attached proxy statement/prospectus provides you with detailed
information about the proposal to approve the merger agreement. Whether or not
you plan to attend the meeting, please take the time to vote by proxy by
returning the enclosed proxy card.
PLEASE DO NOT SEND ANY OF YOUR STOCK CERTIFICATES AT THIS TIME.
By order of the board of directors,
--------------------------------------
Andrew P. Geoghegan
Senior Vice President and General
Counsel
, 2000
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE PROMPTLY COMPLETE, DATE AND RETURN YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE.
SHOULD YOU HAVE ANY QUESTIONS REGARDING THE SPECIAL MEETING OR THE ATTACHED
PROXY STATEMENT/ PROSPECTUS, PLEASE CALL CHARLES H. CROCKETT, ASSISTANT
SECRETARY AND DIRECTOR OF INVESTOR RELATIONS, (207) 885-2349.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
--------
<S> <C>
CHAPTER ONE--THE MERGER..................................... I-1
Questions and Answers About the Merger...................... I-1
Summary..................................................... I-3
The Merger and Special Meeting.............................. I-3
Market Price and Dividend Information....................... I-9
Summary Selected Historical Consolidated Financial Data..... I-11
Summary Unaudited Historical Pro Forma Consolidated
Financial Data............................................ I-13
Comparative Per Share Data.................................. I-15
Recent Developments......................................... I-17
Risk Factors................................................ I-18
Cautionary Statements Concerning Forward-Looking
Statements................................................ I-20
Selected Unaudited Historical Pro Forma Consolidated
Financial Data of Delhaize America and Hannaford.......... I-21
Notes To Unaudited Pro Forma Financial Statements........... I-23
The Merger Transaction...................................... I-24
Background of the Merger.................................... I-24
Hannaford's Reasons for the Merger.......................... I-27
Factors Considered by, and Recommendation of, the Hannaford
Board..................................................... I-27
Opinion of Hannaford's Financial Advisor.................... I-29
Financing of the Transaction................................ I-35
Accounting Treatment........................................ I-35
Governmental and Regulatory Approvals....................... I-35
Interests of Certain Persons in the Merger.................. I-36
Dissenters' Rights.......................................... I-37
Management Following the Merger............................. I-40
Federal Securities Laws Consequences; Stock Transfer
Restriction............................................... I-40
Certain Terms of the Merger Agreement....................... I-40
The Merger.................................................. I-40
Closing and Effective Time.................................. I-40
Merger Consideration........................................ I-41
Limits on Cash and Stock Consideration...................... I-42
Allocation.................................................. I-42
Election Procedure.......................................... I-43
Procedures for Exchange of Certificates..................... I-43
Fractional Shares........................................... I-44
Representations and Warranties.............................. I-44
Certain Covenants........................................... I-44
No Solicitation............................................. I-46
Effect on Stock Options..................................... I-46
Effect on Employee Benefit Matters.......................... I-47
Conditions to Completion of the Merger...................... I-47
Termination................................................. I-48
Effect of Termination....................................... I-49
Termination Payments........................................ I-49
Other Expenses.............................................. I-49
Indemnification............................................. I-49
Amendments and Waivers...................................... I-50
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary of Other Significant Agreements..................... I-50
Stock Exchange Agreement.................................... I-50
Voting Agreement............................................ I-50
Registration Rights Agreement............................... I-50
Material U.S. Federal Income Tax Consequences of the
Merger.................................................... I-51
CHAPTER TWO--INFORMATION ABOUT THE SPECIAL MEETING AND
VOTING.................................................... II-1
General..................................................... II-1
Time and Place.............................................. II-1
Purpose of the Special Meeting.............................. II-1
Voting and Record Date...................................... II-1
Proxies..................................................... II-1
Solicitation of Proxies..................................... II-2
CHAPTER THREE--ADDITIONAL INFORMATION....................... III-1
Information Concerning the Primary Parties.................. III-1
Business of Hannaford....................................... III-1
Business of Delhaize America................................ III-1
Comparison of Rights of Holders of Hannaford Common Stock
and Delhaize America Common Stock......................... III-2
Capital Stock............................................... III-2
Special Meetings of Shareholders............................ III-3
Board of Directors.......................................... III-3
Advance Notice of Shareholder Proposals and Nominations for
Director.................................................. III-4
Exculpation and Indemnification............................. III-5
Mergers, Consolidations, Share Exchanges and Sales of
Assets.................................................... III-5
Anti-Takeover Provisions.................................... III-6
Amendments to Articles of Incorporation and Bylaws.......... III-9
Shareholders' Rights of Dissent and Appraisal............... III-10
Liquidation Rights.......................................... III-11
Shareholders' Agreement..................................... III-12
Shareholder Rights Plan..................................... III-13
Description of Delhaize America Capital Stock Following the
Merger.................................................... III-13
Experts..................................................... III-14
Legal Matters............................................... III-15
Future Shareholder Proposals................................ III-15
Where You Can Find More Information......................... III-15
Delhaize America SEC Filings................................ III-15
Hannaford SEC Filings....................................... III-16
</TABLE>
<TABLE>
<CAPTION>
LIST OF ANNEXES
- ---------------
<S> <C>
Annex A--Agreement and Plan of Merger
Annex B--Opinion of Morgan Stanley & Co. Incorporated
Annex C--Stock Exchange Agreement
Annex D--Voting Agreement
Annex E--Registration Rights Agreement
Annex F--Excerpt from the Maine Business Corporation Act
</TABLE>
ii
<PAGE>
CHAPTER ONE--THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
document, please fill out, sign and mail your signed proxy card in the
enclosed return envelope as soon as possible, so that we may vote your
shares at the special meeting.
In order to assure that we obtain your vote, please give your proxy as
instructed on your proxy card even if you currently plan to attend the
meeting in person.
Q: HOW DO I ELECT TO RECEIVE CASH OR STOCK IN THE MERGER?
A: Shortly after the special meeting of shareholders, you will be sent an
election form to indicate whether you would prefer to receive either cash or
Delhaize America Class A common stock in the merger, or to indicate that you
have no preference. These election forms will be due on the last business
day prior to the closing of the merger. Hannaford and Delhaize America will
publicly announce the due date once it is established.
Q: WILL I ALWAYS RECEIVE THE SPECIFIC AMOUNTS OF CASH AND STOCK THAT I HAVE
ELECTED?
A: No. Due to the requirements that a pre-determined number of shares of
Hannaford common stock be converted into cash and Delhaize America Class A
common stock, respectively, Delhaize America may have to allocate cash or
stock consideration to you in place of the type of consideration you elect
if cash or stock is over-subscribed or under-subscribed by other
shareholders. Consequently, the amount of cash and stock that you receive in
the merger may differ from your actual elections. However, Hannaford
shareholders electing all cash will be assured of receiving cash for at
least 86% of their shares.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD OR OTHERWISE DO NOT VOTE?
A: If you do not return your proxy card or otherwise do not vote, it will have
the same effect as voting against the merger.
Q: MAY I VOTE IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in person rather
than signing and mailing your proxy card.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Send in a later-dated, signed proxy card to Hannaford's Secretary before the
special meeting. Or, you can attend the special meeting in person and give
notice to the Secretary or in the open meeting. You also may revoke your
proxy by sending a notice of revocation to Hannaford's Secretary.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE THEM
FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. Your broker will ask you for instructions on how to vote your shares
and you should therefore be sure to provide your broker with instructions on
how to vote.
Q: IF I PARTICIPATE IN THE HANNAFORD DIVIDEND REINVESTMENT PLAN, HOW DO I VOTE
MY UNCERTIFICATED SHARES?
A: If you participate in the Hannaford Dividend Reinvestment Plan, your proxy
card covers your uncertificated shares held pursuant to the Plan.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger we will send you written instructions for exchanging
your stock certificates.
Q: WHAT WILL HAPPEN TO MY DIVIDENDS?
A: Prior to the merger, Hannaford expects to continue to pay its regular
quarterly dividend on Hannaford common stock at its current rate, subject to
any change that
I-1
<PAGE>
Hannaford's board of directors may determine. After the merger, Delhaize
America expects to continue to pay its regular quarterly dividend on
Delhaize America Class A common stock at its current rate, subject to any
change that Delhaize America's board of directors may determine. For
information on the cash dividends paid by Hannaford and Delhaize America,
see pages I-9 - I-10.
Q: IS THE MERGER TAXABLE?
A: Yes. Regardless of whether you receive cash or stock or a combination of both
in the merger, the merger will be a taxable event for you and you will
recognize taxable gain or loss to the extent that the cash and the fair
market value of any stock received by you in the merger is greater or less
than your adjusted tax basis in your Hannaford shares.
Tax matters are very complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your
tax advisor for a full understanding of the tax consequences of the merger
to you.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger in the first or second quarter of 2000.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You may call the Investor Relations department at Hannaford at
(207) 885-2349.
I-2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE OTHER AVAILABLE
INFORMATION REFERRED TO IN "WHERE YOU CAN FIND MORE INFORMATION" (ON
PAGE III-15). WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO
A MORE COMPLETE DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE MERGER AND SPECIAL MEETING
THE COMPANIES
(SEE PAGE III-1)
HANNAFORD BROS. CO.
145 Pleasant Hill Road
Scarborough, Maine 04074
(207) 883-2911
Hannaford is a multi-regional food retailer with 154 supermarkets located
throughout Maine, New Hampshire and Vermont, and in parts of New York,
Massachusetts, Virginia, North Carolina and South Carolina. Its stores are
operated primarily under the names "Shop'n Save" and "Hannaford." Hannaford
offers consumers comprehensive product variety and outstanding freshness and
quality in perishables, at competitive prices, from modern and convenient
facilities. Hannaford also operates 113 pharmacies within its supermarkets and
combination stores.
DELHAIZE AMERICA, INC. (FORMERLY FOOD LION, INC.)
2110 Executive Drive
Salisbury, North Carolina 28147
(704) 633-8250
Delhaize America engages in one line of business, the operation of retail food
supermarkets in the southeastern and mid-atlantic regions of the United States.
Delhaize America was incorporated in North Carolina in 1957 and maintains its
corporate headquarters in Salisbury, North Carolina. Delhaize America's stores,
which are primarily operated under the names "Food Lion" and "Kash n' Karry,"
sell a wide variety of groceries, produce, meats, dairy products, seafood,
frozen food, deli/bakery and non-food items such as health and beauty care,
prescriptions, and other household and personal products. Delhaize America
offers nationally and regionally advertised brand name merchandise as well as
products manufactured and packaged for Delhaize America under the private labels
of "Food Lion" and "Kash n' Karry." Delhaize America offers over 30,000 stock
keeping units in its Food Lion locations and over 35,000 in its Kash n' Karry
locations. As of , 2000, Etablissements Delhaize Freres et Cie "Le
Lion" S.A. owned % of the Delhaize America Class A common stock and % of the
Delhaize America Class B common stock.
FL ACQUISITION SUB, INC.
2110 Executive Drive
Salisbury, North Carolina 28147
(704) 633-8250
FL Acquisition Sub, Inc. is a wholly-owned subsidiary of Delhaize America formed
under the laws of Maine solely for the purpose of merging with Hannaford.
HANNAFORD'S REASONS FOR THE MERGER
(SEE PAGE I-27)
- THE MERGER WILL POSITION HANNAFORD TO COMPETE MORE EFFECTIVELY. As the
supermarket industry continues to consolidate and grow increasingly
competitive, local and regional supermarket chains suffer the
disadvantages of smaller economies of scale and less purchasing power than
the national chains. A combination of Delhaize America and Hannaford will
create the sixth largest food retailer in the United States, operating
over 1,400 stores throughout the eastern United States from Maine to
Florida, with 1998 total annual revenues of approximately $13.5 billion on
a pro-forma basis. The merger also should provide the combined
I-3
<PAGE>
new company with opportunities for economies of scale, including combined
purchasing power and operating efficiencies.
- THE MERGER CONSIDERATION REPRESENTS A SUBSTANTIAL PREMIUM TO HANNAFORD'S
HISTORICAL STOCK PRICE. In the merger, Hannaford shareholders will receive
cash and/or Delhaize America Class A common stock with a value of $79.00
per share, subject to potential downward adjustment if the average closing
price of Delhaize America's Class A common stock is below $27.00 per share
during the ten consecutive trading days prior to the merger. The $79.00
price represents a premium of (1) approximately 24% from the last sales
price of Hannaford's common stock on August 17, 1999, the day prior to the
date the merger was publicly announced and (2) approximately 75% from the
last sales price of Hannaford's common stock on May 3, 1999, the day prior
to the date Empire Company Limited publicly announced that it would not
renew its standstill agreement with Hannaford. If the merger occurred on
, 2000, the last trading day before the date of this document,
assuming full proration, each Hannaford share to be converted in the
merger would be converted into $67.94 in cash and 0.4096 of a share of
Delhaize America Class A common stock, having a value at that time of
$ (valued at the closing price), for an aggregate value per
share of Hannaford common stock of $ . This represents a premium of
approximately (1) % from the last sales price of Hannaford's common
stock on August 17, 1999 and (2) approximately % from the last sales
price of Hannford's common stock on May 3, 1999.
- THE MERGER REPRESENTS THE BEST TRANSACTION THAT THE BOARD WAS ABLE TO
OBTAIN AFTER A SOLICITATION OF COMBINATION PROPOSALS. In June 1999, the
Hannaford board, with the assistance of its financial and legal advisors,
contacted a number of large industry participants to solicit their
interest in a possible transaction with Hannaford. The board determined
that the merger with Delhaize America represented a more attractive
transaction for Hannaford and its shareholders than any transaction
proposed or interest expressed by the third parties contacted in this
process.
OUR RECOMMENDATION TO SHAREHOLDERS
(SEE PAGES I-27 - I-29)
The Hannaford board of directors believes that the merger is advisable and
in the Company's and your best interests and recommends that you vote for the
proposal to adopt the merger agreement.
WHAT HANNAFORD SHAREHOLDERS
WILL RECEIVE IN THE MERGER
(SEE PAGES I-41 - I-44)
Holders of Hannaford common stock will be entitled to elect with respect to
each of their shares to receive either cash or shares of Delhaize America
Class A common stock, subject to certain limitations discussed below. Upon
completion of the merger, each share of Hannaford common stock will be converted
into the right to receive either:
- $79.00 in cash, without interest; or
- the number of shares of Delhaize America Class A common stock equal to
$79.00 divided by the greater of (a) the DZA Price and (b) $27.00.
In the aggregate, 86% of the shares of Hannaford common stock outstanding at
the time of the merger and not owned by Delhaize America will be converted into
the right to receive cash and the remaining shares of Hannaford common stock
will be converted into the right to receive Delhaize America Class A common
stock.
EXAMPLES (ASSUMING NO PRORATION):
CHOOSING ALL CASH. If you own 100 shares of Hannaford common stock and
elect to receive all cash, you will receive $79.00 multiplied by
I-4
<PAGE>
100, or $7,900. The DZA Price has no effect on the consideration you will
receive.
CHOOSING ALL STOCK. If you own 100 shares of Hannaford common stock and
elect to receive all Delhaize America Class A common stock, the number of shares
of Delhaize America Class A common stock that you will receive depends in part
on the DZA Price.
- -- For example, if the DZA Price is $19.00, you will receive a number of shares
of Delhaize America Class A common stock equal to 79 divided by 27, or
2.9259, multiplied by 100, for a total of 292 shares, with an aggregate
value (determined by using the DZA Price) of $5,548. Additionally, in lieu
of the remaining fractional share, you will receive a cash payment equal to
.59 multiplied by the Delhaize America Class A common stock price
immediately prior to the merger;
- -- If the DZA Price is $29.00, you will receive a number of shares of Delhaize
America Class A common stock equal to 79 divided by 29, or 2.7241 multiplied
by 100, for a total of 272 shares, with an aggregate value (determined by
using the DZA Price) of $7,888. Additionally, in lieu of the remaining
fractional share, you will receive a cash payment equal to .41 multiplied by
the Delhaize America Class A common stock price immediately prior to the
merger.
If the DZA Price is less than $27.00 and you elect to receive all Delhaize
America Class A common stock, the value of your consideration (determined by
using the DZA Price) will be lower than if you elect to receive all cash.
PRORATION:
If Hannaford shareholders as a group elect to receive more cash or Delhaize
America Class A common stock in the merger than the amount available, those
shareholders who made an election for the oversubscribed category will receive a
prorated amount of the undersubscribed category.
EXAMPLE 1:
If you elect all cash and too many other holders elect all cash, then you
and all Hannaford shareholders who elected to receive all cash will receive as
much cash as is available, prorated, and the rest of your consideration in
Delhaize America Class A common stock.
EXAMPLE 2:
If you elect all Delhaize America Class A common stock and too many other
holders elect all stock, then you and all Hannaford shareholders who elected to
receive all stock will receive as much stock as is available, prorated, and the
rest of your consideration in cash.
OPINION OF FINANCIAL ADVISOR
(SEE PAGES I-29 - I-35)
In deciding to approve the merger, the Hannaford board of directors
considered the opinion of its financial advisor, Morgan Stanley & Co.
Incorporated, that, as of the date of its opinion, the consideration to be
received by you in the merger is fair from a financial point of view. The full
text of this opinion is attached to this document as Annex B. We encourage you
to carefully read and consider this opinion.
RISKS ASSOCIATED WITH THE MERGER
(SEE PAGES I-18 - I-19)
You should be aware of and carefully consider the risks relating to the
merger described under "Risk Factors." These risks include the possible
difficulties in combining two companies that have previously operated
independently.
THE SPECIAL MEETING
(SEE PAGE II-1)
The special meeting will be held at the Hannaford Communication Center, 145
Pleasant Hill Road, Scarborough, Maine 04074 on , 2000 at 9:30 a.m.
local time. At the special meeting, holders of Hannaford common stock will be
asked to vote to approve the merger agreement.
I-5
<PAGE>
RECORD DATE
(SEE PAGE II-1)
You can vote at the special meeting if you owned Hannaford common stock at
the close of business on , 2000.
VOTE REQUIRED
(SEE PAGE II-1)
Approval of the merger agreement by Hannaford shareholders requires the
affirmative vote of the holders of a majority of the outstanding shares of
Hannaford common stock.
VOTING AGREEMENT
(SEE PAGE I-50)
When Hannaford and Delhaize America signed the merger agreement, two
companies controlled by the Sobey family, Empire Company Limited and E.C.L.
Investments Limited, entered into a voting agreement with Delhaize America to
vote their shares of Hannaford common stock in favor of the merger agreement.
The total number of shares of Hannaford common stock subject to the voting
agreement represents approximately 24.7% of the outstanding shares of Hannaford
common stock. The full text of the voting agreement is attached as Annex D.
SHARE OWNERSHIP OF MANAGEMENT
(SEE PAGE I-36)
As of the record date for the special meeting, the directors and executive
officers of Hannaford owned approximately % of the shares entitled to vote
at the special meeting (excluding shares held by Empire Company Limited and
E.C.L. Investments Limited, which are affiliated with two Hannaford directors).
Each of them has advised Hannaford that he or she plans to vote all such shares
in favor of approval of the merger agreement.
MANAGEMENT FOLLOWING THE MERGER
(SEE PAGE I-40)
It is anticipated that each director and officer of Delhaize America
immediately prior to the merger will remain in his or her position after the
merger. Immediately after the merger, Hugh G. Farrington, the President and
Chief Executive Officer of Hannaford, will be appointed to the board of
directors of Delhaize America and will serve as its Vice Chairman. In addition,
Empire Company Limited and its affiliates, the largest Hannaford shareholders,
will have the right to appoint one member to the Delhaize America board after
the merger.
After the completion of the merger, it is anticipated that each officer of
Hannaford immediately prior to the merger will remain in his or her position.
FINANCING OF THE MERGER
(SEE PAGE I-35)
It is anticipated that the cash consideration necessary to consummate the
merger will be financed through a 364-day credit facility for up to
$2.5 billion and an additional $500 million five-year revolving credit facility,
each to be arranged by J.P. Morgan Securities Inc., which has delivered a
commitment letter to Delhaize America regarding the financing.
ACCOUNTING TREATMENT
(SEE PAGE I-35)
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles.
CONDITIONS TO THE MERGER
(SEE PAGES I-47 - I-48)
Hannaford and Delhaize America will complete the merger only if the
conditions to the merger are satisfied or in some cases waived, including the
following:
- the approval of the merger agreement by Hannaford shareholders;
- the absence of any law or court order that prohibits the merger; and
- the receipt of necessary approvals from government authorities, including
the expiration of time periods under applicable federal antitrust laws.
Either of Hannaford and Delhaize America may choose to complete the merger
even though a condition has not been satisfied if the law allows us to do so.
I-6
<PAGE>
TERMINATION OF THE MERGER AGREEMENT
(SEE PAGES I-48 - I-49)
Hannaford and Delhaize America can agree to terminate the merger agreement
at any time, even after shareholder approval. In addition, either company can
terminate the merger agreement in various circumstances, including the
following:
- if the merger has not been completed by August 17, 2000;
- if the shareholders of Hannaford fail to approve the merger agreement;
- if a law or final court order prohibits the merger; or
- if the other company breaches its representations or obligations under the
merger agreement in a material manner.
Hannaford may terminate the merger agreement if Delhaize America has not
substantially finalized documentation relating to the debt financing for the
merger by the later of 10 days prior to the special meeting and December 15,
1999. Delhaize America has substantially finalized documentation relating to the
debt financing. The merger agreement also can be terminated in other
circumstances which are described on pages I-48 - I-49.
TERMINATION FEE
(SEE PAGE I-49)
If the merger agreement is terminated by either party in specific
circumstances involving an alternative business transaction between Hannaford
and a third party, Hannaford will be required to pay Delhaize America a
termination fee of $90 million.
NO SOLICITATION
(SEE PAGE I-46)
Hannaford has agreed, subject to certain exceptions, not to initiate or
engage in any discussions with another party regarding a business combination
while the merger is pending.
INTERESTS OF MEMBERS OF HANNAFORD'S BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER
(SEE PAGES I-36 - I-37)
In considering the recommendation of the Hannaford board of directors that
you vote to approve the merger agreement, you should be aware that a number of
Hannaford's directors and officers have agreements, stock options and other
benefit plans that provide them with interests in the merger that are different
from or in addition to yours as a Hannaford shareholder.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
(SEE PAGES I-35 - I-36)
The HSR Act prohibits us from completing the merger until after we have
provided certain information and materials to the Federal Trade Commission and
the Antitrust Division of the Department of Justice, and we have waited the
required period of time. Hannaford and Delhaize America filed premerger
notification forms with the FTC and the Department of Justice on September 8,
1999. On October 8, 1999, the FTC issued to the parties a request for additional
information and documentary material. The parties are in the process of
responding to the request.
STOCK EXCHANGE AGREEMENT
(SEE PAGE I-50)
When Hannaford and Delhaize America signed the merger agreement, two
companies controlled by the Sobey family, Empire Company Limited and E.C.L.
Investments Limited, entered into a stock exchange agreement with Delhaize
America. Pursuant to the stock exchange agreement, immediately prior to the
merger Empire and E.C.L. Investments will exchange with Delhaize America
10,418,565 shares of Hannaford common stock owned by them for aggregate
consideration of $823,066,635 (nominally $79.00 per share) payable as a
combination of Delhaize America Class A common stock and cash. The consideration
will be calculated and payable as follows:
A number of shares of Delhaize America Class A common stock, determined by
dividing $365,000,000 by the greater of (a) the DZA
I-7
<PAGE>
Price and (b) $27.00; and the remainder ($458,066,635) in cash.
Empire and E.C.L. Investments have the ability to adjust, upwards or
downwards, the mix of cash and stock comprising the aggregate consideration, but
in no event will the consideration payable in stock (valued at the greater of
the DZA Price and $27.00) be less than $315,000,000 or more than $421,000,000.
Under this formula, Empire and E.C.L. Investments cannot receive cash for more
than 61.7% of their Hannaford shares. A copy of the stock exchange agreement is
attached to this document as Annex C.
DISSENTERS' RIGHTS
(SEE PAGES I-37 - I-40)
The holders of Hannaford common stock who dissent to the merger have the
right to be paid the fair value of their shares. For information about the
dissenters' rights available in connection with the merger, see "The Merger--The
Merger Transaction--Dissenters' Rights" beginning on page I-37 and the excerpt
from the Maine Business Corporation Act set forth on Annex F.
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
(SEE PAGES III-2 - III-13)
Delhaize America is a North Carolina corporation, and Hannaford is a Maine
corporation. In the event you receive Delhaize America Class A common stock in
the merger, your rights as a shareholder of Delhaize America will be governed by
Delhaize America's charter and bylaws and North Carolina law. You should
consider the fact that Delhaize America's charter and bylaws and North Carolina
law differ in some material respects from Hannaford's charter and bylaws and
Maine law. See "Comparison of Rights of Holders of Hannaford Common Stock and
Delhaize America Common Stock" beginning on page III-2.
I-8
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
The Delhaize America Class A common stock and the Hannaford common stock are
traded on the NYSE. Until September 9, 1999, the Delhaize America Class A common
stock was traded on the Nasdaq National Market. The prices of the Delhaize
America Class A common stock reported herein have been adjusted for a
one-for-three reverse stock split that occurred on September 9, 1999. On
August 17, 1999, the last full trading day prior to the public announcement of
the merger, the Delhaize America Class A common stock closed at $33.00 per share
and the Hannaford common stock closed at $62.125 per share. On , the
last trading date before the date of this document, the Delhaize America
Class A common stock closed at $ per share and the Hannaford common stock
closed at $ per share. At that date, the DZA Price would have been $ .
We urge you to obtain current market quotations before making any decision with
respect to the merger.
COMPARATIVE DIVIDENDS AND MARKET PRICES
DELHAIZE AMERICA--The Delhaize America Class A common stock is traded on the
NYSE under the symbol "DZA." The following table sets forth the dividends
declared and the high and low closing prices per share of the Delhaize America
Class A common stock for the periods indicated. Until September 9, 1999, the
Delhaize America Class A common stock was traded on the Nasdaq National Market
under the symbol "FDLNA."
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS -------------------
DECLARED HIGH LOW
--------- -------- --------
<S> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 3, 1998
First Quarter............................................... $.1011 $29.34 $22.89
Second Quarter.............................................. .1011 24.75 19.41
Third Quarter............................................... .1011 22.50 20.82
Fourth Quarter.............................................. .1011 26.25 22.32
FISCAL YEAR ENDED JANUARY 2, 1999
First Quarter............................................... $.1125 $33.75 $25.41
Second Quarter.............................................. .1125 32.64 27.75
Third Quarter............................................... .1125 34.32 26.43
Fourth Quarter.............................................. .1125 33.18 25.14
FISCAL YEAR ENDING JANUARY 1, 2000
First Quarter............................................... $.1260 $33.93 $26.91
Second Quarter.............................................. .1260 36.93 25.86
Third Quarter............................................... .1260 38.16 23.44
Fourth Quarter (through November 11)........................ .1260 24.19 17.38
</TABLE>
I-9
<PAGE>
HANNAFORD--The Hannaford common stock is traded on the NYSE under the symbol
"HRD." The following table sets forth the dividends declared and the high and
low closing prices per share of the Hannaford common stock for the periods
indicated.
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS -------------------
DECLARED HIGH LOW
--------- -------- --------
<S> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 3, 1998
First Quarter............................................... $ .135 $36.00 $33.13
Second Quarter.............................................. .135 36.25 30.50
Third Quarter............................................... .135 37.00 32.75
Fourth Quarter.............................................. .135 44.13 34.56
FISCAL YEAR ENDED JANUARY 2, 1999
First Quarter............................................... $ .150 $46.44 $38.75
Second Quarter.............................................. .150 46.94 43.38
Third Quarter............................................... .150 47.00 41.25
Fourth Quarter.............................................. .150 53.00 40.06
FISCAL YEAR ENDING JANUARY 1, 2000
First Quarter............................................... $ .165 $53.44 $44.50
Second Quarter.............................................. .165 57.50 43.62
Third Quarter............................................... .165 72.25 53.75
Fourth Quarter (through November 11)........................ .165 72.00 69.06
</TABLE>
I-10
<PAGE>
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Hannaford and Delhaize America are providing the following financial
information to aid you in your analysis of the financial aspects of the merger.
The following selected historical consolidated financial information of Delhaize
America and Hannaford is only a summary, has been derived from their respective
historical financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto, which are incorporated into
this document by reference. See "Where You Can Find More Information" on page
III-15.
DELHAIZE AMERICA(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
36 WEEKS 36 WEEKS FISCAL YEAR ENDED
ENDED ENDED ------------------------------------------------------------------
SEPT. 11, SEPT. 12, JAN 2, JAN. 3, DEC. 28, DEC. 30, DEC. 31,
1999 1998 1999(1) 1998(2) 1996 1995 1994
---------- ---------- ----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.......... $7,500,231 $7,037,655 $10,219,474 $10,194,385 $ 9,005,932 $8,210,884 $7,932,592
Cost of goods
sold............. 5,784,132 5,470,760 7,925,844 7,975,659 7,087,177 6,516,637 6,323,693
Selling and
administrative
expenses......... 1,319,233 1,207,154 1,770,314 1,736,559 1,490,878 1,337,702 1,269,637
Store closing
charge/(income).. 0 0 0 84,402 (27,600) 0 0
Asset impairment
reserve.......... 0 0 0 0 22,187 0 0
Operating income... 396,866 359,741 523,316 397,765 433,290 356,545 339,262
Interest expense... 74,319 68,188 95,334 115,389 80,520 73,484 86,564
Income before
income taxes..... 322,547 291,553 427,982 282,376 352,770 283,061 252,698
Net income......... $ 199,978 $ 188,036 $ 272,585 $ 172,250 $ 215,220 $ 172,361 $ 152,898
Depreciation and
amortization..... $ 177,654 $ 162,207 $ 236,021 $ 219,833 $ 165,286 $ 146,170 $ 139,834
BALANCE SHEET DATA
Current assets..... $1,541,230 $1,449,071 $ 1,512,277 $ 1,328,511 $ 1,539,039 $1,149,235 $1,125,471
Non-current
assets........... 2,272,154 2,161,971 2,163,684 2,167,625 2,052,496 1,496,030 1,356,470
Total assets....... 3,813,384 3,611,042 3,675,961 3,496,136 3,591,535 2,645,265 2,481,941
Current
liabilities...... 1,197,073 982,029 1,040,417 960,788 1,248,028 698,695 690,062
Long-term debt..... 427,063 435,168 429,763 586,355 495,111 355,300 355,300
Shareholders'
equity........... $1,598,472 $1,582,190 $ 1,598,922 $ 1,333,185 $ 1,225,088 $1,102,510 $1,027,353
</TABLE>
- ------------------------
(1) The historical consolidated financial data includes the operations of Kash
n' Karry from the date of acquisition (December 1996) forward.
(2) Fiscal year consisted of 53 weeks. All other Delhaize America fiscal years
consisted of 52 weeks.
I-11
<PAGE>
HANNAFORD
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
39 WEEKS 39 WEEKS FISCAL YEAR ENDED
ENDED ENDED --------------------------------------------------------------
OCT. 2, OCT. 3, JAN. 2, JAN. 3, DEC. 28, DEC. 30, DEC. 31,
1999 1998 1999 1998(1) 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.......... $2,575,383 $2,473,342 $3,323,588 $3,226,433 $2,957,559 $2,568,061 $2,291,755
Cost of goods
sold............. 1,895,798 1,849,762 2,480,346 2,427,287 2,242,784 1,951,248 1,728,499
Selling and
administrative
expenses......... 541,980 496,136 664,357 635,355 568,033 481,017 437,548
Merger related
cost............. 7,179 0 0 0 0 0 0
Asset impairment
reserve.......... 0 0 0 39,950 0 0 0
Operating income... 130,426 127,444 178,885 123,841 146,742 135,796 125,708
Interest expense... 17,615 19,925 26,577 26,425 22,204 19,368 21,360
Income before
income taxes..... 112,811 107,519 152,308 97,416 124,538 116,428 104,348
Net income......... $ 69,729 $ 66,666 $ 94,647 $ 59,647 $ 75,205 $ 70,201 $ 62,288
Depreciation and
amortization..... $ 77,103 $ 71,941 $ 96,739 $ 93,953 $ 77,420 $ 69,016 $ 62,756
BALANCE SHEET DATA
Current assets..... $ 313,679 $ 268,786 $ 295,878 $ 276,061 $ 261,970 $ 194,342 $ 201,347
Non-current
assets........... 998,716 988,697 988,660 951,129 921,757 767,488 676,258
Total assets....... 1,312,395 1,257,483 1,284,538 1,227,190 1,183,727 961,830 877,605
Current
liabilities...... 290,129 250,364 259,599 255,188 240,174 170,830 158,640
Long-term debt..... 176,387 229,497 220,130 235,850 227,525 150,648 153,687
Shareholders'
equity........... $ 703,358 $ 643,708 $ 663,350 $ 601,029 $ 569,156 $ 518,677 $ 454,475
</TABLE>
- ------------------------
(1) Fiscal year consisted of 53 weeks. All other Hannaford fiscal years
consisted of 52 weeks.
I-12
<PAGE>
SUMMARY UNAUDITED HISTORICAL PRO FORMA CONSOLIDATED FINANCIAL DATA
The following tables set forth summary unaudited pro forma financial data
that are presented to give effect to the merger. The unaudited pro forma
consolidated financial data do not reflect any cost savings and other synergies
which may occur as a result of the merger. The unaudited pro forma financial
data are not necessarily indicative of the results of operations or financial
position that would have occurred if the merger had been completed at the
beginning of the periods presented and at the end of the first nine-month period
of 1999, nor are they necessarily indicative of future results of operations or
financial position. The first nine-month period of 1999 includes the 36-week
period ended September 11, 1999, for Delhaize America and the 39-week period
ended October 2, 1999, for Hannaford. The unaudited pro forma financial data
should be read together with the historical financial statements of Delhaize
America and Hannaford incorporated by reference in this document and the
unaudited pro forma financial statements contained elsewhere in this document.
SUMMARY UNAUDITED PRO FORMA
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
36 YEAR ENDED
WEEKS ENDED JANUARY 2,
SEPT. 11, 1999 1999
-------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales.......................................... $10,075,614 $13,543,062
Cost of goods sold................................. 7,679,930 10,406,190
Selling and administrative expenses................ 1,910,348 2,505,644
Operating income................................... 485,336 631,228
Interest expense................................... 239,040 334,398
Income before income taxes......................... 246,296 296,830
Provision for income taxes......................... 112,479 132,313
Net income......................................... $ 133,817 $ 164,517
</TABLE>
I-13
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 11, 1999
------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Assets
Current Assets
Cash and cash equivalents................................. $ 202,764
Accounts receivable, net.................................. 221,030
Inventories............................................... 1,330,956
Prepaid expenses.......................................... 27,020
Deferred income taxes..................................... 73,139
----------
Total current assets.................................. 1,854,909
Property, plant and equipment, net.......................... 2,912,491
Intangible assets/goodwill less accumulated amortization.... 2,993,215
Other assets................................................ 34,196
----------
Total assets.......................................... $7,794,811
==========
Liabilities and Shareholders' Equity
Current Liabilities
Current maturities of long-term debt...................... $ 41,864
Obligations under capital leases.......................... 25,262
Accounts payable.......................................... 933,002
Accrued expenses.......................................... 437,950
Income taxes.............................................. 34,614
Other liabilities......................................... 14,510
----------
Total current liabilities............................. 1,487,202
Deferred income tax liabilities........................... 27,406
Other liabilities......................................... 146,032
Long-term debt............................................ 3,259,535
Obligations under capital leases.......................... 559,859
Shareholders' equity
Common stock A, par value $.50 per share................ 53,240
Common stock B, par value $.50 per share................ 37,654
Additional paid-in-capital................................ 858,302
Retained earnings......................................... 1,365,581
----------
Total shareholders' equity............................ 2,314,777
----------
Total liabilities and shareholders' equity............ $7,794,811
==========
</TABLE>
I-14
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and unaudited pro forma
consolidated per share data of Delhaize America and Hannaford after giving
effect to the merger. The unaudited pro forma consolidated financial data do not
reflect any cost savings and other synergies which may occur as a result of the
merger. The data set forth below should be read together with the unaudited pro
forma consolidated financial statements and the separate historical financial
statements and notes thereto of Delhaize America and Hannaford, which are
included elsewhere in, or incorporated by reference into, this document. The
unaudited pro forma consolidated financial data is not necessarily indicative of
the operating results or financial position that would have occurred had the
merger been completed at the beginning of the periods presented and should not
be construed as indicative of future operations or financial position. The first
nine-month period of 1999 includes the 36-week period ended September 11, 1999,
for Delhaize America and the 39-week period ended October 2, 1999, for
Hannaford.
<TABLE>
<CAPTION>
36 WEEKS YEAR ENDED
ENDED JANUARY 2,
ALL AMOUNTS ARE IN THOUSANDS EXCEPT PER SHARE DATA SEPT. 11, 1999 1999
- -------------------------------------------------- -------------- ----------
<S> <C> <C>
DELHAIZE AMERICA
NET INCOME(1)
$........................................................... $ 199,978 $ 272,585
Historical Basic............................................ 1.27 1.71
Historical Dilutive......................................... $ 1.26 $ 1.71
DIVIDENDS
$........................................................... $ 59,551 $ 71,271
Historical.................................................. $ 0.38 $ 0.45
BOOK VALUE
$........................................................... $1,598,472 $1,598,922
Historical.................................................. $ 10.12 $ 10.03
HANNAFORD
NET INCOME(1)
$........................................................... $ 69,729 $ 94,647
Historical Basic............................................ 1.65 2.24
Historical Dilutive......................................... $ 1.62 $ 2.21
DIVIDENDS
$........................................................... $ 20,909 $ 25,366
Historical.................................................. $ 0.50 $ 0.60
BOOK VALUE
$........................................................... $ 703,358 $ 663,350
Historical.................................................. $ 16.66 $ 15.69
</TABLE>
I-15
<PAGE>
<TABLE>
<CAPTION>
36 WEEKS YEAR ENDED
ENDED JANUARY 2,
ALL AMOUNTS ARE IN THOUSANDS EXCEPT PER SHARE DATA SEPT. 11, 1999 1999
- -------------------------------------------------- -------------- ----------
<S> <C> <C>
CONSOLIDATED
NET INCOME(1)
$........................................................... $ 133,817 $ 164,517
Historical Basic............................................ 0.73 0.89
Historical Dilutive(2)...................................... $ 0.71 $ 0.86
DIVIDENDS
$........................................................... $ 59,551 $ 71,271
Pro Forma................................................... $ 0.32 $ 0.38
BOOK VALUE
$........................................................... $2,314,777 $2,315,228
Pro Forma................................................... $ 12.55 $ 12.45
</TABLE>
- ------------------------
(1) Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding.
Diluted earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding and the weighted average number of potential common shares
outstanding. These share amounts are illustrated below.
<TABLE>
<CAPTION>
YEAR
36 WEEKS ENDED
ENDED JANUARY 2,
SEPT. 11, 1999 1999
-------------- ----------
(IN THOUSANDS)
<S> <C> <C>
DELHAIZE AMERICA
Basic Shares................................................ 157,949 159,361
Diluted Shares.............................................. 158,231 159,707
HANNAFORD
Basic shares................................................ 42,213 42,277
Diluted shares.............................................. 42,964 42,884
PRO FORMA CONSOLIDATED
Basic shares................................................ 184,479 185,891
Diluted shares.............................................. 189,325 190,502
</TABLE>
(2) Pro Forma Consolidated dilutive earnings per share assumes that the
approximately 2.5 million Hannaford employee stock options outstanding will
be converted into options to purchase Delhaize America Class A common stock
giving effect to the merger using the average historical closing price of
Delhaize America Class A common stock during the periods presented.
I-16
<PAGE>
RECENT DEVELOPMENTS
On September 7, 1999, the shareholders of Delhaize America approved the
following proposals at a special meeting:
- an amendment to the articles of incorporation to change the company name
from "Food Lion, Inc." to "Delhaize America, Inc.";
- the conversion of Delhaize America into a holding company by transferring
the Food Lion business to a wholly-owned subsidiary;
- a one-for-three reverse stock split of the Class A and Class B common
stock of Delhaize America;
- the authorization of 500,000,000 shares of Delhaize America capital stock
as "blank check" preferred stock;
- an amendment of the purpose clause of the articles of incorporation
authorizing Delhaize America to engage in any lawful activity for which a
corporation may be formed under North Carolina law; and
- an amendment to the bylaws to provide that the number of directors of
Delhaize America will not be less than eight or more than 14.
On September 9, 1999, the Delhaize America Class A and Class B common stock
were listed on the NYSE under the symbols "DZA" and "DZB," respectively. Prior
to such time, the Delhaize America Class A and Class B common stock had been
traded on the Nasdaq National Market under the symbols "FDLNA" and "FDLNB,"
respectively.
I-17
<PAGE>
RISK FACTORS
In deciding whether to approve the merger agreement, you should consider the
following risks related to the merger and to your investment in Delhaize America
following the merger. You should consider carefully these risks along with the
other information in this document and the documents to which we have referred
you. See "Where You Can Find More Information" on page III-15.
IT IS POSSIBLE THAT HANNAFORD SHAREHOLDERS WILL RECEIVE LESS THAN $79.00 FOR
EACH OF THEIR HANNAFORD SHARES IN THE MERGER
Under the terms of the merger agreement, if the DZA Price is less than
$27.00, the exchange ratio will, in effect, become fixed. Accordingly, if you
elect to receive all Delhaize America Class A common stock in the merger and the
DZA Price is less than $27.00, the value of the Delhaize America Class A common
stock you receive in the merger (valued at the DZA Price) will be less than
$79.00 per share of Hannaford common stock. Additionally, even if you elect to
receive all cash in the merger, you may receive less than $79.00 in value per
share of Hannaford common stock because of possible proration. If the merger
occurred on , 2000, the last full trading day prior to the date of
this document, assuming full proration, each Hannaford share would have been
converted into $67.94 in cash and 0.4096 of a share of Delhaize America Class A
common stock, having a value at that time of $ , for an aggregate
value per share of Hannaford common stock of $ . For an illustration
of this point, see the chart entitled "Value of Consideration at Varying DZA
Prices" on page I-41. Further, the merger will occur at a date later than the
date of the shareholder meeting and there can be no assurance that the market
price of the Delhaize America Class A common stock that you will receive in the
merger will be as high as the price of the Delhaize America Class A common stock
at the time you vote on the merger.
YOU MAY NOT RECEIVE THE AMOUNT OF CASH OR STOCK THAT YOU ELECT TO RECEIVE IN THE
MERGER
The aggregate number of shares of Hannaford common stock to be converted
into cash and Delhaize America Class A common stock in the merger (exclusive of
the shares to be exchanged before the merger by Empire and E.C.L. Investments)
is fixed by the merger agreement at a ratio of 86% cash and 14% stock,
respectively. As a result, if either the cash or stock consideration is
over-subscribed, the cash or stock consideration, as the case may be, will be
allocated on a pro rata basis in the manner set forth in the merger agreement.
As a result, it is possible that you may not receive the amount of cash or stock
that you request in your election form in the merger. In addition, Hannaford
shareholders who make no election of the consideration they wish to receive on
their election form or who fail to make a timely election in accordance with the
designated procedures will have the cash and stock consideration to be received
by them allocated under the terms of the merger agreement and will not be able
to control to any extent the form of consideration they receive in the merger.
ANTITRUST REGULATORY AGENCIES MAY OPPOSE OR IMPOSE CONDITIONS ON THE MERGER
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Delhaize
America and Hannaford were required to file Pre-Merger Notification and Report
Forms with the Antitrust Division of the Department of Justice and the Federal
Trade Commission. Delhaize America and Hannaford made the required initial
filings on September 8, 1999 and review of the merger was assigned to the FTC.
Prior to the expiration of the 30-calendar day waiting period, the FTC issued to
the parties a Request for Additional Information and Documentary Material. The
parties are in the process of responding to the request.
Following its review, the FTC could take action under the antitrust laws to:
- enjoin the merger; or
- require divestiture of assets or businesses of Delhaize America or
Hannaford.
I-18
<PAGE>
In addition, it is possible that one or more individual states could
investigate and challenge the merger under either federal law or their own state
law, although states have no notification and waiting period requirements. The
Attorney General's Office for each of the State of North Carolina and the
Commonwealth of Virginia have requested that Delhaize America and Hannaford
waive the confidentiality of their respective filings made under the HSR Act,
and both parties have agreed to such waiver. Such waiver requests are a routine
aspect of each state's review of the competitive effects of the merger in local
markets. We also do not know whether a third party would challenge the merger on
antitrust grounds or what the result of any third party challenge might be.
Depending on the nature of any of these challenges, and any conditions imposed
as a result, these challenges and conditions could delay completion of the
merger or lessen the anticipated benefits of the merger.
The merger agreement requires the parties to use their respective reasonable
best efforts, and to take all actions reasonably necessary, to obtain all
regulatory clearances under the antitrust laws as expeditiously as possible.
This includes agreeing to the sale or other disposition of assets and taking all
other steps reasonably necessary to vacate or lift any decree, judgment,
injunction or other order that would prohibit the merger.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO INTEGRATE THE OPERATIONS OF
DELHAIZE AMERICA AND HANNAFORD AS SUCCESSFULLY AS WE WOULD LIKE, AND
CONSEQUENTLY, WE MAY NOT ACHIEVE THE ANTICIPATED BENEFITS OF THE MERGER
We have entered into the merger agreement with the expectation that the merger
will result in opportunities for economies of scale and operating efficiencies,
including cost savings anticipated to be $40 million in the first year and
$75 million annually by the third year after the merger, improved customer
service levels and enhanced management resources. We will not be able to achieve
the benefits of the merger unless we are able to integrate successfully and
efficiently certain of the operations of Delhaize America and Hannaford. We
cannot assure you that this will occur. In addition, the consolidation of
certain operations will require substantial attention from management. Any
diversion of management's attention and any difficulties encountered in the
transition and integration process could prevent us from achieving the
anticipated cost savings and other benefits of the merger.
DELHAIZE AMERICA'S INCREASED LEVERAGE COULD ADVERSELY AFFECT IT BY REDUCING ITS
FLEXIBILITY TO RESPOND TO CHANGING BUSINESS AND ECONOMIC CONDITIONS
Delhaize America estimates that the total amount of cash required to fund the
cash consideration to be paid to Hannaford shareholders in the merger is
approximately $2.7 billion. Delhaize America anticipates that all of such amount
will be financed at the Delhaize America holding company level through a 364-day
credit facility for up to $2.5 billion and a $500 million five-year revolving
credit facility. This significant amount of indebtedness could make Delhaize
America more vulnerable to economic downturns and competitive pressures. In
addition, the terms of the financing may contain covenants that adversely affect
the financial condition and flexibility of Delhaize America after the merger. As
a result of the proposed financing, the consolidated capitalization of Delhaize
America after the merger will consist of and the total long-term
debt of Delhaize America will be $ , or % of total capitalization.
I-19
<PAGE>
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING STATEMENTS
This document includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act,
Section 21E of the Exchange Act and the Private Securities Litigation Reform Act
of 1995 about Delhaize America, Hannaford and the combined company that are
subject to risks and uncertainties. All statements included in this document,
other than statements of historical fact, which address activities, events or
developments that Delhaize America and/or Hannaford expects or anticipates will
or may occur in the future, including, without limitation, statements regarding
expansion and growth of business, anticipated store openings, future capital
expenditures, projected cost savings resulting from the merger, business
strategy and trends in or expectations regarding Delhaize America's, Hannaford's
or the combined company's operations and the effect of problems associated with
the year 2000, are forward-looking statements. These forward-looking statements
generally can be identified as statements that include phrases such as
"believe," "expect," "anticipate," "intend," "plan," "forsee," "likely," "will"
or other similar words or phrases.
Although such statements are based on currently available operating,
financial and competitive information, actual outcomes and results may differ
materially from those projected depending upon a variety of factors, including,
but not limited to, changes in the general economy or in the primary markets of
Delhaize America or Hannaford, 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 to complete remodels as rapidly as planned,
stability of product costs, supply or quality control problems with vendors and
issues relating to the effect of the year 2000 problem. This list of factors
that may affect future performance and the accuracy of forward-looking
statements is illustrative, but by no means exhaustive. Accordingly, all
forward-looking statements should be evaluated with the understanding of their
inherent uncertainty.
For additional information with respect to these factors, see the Annual
Reports on Form 10-K for the year ended January 2, 1999 for both Delhaize
America and Hannaford. See "Where You Can Find More Information" on page III-15.
This document describes other important factors that could cause actual results
to differ materially from expectations of Delhaize America and Hannaford,
including under the heading "Risk Factors." All written and oral forward-looking
statements attributable to Delhaize America or Hannaford or persons acting on
behalf of Delhaize America and Hannaford are expressly qualified in their
entirety by such factors. Delhaize America and Hannaford disclaim any obligation
or undertaking to disseminate any updates or revisions to any forward-looking
statements contained in this document or to reflect any change in the
expectations of Delhaize America or Hannaford after the date of this document or
any change in events, conditions or circumstances on which any forward-looking
statement is based.
I-20
<PAGE>
SELECTED UNAUDITED HISTORICAL PRO FORMA CONSOLIDATED FINANCIAL DATA
OF DELHAIZE AMERICA AND HANNAFORD
The following tables set forth selected unaudited consolidated financial
data which are presented to give effect to the merger. The information was
prepared based on the following assumptions:
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles.
The income statement data assumes that the merger was completed at the
beginning of the periods presented. The first nine-month period of 1999 includes
the 36-week period ended September 11, 1999, for Delhaize America and the
39-week period ended October 2, 1999, for Hannaford. The balance sheet data
assume that the merger was completed at the end of the first nine-month period
of 1999.
The expected cost savings to be achieved in the merger, estimated at
approximately $40 million in the first year and $75 million annually by year
three, are excluded from the data.
The unaudited pro forma financial data are not necessarily indicative of the
results of operations or financial positions that would have occurred if the
merger had been completed at the beginning of the periods presented and at the
end of the first nine-month period of 1999, nor are they necessarily indicative
of future results of operations or financial position. The unaudited pro forma
financial data should be read together with the historical financial statements
of Delhaize America and Hannaford incorporated by reference in this document.
The pro forma financial data assumes that the value of the Delhaize America
Class A common stock given as consideration in the merger is equal to $27.00 per
share.
SELECTED UNAUDITED HISTORICAL PRO FORMA
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
Delhaize
America Hannaford Consolidated
Year Ended Year Ended Year Ended
(DOLLARS IN THOUSANDS) January 2, 1999 January 2, 1999 Adjustments January 2, 1999
- ---------------------- --------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net sales............................... $10,219,474 $3,323,588 $ $13,543,062
Cost of goods sold...................... 7,925,844 2,480,346 10,406,190
Selling and administrative expenses..... 1,770,314 664,357 70,973 (a) 2,505,644
----------- ---------- -----------
Operating income........................ 523,316 178,885 631,228
Interest expense........................ 95,334 26,577 212,487 (b) 334,398
----------- ---------- -----------
Income before income taxes............ 427,982 152,308 296,830
Provision for income taxes.............. 155,397 57,661 (80,745)(c) 132,313
----------- ---------- -----------
Net income............................ $ 272,585 $ 94,647 $ 164,517
<CAPTION>
Delhaize
America Hannaford Consolidated
For the 36 For the 39 For the 36
Weeks Ended Weeks Ended Weeks Ended
(DOLLARS IN THOUSANDS) Sept. 11, 1999 Oct. 2, 1999 Adjustments Sept. 11, 1999
- ---------------------- --------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net Sales............................... $ 7,500,231 $2,575,383 $ $10,075,614
Cost of goods sold...................... 5,784,132 1,895,798 7,679,930
Selling and administrative expenses..... 1,319,233 541,980 49,135 (a) 1,910,348
Merger related cost..................... -- 7,179 (7,179)(d) --
----------- ---------- -----------
Operating income........................ 396,866 130,426 485,336
Interest expense........................ 74,319 17,615 147,106 (b) 239,040
----------- ---------- -----------
Income before income taxes............ 322,547 112,811 246,296
Provision for income taxes.............. 122,569 43,082 (53,172)(c) 112,479
----------- ---------- -----------
Net income............................ $ 199,978 $ 69,729 $ 133,817
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
I-21
<PAGE>
SELECTED UNAUDITED HISTORICAL PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DELHAIZE
AMERICA HANNAFORD MERGER CONSOLIDATED
SEPT. 11, 1999 OCT. 2, 1999 ADJUSTMENTS(E) SEPTEMBER 11, 1999
-------------- ------------ -------------- -------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............ $ 150,099 $ 52,665 $ -- $ 202,764
Accounts receivable, net............. 195,997 25,033 -- 221,030
Inventories.......................... 1,109,487 221,469 -- 1,330,956
Prepaid expenses..................... 20,250 6,770 -- 27,020
Deferred income taxes................ 65,397 7,742 -- 73,139
---------- ---------- ---------- ----------
TOTAL CURRENT ASSETS............. 1,541,230 313,679 -- 1,854,909
Property, plant and equipment, net..... 1,999,173 913,318 -- 2,912,491
Intangible assets/goodwill less
accumulated amortization............. 265,002 59,181 2,669,032 2,993,215
Other assets........................... 7,979 26,217 -- 34,196
---------- ---------- ---------- ----------
TOTAL ASSETS..................... $3,813,384 $1,312,395 $2,669,032 $7,794,811
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt............................... $ 21,230 $ 20,634 $ -- $ 41,864
Obligations under capital leases..... 22,868 2,394 -- 25,262
Accounts payable..................... 723,345 209,657 -- 933,002
Accrued expenses..................... 383,203 54,747 -- 437,950
Income taxes......................... 34,614 2,697 -- 37,311
Other liabilities.................... 11,813 -- -- 11,813
---------- ---------- ---------- ----------
TOTAL CURRENT LIABILITIES........ 1,197,073 290,129 -- 1,487,202
Deferred income tax liabilities........ -- 27,406 -- 27,406
Other liabilities...................... 105,638 40,394 -- 146,032
Long-term debt......................... 427,063 176,387 2,656,085 3,259,535
Obligations under capital leases....... 485,138 74,721 -- 559,859
Shareholders' equity
Common stock, par value $.75 per
share............................ -- 31,754 (31,754) --
Common stock A, par value $.50 per
share............................ 39,975 -- 13,265 53,240
Common stock B, par value $.50 per
share............................ 37,654 -- -- 37,654
Additional paid-in-capital............. 155,262 102,200 600,840 858,302
Preferred stock purchase rights........ -- 423 (423) --
Retained earnings...................... 1,365,581 574,163 (574,163) 1,365,581
Less common stock in treasury.......... -- (5,182) 5,182 --
---------- ---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY....... 1,598,472 703,358 12,947 2,314,777
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... $3,813,384 $1,312,395 $2,669,032 $7,794,811
========== ========== ========== ==========
</TABLE>
I-22
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The unaudited historical pro forma consolidated financial information has
been prepared assuming that the merger occurred as of the beginning of the
periods presented and will be accounted for under the purchase method of
accounting. Pro forma adjustments have been made to reflect the expected
purchase price allocation. Under the purchase method of accounting, the assets
and liabilities of Hannaford will be recorded at their respective fair values.
The pro forma adjustments represent management's estimates based on currently
available information, however, a complete valuation of the assets and
liabilities of Hannaford has not yet been completed. The unaudited pro forma
financial information does not reflect any adjustments that may be required to
conform the accounting policies of Hannaford to those of Delhaize America. The
analysis of accounting policy conformity by Delhaize America has not yet been
completed. The actual adjustments recorded upon consummation may differ from the
estimates reflected above.
The estimated purchase price reflected in the unaudited pro forma financial
information assumes that 86% of the total consideration will be in cash and 14%
in Delhaize America Class A common stock. In addition, the pro forma financial
information assumes that Empire and E.C.L. Investments elect to receive
$365 million of their consideration payable in Delhaize America Class A common
stock and the remainder of their consideration of $458 million in cash. The
unaudited pro forma financial statements also do not reflect the impact of
options to purchase Hannaford common stock held by Hannaford employees that will
either be (a) exercised, resulting in the issuance of Hannaford common stock
prior to consummation of the merger or (b) converted into options to purchase
Delhaize America Class A common stock as of the consummation of the merger since
the amount of the impact is not known. As of September 11, 1999, there were
outstanding employee stock options to purchase approximately 2.5 million shares
of Hannaford common stock.
NOTE 2--PRO FORMA ADJUSTMENTS
(a) Represents the amortization of the excess of the expected purchase price
over the estimated fair value of the net assets of Hannaford (goodwill)
arising from the transaction over a period of 40 years.
(b) Represents the interest expense effect of approximately $2.7 billion of
additional debt anticipated as a result of the transaction based on an
average interest rate of approximately 8%. The effect of an interest rate
change of 1/8th of one percent would increase/decrease interest expense
approximately $3.4 million per year.
(c) Represents the anticipated tax effects of the pro forma adjustments listed
above.
(d) Represents an adjustment to eliminate merger costs, principally consisting
of professional fees incurred by Hannaford in connection with the proposed
merger.
(e) Pro forma adjustments to reflect the estimated purchase price, based on the
terms described elsewhere in this document, and the related increases in
long-term borrowings and shareholders' equity to be issued in connection
with the proposed merger. The estimated purchase price includes an estimate
of direct costs incurred by Delhaize America in connection with the
consummation of the proposed merger.
I-23
<PAGE>
THE MERGER TRANSACTION
BACKGROUND OF THE MERGER
The retail supermarket industry has undergone increasing consolidation over
the last several years. The competitive advantages that could result from
combining retail supermarket chains have contributed to this trend. These
include efficiencies as a consequence of increased purchasing power, combined
operations and an ability to serve additional markets. Another significant
reason for this trend is the increased competition in the food retailing
industry, including new market entrants like mass merchandisers and membership
clubs.
The Hannaford board on a regular basis has reviewed its business strategy
and possible alternatives to determine the best course to maintain and
strengthen Hannaford's competitive position and enhance shareholder value. A
combination with a larger chain has been among the strategic alternatives
evaluated by the Hannaford directors from time to time, although these
deliberations were general in nature and did not advance to a detailed
consideration of any specific merger partner or transaction. In addition,
Hannaford management has in the past examined the benefits of acquiring smaller
chains as they became available for purchase as an alternate way to grow and
obtain the benefits of increased size.
In early April 1999, David F. Sobey and Paul Sobey, executives and part of
the controlling shareholder group of Empire Company Limited, met at their
request with Hugh G. Farrington, Hannaford's Chief Executive Officer, and Walter
J. Salmon, Chairman of the Hannaford board. Empire, together with affiliates,
beneficially owns approximately 25% of the outstanding Hannaford common stock.
At the meeting, David Sobey (who also is a member of the Hannaford board) and
Paul Sobey advised Messrs. Farrington and Salmon that they believed that current
market conditions made it a propitious time for the Hannaford board to consider
in depth a possible sale or combination transaction between Hannaford and a
larger chain. Messrs. Sobey noted that they were expressing their own views only
and that the board of directors of Empire had not met or decided upon any
particular course of action with respect to Empire's interest in Hannaford.
Following their meeting with David and Paul Sobey, Messrs. Farrington and
Salmon held a number of meetings with other Hannaford directors and management.
At these meetings, the directors reviewed the status of the company's strategic
planning and appropriate next steps. Also participating in certain of these
meetings were representatives of Morgan Stanley & Co. Incorporated and Weil,
Gotshal & Manges LLP, Hannaford's financial advisor and legal counsel,
respectively, as well as representatives of Verrill & Dana, Hannaford's counsel
with respect to Maine law.
On May 3, 1999, Empire notified Hannaford that it had determined not to
extend the term of its standstill agreement with Hannaford and that, pursuant to
its terms, the standstill agreement would terminate not later than December 31,
1999. In an amendment to its Schedule 13D filing with respect to its Hannaford
common stock and a press release issued on May 4, 1999, Empire stated that its
purpose in delivering the notice was "to enhance Empire's flexibility in
realizing the inherent value in its shares of Hannaford common stock."
On May 19, 1999, the Hannaford board met and reviewed recent developments.
At the meeting, the Hannaford directors requested Morgan Stanley to conduct a
financial review of strategic alternatives available to the company.
On June 16, 1999, the Hannaford board met to consider the results of Morgan
Stanley's review. Morgan Stanley reported on its preliminary valuation analysis
of Hannaford as well as its review of strategic alternatives. Among the possible
strategies reviewed with the Hannaford board were: a continuation of the
company's current strategic business plan; the extension of existing operations
through the purchase of smaller chains or operating assets; the sale of a
minority stake in the company to a third party; a borrowing of funds and
distribution of proceeds to shareholders through a special dividend or stock
repurchase program; the purchase by Hannaford of the shares owned by Empire and
I-24
<PAGE>
its affiliates; the sale of the company to a financial buyer in a leveraged
transaction; and the sale or combination of the company with a larger strategic
partner. The potential advantages and disadvantages as well as the possible
financial implications of each of these alternatives were reviewed in detail by
the directors. Following consideration of the matters presented at the meeting,
the directors authorized Morgan Stanley to solicit proposals regarding a
combination transaction with Hannaford from a limited number of larger
supermarket chains thought to be in the best position to pay the highest value.
Following the June 16, 1999 meeting, confidentiality/standstill agreements
were signed by Hannaford with five supermarket chains. Following the execution
of the agreements, Hannaford's management separately made presentations to
representatives of four of these companies. Additionally, Hannaford made
available to these parties documents for a legal and financial due diligence
review of the company. A form of merger agreement prepared by Weil Gotshal also
was distributed for use in the submission of proposals.
On August 6, 1999, Hannaford received combination proposals from Delhaize
America and one other industry participant. Delhaize America's proposal provided
for a payment to Hannaford shareholders of $77 per share, composed of $45 or 58%
in cash and (x) $32 in Delhaize America Class A common stock if the average of
the closing sales prices of the stock for the ten trading days prior to the
closing of the transaction was at or above $28.50 or (y) a maximum of 3.38
shares of Delhaize America Class A common stock if the average price was below
$28.50. This percentage breakdown between cash and stock assumed a full
proration of the cash election that would be made available to the Hannaford
shareholders in the transaction. The Delhaize America proposal was not
conditioned on financing, and it was accompanied by a commitment letter from
J.P. Morgan Securities, Inc. to provide the required cash funds. The Delhaize
America proposal also sought an agreement from Empire and one of its affiliates
to commit to vote their Hannaford shares in favor of the transaction proposed by
Delhaize America.
The proposal received from the other party provided for a payment to
Hannaford shareholders of $70 per share. Pursuant to this proposal, Hannaford
shareholders would have the option to elect, without limitation, to receive this
price either in cash or in publicly traded securities of the third party
determined by reference to the 20-day average trading price of the third party's
common shares immediately prior to the consummation of the transaction. The
proposal also required Hannaford to issue to the other party an option to
acquire newly issued shares constituting 19.9% of the Hannaford common stock at
the proposal price.
On August 8, 1999, certain Hannaford directors and representatives of Morgan
Stanley and Weil Gotshal held a telephonic conference call to review the
proposals in advance of a meeting of the full Hannaford board scheduled for
August 12, 1999. Following this call, representatives of Morgan Stanley had a
number of telephone calls with representatives of Delhaize America and the other
party with the objective of obtaining their best proposals.
On August 11, 1999, the other party indicated that it was increasing the
consideration to be paid pursuant to its proposal to $75 per share.
On August 12, 1999, the Hannaford board met with its advisors to review the
proposals. Morgan Stanley presented a detailed financial review of the proposals
and Weil Gotshal discussed the board's fiduciary obligations and both proposals'
terms and legal implications. The board also discussed industry consolidation,
potential synergies resulting from both transactions and regulatory matters.
Following its review, the Hannaford board directed Morgan Stanley to urge
representatives of Delhaize America to, among other things, increase the value
of its proposal, increase the cash portion of the consideration to be paid to
shareholders and lower below $28.50 the "collar" (I.E., the Delhaize America
Class A common stock price at which the maximum number of shares of Delhaize
America common stock to be issued in the transaction would become fixed). Morgan
Stanley was directed to urge representatives of the other party to increase the
value of its offer, make certain changes to the
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<PAGE>
proposed form of agreement that it had submitted with respect to regulatory
matters and to drop its request for a stock option from Hannaford.
Following the August 12, 1999 meeting, Delhaize America's representatives,
who were not informed of the terms of the other bidder's proposal, advised
Morgan Stanley that it was increasing the consideration to be paid pursuant to
its proposal to $79 per share, increasing the percentage of cash to be paid to
Hannaford's shareholders from 58% to 86% (which increase was made possible by
the separate arrangements with Empire and its affiliate described in the next
sentence and below) and lowering the "collar" from $28.50 to $27.00. In
connection with discussions relating to Delhaize America's request for a voting
agreement, Empire and its affiliate, E.C.L. Investments Ltd. (collectively, the
"Empire Group"), sought Delhaize America's agreement to exchange the Empire
Group's Hannaford shares for consideration at the same value as that received by
Hannaford's other shareholders, but for a lower percentage of cash and greater
percentage of Delhaize America Class A common stock. Delhaize America indicated
that in principle it would be amenable to such an agreement with the Empire
Group.
Following the August 12, 1999 Hannaford board meeting, the other party
advised Morgan Stanley that it was not prepared to make any further
modifications to its proposal.
On August 15, 1999, the Hannaford board held a telephonic meeting with its
advisors to discuss the status of the revised proposals. At this meeting, the
board carefully weighed the merits of each proposal, including the greater
nominal value presented by the Delhaize America proposal, as well as the
potential decrease in value by reason of possible decreases in the future market
price of the securities offered by Delhaize America, which risk was not present
in the other party's proposal. The Hannaford board also considered the fact that
the Empire Group would receive a higher percentage of Delhaize America Class A
common stock under the Delhaize America proposal than would other Hannaford
shareholders. Following a review and thorough discussion, the Hannaford
directors determined to proceed with the Delhaize America proposal and
authorized management and Hannaford's advisors to finalize the necessary
documentation.
Commencing on the morning of August 16, 1999, representatives of the legal
advisors to Hannaford, Delhaize America and the Empire Group met together and
separately to negotiate the final forms of agreements. Among other changes,
Delhaize America agreed to certain modifications to its proposal regarding the
termination and "no-shop" provisions of the merger agreement and a reduction in
the termination fee from $100 million to $90 million. Additionally, the Empire
Group agreed to enter into a voting agreement with Delhaize America and Delhaize
America agreed to a cash and stock allocation with the Empire Group.
The Hannaford board next met on the afternoon of August 17, 1999.
Hannaford's management, financial advisors and legal counsel made presentations
concerning the terms of the merger agreement and related documentation and the
proposed transaction. At the meeting, Morgan Stanley gave its oral opinion,
which was subsequently confirmed in writing, that, as of August 17, 1999, the
consideration to be received in the merger is fair, from a financial point of
view, to the Hannaford shareholders. See "--Opinion of Hannaford's Financial
Advisor" beginning on page I-29. After a full discussion and consideration, the
Hannaford board unanimously (with one director absent) approved the merger
agreement and the merger and authorized management to conclude and execute the
merger agreement on the terms discussed and approved at the meeting. The
Hannaford board also determined to recommend that the Hannaford shareholders
vote to approve the merger agreement. For a description of the reasons for the
decision and recommendation, see "--Hannaford's Reasons for the Merger" on
page I-27 and "--Factors Considered by, and Recommendation of, the Hannaford
Board" beginning on page I-27.
During the evening of August 17 and the early morning of August 18, 1999,
Hannaford and Delhaize America finalized the terms of the merger agreement and
executed that agreement.
I-26
<PAGE>
Additionally, the Empire Group and Delhaize America finalized the terms of the
stock exchange agreement and voting agreement and signed those agreements.
On the morning of August 18, 1999, before the opening of trading on the New
York Stock Exchange, Hannaford and Delhaize America issued a joint press release
announcing that they had executed the merger agreement.
HANNAFORD'S REASONS FOR THE MERGER
Hannaford is pursuing the merger for the following reasons:
- THE MERGER WILL POSITION HANNAFORD TO COMPETE MORE EFFECTIVELY. As the
supermarket industry continues to consolidate and grow increasingly
competitive, local and regional supermarket chains suffer the
disadvantages of smaller economies of scale and less purchasing power than
the national chains. A combination of Delhaize America and Hannaford will
create the sixth largest food retailer in the United States, operating
over 1,400 stores throughout the eastern United States from Maine to
Florida, with total 1998 annual revenues of approximately $13.5 billion on
a pro-forma basis. The merger also should provide the combined company
with opportunities for economies of scale, including combined purchasing
power and operating efficiencies.
- THE MERGER CONSIDERATION REPRESENTS A SUBSTANTIAL PREMIUM TO HANNAFORD'S
HISTORICAL STOCK PRICE. In the merger, Hannaford shareholders will receive
cash and/or Delhaize America Class A common stock with a value of $79.00
per share, subject to potential downward adjustment if the average closing
price of Delhaize America's Class A common stock is below $27.00 per share
during the ten consecutive trading days prior to the merger. This
represents a premium of approximately (1) 24% from the last sales price of
Hannaford's common stock on August 17, 1999, the day prior to the date the
merger was publicly announced and (2) approximately 75% from the last
sales price of Hannaford's common stock on May 3, 1999, the day prior to
the date Empire publicly announced that it would not renew its standstill
agreement with Hannaford. If the merger occurred on , 2000, the last
trading day before the date of this document, assuming full proration,
each Hannaford share to be converted in the merger would be converted into
$67.94 in cash and 0.4096 of a share of Delhaize America Class A common
stock, having a value at that time of $ (valued at the
closing price), for an aggregate value per share of Hannaford common stock
of $ . This represents a premium of approximately
(1) % from the last sales price of Hannaford's common stock on
August 17, 1999 and (2) approximately % from the last sales price of
Hannaford's common stock on May 3, 1999.
- THE MERGER REPRESENTS the BEST TRANSACTION THAT THE BOARD WAS ABLE TO
OBTAIN AFTER A SOLICITATION OF COMBINATION PROPOSALS. In June 1999, the
Hannaford board, with the assistance of its financial and legal advisors,
contacted a number of large industry participants to solicit their
interest in a possible transaction with Hannaford. See "--Background of
the Merger" beginning on page I-24. The board determined that the merger
with Delhaize America represented a more attractive transaction for
Hannaford and its shareholders than any transaction proposed or interest
expressed by the third parties contacted in this process.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE HANNAFORD BOARD
At a meeting of the Hannaford board held on August 17, 1999, after due
consideration, the Hannaford board unanimously (with one director absent):
- determined that the terms of the merger agreement are advisable and fair
to and in the best interests of Hannaford and its shareholders;
- voted to approve the merger and the merger agreement and related matters;
and
- determined to recommend that the Hannaford shareholders approve the merger
agreement.
I-27
<PAGE>
In reaching its decision to approve the merger agreement and the merger, and
to recommend that Hannaford shareholders approve the merger agreement, the
Hannaford board consulted with Hannaford's management and its financial and
legal advisors and considered certain factors, including the following:
- the reasons described under "--Hannaford's Reasons for the Merger" on
page I-27;
- the terms of the merger agreement, including without limitation, the form
of consideration, the price risk presented by the "collar" provisions in
the merger agreement and Hannaford's ability, under certain circumstances,
to terminate the merger agreement to accept an acquisition proposal deemed
by the Hannaford directors to be superior to the merger upon payment of a
termination fee to Delhaize America;
- the long-term interests of Hannaford and its shareholders, as well as the
interests of Hannaford's employees, customers, creditors, suppliers and
the communities in which Hannaford operates;
- information concerning the business, earnings, operations, financial
condition and prospects of Hannaford and Delhaize America, both
individually and on a combined basis, including information with respect
to the past earnings and stock performance of each of Hannaford and
Delhaize America;
- various alternatives to the merger, including remaining independent, and
the risks associated with those alternatives;
- the ability to complete the merger, including, in particular, the
likelihood of obtaining regulatory approvals and the terms of the merger
agreement regarding the obligations of both companies to pursue these
regulatory approvals, including the obligation of both companies to hold
separate or sell or otherwise dispose of stores in order to obtain the
expiration or termination of the HSR waiting period;
- the provision by Delhaize America to Hannaford of a commitment letter from
its financing sources to provide funds necessary to effect the merger and
the fact that the merger agreement does not provide a termination right to
Delhaize America in the event it is unable to obtain this financing;
- the familiarity of the Hannaford board with the business, properties and
prospects of Hannaford, including the opportunities and alternatives
available to Hannaford if the merger were not to be undertaken;
- the analysis and presentation of Morgan Stanley, and Morgan Stanley's oral
opinion, subsequently confirmed in writing, to the effect that, as of the
date, and based upon and subject to the assumptions, limitations and
qualifications set forth in its opinion, the consideration to be received
in the merger is fair, from a financial point of view, to the Hannaford
shareholders;
- the fact that no portion of the consideration to be received by Hannaford
shareholders in the merger will be tax-free to Hannaford shareholders for
U.S. federal income tax purposes;
- the fact that the Empire Group agreed to vote its shares of Hannaford
common stock (which shares represented approximately 24.7% of the
outstanding common stock of Hannaford as of the date of the merger
agreement) for the approval of the merger agreement;
- the fact that the consideration to be received by Hannaford's other
shareholders in the merger will consist of a greater proportion of cash
than the consideration to be received by the Empire Group in connection
with the exchange of their shares immediately prior to the merger;
- the notice by Empire that it had determined not to extend the term of its
standstill agreement with Hannaford;
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<PAGE>
- the interests of the directors and executive officers in the merger as
described in "--Interests of Certain Persons in the Merger" on page I-36.
The Hannaford board also was aware of certain potential risks relating to
the merger, including the following:
- the terms and conditions of the merger agreement, including but not
limited to:
- the obligation of Hannaford to pay a termination fee of $90 million to
Delhaize America under certain circumstances upon termination of the
merger agreement;
- the prohibition against solicitation of alternative transactions and
certain restrictions on engaging in discussions with third parties
regarding alternative transactions;
- the limitations upon the interim business operations of Hannaford
imposed by the merger agreement and the risks to Hannaford's continuing
business if the merger is not consummated;
- the risks in consummating the merger;
- the likelihood that the merger will be dilutive to Delhaize America's
reported earnings per share for a period of time after the merger due to
the recognition of goodwill under purchase accounting as required by
generally accepted accounting principles;
- the risk that the Hannaford shareholders could receive shares of Delhaize
America Class A common stock or a combination of cash and Delhaize America
Class A common stock with a market value of less than $79.00 per share;
- the impact of the merger on Hannaford's customers and employees and the
potential negative impact on the ability of Hannaford to retain key
employees if the merger is not consummated;
- the risk that, because of potential proration, Hannaford shareholders may
receive a form of consideration different from that which they elected to
receive;
- the risk associated with integrating certain of the support functions of
the combined company and the achievement of anticipated cost savings; and
- the other risks described under "Risk Factors" on pages I-18 - I-19.
The foregoing discussion of the information and factors considered and given
weight by the Hannaford board is not intended to be exhaustive, but includes the
material factors considered by the Hannaford board. The Hannaford board relied
on the experience and expertise of Morgan Stanley, its financial advisor, for
quantitative analysis of the financial terms of the merger. See "--Opinion of
Hannaford's Financial Advisor" on pages I-29 - I-35. In reaching its decision to
approve the merger agreement and the merger and to recommend approval of the
merger agreement to the Hannaford shareholders, the Hannaford board did not
assign any relative or specific weights to the various factors considered.
Instead, the Hannaford board conducted an overall analysis of the factors
described above, including by participating in discussions with and asking
questions of Hannaford's management and legal and financial advisors. In
considering the factors above, individual directors may have given different
weight to different factors.
For the reasons discussed above, the Hannaford board has unanimously
approved (with one director absent) and deemed advisable and in the best
interests of Hannaford and its shareholders the merger agreement and the merger,
and recommends that Hannaford shareholders vote FOR approval of the merger
agreement.
OPINION OF HANNAFORD'S FINANCIAL ADVISOR
Under an engagement letter dated May 27, 1999, Hannaford retained Morgan
Stanley to provide it with financial advisory services and a financial fairness
opinion in connection with the merger. The
I-29
<PAGE>
Hannaford board selected Morgan Stanley to act as Hannaford's financial advisor
based on Morgan Stanley's qualifications, expertise and reputation and its
knowledge of the business and affairs of Hannaford. At the meeting of the
Hannaford board on August 17, 1999, Morgan Stanley rendered its oral opinion,
subsequently confirmed in writing, that as of August 17, 1999, and subject to
and based on the considerations in its opinion, the consideration to be received
by the Hannaford shareholders pursuant to the merger agreement was fair from a
financial point of view to the holders of shares of Hannaford common stock.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY IS ATTACHED AS
APPENDIX B TO THIS DOCUMENT AND SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF
THE REVIEW UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION. MORGAN
STANLEY'S OPINION IS DIRECTED TO THE HANNAFORD BOARD OF DIRECTORS AND ADDRESSES
ONLY THE FAIRNESS OF THE MERGER CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF
SHARES OF HANNAFORD COMMON STOCK PURSUANT TO THE MERGER AGREEMENT FROM A
FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION. IT DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF HANNAFORD COMMON STOCK AS TO HOW TO VOTE AT THE SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS DOCUMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. WE ENCOURAGE YOU
TO READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Hannaford and Delhaize America, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning Hannaford prepared by the management of
Hannaford;
- analyzed certain financial projections prepared by the management of
Hannaford;
- reviewed information relating to certain strategic, financial and
operational benefits anticipated from the merger, prepared by the
managements of Hannaford and Delhaize America, respectively;
- discussed the past and current operations and financial condition and the
prospects of Hannaford and Delhaize America, including information
relating to certain strategic, financial and operational benefits
anticipated from the merger, with senior executives of Hannaford and
Delhaize America, respectively;
- reviewed the reported prices and trading activity for Hannaford common
stock and Delhaize America Class A common stock;
- compared the financial performance of Hannaford and Delhaize America and
the prices and trading activity of Hannaford common stock and Delhaize
America Class A common stock with that of certain other comparable
publicly-traded companies and their securities;
- reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
- participated in discussions and negotiations among representatives of
Hannaford and Delhaize America and their financial and legal advisors;
- reviewed the Stock Exchange Agreement, dated August 17, 1999, among the
Empire Group and Delhaize America pursuant to which, immediately prior to
the closing of the merger, the Empire Group will exchange its shares of
Hannaford common stock for a combination of cash and Delhaize America
Class A common stock;
- reviewed the merger agreement, dated August 17, 1999, and certain related
documents; and
- performed such other analyses as they have deemed appropriate.
I-30
<PAGE>
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by Morgan Stanley for the
purposes of its opinion. With respect to the financial projections, Morgan
Stanley assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Hannaford. In addition, Morgan Stanley assumed that the merger will be
completed in accordance with the terms set forth in the merger agreement. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities of Hannaford nor was Morgan Stanley furnished with any such
appraisals. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of its opinion.
The following is a summary of the material financial valuation analyses
performed by Morgan Stanley in connection with rendering its opinion to the
Hannaford board of directors on August 17, 1999 and subsequently confirmed in
writing as of August 17, 1999. The summary includes information presented in
tabular format. In order to understand fully the financial analyses used by
Morgan Stanley, the tables must be read together with the applicable text. The
tables alone do not constitute a complete description of the financial analyses.
PEER GROUP COMPARISON. Morgan Stanley compared certain financial
information of Hannaford with publicly available information for the
Multi-Regional Supermarket Companies and the Regional Supermarket Companies.
For the purposes of this comparison, the list of Multi-Regional Supermarket
Companies consisted of Koninklijke Ahold NV, Albertson's, Inc., The Kroger Co.,
Safeway Inc. and The Great Atlantic & Pacific Tea Company, Inc. The list of
Regional Supermarket Companies consisted of Delhaize America, Winn-Dixie
Stores, Inc., Ruddick Corporation and Weis Markets, Inc.
For this analysis, Morgan Stanley examined median estimates from securities
research analysts, where appropriate. The following table presents, as of
August 10, 1999, the median for these groups of the following statistics:
- the ratio of stock price to calendar year 2000 estimated earnings per
share ("EPS"),
- the ratio of aggregate value, defined as market capitalization plus total
debt less cash and cash equivalents, to:
- the previous twelve months EBITDA, and
- the previous twelve months EBIT, and
- the ratio of stock price to calendar year 2000 estimated EPS to five year
projected EPS growth rates.
<TABLE>
<CAPTION>
AGGREGATE VALUE TO CALENDAR YEAR 2000 P/E
------------------------------- TO 5 YR
CALENDAR YEAR 2000E LAST 12 MONTHS LAST 12 MONTHS PROJECTED EPS
COMPANY P/E EBITDA EBIT GROWTH RATE
- ------- ------------------- -------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Hannaford......................... 20.3x 9.2x 14.2x 1.7x
Multi-Regional Supermarket
Companies....................... 20.2x 10.3x 16.3x 1.2x
Regional Supermarket Companies.... 15.1x 7.2x 11.7x 1.3x
</TABLE>
I-31
<PAGE>
No company in this peer group comparison analysis is identical to Hannaford.
In evaluating the peer groups, Morgan Stanley made judgments and assumptions
with regard to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Hannaford, such as the impact of competition on the businesses of Hannaford and
the industry generally, industry growth and the absence of any adverse material
change in the financial condition and prospects of Hannaford or the industry or
in the financial markets in general. Mathematical analysis (such as determining
the mean or median) is not in itself a meaningful method of using peer group
data.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. As part of its analysis,
Morgan Stanley reviewed the following transactions, referred to in this section
as the Selected Precedent Transactions.
SELECTED PRECEDENT TRANSACTIONS
<TABLE>
<CAPTION>
ACQUISITION OF BY
- -------------- --
<S> <C>
Richfood Holdings SuperValu
Pathmark Ahold
Fred Meyer Kroger
Dominick's Safeway
American Stores Albertson's
Giant Food Ahold
Ralphs Grocery Fred Meyer
Quality Food Fred Meyer
Smith's Food & Drug Fred Meyer
Vons Safeway
Stop & Shop Ahold
</TABLE>
Morgan Stanley compared the publicly available statistics for the Selected
Precedent Transactions listed above to the relevant financial statistics for the
merger based on the merger consideration to be received by holders of shares of
Hannaford's common stock. The following table presents the mean for the merger
and the Selected Precedent Transactions and the Hannaford/Delhaize America
merger of the following statistics:
- the ratio for the acquired company of aggregate enterprise value, to the
last 12 months of EBITDA;
- the merger consideration paid in such transaction to estimated next
12 months EPS; and
- premium to stock price one month before the merger. Due to published
rumors of a potential transaction, the price for Hannaford used to analyze
the one day premium was the price as of May 3, 1999, a date prior to
published rumors regarding a potential transaction.
<TABLE>
<CAPTION>
MERGER
AGGREGATE VALUE TO CONSIDERATION 1 MONTH
STOCK PRICE LAST 12 MONTHS TO LAST 12 MONTHS PRIOR PRICE
TRANSACTIONS PREMIUM EBITDA EPS PREMIUM
-------------------- ------------------ ----------------- -----------
<S> <C> <C> <C>
Hannaford Bros./Delhaize America................... 12.7x 28.7x 74.8%
Selected Precedent Transactions.................... 8.7x 26.6x 26.0%
</TABLE>
I-32
<PAGE>
No transaction utilized in the Selected Precedent Transactions analysis as a
comparison is identical to the merger. In evaluating the Selected Precedent
Transactions, Morgan Stanley made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Hannaford
such as the impact of competition on the business of Hannaford and the
industries in which it operates generally, industry growth and the absence of
any adverse material change in the financial condition and prospects of
Hannaford or the industries in which it operates or in the financial markets in
general. Mathematical analysis (such as determining the mean) is not in itself a
meaningful method of using precedent transactions data.
DISCOUNTED EQUITY VALUE. Morgan Stanley performed an analysis of the
present value per share of the implied value of Hannaford on a stand-alone basis
based on Hannaford's future equity value. Morgan Stanley based its analysis on
both Hannaford's management and implied equity research analyst estimates of
financial performance through calendar year 2002. Using a discount rate of
11.0%, Morgan Stanley calculated the net present value per share of Hannaford
based on a range of multiples of estimated calendar year 2001 earnings,
estimated calendar year 2002 earnings and estimated calendar year 2000 EBITDA.
The following table presents the implied Hannaford value per share based upon
this analysis:
<TABLE>
<CAPTION>
IMPLIED VALUE PER
HANNAFORD SHARE
--------------------
<S> <C>
Research Analyst Estimates.................................. $ 43.47--$56.47
Management Base Case Estimates.............................. $ 49.12--$63.95
Management Upside Case Estimates............................ $ 55.50--$72.45
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. Morgan Stanley performed a discounted cash
flow analysis of Hannaford to determine a range of present values for Hannaford
based on the financial projections prepared by the management of Hannaford as
well as research analyst estimates. Morgan Stanley calculated unlevered free
cash flow as the after-tax operating earnings of Hannaford excluding any
interest income and interest expense, plus depreciation and amortization, plus
deferred taxes, plus or minus net changes in non-cash working capital, minus
capital expenditures. Morgan Stanley calculated terminal values by applying a
range of multiples to EBITDA in calendar year 2008 from 6.0 to 8.0 times. Morgan
Stanley then discounted the unlevered free cash flows and terminal values to
present values using a discount rate of 10.0%.
The following table presents the implied Hannaford value per share, based
upon this analysis, excluding any potential operating benefits to be realized
from the merger:
<TABLE>
<CAPTION>
IMPLIED VALUE PER
HANNAFORD SHARE
--------------------
<S> <C>
Research Analyst Estimates.................................. $ 47.23--$58.85
Management Base Case Estimates.............................. $ 57.20--$70.79
Management Upside Case Estimates............................ $ 71.54--$89.20
</TABLE>
PRO FORMA MERGER ANALYSIS. Morgan Stanley analyzed the pro forma impact of
the merger on Delhaize America's earnings per share for calendar years 1999,
2000, 2001 and 2002. Such analysis was based on earnings projections:
- by Hannaford management for Hannaford both excluding potential operational
benefits to be realized from the merger ("Management Case") and including
potential operational benefits to be realized from the merger provided by
Hannaford ("Management Case with Synergies"),
- by securities research analysts for Delhaize America in all cases.
I-33
<PAGE>
Morgan Stanley analyzed the pro forma impact of the merger on Delhaize
America's earnings per share for calendar years 1999, 2000, 2001 and 2002.
Morgan Stanley observed that the merger would be dilutive in each year assuming
a Delhaize America Class A common stock price of $24.00--$36.00 for both the
Management Case and the Management Case with Synergies.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Morgan Stanley believes that selecting any
portion of its analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion. In addition, Morgan
Stanley may have given various analyses and factors more or less weight than
other analyses and factors, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Hannaford. In performing its analyses,
Morgan Stanley made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Hannaford. Any estimates contained in Morgan Stanley's
analyses are not necessarily indicative of future results or actual values,
which may be significantly more or less favorable than those suggested by such
estimates.
The projections furnished to Morgan Stanley and used in formulating Morgan
Stanley's opinion were provided to Morgan Stanley in connection with the review
of the merger, by the management of each of Hannaford and Delhaize America. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projection.
The analyses performed were prepared solely as part of Morgan Stanley's
analysis of the fairness of the merger consideration to be received by holders
of Hannaford common stock pursuant to the merger agreement from a financial
point of view to holders of Hannaford common stock and were conducted in
connection with the delivery of the Morgan Stanley opinion. The analyses do not
purport to be appraisals or to reflect the prices at which Hannaford might
actually be sold.
The merger consideration to be received by the holders of Hannaford common
stock pursuant to the merger agreement was determined through arm's-length
negotiations between Hannaford and Delhaize America and was approved by the
Hannaford board. Morgan Stanley provided advice to Hannaford during these
negotiations; however, Morgan Stanley did not recommend any specific
consideration to Hannaford or that any specific consideration constituted the
only appropriate consideration for the merger.
In addition, Morgan Stanley's opinion and presentation to the Hannaford
board was one of many factors taken into consideration by Hannaford's board
making its decision to adopt the plan of merger and to approve the merger. See
"--Hannaford's Reasons for the Merger" on page I-27.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as determinative of the opinion of the Hannaford board with respect to
the consideration or of whether the Hannaford Board would have been willing to
agree to a different consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate, estate and other purposes. In the past, Morgan
Stanley and its affiliates have provided financing and financial advisory
services for Delhaize America and have received fees for
I-34
<PAGE>
rendering these services. In the ordinary course of Morgan Stanley's trading and
brokerage activities, Morgan Stanley or its affiliates may at any time hold long
or short positions, trade or otherwise effect transactions, for its own account
or for the account of customers, in the equity securities of Hannaford or
Delhaize America.
Pursuant to the engagement letter, Morgan Stanley provided financial
advisory services and a financial fairness opinion in connection with the
merger. For these services, Hannaford has agreed to pay Morgan Stanley a
transaction fee of 0.45% of the aggregate transaction value, or approximately
$17,000,000, when the merger occurs (a portion of which has already been paid).
In addition, Hannaford has agreed to reimburse Morgan Stanley for its expenses
related to the engagement and to indemnify Morgan Stanley and its affiliates,
their respective directors, officers, agents and employees and each person, if
any, controlling Morgan Stanley or any of its affiliates against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, arising out of Morgan Stanley's engagement.
FINANCING OF THE TRANSACTION
Delhaize America estimates that the total amount of cash required to
complete the merger is approximately $2.7 billion. It is anticipated that the
cash consideration required to complete the merger will be funded through the
entering into of (i) a 364-day capital markets bridge facility for up to
$2.5 billion; and (ii) a $500 million five-year syndicated revolving credit
facility. J.P. Morgan Securities Inc. is expected to be the lead arranger and
book runner and Morgan Guaranty Trust Company of New York is expected to be the
administrative agent in connection with both facilities. J.P. Morgan has
previously delivered a fully-underwritten commitment letter to Delhaize America
with respect to the financing.
Pursuant to the merger agreement, Hannaford can terminate the merger
agreement if on or prior to the later of (i) ten days prior to the special
meeting of shareholders and (ii) December 15, 1999, Delhaize America has not
provided Hannaford with substantially final documentation relating to the debt
financing together with a written confirmation from Delhaize America and its
lenders to the effect that they are prepared to enter such documentation.
Delhaize America has substantially finalized documentation relating to the debt
financing.
ACCOUNTING TREATMENT
Delhaize America will account for the merger as a purchase for accounting
and financial reporting purposes under generally accepted accounting principles.
On the date of the merger, Delhaize America will record the assets and
liabilities of Hannaford at their estimated fair market values and the results
of operations of Hannaford will be included in the results of operations of
Delhaize America for periods after the merger.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the HSR Act, and the rules promulgated thereunder by the Federal Trade
Commission, the merger cannot be consummated until notifications have been given
and certain information has been furnished to the FTC and the Antitrust Division
of the Department of Justice and the specified waiting period requirements have
been satisfied. Delhaize America and Hannaford filed notification and report
forms under the HSR Act with the FTC and the Antitrust Division on September 8,
1999. Additional information and documentary material was requested by the FTC
prior to the expiration of the 30-calendar day waiting period. Therefore, the
waiting period will not terminate until 20 days after Delhaize America and
Hannaford have "substantially complied" (as this term is defined under the HSR
Act) with each request unless the FTC or the Antitrust Division terminates the
waiting period earlier. Consequently, the completion of the merger may be
delayed by reason of the HSR Act. In addition, the Attorney General's Office for
each of the State of North Carolina and the
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<PAGE>
Commonwealth of Virginia have requested that Delhaize America and Hannaford
waive the confidentiality of their respective filings made under the HSR Act,
and both parties have agreed to such waiver. Such waiver requests are routine
aspect of each state's review of the competitive effects of the merger in local
markets. At any time before or after completion of the merger, the Antitrust
Division, the FTC, a state governmental authority or a private person or entity
could seek to enjoin the merger under antitrust laws or to cause Delhaize
America to divest, in whole or in part, any of its assets or businesses,
including assets and businesses of Hannaford. There can be no assurance that a
challenge to the merger will not be made or that, if a challenge is made,
Delhaize America will prevail. The obligations of Delhaize America and Hannaford
to consummate the merger are subject to the condition that there be no order,
decree or injunction of any court of competent jurisdiction that prohibits the
completion of the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. In considering the recommendation of the Hannaford board that
Hannaford shareholders vote to approve the merger agreement, shareholders should
be aware that certain members of the Hannaford board and Hannaford's management
have interests in the merger that are different from, and in addition to, the
interests of Hannaford shareholders. The Hannaford board was aware of such
interests and considered them, among other matters, when voting to approve the
merger.
The merger agreement provides that, following the effective time of the
merger, Delhaize America will honor all obligations under employment or
severance agreements and pay all benefits accrued through the effective time
under employee benefit plans, policies and arrangements in accordance with the
terms thereof, including those that provide, under certain circumstances, for
payment or acceleration of benefits upon or in connection with a change of
control of Hannaford.
EMPLOYMENT CONTINUITY AGREEMENTS. Hannaford has entered into employment
continuity agreements with all of its executive officers (Messrs. Farrington,
Hodge, Anicetti, Fritzson, Geoghegan and Strout) and substantially all of the
other Hannaford officers. Each employment continuity agreement provides
generally that, in the event that the officer's employment with Hannaford is
terminated within two years after a "change in control," unless the termination
is for "cause" or is voluntary without "good reason", as these terms are defined
in the agreements, Hannaford will pay to the officer the following payments, and
will provide the following benefits:
- with respect to non-executive officers, a cash payment equal to the
officer's base salary and annual incentive award, and with respect to
executive officers, a cash payment equal to two times the executive
officer's base salary and annual incentive award (three times for
Mr. Farrington);
- continuation of employee benefits for 12 months for non-executive officers
and 24 months for executive officers (36 months for Mr. Farrington);
- an additional 12 months, for non-executive officers, and 24 months, for
executive officers, of employer contributions under the Nonqualified
Savings and Investment Plan and the Supplemental Executive Retirement Plan
(36 months for Mr. Farrington);
- acceleration of payments under the Deferred Compensation Plan and payment
of awards earned under the Annual Incentive Plan.
There are no plans for the employment of any of the above-named executive
officers to be terminated following the merger. However, assuming that all of
the above-named executive officers are terminated by Hannaford, other than for
cause, or by the executive officer for good reason, Hannaford would pay to the
above-named executive officers aggregate payments currently estimated to be
approximately $5,675,704.
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<PAGE>
STOCK OPTION PLANS. Under the Hannaford stock option plans, all outstanding
and unvested options to purchase shares of Hannaford common stock will vest upon
approval of the merger agreement by the Hannaford shareholders.
With respect to the following executive officers of Hannaford,
Messrs. Farrington, Hodge, Anicetti, Fritzson, Geoghegan and Strout, an
aggregate of approximately 223,983 options to acquire shares of Hannaford common
stock will vest upon the approval of the merger agreement by the Hannaford
shareholders. These options have a weighted average exercise price of $40.82 per
share.
OTHER EXECUTIVE BENEFIT PLANS. The Hannaford Long-Term Incentive Plan
provides, at the discretion of the Human Resources Committee of the board, for
adjustment of the performance periods and the performance goals upon the
approval of the merger agreement by Hannaford shareholders.
MAINTENANCE OF BENEFITS FOR HANNAFORD EMPLOYEES. Delhaize America has
agreed, for a period of not less than two years following the merger, to provide
to persons who continue to be employed by Hannaford or its subsidiaries at and
following the effective time of the merger, annual compensation not less
favorable, and benefits which, in the aggregate, are no less favorable, than
those provided by Hannaford and its subsidiaries as of the effective time of the
merger. In addition, for a period of two years following the merger, Delhaize
America has agreed to establish and maintain a plan to provide severance and
termination benefits to all non-union employees that are no less favorable than
the severance and termination benefits provided under Hannaford's plans and
arrangements in effect as of the effective time.
DIRECTOR AND VICE CHAIRMAN OF DELHAIZE AMERICA. The merger agreement
provides that, immediately following the effective time of the merger, Hugh G.
Farrington, a director and Chief Executive Officer of Hannaford, will be added
to the Delhaize America board and become a Vice Chairman of Delhaize America and
a member of its Executive Committee.
CONSULTING ARRANGEMENTS. Lochridge & Co., a consulting firm in which
Richard Lochridge, a director of Hannaford, is a principal, has been retained by
Hannaford and Delhaize America as a consultant to each company to assist in
providing merger integration services. For its services, Lochridge & Co. will
receive a fee from Hannaford and Delhaize America of $ .
INDEMNIFICATION AND INSURANCE. Under the merger agreement, Delhaize America
will:
- indemnify and advance expenses, including fees of counsel, to present and
former directors, officers and employees of Hannaford and its subsidiaries
for liabilities from their acts or omissions in those capacities occurring
prior to the effective time of the merger; and
- for not less than six years after the effective time of the merger,
provide officers' and directors' liability insurance covering acts or
omissions occurring prior to the effective time of the merger by each
person currently covered by Hannaford's officers' and directors' liability
insurance policy. This Delhaize America policy must be no less favorable
than the Hannaford policy in effect on August 17, 1999, except that
Delhaize America is obligated to pay in the aggregate no more than 300% of
the annual premium paid by Hannaford for such insurance as of August 17,
1999.
DISSENTERS' RIGHTS
HOLDERS OF HANNAFORD COMMON STOCK ARE ENTITLED TO DISSENTERS' RIGHTS UNDER
SECTION 908 OF THE MAINE BUSINESS CORPORATION ACT (THE "MBCA"). BY COMPLYING
WITH SECTION 909 OF THE MBCA, A HANNAFORD SHAREHOLDER MAY DISSENT FROM THE
MERGER AND, IF THE MERGER IS EFFECTED, BE PAID THE FAIR VALUE OF HIS OR HER
SHARES AS OF THE DAY PRIOR TO THE DATE ON WHICH THE MERGER IS APPROVED BY THE
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<PAGE>
HANNAFORD SHAREHOLDERS, EXCLUDING THE EFFECT OF ANY APPRECIATION OR DEPRECIATION
OF THEIR SHARES IN ANTICIPATION OF THE MERGER.
THIS RIGHT OF DISSENT MAY BE EXERCISED AS TO ALL OR LESS THAN ALL OF A
SHAREHOLDER'S SHARES. IN ORDER TO EXERCISE THIS RIGHT, A SHAREHOLDER MUST COMPLY
WITH FOUR PRINCIPAL REQUIREMENTS:
- THE SHAREHOLDER MUST FILE WITH HANNAFORD A WRITTEN OBJECTION TO THE MERGER
AT OR PRIOR TO THE SPECIAL MEETING. A VOTE AGAINST THE MERGER AGREEMENT
DOES NOT IN ITSELF CONSTITUTE THE REQUIRED WRITTEN OBJECTION. NO OBJECTION
IS REQUIRED, HOWEVER, FROM ANY RECORD SHAREHOLDER TO WHOM HANNAFORD HAS
FAILED TO SEND NOTICE OF THE SPECIAL MEETING.
- THE SHAREHOLDER MUST NOT VOTE IN FAVOR OF THE MERGER AGREEMENT. THE
SHAREHOLDER MAY ABSTAIN FROM THE VOTE. HOWEVER, IF THE SHAREHOLDER SIGNS
AND DELIVERS A PROXY CARD FOR THE SPECIAL MEETING, UNLESS THE SIGNED PROXY
CARD SPECIFICALLY INDICATES THAT THE SHAREHOLDER WISHES TO VOTE AGAINST OR
ABSTAIN, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED IN FAVOR OF
THE MERGER AGREEMENT AND THE SHAREHOLDER WILL NOT BE PERMITTED TO EXERCISE
HIS OR HER RIGHT OF DISSENT.
- THE SHAREHOLDER MUST FILE A WRITTEN DEMAND FOR PAYMENT OF THE FAIR VALUE
OF HIS OR HER SHARES WITHIN 15 DAYS AFTER THE DATE OF SHAREHOLDER APPROVAL
OF THE MERGER AGREEMENT. A DEMAND FOR PAYMENT MUST BE DELIVERED IN PERSON
OR BY REGISTERED OR CERTIFIED MAIL TO HANNAFORD BROS. CO., EITHER AT ITS
REGISTERED OFFICE IN MAINE (ONE PORTLAND SQUARE, 9TH FLOOR, PORTLAND,
MAINE 04112-0586, ATTN: PETER B. WEBSTER, CLERK) OR ITS PRINCIPAL PLACE OF
BUSINESS (145 PLEASANT HILL ROAD, SCARBOROUGH, MAINE 04074, ATTN: INVESTOR
RELATIONS). THE DEMAND MUST SPECIFY THE NAME AND CURRENT ADDRESS OF THE
SHAREHOLDER. ONCE FILED, A DEMAND FOR PAYMENT MAY NOT BE WITHDRAWN WITHOUT
THE CONSENT OF HANNAFORD. A SHAREHOLDER MAKING SUCH A DEMAND MAY NOT
THEREAFTER VOTE OR EXERCISE ANY OTHER RIGHTS AS A SHAREHOLDER OF
HANNAFORD.
- AT THE TIME THE SHAREHOLDER FILES HIS OR HER DEMAND, OR WITHIN 20 DAYS
THEREAFTER, THE SHAREHOLDER MUST SUBMIT THE CERTIFICATES REPRESENTING THE
SHARES FOR WHICH HE OR SHE IS DEMANDING PAYMENT, FOR NOTATION OF THE FACT
OF SUCH SHAREHOLDER DEMAND. A SHAREHOLDER SUBMITTING CERTIFICATES FOR
NOTATION SHOULD MAIL OR DELIVER THEM TO HANNAFORD BROS. CO., 145 PLEASANT
HILL ROAD, SCARBOROUGH, MAINE 04074, ATTN: INVESTOR RELATIONS.
ALTERNATIVELY, THE SHAREHOLDER MAY SUBMIT THE CERTIFICATES TO HANNAFORD'S
TRANSFER AGENT (CONTINENTAL STOCK TRANSFER & TRUST COMPANY, 2 BROADWAY,
NEW YORK, NY 10004). SUBMITTED CERTIFICATES WILL BE RETURNED TO THE
SHAREHOLDER PROMPTLY AFTER NOTATION HAS BEEN MADE. UNDER THE MBCA, A
DISSENTING SHAREHOLDER WHO FAILS TO SUBMIT CERTIFICATES FOR NOTATION
WITHIN THIS TIME LIMIT WILL, AT HANNAFORD'S OPTION, LOSE ALL RIGHTS AS A
DISSENTING SHAREHOLDER (UNLESS A COURT OF COMPETENT JURISDICTION FOR GOOD
AND SUFFICIENT CAUSE SHOWN OTHERWISE DIRECTS).
ANY SHAREHOLDER FAILING EITHER TO OBJECT OR TO MAKE DEMAND IN THE TIME AND
MANNER PROVIDED IN SECTION 909 WILL HAVE HIS OR HER SHARES CONVERTED INTO EITHER
CASH, DELHAIZE AMERICA CLASS A COMMON STOCK OR A COMBINATION OF CASH AND
DELHAIZE AMERICA CLASS A COMMON STOCK, IN ACCORDANCE WITH THE MERGER AGREEMENT.
IN GENERAL, ANY SHAREHOLDER MAKING AN OBJECTION AND DEMAND WILL THEREAFTER BE
ENTITLED ONLY TO PAYMENT AS PROVIDED IN SECTION 909 AND WILL HAVE NO OTHER
RIGHTS AS A SHAREHOLDER OF HANNAFORD.
THE RIGHT OF A SHAREHOLDER TO BE PAID THE FAIR VALUE OF HIS OR HER SHARES
WILL TERMINATE IN THE EVENT (1) THE MERGER IS NOT APPROVED OR IS ABANDONED,
(2) THE SHAREHOLDER DEMAND IS WITHDRAWN UPON CONSENT, (3) NO JUDICIAL ACTION FOR
THE DETERMINATION OF FAIR VALUE HAS BEEN FILED WITHIN THE TIME PRESCRIBED BY
MAINE LAW, OR (4) A COURT OF COMPETENT JURISDICTION DETERMINES THAT THE
SHAREHOLDER IS NOT ENTITLED TO DEMAND PAYMENT.
WITHIN THE LATER OF 25 DAYS AFTER THE MERGER IS APPROVED BY THE SHAREHOLDERS
OR 10 DAYS AFTER THE EFFECTIVE TIME OF THE MERGER, HANNAFORD WILL GIVE WRITTEN
NOTICE TO EACH DISSENTING SHAREHOLDER WHO HAS COMPLIED WITH THE ABOVE PROCEDURE
THAT THE MERGER HAS BEEN EFFECTED, AND WILL MAKE A WRITTEN OFFER AT A SPECIFIED
PRICE TO PURCHASE THE SHARES AS TO WHICH EACH SHAREHOLDER IS DISSENTING. THIS
OFFER WILL BE
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<PAGE>
MADE AT THE SAME PRICE PER SHARE TO ALL DISSENTING SHAREHOLDERS. THIS NOTICE AND
OFFER WILL BE ACCOMPANIED BY THE BALANCE SHEET OF HANNAFORD AS OF THE LATEST
AVAILABLE DATE (AND NOT MORE THAN 12 MONTHS PRIOR TO THE MAKING OF THE OFFER)
AND A PROFIT AND LOSS STATEMENT OF HANNAFORD FOR THE 12-MONTH PERIOD ENDED ON
THE DATE OF THE BALANCE SHEET.
IF HANNAFORD AND THE HOLDER OF HANNAFORD COMMON STOCK AGREE ON A PRICE
DURING THE 20 DAYS AFTER THE LAST DATE FOR DELIVERY OF THE PURCHASE OFFER
NOTICE, HANNAFORD WILL, WITHIN 90 DAYS AFTER THE EFFECTIVE TIME OF THE MERGER,
MAKE PAYMENT OF THE AGREED AMOUNT UPON SURRENDER BY THE DISSENTING SHAREHOLDER
OF HIS OR HER SHARES, AND UPON THIS PAYMENT THE DISSENTING SHAREHOLDER WILL
CEASE TO HAVE ANY INTEREST IN HIS OR HER SHARES. ALL ACTIONS TO DETERMINE FAIR
VALUE, WHETHER BROUGHT BY HANNAFORD OR A SHAREHOLDER, MUST BE FILED WITHIN
6 MONTHS AFTER THE EFFECTIVE TIME OF THE MERGER. HOLDERS OF HANNAFORD COMMON
STOCK SEEKING APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES OF
HANNAFORD COMMON STOCK COULD BE MORE THAN, THE SAME AS OR LESS THAN THE VALUE OF
THE CONSIDERATION THAT THEY WOULD OTHERWISE RECEIVE IN THE MERGER IF THEY DID
NOT SEEK APPRAISAL OF THEIR SHARES, AND THAT INVESTMENT BANKING OPINIONS AS TO
FAIRNESS FROM A FINANCIAL POINT OF VIEW ARE NOT NECESSARILY OPINIONS AS TO FAIR
VALUE UNDER SECTION 909.
ALL DISSENTING SHAREHOLDERS, WHEREVER RESIDING, WHO HAVE NOT AGREED WITH
HANNAFORD ON A PRICE FOR THEIR SHARES WILL BE JOINED IN ANY ACTION TO DETERMINE
FAIR VALUE AND MUST BE GIVEN SERVICE OF PROCESS. THE VALUE DETERMINED BY THE
COURT WILL BE BINDING ON ALL ELIGIBLE DISSENTING SHAREHOLDERS. UPON THE REQUEST
OF HANNAFORD, THE COURT WILL CONSIDER AND PASS UPON WHETHER SPECIFIED DISSENTING
SHAREHOLDERS HAVE SATISFACTORILY COMPLIED WITH ALL OF THE REQUIREMENTS OF
SECTION 909, AND IF IT FINDS THAT ANY SHAREHOLDER HAS NOT, THE APPLICABLE
SHAREHOLDER WILL NOT BE ENTITLED TO BE PAID THE FAIR VALUE AS DETERMINED BY THE
COURT, BUT WILL BE BOUND BY THE TERMS OF THE MERGER AGREEMENT. THE BURDEN OF
PROOF IS ON THE SHAREHOLDER TO PROVE HIS OR HER ELIGIBILITY.
THE JUDGMENT FIXING THE FAIR VALUE OF THE SHARES IS TO INCLUDE INTEREST, AT
A RATE AS THE COURT MAY FIND TO BE FAIR AND EQUITABLE, FROM THE DATE OF THE
SHAREHOLDER VOTE TO THE DATE OF PAYMENT UNLESS, AS TO ANY SHAREHOLDER, THE COURT
DETERMINES THAT THE SHAREHOLDER'S REFUSAL TO ACCEPT HANNAFORD'S OFFER PAYMENT
FOR THE SHARES WAS ARBITRARY, VEXATIOUS, OR NOT IN GOOD FAITH, IN WHICH CASE THE
COURT MAY, IN ITS DISCRETION, DISALLOW INTEREST. THE JUDGMENT WILL BE PAYABLE
ONLY UPON SURRENDER TO HANNAFORD OF THE CERTIFICATE REPRESENTING SHARES. UPON
PAYMENT OF THE JUDGMENT, A DISSENTING SHAREHOLDER WILL CEASE TO HAVE ANY
INTEREST IN THE SHARES. COSTS AND EXPENSES OF THE PROCEEDING, AS DETERMINED BY
THE COURT, WILL BE ASSESSED AGAINST HANNAFORD UNLESS A SHAREHOLDER'S REFUSAL TO
ACCEPT HANNAFORD'S OFFER OF PAYMENT FOR HIS OR HER SHARES IS FOUND TO HAVE BEEN
ARBITRARY, VEXATIOUS, OR NOT IN GOOD FAITH, IN WHICH CASE THE COURT MAY ASSESS
ALL OR A PORTION OF SUCH COSTS AGAINST SUCH SHAREHOLDER. COSTS AND EXPENSES WILL
NOT INCLUDE THE FEES AND EXPENSES OF COUNSEL OR OF EXPERT WITNESSES, BUT WILL
INCLUDE REASONABLE COMPENSATION AND EXPENSES TO ANY APPRAISERS APPOINTED BY THE
COURT. IF THE "FAIR VALUE" OF THE SHARES, AS DETERMINED BY THE COURT,
"MATERIALLY EXCEEDS" THE AMOUNT WHICH HANNAFORD OFFERED TO PAY THEREFOR, OR IF
NO SUCH OFFER WAS MADE, THE COURT, IN ITS DISCRETION, MAY AWARD ANY SHAREHOLDER
WHO IS A PARTY TO THE PROCEEDING ALL OR PART OF SUCH SHAREHOLDER'S ATTORNEYS'
FEES OR EXPENSES AND REASONABLE COMPENSATION AND EXPENSES TO ANY EXPERT EMPLOYED
BY SUCH SHAREHOLDER.
IF A SHAREHOLDER HAS EXERCISED HIS OR HER RIGHT TO DISSENT WITH RESPECT TO
ANY SHARES OF HANNAFORD, ANY TRANSFEREE OF THE SHARES WILL NOT ACQUIRE ANY
RIGHTS IN HANNAFORD OTHER THAN THE RIGHTS WHICH THE TRANSFERRING SHAREHOLDER HAD
WITH RESPECT TO THE SHARES AS A DISSENTING SHAREHOLDER. ANY NEW CERTIFICATE
ISSUED EVIDENCING THE TRANSFERRED SHARES SHALL BEAR A NOTATION REFLECTING THE
DEMAND MADE BY THE TRANSFEROR.
A SHAREHOLDER WHO IS A MINOR OR OTHERWISE LEGALLY INCAPACITATED WILL BE
BOUND BY THE TIME LIMITATIONS OF SECTION 909 OF THE MBCA. ANY INCAPACITATED
SHAREHOLDER MAY PERSONALLY, OR THROUGH A GUARDIAN OR ANY PERSON ACTING FOR SUCH
SHAREHOLDER AS A LEGALLY AUTHORIZED REPRESENTATIVE, TAKE ALL ACTIONS NECESSARY
TO ASSERT HIS OR HER RIGHT TO DISSENT. FAILURE TO FOLLOW THE STEPS REQUIRED BY
SECTION 909 OF THE MBCA FOR PERFECTING DISSENTERS' RIGHTS MAY RESULT IN THE LOSS
OF THESE RIGHTS. IN VIEW OF THE COMPLEXITY OF SECTION 909, SHAREHOLDERS OF
HANNAFORD WHO ARE CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT THEIR
LEGAL ADVISORS.
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<PAGE>
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF SECTIONS 908 AND 909 OF THE MBCA, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE COMPLETE TEXT OF THESE SECTIONS, COPIES OF WHICH ARE
ATTACHED TO THIS DOCUMENT AS ANNEX F.
MANAGEMENT FOLLOWING THE MERGER
It is anticipated that each director and executive officer of Delhaize
America immediately prior to the merger will remain as such immediately after
the merger. Immediately following the merger, Hugh G. Farrington, the Chief
Executive Officer of Hannaford, will be appointed to the board of directors of
Delhaize America and its Executive Committee and will serve as the Vice Chairman
of Delhaize America. In addition, Empire Company Limited and its affiliates, the
largest Hannaford shareholders, will have the right to appoint one member to the
Delhaize America board after the merger.
After the completion of the merger, it is anticipated that each officer of
Hannaford immediately prior to the merger will remain in his or her position.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION
All shares of Delhaize America Class A common stock received by Hannaford
shareholders in the merger will be freely transferable, except that shares of
Delhaize America Class A common stock received by persons who are deemed to be
affiliates of Hannaford under the Securities Act at the time of the special
meeting may be resold by them only in transactions permitted by Rule 145 or
otherwise permitted under the Securities Act. Persons who may be deemed to be
affiliates of Hannaford for such purposes generally include individuals or
entities that control, are controlled by or are under common control with
Hannaford and may include certain officers, directors and principal shareholders
of Hannaford. The merger agreement requires Hannaford to provide Delhaize
America with a letter identifying such persons and to use all reasonable efforts
to cause each of these affiliates to execute a written agreement to the effect
that these persons will not offer or sell or otherwise dispose of any of the
shares of Delhaize America Class A common stock issued to them in the merger in
violation of the Securities Act or the rules and regulations promulgated by the
SEC thereunder.
This document does not cover any resales of Delhaize America Class A common
stock to be received by the shareholders of Hannaford upon completion of the
merger, and no person is authorized to make any use of this document in
connection with any such resale.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the merger agreement. The full text of the merger agreement, as
amended, is attached as Annex A and is incorporated by reference to this
document. We encourage you to read the entire merger agreement.
THE MERGER
When the merger occurs, FL Acquisition Sub, a wholly-owned subsidiary of
Delhaize America, will merge with and into Hannaford, and Hannaford will become
a wholly-owned subsidiary of Delhaize America.
CLOSING AND EFFECTIVE TIME
The closing of the merger will take place on the second business day after
the satisfaction or waiver of the latest to occur of all of the closing
conditions, other than those conditions that by their nature are to be satisfied
at the closing.
At the closing of the merger, Hannaford and FL Acquisition Sub will file
articles of merger with the Secretary of State of the State of Maine. The merger
will become effective at such time as the
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articles of merger are duly filed with the Secretary of State of the State of
Maine or at such later time as is agreed by Delhaize America and Hannaford and
specified in the articles of merger.
MERGER CONSIDERATION
In the merger, Hannaford shareholders will have the right to make one of the
following elections and receive the per share consideration indicated below:
<TABLE>
<CAPTION>
ELECTION CONSIDERATION TO BE RECEIVED PER SHARE
- -------- ------------------------------------------------------------
<S> <C>
Cash Election -- $79.00 per share in cash, without interest
SUBJECT TO PRORATION
Stock Election -- A number of shares of Delhaize America Class A common
SUBJECT TO PRORATION stock equal to:
$79.00 DIVIDED BY (the greater of the DZA Price or
$27.00)
DZA Price = -- the average of the last sales prices, regular way
(rounded to 4 decimal points), of Delhaize America Class A
common stock as reported on the NYSE composite
transactions reporting system for the ten consecutive
trading days prior to (but not including) the date of the
merger.
</TABLE>
The chart below describes, at varying DZA Prices, (i) the value per share to
holders of Hannaford common stock who make a Cash Election or a Stock Election
in the merger with respect to each share, assuming no proration, (ii) the value
per share to holders of Hannaford common stock in the merger, assuming full
proration (I.E., 86% cash and 14% stock), and (iii) the value per share to the
Empire Group of the consideration to be received by them pursuant to the Stock
Exchange Agreement (assuming, if the DZA Price is less than $27.00, that the
Empire Group elects to receive the maximum amount of its consideration in cash).
VALUE OF CONSIDERATION AT VARYING DZA PRICES
<TABLE>
<CAPTION>
(I) (II) (III)
---------------------------------- ------------------------------ ------------------------------
VALUE TO PUBLIC VALUE TO PUBLIC
ASSUMING NO PRORATION ASSUMING FULL PRORATION VALUE TO EMPIRE GROUP
---------------------------------- ------------------------------ ------------------------------
STOCK ELECTION
DZA CASH ----------------------- CASH STOCK TOTAL CASH STOCK TOTAL
PRICE ELECTION SHARES SHARE VALUE* PORTION PORTION* VALUE PORTION PORTION* VALUE
- ----- -------- -------- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$19.00 $79.00 2.9259 $55.59 $67.94 $ 7.78 $75.72 $48.77 $21.28 $70.05
$20.00 $79.00 2.9259 $58.52 $67.94 $ 8.19 $76.13 $48.77 $22.40 $71.17
$21.00 $79.00 2.9259 $61.44 $67.94 $ 8.60 $76.54 $48.77 $23.51 $72.28
$22.00 $79.00 2.9259 $64.37 $67.94 $ 9.01 $76.95 $48.77 $24.64 $73.41
$23.00 $79.00 2.9259 $67.30 $67.94 $ 9.42 $77.36 $48.77 $25.76 $74.53
$24.00 $79.00 2.9259 $70.22 $67.94 $ 9.83 $77.77 $48.77 $26.87 $75.64
$25.00 $79.00 2.9259 $73.15 $67.94 $10.24 $78.18 $48.77 $28.00 $76.77
$26.00 $79.00 2.9259 $76.07 $67.94 $10.65 $78.59 $48.77 $29.11 $77.88
$27.00 $79.00 2.9259 $79.00 $67.94 $11.06 $79.00 $48.77 $30.23 $79.00
$28.00 $79.00 2.8214 $79.00 $67.94 $11.06 $79.00 $48.77 $30.23 $79.00
</TABLE>
- ------------------------
* Valued at the DZA Price
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LIMITS ON CASH AND STOCK CONSIDERATION
The aggregate number of shares of Hannaford common stock to be converted
into the right to receive cash in the merger is 27,316,686 shares plus 86% of
any shares of Hannaford common stock issued after the date of execution of the
merger agreement pursuant to the exercise of outstanding Hannaford stock
options. The remaining number of shares of Hannaford common stock outstanding at
the time of the merger and not owned by Delhaize America will be converted into
the right to receive Delhaize America Class A common stock. The effect of this
formula is that overall consideration to be received by Hannaford shareholders
in the merger will be 86% cash and 14% Delhaize America Class A common stock.
ALLOCATION
If the number of shares of Hannaford common stock for which cash is elected
exceeds the aggregate number of shares of Hannaford common stock to be converted
into the right to receive cash in the merger, then:
- those shares of Hannaford common stock for which Delhaize America Class A
common stock is elected and all shares of Hannaford common stock covered
by non-elections or as to which no election is made will be converted into
the right to receive Delhaize America Class A common stock; and
- those shares of Hannaford common stock for which cash is elected will be
converted into the right to receive (A) an amount of cash, without
interest, equal to the product of (x) $79 and (y) a fraction (the "Cash
Fraction"), the numerator of which is the aggregate number of shares of
Hannaford common stock to be converted into the right to receive cash in
the merger and the denominator of which is the number of shares of
Hannaford common stock electing cash, and (B) a number of shares of
Delhaize America Class A common stock equal to the product of (x) $79
divided by the greater of $27 or the DZA Price and (y) a fraction equal to
one minus the Cash Fraction.
If the number of shares of Hannaford common stock for which Delhaize America
Class A common stock is elected exceeds the maximum number of shares of
Hannaford common stock that can be converted into the right to receive Delhaize
America Class A common stock in the merger, then:
- those shares of Hannaford common stock for which cash is elected and all
shares of Hannaford common stock covered by non-elections or as to which
no election is made will be converted into the right to receive cash; and
- those shares of Hannaford common stock for which Delhaize America Class A
common stock is elected will be converted into the right to receive
(A) an amount of shares of Delhaize America Class A common stock equal to
the product of (x) the exchange ratio and (y) a fraction (the "Stock
Fraction"), the numerator of which is the total number of shares of
Hannaford common stock outstanding immediately prior to the merger minus
the aggregate number of shares of Hannaford common stock to be converted
into the right to receive cash in the merger and the denominator of which
is the total number of shares of Hannaford common stock for which Delhaize
America Class A common stock is elected, and (B) an amount of cash,
without interest, equal to the product of (x) $79 and (y) a fraction equal
to one minus the Stock Fraction.
In the event there is neither an over-election of cash nor an over-election
of Delhaize America Class A common stock, all shares of Hannaford common stock
for which cash is elected will receive cash, all shares of Hannaford common
stock for which Delhaize America Class A common stock is elected will receive
Delhaize America Class A common stock, and all non-election shares will be
converted into the right to receive (A) an amount of cash, without interest,
equal to the product of
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(x) $79 and (y) a fraction, the numerator of which is the aggregate number of
shares of Hannaford common stock to be converted into the right to receive cash
in the merger less those shares of Hannaford common stock for which cash is
elected and the denominator of which is the non-election shares and (B) a number
of shares of Delhaize America Class A common stock equal to the product of
(x) $79 divided by the greater of $27 or the DZA Price and (y) a fraction, the
numerator of which is the maximum number of shares of Hannaford common stock
that can be converted into the right to receive Delhaize America Class A common
stock in the merger less those shares of Hannaford common stock for which
Delhaize America Class A common stock is elected and the denominator of which is
the number of shares of Hannaford common stock for which no election has been
made.
ELECTION PROCEDURE
Not less than thirty days prior to the closing of the merger, Hannaford
shareholders will be sent an election form pursuant to which they can elect to
receive either cash or shares of Delhaize America Class A common stock in
exchange for their Hannaford shares, subject to the proration process described
above in "--Allocation." These election forms will be due on the business day
before the closing--Hannaford and Delhaize America will publicly announce this
date once it is established--and until that time, the elections may be changed.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Upon completion of the merger, Delhaize America will make available to First
Chicago Trust Company of New York, the exchange agent, certificates for the
shares of Delhaize America Class A common stock issuable, and cash payable, in
exchange for outstanding shares of Hannaford common stock and any dividends or
distributions to which holders of shares of Hannaford common stock may be
entitled.
Promptly after the merger, the exchange agent will mail to each holder of
record of Hannaford common stock prior to the merger a letter of transmittal and
instructions for effecting the exchange of their shares of Hannaford common
stock for the consideration to be received by them in the merger.
Upon surrender of a certificate for cancellation to the exchange agent or to
any other agent appointed by Delhaize America, together with a letter of
transmittal duly completed and validly executed in accordance with the
instructions provided with the letter of transmittal, the holder of the
certificate will be entitled to receive a pro rata portion of the merger
consideration, and the surrendered certificate will then be cancelled. Until
surrendered, each outstanding certificate will be deemed from and after the
merger, subject to the payment of dividends declared after the merger but prior
to surrender of certificates, to evidence only the ownership of the number of
full shares of Delhaize America Class A common stock and the aggregate cash
amount into which the shares of Hannaford common stock evidenced by the
certificate has been converted and cash in lieu of fractional shares.
Notwithstanding the foregoing, shareholders who own Hannaford common stock
through Hannaford's Dividend Reinvestment Plan do not have an obligation to
surrender a certificate in order to effectuate the exchange of their shares of
Hannaford common stock for the consideration to be received by them in the
merger.
If you do not have your Hannaford common stock certificate, you may make an
affidavit of that fact. In addition, Delhaize America may require that you post
a bond in a reasonable amount determined by Delhaize America as indemnity
against any claim that may be made against Delhaize America with respect to the
missing stock certificate. Upon receipt of the affidavit and any required bond
the exchange agent will issue the requisite number of shares of Delhaize America
Class A common stock.
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FRACTIONAL SHARES
Delhaize America will not issue any fractional shares in the merger. Each
person who would otherwise be entitled to receive a fraction of a share of
Delhaize America Class A common stock will receive from Delhaize America an
amount of cash equal to the product of such fraction and the closing price of
the Delhaize America Class A common stock on the NYSE for the trading day
immediately prior to the merger.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, each of Hannaford and Delhaize America makes
representations and warranties about itself and its business in favor of the
other party, which include representations and warranties about such matters as:
- the organization of the parties and their subsidiaries and similar
corporate matters;
- the parties' capital structures;
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters;
- absence of breach or conflict and compliance with applicable laws,
regulations, organizational documents, agreements and other existing
obligations;
- regulatory approvals, licenses and permits;
- reports and financial statements filed with the SEC and the accuracy of
the information contained therein;
- absence of material adverse changes and the non-occurrence of certain
events;
- pending or threatened litigation;
- the accuracy of information supplied by each of Hannaford and Delhaize
America for use in the registration statement regarding the merger, of
which this document forms a part;
- tax matters;
- retirement and other employee benefit plans and matters relating to the
Employee Retirement Income Security Act of 1974, as amended;
- environmental compliance and liability;
- brokers' and finders' fees incurred in connection with the merger;
- non-applicability of certain takeover provisions to the merger; and
- insurance.
CERTAIN COVENANTS
Under the merger agreement, Hannaford has agreed prior to the merger to
operate its business in the ordinary course consistent with past practice and
use reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
officers and employees.
In addition, the merger agreement places specific restrictions on the
ability of Hannaford and its subsidiaries to:
- amend their charter or bylaws;
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- engage in extraordinary corporate transactions;
- make any investment in or acquisition of any business of any person or any
material amount of assets, except for acquisitions for cash not to exceed
$1,000,000 per acquisition and $10,000,000 in the aggregate for all
acquisitions;
- dispose of any material assets except in the ordinary course of business
consistent with past practice;
- declare or pay any dividend with respect to its capital stock other than
cash dividends payable by Hannaford in an aggregate amount not in excess
of $.165 per share per calendar quarter;
- issue any securities;
- redeem or otherwise acquire any of their outstanding capital stock;
- move the location, close, shut down or otherwise eliminate Hannaford's
headquarters or distribution centers or effect a general staff reduction
at such headquarters or distribution centers;
- enter into any new lease or purchase or acquire any real estate outside
the ordinary course of business;
- except for items or projects committed to or budgeted for prior to the
merger agreement, make or commit to make any capital expenditure except
for individual capital expenditure projects or items not exceeding
$1,000,000 per project or item or $10,000,000 in the aggregate;
- take any material action regarding taxes;
- increase the compensation or benefits of any director, officer or
employee, except for normal increases in the ordinary course of business
consistent with past practice;
- accelerate any income, postpone any expense or reverse any reserve, except
on a basis consistent with past practice or as otherwise required by law;
- agree or commit to do any of the foregoing; and
- take or agree or commit to take any action that would make any
representation and warranty of Hannaford under the merger agreement
inaccurate in any material respect at, or as of any time prior to, the
merger.
Under the merger agreement, Delhaize America has agreed prior to the merger
to operate its business in the ordinary course consistent with past practice and
use reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
officers and employees.
In addition, the merger agreement places specific restrictions on the
ability of Delhaize America and its subsidiaries to:
- amend their charter or bylaws;
- engage in extraordinary corporate transactions;
- make any investment in or acquisition of any business of any person or any
material amount of assets, except for acquisitions not to exceed
$100,000,000 in the aggregate for all acquisitions;
- dispose of material assets except in the ordinary course of business
consistent with past practice;
- issue any securities;
- declare or pay any dividend with respect to its capital stock other than
cash dividends payable by Delhaize America in an aggregate amount not in
excess of $.1512 per share per calendar quarter;
- redeem or otherwise acquire any of their outstanding capital stock;
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- move the location, close, shut down or otherwise eliminate Delhaize
America's headquarters or distribution centers or effect a general staff
reduction at such headquarters or distribution centers;
- enter into any new lease or purchase or acquire any real estate;
- except for items or projects committed to or budgeted for prior to the
merger agreement, make or commit to make any capital expenditure except
for individual capital expenditure projects or items not exceeding
$15,000,000 per project or item or $100,000,000 in the aggregate;
- take any material action regarding taxes;
- increase the compensation or benefits of any director, officer or
employee, except for normal increases in the ordinary course of business
consistent with past practice;
- agree or commit to do any of the foregoing; and
- take or agree or commit to take any action that would make any
representation and warranty of Delhaize America hereunder inaccurate in
any material respect at, or as of any time prior to, the merger.
NO SOLICITATION
Until the termination of the merger agreement, Hannaford will not, and will
cause its subsidiaries and the officers, directors, employees, investment
bankers, consultants and other agents of Hannaford and its subsidiaries not to,
take any action to solicit, initiate, encourage or facilitate the making of any
Acquisition Proposal.
The term "Acquisition Proposal" means any bona fide inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of more than 25% of the aggregate assets of Hannaford and its subsidiaries,
taken as a whole, or more than 25% of the voting power of the shares of
Hannaford common stock then outstanding or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Hannaford, other than the transactions contemplated by the merger
agreement or the stock exchange agreement.
However, the merger agreement permits Hannaford to furnish information to,
or enter into negotiations with, any party that has indicated its willingness to
make an unsolicited bona fide offer relating to an Acquisition Proposal if the
Hannaford board has determined that the Acquisition Proposal is reasonably
likely to lead to a Superior Proposal.
The term "Superior Proposal" means any bona fide Acquisition Proposal on
terms that the Hannaford board determines in its good faith judgment are more
favorable to Hannaford's shareholders than the merger agreement and the merger
taken as a whole, and for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Hannaford board.
Hannaford has agreed to inform Delhaize America of any Acquisition Proposal
or any discussion or negotiations regarding an Acquisition Proposal. Hannaford
has also agreed to use all reasonable efforts to keep Delhaize America informed
of the status and terms of any developments with respect to such discussions and
negotiations.
EFFECT ON STOCK OPTIONS
Upon completion of the merger, each option outstanding immediately prior to
the merger to purchase shares of Hannaford common stock pursuant to Hannaford
option plans will be assumed by Delhaize America and converted into an
immediately exercisable option to purchase the number of shares of Delhaize
America Class A common stock equal to (i) the number of shares of Hannaford
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common stock subject to such option multiplied by (ii) $79.00 divided by the DZA
Price, at an exercise price per share equal to (A) the former exercise price per
share immediately prior to the merger divided by (B) $79.00 divided by the DZA
Price; provided, however, that if the DZA Price is less than $27.00, the total
number of shares of Delhaize America Class A common stock as to which any
converted options may be exercised prior to one year after the closing of the
merger may not exceed 7,278,315 (such maximum number of shares to be apportioned
in a manner determined by Hannaford, with the consent of Delhaize America). If
the merger occurred on , 2000, the last trading day before the date of
this document, the total number of shares of Delhaize America Class A common
stock as to which all converted options may be exercised (including exercises
later than one year after the closing of the merger) is shares. In
addition, for any Hannaford stock option to which Section 421 of the Internal
Revenue Code applies by reason of its qualification under Section 422 of the
Internal Revenue Code (a so-called Incentive Stock Option), the conversion
formula shall be adjusted, if necessary, to comply with Section 424(a) of the
Internal Revenue Code.
EFFECT ON EMPLOYEE BENEFIT MATTERS
Following the merger, Delhaize America will cause Hannaford to:
- honor all obligations under employment or severance agreements of
Hannaford and its subsidiaries; and pay all benefits accrued through the
effective time under employee benefit plans, programs, policies and
arrangements of Hannaford and its subsidiaries in accordance with their
terms.
- Specifically, Delhaize America will provide, or cause Hannaford to
provide, the employees of Hannaford who continue to be employed by
Hannaford or its subsidiaries after the merger, for a period of no less
than two years following the merger, with (A) annual compensation no less
favorable than the annual compensation which they were receiving
immediately prior to the merger, and (B) benefits which, in the aggregate,
are no less favorable than the benefits provided to such employees
immediately prior to the merger.
- Additionally, for a period of two years following the merger, Delhaize
America will establish and maintain a plan to provide severance and
termination benefits to all non-union employees of Hannaford and its
subsidiaries which are no less favorable than the severance and
termination benefits provided under Hannaford's current plans and
arrangements. If any current Hannaford employees are included in any
benefit plan of Delhaize America after the merger, they will receive
credit for their time as employees of Hannaford and its subsidiaries for
service prior to the merger to the same extent such service was counted
under similar Hannaford benefit plans for purposes of eligibility,
vesting, eligibility for retirement and benefit accrual. If any Hannaford
employees are included in any medical, dental or health plan other than
the plan or plans they participated in prior to the merger, these plans
will not include pre-existing condition exclusions, except to the extent
such exclusions were applicable under the similar Hannaford benefit plan
and the plans will provide credit for any deductibles and co-payments
applied or made with respect to each employee in the calendar year of the
change.
Upon the effective time of the merger, Hannaford's employee stock purchase
plan will be terminated with the effect that the then current offering period
under such plan, to the extent not already terminated, will be terminated
effective as of the merger.
CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of Hannaford and Delhaize America to complete the merger are subject
to the satisfaction (or waiver by the party for whose benefit the applicable
condition exists) of the following conditions:
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- the approval of the merger agreement by the holders of a majority of the
outstanding Hannaford common stock;
- the expiration of the applicable waiting period under the
Hart-Scott-Rodino Act;
- the absence of any applicable law, regulation, judgment, injunction, order
or decree prohibiting or enjoining the completion of the merger;
- the effectiveness of the registration statement regarding the Delhaize
America Class A common stock to be issued in the merger and the absence of
a stop order suspending the effectiveness of the registration statement or
any proceedings for such purpose pending before or threatened by the SEC;
and
- the approval for listing of the shares of Delhaize America Class A common
stock to be issued in the merger by the NYSE, subject to official notice
of issuance.
CONDITION TO THE OBLIGATIONS OF DELHAIZE AMERICA. The obligation of
Delhaize America and FL Acquisition Sub to complete the merger is subject to the
compliance by Hannaford with its obligations under the merger agreement and the
representations and warranties of Hannaford contained in the merger agreement
being true and correct both as of the date of the merger agreement and as of the
effective date.
CONDITION TO THE OBLIGATIONS OF HANNAFORD. The obligations of Hannaford to
complete the merger are subject to the compliance by Delhaize America with its
obligations under the merger agreement and the representations and warranties of
Delhaize America contained in the merger agreement being true and correct both
as of the date of the merger agreement and as of the effective date.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger, whether before or after the
shareholders of Hannaford have approved the merger agreement:
- by mutual written consent of Hannaford and Delhaize America;
- by either Hannaford or Delhaize America if:
(i) the merger has not been consummated by August 17, 2000;
(ii) the shareholders of Hannaford fail to approve the merger agreement at a
duly held meeting of shareholders of Hannaford;
(iii) if the completion of the merger is prohibited by any law or regulation
or if any injunction, judgment, order or decree enjoining Hannaford or
Delhaize America from completing the merger is entered and such
injunction, judgment, order or decree has become final and
nonappealable; or
(iv) the other party is in material breach of the merger agreement and such
breach is not cured within 30 days after notice of such breach.
- by Hannaford:
(i) if the Hannaford board has received an Acquisition Proposal which it has
determined in good faith is a Superior Proposal and it pays the required
termination fee to Delhaize America; or
(ii) if Delhaize America fails to deliver to Hannaford substantially final
documentation relating to the debt financing of the merger on or prior
to the later of 10 days prior the special meeting or December 15, 1999;
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- by Delhaize America:
(i) if (A) the Hannaford board fails to recommend or withdraws, modifies or
changes in a manner adverse to Delhaize America its approval or
recommendation of the merger agreement or the merger or recommends a
Superior Proposal to the Hannaford shareholders or (B) Hannaford has
entered into a definitive agreement regarding a Superior Proposal with a
third party or the Hannaford board resolves to do any of the foregoing.
EFFECT OF TERMINATION
If the merger agreement is terminated, there will be no liability on the
part of Delhaize America, Hannaford or FL Acquisition Sub, except as otherwise
provided in the merger agreement and as set forth below under "--Termination
Payments." Nothing, however, will relieve any party of any liability or damages
resulting from any willful material breach by that party of the merger
agreement.
TERMINATION PAYMENTS
If Hannaford terminates the merger agreement because it received an
Acquisition Proposal which Hannaford determined in good faith is a Superior
Proposal or if Delhaize America terminates the merger agreement because
(A) Hannaford's board of directors fails to recommend or withdraws or modifies
or changes in a manner adverse to Delhaize America its approval or
recommendation of the merger agreement or the merger or recommends a Superior
Proposal to the Hannaford shareholders or (B) Hannaford enters into a definitive
agreement providing for a Superior Proposal with a third party, then Hannaford
will be required to pay to Delhaize America an amount equal to $90 million.
Additionally, if Delhaize America terminates the merger agreement because
Hannaford breaches a representation, warranty, covenant or agreement under the
merger agreement and an Acquisition Proposal has been made to Hannaford after
the date of the merger agreement but prior to such termination, and within
twelve months after the termination of the merger agreement (a) a transaction
constituting an Acquisition Proposal is consummated, or (b) a definitive
agreement for such transaction is entered into by Hannaford, then Hannaford will
be required to pay to Delhaize America $90 million upon the consummation of any
such transaction or the execution of any such definitive agreement.
OTHER EXPENSES
Except as otherwise specified in the merger agreement or agreed in writing
by the parties, all costs and expenses incurred in connection with the merger
agreement and the transactions contemplated by the merger agreement shall be
paid by the party incurring such cost or expense.
INDEMNIFICATION
The merger agreement provides that Delhaize America will, or will cause
Hannaford to, indemnify each person who was an employee, agent, director or
officer of Hannaford or its subsidiaries prior to August 17, 1999, with respect
to any claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost or expense, including reasonable fees and
expenses of counsel, against any such person in their capacity as an employee,
agent, officer or director of Hannaford or its subsidiaries, based in whole or
in part, or arising in whole or in part out of, any facts or circumstances
occurring at or prior to the merger.
Delhaize America also will cause Hannaford to maintain Hannaford's existing
directors' and officers' liability insurance policy (or a policy with
substantially similar coverage) for not less than six years after the merger but
only to the extent related to facts or circumstances occurring at or prior to
the merger, provided that the aggregate annual premium for maintaining such
insurance during the six year period does not exceed 300% of the per annum
aggregate premium paid by Hannaford on
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August 17, 1999, in which case Delhaize America will cause Hannaford to provide
the most advantageous coverage then available at an annual premium of 300% of
such rate.
AMENDMENTS AND WAIVERS
Any provision of the merger agreement may be amended or waived prior to the
merger if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by Hannaford and Delhaize America or, in the case of a
waiver, by the party against whom the waiver is to be effective. After the
approval of the merger agreement by the shareholders of Hannaford, there shall
be no amendment that by law requires further approval by shareholders without
the approval of Hannaford shareholders.
SUMMARY OF OTHER SIGNIFICANT AGREEMENTS
STOCK EXCHANGE AGREEMENT
In connection with the execution of the merger agreement, the Empire Group
entered into a stock exchange agreement with Delhaize America. Pursuant to the
stock exchange agreement, immediately prior to the closing of the merger, the
Empire Group will exchange their 10,418,565 shares of Hannaford common stock for
aggregate consideration of $823,066,635 (nominally $79.00 per share) payable as
a combination of Delhaize America Class A common stock and cash. The
consideration will be determined and payable as follows:
- A number of shares of Delhaize America Class A common stock determined by
dividing $365,000,000 by the greater of (i) the DZA Price and
(ii) $27.00; and
- the remainder of $458,066,635, or 55.7% of the total consideration to be
received, payable in cash.
The Empire Group may elect to adjust, upwards or downwards, the cash and
stock mix of the consideration, provided that the consideration payable in
Delhaize America Class A common stock may in no event be less than $315,000,000
(38.3% of the total consideration to be received) or in excess of $421,000,000
(51.2% of the total consideration to be received), in each case the number of
shares to be determined by dividing such amount by the greater of: (i) the DZA
Price and (ii) $27.00. A copy of the stock exchange agreement is attached to
this document as Annex C.
VOTING AGREEMENT
In connection with the execution of the merger agreement, the Empire Group
also entered into a voting agreement with Delhaize America pursuant to which,
among other things, the Empire Group agreed to vote their 10,418,565 shares of
Hannaford common stock (representing approximately 24.7% of the outstanding
Hannaford common stock) in favor of the merger. A copy of the voting agreement
is attached to this document as Annex D.
REGISTRATION RIGHTS AGREEMENT
In connection with the execution of the merger agreement, the Empire Group
and certain of their affiliates entered into a registration rights agreement
with Delhaize America pursuant to which, among other things, Delhaize America
agreed to file a shelf registration statement with the SEC for the registration
of the shares of Delhaize America Class A common stock to be received by the
Empire Group and their affiliates in the merger. Delhaize America agreed to keep
the registration statement in effect until two years after the merger or the
time when such parties no longer hold the Delhaize America Class A common stock
received by them in the merger, whichever occurs first. A copy of the
registration rights agreement is attached to this document as Annex E.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summarizes the material United States federal income tax
consequences of the merger to Hannaford shareholders. This discussion is based
on current law, which is subject to change at any time, possibly with
retroactive effect. This summary only applies to a shareholder who is a United
States person for federal income tax purposes who holds shares of Hannaford
common stock as a capital asset. This summary does not deal with the tax
consequences of the merger to special classes of Hannaford shareholders, such as
insurance companies, tax-exempt organizations, financial institutions, dealers
in securities, non-United States persons, persons who acquired the shares of
Hannaford common stock pursuant to an exercise of employee stock options or
rights or otherwise as compensation, persons who hold shares of Hannaford common
stock as part of a position in a "straddle" or as part of a "hedging" or
"conversion" transaction for United States federal income tax purposes, and
persons with a "functional currency" other than the United States dollar.
Further, this summary does not address the tax consequences of the merger under
applicable state, local or foreign laws. EACH HANNAFORD SHAREHOLDER SHOULD
CONSULT WITH HIS OR HER OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF THE MERGER
IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICATION OF
ANY STATE, LOCAL OR FOREIGN LAW.
The receipt of cash and/or Delhaize America Class A common stock in exchange
for Hannaford common stock pursuant to the merger, the receipt of cash instead
of fractional shares of Hannaford common stock, and the receipt of cash by a
dissenting Hannaford common shareholder exercising dissenters' rights under the
Maine Business Corporation Act, will be fully taxable transactions for federal
income tax purposes. A Hannaford shareholder will generally recognize gain or
loss for federal income tax purposes in an amount equal to the difference
between the sum of the amount of cash and the fair market value of the Delhaize
America Class A common stock received in the merger and such shareholder's
adjusted tax basis in his or her Hannaford common stock exchanged therefor. For
this purpose, the fair market value of the Delhaize America Class A common stock
received by a Hannaford shareholder in the merger will be determined by
reference to the trading price of a share of Delhaize America Class A common
stock as of the closing date of the merger. A shareholder's adjusted tax basis
in any such share of Delhaize America Class A common stock immediately following
the merger will be the fair market value of such stock as determined in the
preceding sentence, and the holding period with respect to any such share of
Delhaize America Class A common stock will begin on the day following the
closing date of the merger.
The gain or loss recognized on the exchange of Hannaford common stock for
cash and/or Delhaize America Class A common stock will be capital gain or loss;
such capital gain or loss will be long-term capital gain or loss if the
Hannaford shareholder has held the stock for more than one year as of the date
of exchange. There are certain limitations on the deductibility of capital
losses. Any amounts received pursuant to dissenters' rights that are denominated
as interest will be taxable as ordinary income.
A United States holder of Hannaford common stock may be subject, under
certain circumstances, to backup withholding at a rate of 31 percent with
respect to the cash received in exchange for Hannaford stock in the merger or
instead of fractional shares or because of the exercise of dissenters' rights,
unless such holder provides proof of an applicable exemption or a correct
taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules. Any amounts required to be
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability if the
required information is furnished to the Internal Revenue Service.
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CHAPTER TWO--INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
GENERAL
This document is being sent to solicit proxies from Hannaford common
shareholders by the Hannaford board for use at the special meeting.
TIME AND PLACE
The special meeting will be held at 9:30 a.m. local time, on ,
2000 at the Hannaford Communication Center, 145 Pleasant Hill Road, Scarborough,
Maine 04074.
PURPOSE OF THE SPECIAL MEETING
The purpose of the Hannaford special meeting is to consider and vote upon a
proposal to approve the merger agreement.
VOTING AND RECORD DATE
Only holders of record of shares of Hannaford common stock at the close of
business on are entitled to notice of and to vote at the special
meeting.
The presence of the holders of a majority of the outstanding shares of
Hannaford common stock is necessary to constitute a quorum at the special
meeting. Holders may attend by proxy or in person. The affirmative vote of the
holders of a majority of the outstanding shares of Hannaford common stock is
required to approve the merger agreement.
On , 2000, there were shares of Hannaford common stock
outstanding held by approximately holders of record.
PROXIES
All shares of Hannaford common stock represented by properly executed
proxies received prior to or at the special meeting will be voted in accordance
with the instructions indicated on such proxies. Proxies that have been revoked
properly and on time will not be counted. If no instructions are indicated on a
properly executed returned proxy, that proxy will be voted FOR approval of the
merger agreement. A properly executed proxy marked "ABSTAIN," although counted
for purposes of determining whether there is a quorum, will not be voted.
Accordingly, a proxy marked "ABSTAIN" will have the effect of a vote against the
merger agreement. In addition, if a holder does not otherwise vote in person at
the special meeting, the failure to return a proxy will have the effect of a
vote against the merger agreement.
In accordance with NYSE rules, brokers and nominees who hold shares in
street name for customers are precluded from exercising their voting discretion
with respect to the approval of the merger agreement. Thus, absent specific
instructions from the beneficial owner of such shares, brokers and nominees will
not be able to vote such shares with respect to the approval of the merger
agreement. Shares represented by these "broker non-votes" will be counted for
purposes of determining whether there is a quorum at the special meeting but
will have the effect of a vote against the merger agreement.
The Hannaford board is not currently aware of any business to be acted upon
at the special meeting other than the matters described in this document. If,
however, other matters are properly brought before the special meeting, the
persons appointed as proxies will have discretion to vote or act on those
matters according to their judgment. This procedure would also apply to
adjournments or postponements of the special meeting. These adjournments or
postponements may be for the purpose of soliciting additional proxies. Proxies
voted against the proposal to be considered at the special
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meeting will not be voted in favor of an adjournment or postponement of the
special meeting for the purpose of soliciting additional proxies.
The grant of a proxy on the enclosed proxy card does not preclude a
shareholder from voting in person at the special meeting. In addition,
shareholders may revoke a proxy at any time prior to its exercise by:
- delivering, prior to the special meeting, a written notice of revocation
bearing a later date or time than the revoked proxy to Hannaford's
Secretary;
- completing and submitting a new later-dated proxy card; or
- attending the special meeting and giving notice to Hannaford's Secretary
or in open meeting.
Attendance at the special meeting will not by itself constitute revocation
of a proxy--you must vote in person at the meeting. If a broker has been
instructed to vote your shares, you must follow directions received from your
broker in order to change your vote.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be paid by Hannaford. In addition to
solicitation by mail, arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxy materials to beneficial
owners and Hannaford will, upon request, reimburse them for their reasonable
expenses in doing so. Hannaford may request the return of proxy cards by
telegram or in person. The extent to which this will be necessary depends
entirely upon how promptly proxy cards are returned. You are urged to send in
your proxies without delay.
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CHAPTER THREE--ADDITIONAL INFORMATION
INFORMATION CONCERNING THE PRIMARY PARTIES
BUSINESS OF HANNAFORD
Hannaford is a multi-regional food retailer with 154 supermarkets located
throughout Maine, New Hampshire and Vermont, and in parts of New York,
Massachusetts, Virginia, North Carolina and South Carolina. Its stores are
operated primarily under the names "Shop'n Save" and "Hannaford." Hannaford
offers consumers comprehensive product variety and outstanding freshness and
quality in perishables, at competitive prices, from modern and convenient
facilities. Hannaford also operates 113 pharmacies within its supermarkets and
combination stores.
BUSINESS OF DELHAIZE AMERICA
Delhaize America engages in one line of business, the operation of retail
food supermarkets in the southeastern and mid-Atlantic regions of the United
States. Delhaize America was incorporated in North Carolina in 1957 and
maintains its corporate headquarters in Salisbury, North Carolina. Delhaize
America's stores, which are primarily operated under the names "Food Lion" and
"Kash n' Karry," sell a wide variety of groceries, produce, meats, dairy
products, seafood, frozen food, deli/bakery and non-food items such as health
and beauty care, prescriptions, and other household and personal products.
Delhaize America offers nationally and regionally advertised brand name
merchandise as well as products manufactured and packaged for Delhaize America
under the private labels of "Food Lion" and "Kash n' Karry." Delhaize America
offers over 30,000 stock keeping units in its Food Lion locations and over
35,000 in its Kash n' Karry locations.
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COMPARISON OF RIGHTS OF HOLDERS
OF HANNAFORD COMMON STOCK
AND
DELHAIZE AMERICA COMMON STOCK
At the effective time, holders of Hannaford common stock receiving shares of
Delhaize America Class A common stock in the merger will become shareholders of
Delhaize America. The following is a summary of the material differences between
the rights of holders of Delhaize America Class A common stock and holders of
Hannaford common stock. Since Delhaize America is organized under the laws of
the State of North Carolina and Hannaford is organized under the laws of the
State of Maine, differences in the rights of holders of Delhaize America
Class A common stock and those of holders of Hannaford common stock arise from
differing provisions of the North Carolina Business Corporation Act and the
Maine Business Corporation Act in addition to differing provisions of their
respective charters and bylaws. The following summary does not purport to be a
complete description of the provisions affecting, and differences between, the
rights of holders of Delhaize America Class A common stock and holders of
Hannaford common stock. This summary is qualified in its entirety by reference
to the North Carolina Business Corporation Act and the Maine Business
Corporation Act and the governing corporate instruments of Delhaize America and
Hannaford, to which the shareholders of Hannaford are referred. See "Where You
Can Find More Information" on page III-15.
CAPITAL STOCK
DELHAIZE AMERICA. Delhaize America's authorized capital stock consists of
1,500,000,000 shares of Class A common stock, par value $.50 per share,
1,500,000,000 shares of Class B common stock, par value $.50 per share, and
500,000,000 shares of preferred stock, par value $.50 per share. As of
, 2000, there were outstanding shares of Class A common
stock, shares of Class B common stock, and no shares of preferred
stock.
Holders of Class B common shares are entitled to one vote per share, and
holders of Class A common shares are not entitled to vote unless otherwise
provided by North Carolina law.
Under Delhaize America's articles of incorporation, if the board of
directors of Delhaize America declares a dividend payable to holders of Class B
common shares other than a dividend payable in shares of the same class of
stock, the board must also declare a per share dividend on Class A common shares
greater than the per share dividend paid to the holders of the Class B common
shares. The board of directors may declare dividends on Class A common shares in
excess of dividends paid to holders of Class B common shares, or without
declaring a dividend on Class B common shares. No superior dividend is required
on Class A common shares with respect to a dividend paid in partial or complete
liquidation.
Delhaize America's articles of incorporation authorize the board of
directors of Delhaize America to issue shares of Delhaize America preferred
stock in one or more classes or series and to fix the preferences, limitations
and relative rights of the shares of Delhaize America preferred stock.
HANNAFORD. Hannaford's authorized capital stock consists of 110,000,000
shares of common stock, par value $.75 per share, 2,000,000 shares of Class A
serial preferred stock, no par value, and 28,000,000 shares of Class B serial
preferred stock, par value $.01 per share. Hannaford's articles of incorporation
authorize the board of directors of Hannaford to divide any of the preferred
stock into one or more series and to determine the relative rights and
preferences of the shares of any series of preferred stock. 2,000,000 shares of
Series A Junior Participating Preferred Stock have been designated from the
Class A serial preferred stock and reserved for issuance pursuant to Hannaford's
shareholder rights agreement. As of , 2000, there were outstanding
shares of Hannaford common stock and no shares of Class A or
Class B serial preferred stock.
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<PAGE>
SPECIAL MEETINGS OF SHAREHOLDERS
DELHAIZE AMERICA. Under Delhaize America's bylaws, special shareholders'
meetings may be called only by the president and chief executive officer or by
any two members of the board of directors.
HANNAFORD. Under Hannaford's bylaws, special shareholders' meetings may be
called only by the board of directors, the chairman of the board, the president
or the holders of more than 20% of the outstanding shares entitled to vote for
directors. Under Maine law, the holders of 10% of the outstanding voting shares
have the right under certain circumstances to petition a court, for good cause
shown, to call a special meeting of shareholders.
BOARD OF DIRECTORS
DELHAIZE AMERICA. Under Delhaize America's bylaws, the board of directors
consists of eight to 14 persons, with the exact number established from time to
time by the shareholders or the board of directors. Under North Carolina law,
only the shareholders may change the range for the size of the board of
directors. Currently, the board of directors consists of 10 directors.
Immediately following the merger, Hugh G. Farrington, the Chief Executive
Officer of Hannaford, will be appointed to the board of directors of Delhaize
America. In addition, Empire Company Limited and its affiliates, the largest
Hannaford shareholders, will have the right to appoint one member of the
Delhaize America board after the merger.
A director holds office until the next annual shareholders' meeting after
his or her election and until his or her successor is elected and qualified, or
until his or her earlier death, resignation, removal or disqualification. Under
Delhaize America's bylaws, no person who reaches the age of 70 may stand for
election, reelection or reappointment to the board of directors (except for
directors who were over 65 on July 3, 1997).
Under North Carolina law, holders of Delhaize America Class B common shares
may remove a director with or without cause if the number of votes cast to
remove him or her exceeds the number of votes cast not to remove him or her. In
addition, holders of Delhaize America Class B common shares may remove the
entire board of directors from office with or without cause by the affirmative
vote of a majority of the votes entitled to be cast at any election of
directors. Upon petition by Delhaize America or its shareholder holding at least
10% of its outstanding shares, a court may also remove a director in certain
cases.
Shareholders of Delhaize America do not have cumulative voting rights in the
election of directors so long as Delhaize America has a class of shares
registered under Section 12 of the Securities Exchange Act of 1934.
HANNAFORD. Under Hannaford's articles of incorporation, the board of
directors consists of seven to 18 directors, as from time to time determined by
resolution of the shareholders or the board of directors. Hannaford's bylaws
further require that any change to the number of directors be approved by at
least two-thirds of the outstanding shares of stock entitled to vote on
directors, if such action is taken by shareholders, or by at least two-thirds of
the directors then in office, if such action is taken by the board of directors.
The Hannaford board is divided into three classes, with directors serving
staggered three-year terms. Under Hannaford's articles of incorporation, no
director may stand for reelection after reaching the age of 70, and the term for
any director who attains the age of 70 will terminate at the next annual
shareholders' meeting following his 70th birthday.
Under Maine law, a Hannaford director may be removed, with or without cause
only by the affirmative vote of two-thirds of the outstanding shares. Upon
petition by two-thirds of the directors then in office, a court may also remove
a director under certain circumstances.
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<PAGE>
Holders of Hannaford common stock do not have cumulative voting rights in
the election of directors.
ADVANCE NOTICE OF SHAREHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR
DELHAIZE AMERICA. Delhaize America's bylaws establish advance notice
procedures for shareholder proposals and nominations of persons for election as
directors. Under the bylaws, a shareholder wishing to bring any action before a
shareholders' meeting, including the nomination of a person for election as a
director, must give written notice to the secretary of Delhaize America not less
than 10 days nor more than 60 days prior to the meeting. However, if less than
21 days' notice of the meeting is given by Delhaize America, the shareholder
must provide notice no later than the 10th day following the date on which
notice of the meeting was mailed to shareholders. In addition, any shareholder
who wishes the board of directors of Delhaize America to consider taking a
position with respect to the matter, or to consider nominating the person
recommended by the shareholder for election as a director, must deliver notice
to the secretary of Delhaize America not less than 90 days nor more than
150 days prior to the meeting.
For matters not involving a nomination for director, the notice must
describe:
- the business desired to be brought before the meeting;
- the name and address of the shareholder proposing the action; and
- the class and number of shares owned by the shareholder.
For shareholder nominations for director, the notice must:
- set forth the name and address of the shareholder who intends to make the
nomination and the person(s) to be nominated;
- represent that the shareholder is a holder of record of shares entitled to
vote at the meeting and intends to appear in person or by proxy at the
meeting to nominate such person;
- describe all arrangements or understandings between the shareholder and
the nominee;
- include any information about the nominee that would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
SEC; and
- include the consent of the nominee to serve as a director.
HANNAFORD. Under Hannaford's bylaws, any shareholder who desires to propose
a matter for action by the shareholders at an annual meeting must give written
notice of the proposed action to the secretary of Hannaford. The notice must be
received by Hannaford not earlier than 135 days nor later than 90 days prior to
the anniversary date of the last annual meeting, except if the annual meeting is
held more than 30 days before or after the anniversary date of the last annual
meeting, in which case notice must be given not later than 10 days after
Hannaford first announces publicly the intended date of the meeting.
The notice must contain:
- the name and address of the shareholder proposing such action;
- a representation that the proponent is a shareholder of record; and
- a fair description of the proposal or if the proposal relates to the
nomination of directors, the name, address and business background of each
such candidate.
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<PAGE>
EXCULPATION AND INDEMNIFICATION
DELHAIZE AMERICA. North Carolina law requires that a director of a North
Carolina corporation discharge his duties (a) in good faith, (b) with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances and (c) in a manner the director reasonably believes to be in the
best interests of the corporation. North Carolina law provides that the duties
of a director considering a change in control situation are no different or
higher than the duties otherwise provided by law. North Carolina law allows a
North Carolina corporation to include a provision in its articles of
incorporation limiting or eliminating the personal liability of any director
arising out of an action, whether by or in the right of the corporation, for
monetary damages for breach of any duty as a director, except for (a) acts or
omissions that the director knew or believed were clearly in conflict with the
best interests of the corporation, (b) any liability for unlawful distributions,
(c) any transaction from which the director derived an improper personal benefit
and (d) acts or omissions occurring prior to the time the provision became
effective. Delhaize America's articles of incorporation release each director,
to the fullest extent permitted by law, from personal liability for monetary
damages in any action for breach of his or her duty as a director. In addition,
as permitted by North Carolina law, Delhaize America's bylaws require Delhaize
America to indemnify its directors and officers to the fullest extent permitted
by law against liabilities arising out of their status as such, unless such
liabilities relate to activities that were at the time taken known or believed
by the director or officer to be clearly in conflict with the best interests of
Delhaize America.
HANNAFORD. Maine law provides that the directors and officers of a Maine
corporation must exercise their powers and discharge their duties (a) in good
faith, (b) with a view to the interests of the corporation and of the
shareholders and (c) with that degree of diligence, care and skill which
ordinarily prudent persons would exercise under similar circumstances. Maine law
further provides that in discharging their duties, the directors and officers
may, in considering the best interests of the corporation and its shareholders,
consider the effects of any action upon employees, suppliers and customers of
the corporation, communities in which offices or other establishments of the
corporation are located and all other pertinent factors. Under Maine law, a
director will not be personally liable for monetary damages for failure to
discharge any duty as a director unless the director is found not to have acted
honestly or in the reasonable belief that the action was in or not opposed to
the best interests of the corporation or its shareholders. As permitted by Maine
law, Hannaford's bylaws require Hannaford to indemnify any director or officer
for liabilities arising in connection with his or her status as such, unless it
is adjudicated that he or she did not act honestly or with the reasonable belief
that his or her action was in or not opposed to the best interests of Hannaford
or its shareholders, or with respect to any criminal action, unless he or she
had no reasonable cause to believe that his conduct was unlawful.
MERGERS, CONSOLIDATIONS, SHARE EXCHANGES AND SALES OF ASSETS
DELHAIZE AMERICA. Under North Carolina law, a majority of all votes
entitled to be cast by each voting group entitled to vote separately must
approve any merger, share exchange or sale of all or substantially all of the
assets of a corporation not in the ordinary course of business. Separate voting
by voting groups is required to approve a merger if it contains a provision
that, if contained in a proposed amendment to the articles of incorporation,
would require action by one or more separate voting groups, except where the
consideration to be received in exchange for the shares of the group consists
solely of cash. Except as described above for certain mergers, separate voting
by voting groups is also required to approve a share exchange by each class or
series of shares to be acquired in the exchange. Except as described above for
certain mergers, under North Carolina law, nonvoting shares generally do not
have the right to vote on the sale by a corporation of all or substantially all
of its assets.
Under North Carolina law, approval of a merger by the shareholders of the
surviving corporation is not required in certain instances, including a merger
in which, among other things, the articles of
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<PAGE>
incorporation of the surviving corporation do not change and the number of
voting shares and shares entitled to participate without limitation in
distributions, respectively, outstanding immediately after the merger and
issuable as a result of the merger does not exceed by more than 20% the number
of voting shares and shares entitled to participate without limitation in
distributions outstanding immediately before the merger. Delhaize America is
also subject to certain statutory anti-takeover provisions described below under
the caption "--Anti-Takeover Provisions."
HANNAFORD. Maine law generally requires that any merger, consolidation, or
sale of all or substantially all the assets of a corporation not in the ordinary
course of business be approved by the affirmative vote of the majority of the
issued and outstanding shares of each voting group entitled to vote. Approval of
a merger by the shareholders of a surviving corporation is not required in
certain instances, however, including a merger in which the articles of
incorporation of the surviving corporation are not amended and the number of
shares of any class to be issued does not exceed 15% of the number of shares of
the same class outstanding immediately prior to the merger. Hannaford is also
subject to certain statutory anti-takeover provisions described below under the
caption "--Anti-Takeover Provisions."
ANTI-TAKEOVER PROVISIONS
DELHAIZE AMERICA. Delhaize America is subject to the North Carolina Control
Share Acquisition Act, which provides shareholders of a corporation with the
opportunity to vote on whether to afford voting rights to certain persons who
acquire shares of the corporation. The act is triggered by the acquisition by a
person of shares of voting stock of a corporation that, when added to all other
shares beneficially owned by the person, would result in that person holding
one-fifth, one-third or a majority of the voting power in the election of
directors. Under the act, the shares acquired that result in crossing any of
these thresholds have no voting rights until voting rights are conferred by the
affirmative vote of the holders of a majority of all outstanding shares entitled
to vote in the election of directors, excluding those shares held by any person
involved in the acquisition of the shares, any officer of the corporation and
any employee of the corporation who is also a director of the corporation. If
voting rights are conferred on the shares and the person involved in the
acquisition has a majority of all voting power for the election of directors,
all shareholders of the corporation (other than the person who made the
acquisition) have the right to require that their shares be redeemed at their
fair value, which will be not less than the highest price paid per share by the
acquirer for shares of the corporation in the acquisition triggering the act.
The act does not apply, among other instances, to a merger to which the
corporation is a party or a sale of shares by the corporation or its parent or
subsidiary.
Delhaize America is also subject to the North Carolina Shareholder
Protection Act, which governs certain business combinations by a North Carolina
corporation with an entity that beneficially owns more than 20% of the voting
shares of the corporation, or with any affiliate or associate of that entity.
Under the Shareholder Protection Act, the holders of 95% of the voting shares of
Delhaize America must approve any business combination by Delhaize America with
any such entity or any affiliate or associate of such entity. A business
combination includes a merger or consolidation of the corporation with or into
any other corporation, the sale or lease of all or any substantial part of the
corporation's assets to the other entity, or any payment, sale or lease of any
assets to the corporation or any subsidiary thereof in exchange for securities
of the corporation except assets having a fair market value of less than
$5,000,000. The Shareholder Protection Act will not apply to a business
combination if:
- the cash, or fair market value of other consideration, to be received per
share by the holders of the corporation's common stock in such business
combination bears the same or a greater percentage relationship to the
market price of the corporation's common stock immediately prior to the
announcement of the business combination by the corporation as the highest
per share price which the other entity has previously paid for any of the
shares of the corporation's
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<PAGE>
common stock already owned by it bears to the market price of the
corporation's common stock immediately prior to the commencement of the
acquisition of the corporation's common stock by such other entity,
directly or indirectly;
- the cash, or fair market value of other consideration, to be received per
share by holders of the corporation's common stock in such business
combination is not less than the highest per share price paid by such
other entity in acquiring any of its holdings of the shares of the
corporation's common stock and is not less than the earnings per share of
the corporation's common stock for the four full consecutive fiscal
quarters immediately preceding the record date for the solicitation of
votes on such business combination, multiplied by the then price/earnings
multiple, if any, of the other entity as customarily computed and reported
in the financial community;
- after the other entity has acquired a 20% interest and prior to the
business combination, (i) the other entity has taken steps to ensure that
the corporation's board of directors included at all times representation
by continuing directors proportionate to the outstanding shares of the
corporation's common stock held by the persons not affiliated with the
other entity, (ii) there has been no reduction in the rate of dividends
payable, except as unanimously approved by the board of directors,
(iii) the other entity has not acquired any newly issued shares of the
corporation's capital stock, directly or indirectly, from the corporation,
except upon conversion of any convertible securities, and (iv) the other
entity has not acquired any additional shares of the corporation's
outstanding common stock or securities convertible into common stock;
- the other entity has not received the benefit, except proportionately with
all other shareholders, of any loans, advances, guarantees, pledges, or
other financial assistance or tax credits provided by the corporation or
made any major change in the corporation's business or equity capital
structure unless by a unanimous vote of the directors, in each case prior
to consummation of the business combination; and
- a proxy statement responsive to the requirements of the Securities
Exchange Act of 1934 has been mailed to the public shareholders of the
corporation for the purpose of soliciting shareholder approval of the
business combination and shall contain prominently in the forepart thereof
any recommendations as to the advisability or inadvisability of the
business combination which the continuing directors, or any of them, may
choose to state and, if deemed advisable by a majority of the continuing
directors, an opinion of a reputable investment banking firm as to the
fairness of the terms of the business combination to the public
shareholders, which firm is selected by a majority of the continuing
directors and is paid a reasonable fee for its services upon receipt of
such opinion.
HANNAFORD. Hannaford is subject to Section 910 of the MBCA, which is
designed to protect shareholders of publicly owned Maine corporations against
certain changes in control. The act is triggered by the acquisition by a person
(a "control person") of shares of voting stock of a corporation that, when added
to all other shares beneficially owned by the person, would result in that
person holding twenty-five percent of the total number of shares outstanding.
Any control person must notify each shareholder of the corporation and, if
demanded by any shareholder, make a written offer to purchase each demanding
shareholders' shares at their fair value. If the demanding shareholder and the
control person cannot agree on the fair value of the shares, the control person
may bring an action in the Superior Court in the State of Maine to determine the
fair value of those shares.
Hannaford is also subject to Section 611-A of the MBCA which prohibits,
under certain circumstances, any Maine corporation with a class of stock
registered or traded on a national securities exchange or registered with the
SEC under Section 12(g) of the Exchange Act, from engaging in certain "business
combinations" with an interested shareholder for a period of five years after
the person becomes an interested shareholder. An "interested shareholder" means
(1) the beneficial owner of 25% or more of the outstanding voting stock of the
corporation; or (2) an affiliate or associate of
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the corporation that, at any time within the five-year period immediately prior
to the date in question, was the beneficial owner of 25% or more of the
outstanding voting stock of the corporation.
Under section 611-A, a "business combination" means:
- a merger or consolidation of a domestic corporation which results in that
corporation becoming an affiliate of the interested shareholder;
- any disposition of assets of the domestic corporation having an aggregate
market value equal to (a) 10% or more of the aggregate market value or
book value of the assets of that corporation, (b) more than 10% of the
aggregate market value of the outstanding stock of that corporation, or
(c) 10% or more of the earning power or income of that corporation, which
transaction is pursuant to an agreement with the interested shareholder;
- the transfer by the domestic corporation of any stock that has an
aggregate market value equal to 5% or more of the aggregate market value
of all the outstanding stock of that corporation to the interested
shareholder;
- the adoption of any plan for the liquidation or dissolution of the
domestic corporation pursuant to any agreement with the interested
shareholder;
- any reclassification of securities, recapitalization, or merger or
consolidation of the domestic corporation with its own subsidiary,
pursuant to an agreement with the interested shareholder, which increases
the voting stock of the domestic corporation held by the interested
shareholder; or
- any receipt by the interested shareholder of the benefit, except
proportionately as a shareholder of that corporation, of any financial
assistance or tax advantages provided by the domestic corporation.
A "business combination" is not prohibited by Maine law if it is approved by
the board of directors prior to the interested shareholder becoming interested
or by the board of directors and by a majority of the other shareholders of the
corporation or by the directors, officers or employees of the corporation after
the interested shareholder became interested. Maine corporations may not opt out
of Section 611-A.
Hannaford's articles of incorporation provide that Hannaford may not enter
into certain "material transactions" with a control person unless: (1) the
control person offers to mail to all shareholders of record a proxy or
information statement describing the transaction which complies with the
requirements of the securities laws; (2) the transaction is approved by a
majority of Hannaford's independent directors and such directors have determined
that the mailing of such a proxy or information statement is not necessary to
protect the interests of the shareholders of Hannaford; or (3) the transaction
was entered into prior to May 25, 1988.
For purposes of Hannaford's articles of incorporation, material transaction
means:
- an issuance or transfer by Hannaford of its equity securities which
increases by more than 1% the percentage beneficial ownership of a control
person in the capital stock of Hannaford;
- the disposition of any assets of Hannaford having an aggregate fair market
value in excess of 5% of Hannaford's total consolidated assets at the end
of its last full fiscal year;
- any merger or consolidation of Hannaford with a control person or another
person which is (or as a result of such merger would become) an affiliate
or associate of such control person;
- any reclassification of securities which increases by more than 1% the
percentage beneficial ownership of a control person in the capital stock
of Hannaford; or
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- the adoption of any plan for the liquidation or dissolution of Hannaford
proposed by any control person.
AMENDMENTS TO ARTICLES OF INCORPORATION AND BYLAWS
DELHAIZE AMERICA. Under North Carolina law, an amendment to the articles of
incorporation must be proposed by the board of directors and approved by the
shareholders. The shareholder vote required to approve an amendment to the
articles of incorporation of a North Carolina corporation depends on whether the
amendment would trigger dissent and appraisal rights with regard to a voting
group. The holders of a majority of the votes entitled to be cast within a
voting group must approve any amendment that would trigger dissent and appraisal
rights with regard to that voting group. An amendment that would not trigger
dissent and appraisal rights will be approved by a voting group if the votes
cast within the voting group favoring the action exceed the votes cast opposing
the action. North Carolina law also provides that the holders of the outstanding
shares of a class are entitled to vote as a separate voting group on certain
amendments, including, among others, any amendment that would:
- increase or decrease the aggregate number of authorized shares of a class;
- effect an exchange or reclassification of all or part of the shares of the
class into shares of another class, or of all or part of the shares of
another class into shares of the class;
- change the designation, rights, preferences or limitations of the shares
of the class;
- change the shares of the class into a different number of shares of the
same class;
- create a new class having rights or preferences with respect to
distributions or to dissolution that are prior, superior or substantially
equal to the shares of the class; or
- increase the rights, preferences, or number of authorized shares of any
class that have rights or preferences with respect to distributions or to
dissolution that are prior, superior or substantially equal to the shares
of the class.
North Carolina law provides that a North Carolina corporation's bylaws
generally may be amended by the board of directors or shareholders of the
corporation. However, any bylaw adopted, amended or repealed by the shareholders
may not be readopted, amended or repealed by the board of directors unless the
articles of incorporation or a bylaw adopted by the shareholders authorize the
board of directors to adopt, amend or repeal that particular bylaw.
HANNAFORD. Under Maine law, any proposed amendment to Hannaford's articles
of incorporation must be set forth in a resolution of the board of directors.
Maine law further requires that an approved amendment be put to a vote of and
approved by majority vote of the shareholders at an annual or special meeting
and, if appropriate, majority vote of the outstanding shares of any other
classes entitled to vote. If an amendment is proposed by at least 10% of the
holders of any class of Hannaford stock, the board of directors must submit the
proposed amendment to the shareholders at a special or annual meeting.
Hannaford's articles of incorporation may also be amended by unanimous written
consent of all shareholders, in which case, no resolution of the board of
directors is necessary. Hannaford's articles of incorporation also require that
any amendments which adversely affect the rights of the holders of preferred
stock be approved by the affirmative vote of two-thirds of the outstanding
shares of preferred stock. Similarly, any charter amendments pertaining to
removal of directors, and the board of directors, generally require the
affirmative vote of two-thirds of the outstanding shares. Maine law also
provides that the holders of the outstanding shares of a class are entitled to
vote as separate voting groups on certain amendments, including among others,
any amendment that would:
- increase or decrease the aggregate number of authorized shares of a class;
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- effect an exchange or reclassification of all or part of the shares of the
class into shares of another class, or of all or part of the shares of
another class into shares of the class;
- change the designation, rights, preferences or limitations of the shares
of the class;
- change the shares of the class into a different number of shares of the
same class;
- create a new class having rights or preferences with respect to
distributions or to dissolution that are prior, or superior to, the shares
of the class; or
- increase the rights, preferences or number of authorized shares of any
class that have rights or preferences with respect to distributions or to
dissolution that are prior, or superior to the shares of the class.
Maine law provides that either the shareholders or the board of directors
may amend the bylaws, unless the articles of incorporation provide otherwise.
Hannaford's by-laws provide that the by-laws may be amended by the shareholders
or the board of directors provided, however, that the directors may not, for two
years after any shareholder amendment, amend or readopt the by-law provisions
previously amended or repealed by the shareholders.
SHAREHOLDERS' RIGHTS OF DISSENT AND APPRAISAL
DELHAIZE AMERICA. Under the North Carolina Business Corporation Act, a
shareholder of a North Carolina corporation is entitled to dissent from, and
obtain payment of the "fair value" of his or her shares in the event of, any of
the following corporate transactions:
- completion of a plan of merger to which the corporation is a party,
subject to certain exceptions;
- completion of a plan of share exchange to which the corporation is a party
as the corporation whose shares will be acquired, subject to certain
exceptions;
- completion of a sale or exchange of all or substantially all of the
property of the corporation other than in the regular course of business,
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 proceeds are to be distributed in cash to shareholders within one
year;
- an amendment to the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(a) alters or abolishes a preferential right of the shares; (b) 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; (c) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (d) excludes or limits
the right of shares to vote on any matter; (e) 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; or (f) changes the
corporation into a nonprofit corporation or cooperative organization; or
- 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.
With respect to corporations, like Delhaize America, that have a class or
series of shares listed on a national securities exchange, designated as a
national market security or held by more than 2,000 record shareholders,
dissenters' rights are not available to the holders of these shares by reason of
a merger, share exchange or sale or exchange of property unless (a) the articles
of incorporation, bylaws or a resolution of the board of directors of the
corporation provide otherwise or (b) in the case of a merger or share exchange,
the holders of the shares are required to accept anything other than (1) cash,
(2) shares in another corporation that are listed on a national securities
exchange, designated as a national market security or held by more than 2,000
record shareholders or (3) a combination of
III-10
<PAGE>
cash and such shares. A shareholder who has the right to dissent from a
transaction and receive payment of the "fair value" of his or her shares must
follow specific procedural requirements in order to maintain such right and
obtain such payment.
HANNAFORD. Under Maine law, a shareholder of a Maine corporation is
entitled to dissent from, and obtain payment of the "fair value" of his or her
shares in the event of, any of the following corporate transactions:
- completion of a plan of merger, subject to certain exceptions; or
- completion of a sale or other disposition, excluding a mortgage or other
security interest, of all or substantially all the assets of the
corporation.
With respect to corporations that (1) prior to the date of the merger, owned
all outstanding shares of the other party to the merger or (2) do not require
shareholder approval to consummate the merger, dissenters' rights are not
available unless:
- the articles of incorporation provide otherwise; or
- in the case of a merger or share exchange, the holders of the shares are
required to accept anything other than (1) shares of the surviving
corporation or a combination of such shares and cash, (2) shares in
another corporation that are listed on a national securities exchange,
designated as a national market security or held by more than 2,000 record
shareholders, or (3) a combination of such shares and cash. A shareholder
who has the right to dissent from a transaction and receive payment of the
"fair value" of his or her shares must follow specific procedural
requirements in order to maintain such right and obtain such payment.
LIQUIDATION RIGHTS
DELHAIZE AMERICA. North Carolina law provides that a corporation may be
dissolved if the board of directors recommends dissolution to the shareholders,
unless the board of directors determines that there is a conflict of interest or
other special circumstances, and the shareholders entitled to vote approve the
proposal. Subject to the liquidation preference of any preferred stock issued by
Delhaize America, upon dissolution and liquidation of Delhaize America, assets
and funds remaining after payment of all debts and other liabilities will be
distributed as follows:
- first, to holders of Class A common shares in an amount equal to the par
value of the Class A common shares;
- next, to holders of Class B common shares in an amount equal to the par
value of the Class B common shares; and
- thereafter, equally to holders of Class A and Class B common shares pro
rata according to the number of common shares held, regardless of class.
Because Delhaize America has operating subsidiaries, its rights and the
rights of its creditors and shareholders, including the holders of the shares of
any Delhaize America preferred stock that may be issued, to participate in the
assets of any subsidiary upon the liquidation or recapitalization of the
subsidiary may be subject to the prior claims of the subsidiary's creditors.
HANNAFORD. Maine law provides that a corporation may be dissolved either by
(i) the adoption of a resolution recommending dissolution by the board of
directors and directing that the question be submitted to a vote at a meeting of
the shareholders or, (ii) at least 20% of the shareholders proposing in writing
the dissolution of the corporation and calling upon the board of directors to
submit their proposal to a vote of the shareholders. If the directors fail to
act within 30 days such shareholders are entitled to call a special meeting of
the shareholders to consider such proposal. Maine law requires the affirmative
vote of at least two-thirds of the shareholders so entitled to vote and, if any
class is entitled
III-11
<PAGE>
to vote separately, the affirmative vote of at least two-thirds of such
shareholders to approve the dissolution of any domestic corporation.
Upon dissolution and liquidation of Hannaford, assets and funds remaining
after payment of all debts and other liabilities will be distributed as follows;
- first to holders of Series A Preferred Stock in an amount equal to the
greater of (A) $6,000 per share plus accrued and unpaid dividends and
distributions thereon, or (B) 100 times the amount to be distributed per
share to holders of Hannaford common stock;
- second to Hannaford stock ranking on a parity with the Series A Preferred
Stock, unless distributions are made ratably on the Series A Preferred
Stock and all other shares of such parity stock in proportion to the total
amounts to which the holders of Series A Preferred Stock are entitled and
to which the holders of such parity shares are entitled, in each case upon
such dissolution; and
- third to the holders of shares of stock ranking junior to the foregoing.
SHAREHOLDERS' AGREEMENT
DELHAIZE AMERICA. Delhaize America has entered into a shareholders'
agreement with its parent company, Etablissements Delhaize Freres et Cie "Le
Lion" S.A., governing, among other things, the nomination and election of
directors and the management of Delhaize America. In accordance with the
agreement, Delhaize America has established a nominating committee of the board
of directors consisting of three directors, one of whom is designated by
Etablissements Delhaize Freres et Cie "Le Lion" S.A., one of whom is the chief
executive officer of Delhaize America or his designee, and one of whom is an
independent director. The agreement provides that the slate of directors
nominated by the nominating committee must consist of 10 persons, four of whom
are proposed by Etablissements Delhaize Freres et Cie "Le Lion" S.A., two of
whom are designated by the chief executive officer of Delhaize America and four
of whom are independent directors. Under the agreement, a nomination to fill a
vacancy on the board of directors is selected in the same manner as the director
who ceased being a director was selected. The agreement requires Etablissements
Delhaize Freres et Cie "Le Lion" S.A. to vote its shares of Delhaize America
stock to elect the slate of directors nominated in accordance with the foregoing
procedures.
The shareholders' agreement also requires that the bylaws of Delhaize
America provide, during the term of the agreement, provisions which prohibit the
board of directors from taking certain actions without the affirmative vote of
at least 70% of the directors. Such actions include:
- the appointment of any person to serve as chief executive officer of the
company other than Tom E. Smith;
- the approval of nominees for director;
- the authorization of any contract involving payment of cash and property
in excess of $500,000, other than transactions in the ordinary course of
business;
- the approval of capital expenditures of more than $500,000 in any one
instance or $1,000,000 in the aggregate in any fiscal year, other than
transactions in the ordinary course of business;
- the authorization of the issuance of stock of Delhaize America or any
subsidiary or any options, warrants or other convertible securities,
subject to certain exceptions;
- the sale of a substantial part of Delhaize America's assets other than in
the ordinary course of business;
- an amendment to the articles of incorporation or bylaws; or
- the submission to the shareholders of Delhaize America of any amendment to
the articles of incorporation or a merger, reorganization,
recapitalization or liquidation of Delhaize America.
III-12
<PAGE>
The shareholders' agreement will expire on the earlier of April 30, 2001 or
the time Etablissements Delhaize Freres et Cie "Le Lion" S.A. reduces its direct
and indirect ownership of Delhaize America stock to less than 10%.
HANNAFORD. The Company was a party to a standstill agreement with Empire
and certain of its affiliates. Empire terminated the standstill agreement on
August 20, 1999. Hannaford does not currently have any agreements with its
shareholders.
SHAREHOLDER RIGHTS PLAN
DELHAIZE AMERICA. Delhaize America does not have a shareholder rights plan.
HANNAFORD. Hannaford's shareholder rights agreement provided to each
Hannaford shareholder a dividend distribution of one preferred stock purchase
right for each share of Hannaford common stock. Each purchase right entitles the
holder to 1/100 of a share of preferred stock of Hannaford, designated as a
Series A Junior Participating Preferred Stock, at a price of $60 per 1/100 of a
share (the "Purchase Price"). These purchase rights are an anti-takeover device
designed to cause substantial dilution to a person or group that attempts to
acquire Hannaford on terms not approved by the board of directors, unless the
offer is conditioned on a substantial number of purchase rights being acquired.
The purchase rights will not be exercisable until the earlier of (i) a
public announcement that a person, other than (A) Hannaford, (B) any employee
plan of Hannaford, (C) the Empire shareholders and their affiliates or (D) any
person who owns greater than 20% of Hannaford's shares, provided that Hannaford
facilitated the acquisition by such person of such shares, has acquired or
obtained the right to acquire beneficial ownership of 20% or more of the shares
of voting stock then outstanding, or (ii) a public announcement of a tender or
exchange offer (other than by Hannaford) which results in the ownership of 30%
or more of the shares of voting stock then outstanding by an acquiring person.
The purchase rights are not exercisable until the earlier of (i) the 10th day
after an acquiring person becomes such or a public announcement of such fact has
been made; or (ii) the commencement date of or the first public announcement by
any non-exempt person of an intent to commence a tender offer, which, if
consummated, would result in such person being a beneficial owner of greater
than 30% of the shares of Hannaford. The purchase rights will expire at the
close of business on February 4, 2001, unless earlier redeemed by Hannaford.
The Series A Preferred Stock is nonredeemable and generally subordinate to
any other series of Hannaford's preferred stock. Series A Preferred Stock may
not be issued except upon exercise of the purchase rights.
If the purchase rights are exercised and Hannaford is acquired in a merger
or other business combination or more than 50% of the assets of Hannaford are
sold, each holder of a purchase right will receive common stock of the acquiring
company having a value equal to two times the Purchase Price. If Hannaford is
the surviving corporation and the common stock remains outstanding or if an
acquiring person engages in certain self-dealing transactions specified in the
rights agreement, or if any person (other than an acquiring person) own 30% or
more of Hannaford's voting stock, through a transaction which has not been
approved by a majority of the independent directors, each holder of a purchase
right, other than the acquiring person, will receive that number of shares of
the Series A Preferred Stock equal to two times the Purchase Price. Until a
purchase right is exercised, the holder has no rights as a shareholder of
Hannaford.
DESCRIPTION OF DELHAIZE AMERICA CAPITAL STOCK FOLLOWING THE MERGER
The following discussion is of the capital stock of Delhaize America
following the merger.
Delhaize America's authorized capital stock consists of 1,500,000,000 shares
of Class A common stock, 1,500,000,000 shares of Class B common stock and
500,000,000 shares of preferred stock. As of
III-13
<PAGE>
, 2000 shares of Class A common stock were issued and outstanding,
shares of Class B common stock were issued and outstanding and no
shares of preferred stock were outstanding. As of , 2000, there were
holders of record of the Class A common stock and holders of record
of the Class B common stock.
CLASS A AND CLASS B COMMON STOCK. The holders of Class B common stock are
entitled to one vote per share on all matters on which the holders of Class B
common stock are entitled to vote and do not have cumulative voting rights in
the election of directors. Holders of Class A common stock do not have voting
rights except to the extent provided by North Carolina law.
The board of directors of Delhaize America may declare and pay dividends on
the Class A common stock and Class B common stock out of earnings or assets
legally available for the payment thereof, provided that, whenever a dividend is
declared and paid to holders of Class B common stock (other than a dividend
payable in Class B common stock), the Delhaize America board must also declare
and pay to the holders of Class A common stock a per share dividend greater than
the per share dividend declared and paid to the holders of the Class B common
stock. The Delhaize America board may declare and pay dividends to the holders
of Class A common stock without declaring and paying dividends to the holders of
the Class B common stock. Upon dissolution and liquidation of Delhaize America,
the holders of Class A common stock will be entitled to receive an amount equal
to the par value of the Class A common stock before any payment is made with
respect to Class B common stock. After such payment is made to the holders of
Class A common stock, the holders of Class B common stock will be entitled to
receive an amount equal to the par value of the Class B common stock before any
further payment is made with respect to the Class A common stock. Thereafter,
the remainder of the assets of Delhaize America will be distributed equally to
all shareholders pro rata according to the number of shares of common stock
held, regardless of class.
Holders of Class A common stock and Class B common stock have no preemptive
rights to subscribe for any additional securities of any class which Delhaize
America may issue, nor any conversion, redemption or sinking fund rights.
PREFERRED STOCK. As of , 2000, no shares of Delhaize America
preferred stock were outstanding. The Delhaize America board has the authority,
without further shareholder approval, to create a series of preferred stock, to
issue shares of preferred stock in such series up to the maximum number of
shares of the relevant class of preferred stock authorized, and to determine the
preferences, rights, privileges and restrictions of any such series, including
the dividend rights, voting rights, rights and terms of redemption, liquidation
preferences, the number of shares constituting any such series and the
designation of such series.
TRANSFER AGENT. The transfer agent for the Class A common stock and
Class B common stock is First Chicago Trust Company of New York.
EXPERTS
The audited financial statements of Delhaize America and of Hannaford
incorporated by reference in this document have been audited by
PricewaterhouseCoopers LLP, independent accountants, as indicated in their
reports with respect thereto, and have been incorporated herein in reliance upon
the authority of said firm as experts in giving said reports. With respect to
the unaudited consolidated financial information of Hannaford for the
three-month periods ended April 3, 1999, and April 4, 1998, the six-month
periods ended July 3, 1999, and July 4, 1998, and the nine-month periods ended
October 2, 1999, and October 3, 1998, incorporated by reference in this
document, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports dated April 21, 1999, July 21,
1999, and October 20, 1999, incorporated by reference herein, state that they
did not
III-14
<PAGE>
audit and they do not express an opinion on that unaudited consolidated
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. PricewaterhouseCoopers LLP is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited consolidated financial information because each report
is not a "report" or a "part" of the registration statement prepared or
certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11
of the Securities Act.
LEGAL MATTERS
The validity of the Delhaize America Class A common stock offered hereby
will be passed upon by Robinson, Bradshaw & Hinson, P.A. with respect to North
Carolina law.
FUTURE SHAREHOLDER PROPOSALS
Hannaford expects to hold an annual meeting of shareholders in 2000 only if
the merger is not consummated prior to July 2000. In the event of such a
meeting, proposals intended to be presented by shareholders at the 2000 annual
meeting of shareholders and included in Hannaford's proxy statement for such
meeting must be received by the Secretary of Hannaford at 145 Pleasant Hill
Road, Scarborough, Maine 04074, on or before a date to be determined by
Hannaford, which date shall be a reasonable time prior to the annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Delhaize America and Hannaford file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that are filed at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-8330 for further information on the public
reference room. SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
HTTP://WWW.SEC.GOV. Reports, proxy statements and other information concerning
Delhaize America and Hannaford also may be inspected at the offices of the NYSE
at 20 Broad Street, New York, NY 10005.
Delhaize America filed a registration statement on Form S-4 to register with
the SEC the Delhaize America Class A common stock that Delhaize America will
issue to the Hannaford shareholders in the merger. This document is part of that
registration statement and constitutes a prospectus of Delhaize America in
addition to being a proxy statement for Hannaford for its special meeting. As
allowed by SEC rules, this document does not contain all of the information you
can find in the registration statement or the exhibits to the registration
statement.
The SEC allows Hannaford and Delhaize America to "incorporate by reference"
information into this document, which means that Hannaford and Delhaize America
can disclose important information to you by referring to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this document, except for any information superseded by information
in this document. These documents contain important information about our
companies and their businesses and finances.
This document incorporates by reference the documents set forth below.
DELHAIZE AMERICA SEC FILINGS:
- Annual Report on Form 10-K for the fiscal year ended January 2, 1999, as
amended by Amendment No. 1 to Annual Report on Form 10-K/A filed on
August 17, 1999;
- Quarterly Report on Form 10-Q for the quarter ended September 11, 1999;
III-15
<PAGE>
- Quarterly Report on Form 10-Q for the quarter ended June 19, 1999, as
amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed on
August 17, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 27, 1999, as
amended by Amendment No. 1 to Quarterly Report on Form 10Q/A filed on
August 17, 1999;
- Current Report on Form 8-K filed August 19, 1999;
- Current Report on Form 8-K filed September 17, 1999; and
- The description of the Delhaize America Class A common stock contained in
the Registration Statement on Form 8-A filed with the SEC on March 1,
1984.
HANNAFORD SEC FILINGS:
- Annual Report on Form 10-K for the fiscal year ended January 2, 1999;
- Quarterly Report on Form 10-Q for the quarter ended April 3, 1999;
- Quarterly Report on Form 10-Q for the quarter ended July 3, 1999;
- Quarterly Report on Form 10-Q for the quarter ended October 2, 1999;
- Current Report on Form 8-K filed June 17, 1999;
- Current Report on Form 8-K filed June 21, 1999;
- Current Report on Form 8-K filed August 19, 1999;
- Current Report on Form 8-K filed September 1, 1999; and
- Definitive Proxy Statement on Schedule 14A for the Annual Meeting of
Shareholders held on May 19, 1999, filed April 5, 1999.
Delhaize America and Hannaford are also incorporating by reference
additional documents that they file with the SEC between the date of this
document and the date of the special meeting.
If you are a shareholder of Hannaford, we may have sent you some of the
documents listed above, but you can obtain any of them from us or the SEC.
Documents listed above are available from us without charge, excluding all
exhibits unless the exhibits have specifically been incorporated by reference in
this document. Shareholders may obtain documents listed above by requesting them
in writing from the appropriate company at the following address:
<TABLE>
<S> <C>
Delhaize America, Inc. P.O. Box 1330 Hannaford Bros. Co.
2110 Executive Drive 145 Pleasant Hill Road
Salisbury, North Carolina 28145 Scarborough, Maine 04074
Attn: Investor Relations Attn: Investor Relations
</TABLE>
If you would like to request documents from us, please do so by so
that you may receive them before the special meeting. You should rely only on
the information contained in this document to vote on the proposals submitted by
the Hannaford board. We have not authorized anyone to provide you with
information that is different from what is contained in this document. This
document is dated . You should not assume that the information
contained in this document is accurate as of any date other than such date, and
neither the mailing of this document to the shareholders of Hannaford nor the
issuance of Delhaize America Class A common stock in the merger shall create any
implication to the contrary.
Delhaize America has provided all of the information contained in this
document with respect to Delhaize America, and Hannaford has provided all of the
information contained in this document with respect to Hannaford.
YOU ARE URGED TO SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE
ENCLOSED PREPAID ENVELOPE. PROMPT RETURN OF YOUR PROXY MAY SAVE HANNAFORD
ADDITIONAL SOLICITATION EXPENSE.
WE ENCOURAGE ALL SHAREHOLDERS OF HANNAFORD TO ATTEND THE SPECIAL MEETING ON
.
III-16
<PAGE>
ANNEX A
[CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 17, 1999
AMONG
FOOD LION, INC.,
HANNAFORD BROS. CO.
AND
FL ACQUISITION SUB, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
Article 1 The Merger........................................ A-1
Section 1.01 The Merger................................... A-1
Section 1.02 Articles of Incorporation.................... A-2
Section 1.03 Bylaws....................................... A-2
Section 1.04 Directors and Officers....................... A-2
Article 2 Conversion of Securities.......................... A-2
Section 2.01 Conversion of Securities..................... A-2
Section 2.02 Surrender of Certificates.................... A-5
Section 2.03 No Further Ownership Rights in Company Common
Stock................................................... A-6
Section 2.04 Lost, Stolen or Destroyed Certificates....... A-6
Section 2.05 Withholding Rights........................... A-6
Section 2.06 Dissenting Shares............................ A-7
Section 2.07 Stock Option and Other Stock Plans........... A-7
Article 3 Representations and Warranties of Company......... A-8
Section 3.01 Organization and Power....................... A-8
Section 3.02 Corporate Authorization...................... A-9
Section 3.03 Governmental Authorization................... A-9
Section 3.04 Non-Contravention............................ A-9
Section 3.05 Capitalization of Company.................... A-10
Section 3.06 Capitalization of Subsidiaries............... A-10
Section 3.07 SEC Filings.................................. A-11
Section 3.08 Financial Statements......................... A-11
Section 3.09 Disclosure Documents......................... A-11
Section 3.10 Information Supplied......................... A-12
Section 3.11 Absence of Certain Changes................... A-12
Section 3.12 No Undisclosed Material Liabilities.......... A-13
Section 3.13 Litigation................................... A-13
Section 3.14 Taxes........................................ A-13
Section 3.15 Employee Benefit Plans; ERISA................ A-14
Section 3.16 Compliance with Laws; No Default............. A-16
Section 3.17 No Default................................... A-16
Section 3.18 Finders' Fees................................ A-16
</TABLE>
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<TABLE>
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<S> <C>
Section 3.19 Environmental Matters........................ A-16
Section 3.20 Opinion of Financial Advisor................. A-17
Section 3.21 [Intentionally deleted]...................... A-17
Section 3.22 Takeover Statutes............................ A-17
Section 3.23 Affiliates................................... A-17
Section 3.24 Company's Articles of Incorporation.......... A-17
Section 3.25 Company Rights Agreement..................... A-17
Article 4 Representations and Warranties of Parent.......... A-18
Section 4.01 Organization and Power....................... A-18
Section 4.02 Corporate Authorization...................... A-18
Section 4.03 Governmental Authorization................... A-18
Section 4.04 Non-Contravention............................ A-18
Section 4.05 Capitalization of Parent..................... A-19
Section 4.06 Capitalization of Subsidiaries............... A-19
Section 4.07 SEC Filings.................................. A-20
Section 4.08 Financial Statements......................... A-20
Section 4.09 Disclosure Documents......................... A-20
Section 4.10 Information Supplied......................... A-20
Section 4.11 Absence of Certain Changes................... A-21
Section 4.12 No Undisclosed Material Liabilities.......... A-22
Section 4.13 Litigation................................... A-22
Section 4.14 Taxes........................................ A-22
Section 4.15 Employee Benefits, ERISA..................... A-22
Section 4.16 Compliance with Laws......................... A-23
Section 4.17 No Default................................... A-24
Section 4.18 Finders' Fees................................ A-24
Section 4.19 Environmental Matters........................ A-24
Section 4.20 [Intentionally Deleted]...................... A-24
Section 4.21 Takeover Statutes............................ A-24
Section 4.22 Affiliates................................... A-25
Section 4.23 Merger Subsidiary............................ A-25
Section 4.24 Financing.................................... A-25
Article 5 Covenants......................................... A-25
</TABLE>
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<S> <C>
Section 5.01 Conduct of Company........................... A-25
Section 5.02 Conduct of Parent............................ A-27
Section 5.03 Shareholder Meeting; Proxy Materials; Form
S-4..................................................... A-28
Section 5.04 Access to Information........................ A-29
Section 5.05 No Solicitation.............................. A-29
Section 5.06 Notice of Certain Events..................... A-30
Section 5.07 Reasonable Best Efforts...................... A-31
Section 5.08 Cooperation.................................. A-32
Section 5.09 Public Announcements......................... A-32
Section 5.10 Further Assurances........................... A-32
Section 5.11 Affiliates................................... A-32
Section 5.12 Director and Officer Liability............... A-33
Section 5.13 Obligations of Merger Subsidiary............. A-33
Section 5.14 Listing of Stock............................. A-33
Section 5.15 Antitakeover Statutes........................ A-33
Section 5.16 Parent Board................................. A-34
Section 5.17 Employee Benefits............................ A-34
Section 5.18 Stock Exchange Agreement..................... A-34
Section 5.19 Definitive Financing Documents............... A-34
Article 6 Conditions to the Merger.......................... A-35
Section 6.01 Conditions to the Obligations of Each
Party................................................... A-35
Section 6.02 Conditions to the Obligations of Parent and
Merger Subsidiary....................................... A-35
Section 6.03 Conditions to the Obligations of Company..... A-35
Article 7 Termination....................................... A-36
Section 7.01 Termination.................................. A-36
Section 7.02 Effect of Termination........................ A-37
Section 7.03 Payments..................................... A-37
Article 8 Miscellaneous..................................... A-37
Section 8.01 Certain Definitions.......................... A-37
Section 8.02 Notices...................................... A-38
Section 8.03 Entire Agreement;Non-Survival of
Representations and Warranties; Third Party
Beneficiaries........................................... A-38
Section 8.04 Amendments; No Waivers....................... A-38
Section 8.05 Successors and Assigns....................... A-39
</TABLE>
iii
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<S> <C>
Section 8.06 Governing Law................................ A-39
Section 8.07 Jurisdiction................................. A-39
Section 8.08 Counterparts; Effectiveness.................. A-39
Section 8.09 Interpretation............................... A-39
Section 8.10 Severability................................. A-39
Section 8.11 Specific Performance......................... A-39
Section 8.12 Joint and Several Liability.................. A-40
</TABLE>
<TABLE>
<S> <C>
Schedules
Exhibit A Form of Company Voting Agreement
Exhibit B Stock Exchange Agreement
Exhibit C Registration Rights Agreement
</TABLE>
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[CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 17, 1999, among FOOD
LION, INC., a North Carolina corporation ("PARENT"), HANNAFORD BROS. CO., a
Maine corporation ("COMPANY"), and FL ACQUISITION SUB, INC., a Maine corporation
and a wholly-owned subsidiary of Parent ("MERGER SUBSIDIARY").
WHEREAS, the respective Boards of Directors of Parent and Company have
approved, and deem it advisable and in the best interests of their respective
shareholders to consummate, the merger of Merger Subsidiary with and into
Company on the terms and conditions set forth herein;
WHEREAS, pursuant to the Merger, among other things, each issued and
outstanding share of Company Common Stock, including Company Rights (each as
defined in Section 2.01(a)), issued and outstanding immediately prior to the
effective time, other than shares held directly by Parent or shares held by
Dissenting Holders (as defined in Section 2.06) will be converted into the right
to receive Merger Consideration (as defined in Section 2.02(b));
WHEREAS, as a condition and inducement to Parent's willingness to enter into
this Agreement, concurrently with the execution and delivery of this Agreement,
Parent and certain stockholders of Company (the "VOTING STOCKHOLDERS") are
entering into a voting agreement dated as of the date of this Agreement (the
"COMPANY VOTING AGREEMENT"), a form of which is attached hereto as Exhibit A,
pursuant to which such stockholders agree to vote their shares of Company Common
Stock (as hereinafter defined) in favor of the proposal to approve and adopt the
Merger and this Agreement;
WHEREAS, simultaneously with the execution of this Agreement, Parent and the
Voting Stockholders are entering into a Stock Exchange Agreement (the "STOCK
EXCHANGE AGREEMENT"), a form of which is attached hereto as Exhibit B, whereby
the Voting Stockholders agree to sell shares of Company Common Stock to Parent
in exchange for shares of Parent Common Stock (as defined herein) and cash as
set forth therein, such transaction to be consummated immediately prior to the
consummation of the Merger; and
WHEREAS, simultaneously with the execution of this Agreement, Parent and
certain stockholders are entering into a Registration Rights Agreement, a form
of which is attached hereto as Exhibit C, whereby Company has agreed to register
the resale of the shares of Parent Common Stock that such stockholders will
receive in connection with the Merger and the Stock Exchange Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.01 THE MERGER. (a) Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as hereinafter defined),
Merger Subsidiary shall be merged (the "Merger") with and into Company in
accordance with the Maine Business Corporation Act (the "Maine Law"), whereupon
the separate existence of Merger Subsidiary shall cease, and Company shall
continue as the surviving corporation (the "Surviving Corporation").
(b) Upon the terms and subject to the conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m. on a date
(the "Closing Date") which shall be the second business day after satisfaction
or waiver of the conditions set forth in Article 6, other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver
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of those conditions, at the offices of Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York 10153, or at such other time, date or place as agreed
to in writing by the parties hereto.
(c) Upon the Closing, Company and Merger Subsidiary will file articles of
merger, with an attached plan of merger in a form to be agreed upon by the
parties in accordance with the terms of this Agreement, with the Secretary of
State of the State of Maine and make all other filings or recordings required by
the Maine Law in connection with the Merger. The Merger shall become effective
at such time as the articles of merger are duly filed with the Secretary of
State of the State of Maine or at such later time as is agreed by Parent and
Company and specified in the articles of merger (the "Effective Time").
(d) The Merger shall have the effects set forth in Section 905 of the Maine
Law.
Section 1.02 ARTICLES OF INCORPORATION. The articles of incorporation of
Company shall be the articles of incorporation of the Surviving Corporation,
except that, at the Effective Time, certain amendments thereto as agreed to by
Parent and Company shall be effected in the articles of merger filed pursuant to
Section 1.01(c).
Section 1.03 BYLAWS. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 1.04 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
the Maine Law and the articles of incorporation and bylaws of the Surviving
Corporation, (a) the directors of Merger Subsidiary at the Effective Time shall
be the directors of the Surviving Corporation, and (b) the officers of Company
at the Effective Time shall be the officers of the Surviving Corporation.
ARTICLE 2
CONVERSION OF SECURITIES
Section 2.01 CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any capital
stock of Parent, Merger Subsidiary or Company:
(a) COMPANY COMMON STOCK. Each share of common stock, par value $0.75 per
share, of Company ("Company Common Stock"), including the associated right (the
"Company Rights") to purchase shares of Series A Junior Participating Preferred
Stock, no par value, of Company, pursuant to the terms of the Rights Agreement,
dated as of December 16, 1997, between Company and Continental Stock Transfer
and Trust Company (the "Company Rights Agreement"), issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock held directly by Parent, all of which shares shall be cancelled and
extinguished, or shares held by Dissenting Holders (as defined in
Section 2.06)) automatically will be converted into the right to receive,
pursuant to the provisions of this Section 2.01:
(i) (A) $79.00 in cash, without interest (the "Per Share Cash Amount")
or (B) the number of fully paid and non-assessable shares of Class A common
stock ("Parent Common Stock"), of Parent equal to $79.00 divided by (i) the
average of the per share last sales prices, regular way (rounded to 4
decimal points, the "Average Parent Price") of the Parent Common Stock as
reported on the New York Stock Exchange, Inc. (the "NYSE") composite
transactions reporting system as reported in the New York City edition of
The Wall Street Journal, or, if not reported therein, another authoritative
source) for the ten consecutive trading days (the "Average Period") prior to
(but not including) the Closing Date or (ii) $ 9.00, whichever is higher
(the "Exchange Ratio") or (C) a combination of cash and shares of Parent
Common Stock, all as determined in accordance with this Section 2.01.
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(ii) The aggregate number of shares of Company Common Stock to be
converted into the right to receive cash in the Merger (the "Cash Election
Number") shall be 27,316,686 shares plus 86% of any shares of Company Common
Stock issued after the date hereof pursuant to the exercise of Company Stock
Options outstanding at the date hereof. The remaining number of shares of
Company Common Stock outstanding immediately prior to the Effective Time
(the "Stock Election Number"), will be converted into the right to receive
Parent Common Stock in the Merger.
(iii) Subject to the allocation and election procedures set forth in
this Section 2.01, each record holder of shares of Company Common Stock
immediately prior to the Effective Time will be entitled in respect of each
such share to (i) elect to receive cash for such share (a "Cash Election"),
(ii) elect to receive Parent Common Stock for such share (a "Stock
Election"), or (iii) indicate that such record holder has no preference as
to the receipt of cash or Parent Common Stock for such share (a
"Non-Election"). All such elections will be made on a form designated for
that purpose (a "Form of Election").
(iv) If the aggregate number of shares covered by Cash Elections (the
"Cash Election Shares") exceeds the Cash Election Number, all shares of
Company Common Stock covered by Stock Elections (the "Stock Election
Shares") and all shares of Company Common Stock covered by Non-Elections or
as to which no election is made (the "Non-Election Shares") will be
converted into the right to receive Parent Common Stock, and the Cash
Election Shares (which, for the purposes of the calculation below, shall
include Dissenting Shares, if any) will be converted into the right to
receive cash and Parent Common Stock in the following manner:
Each Cash Election Share will be converted into the right to receive
(A) an amount of cash, without interest, equal to the product of (x) the
Per Share Cash Amount and (y) a fraction (the "CASH FRACTION"), the
numerator of which is the Cash Election Number and the denominator of
which will be the total number of Cash Election Shares, and (B) a number
of shares of Parent Common Stock equal to the product of (x) the Exchange
Ratio and (y) a fraction equal to one minus the Cash Fraction.
(v) If the aggregate number of Stock Election Shares exceeds the Stock
Election Number, all Cash Election Shares and all Non-Election Shares will
be converted into the right to receive cash, and all Stock Election Shares
will be converted into the right to receive Parent Common Stock and cash in
the following manner:
Each Stock Election Share will be converted into the right to receive
(A) an amount of shares of Parent Common Stock equal to the product of
(x) the Exchange Ratio and (y) a fraction (the "STOCK FRACTION"), the
numerator of which will be the Stock Election Number and the denominator
of which will be the total number of Stock Election Shares, and (B) an
amount in cash, without interest, equal to the product of (x) the Per
Share Cash Amount and (y) a fraction equal to one minus the Stock
Fraction.
(vi) In the event that neither subparagraph (iv) or subparagraph
(v) above is applicable, all Cash Election Shares will be converted into the
right to receive cash, all Stock Election Shares will be converted into the
right to receive Parent Common Stock, and all Non-Election Shares will be
converted into the right to receive (A) an amount in cash equal to the
product of (x) the Per Share Cash Amount and (y) a fraction, the numerator
of which is the Cash Election Number less the Cash Election Shares (which,
for the purposes of this calculation, shall include Dissenting Shares, if
any) and the denominator of which is the Non-Election Shares and (B) a
number of shares of Parent Common Stock equal to the product of (x) the
Exchange Ratio and (y) a fraction, the numerator of which is the Stock
Election Number less the Stock Election Shares and the denominator of which
is the Non-Election Shares.
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(b) Election Procedure.
(i) Parent and Company each will use its reasonable best efforts to
cause a Form of Election to be mailed not less than thirty (30) days prior
to the anticipated Effective Time to all holders of record of shares of
Company Common Stock and to make the Form of Election available to all
persons who become record holders of Company Common Stock subsequent to such
time. Elections will be made by record holders of Company Common Stock by
mailing to the Exchange Agent a Form of Election. Holders of record of
shares of Company Common Stock who hold such shares as nominees, trustees or
in other representative capacities (a "Stock Representative") may submit
multiple Forms of Election, provided that such Stock Representative
certifies that each such Form of Election covers all the shares of Company
Common Stock held by each Stock Representative for a particular beneficial
owner. To be effective, a Form of Election must be properly completed,
signed and submitted to the Exchange Agent. Parent will have the discretion,
which it may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of Parent (or the Exchange Agent) in such matters, if
reasonably reached, will be conclusive and binding. Neither Parent nor the
Exchange Agent will be under any obligation to notify any person of any
defect in a Form of Election submitted to the Exchange Agent. The Exchange
Agent will make all computations contemplated by this Section 2.01 and all
such computations will be conclusive and binding on the holders of Company
Common Stock.
(ii) For the purposes hereof, a record holder of Company Common Stock
who does not submit a Form of Election that is received by the Exchange
Agent prior to the Election Deadline (as defined herein) will be deemed to
have made a Non-Election. If Parent or the Exchange Agent determine that any
purported Cash Election or Stock Election was not properly made (and any
such defect is not subsequently cured), such purported Cash Election or
Stock Election will be deemed to be of no force and effect and the
shareholder making such purported election will for purposes hereof be
deemed to have made a Non-Election.
(iii) A Form of Election must be received by the Exchange Agent by the
close of business on the last business day prior to the day during which the
Effective Time occurs (the "Election Deadline") in order to be effective.
All elections may be revoked by record holders submitting the Forms of
Election if such revocation is in writing and received by the Exchange Agent
prior to the Election Deadline.
(c) CANCELLATION OF CERTAIN SHARES. Each share of Company Common Stock
held in the treasury of Company or owned by Parent or Merger Subsidiary
immediately prior to the Effective Time shall be cancelled and extinguished, and
no consideration shall be delivered therefor.
(d) CAPITAL STOCK OF MERGER SUBSIDIARY. Each share of Common Stock, $0.75
par value, of Merger Subsidiary issued and outstanding immediately prior to the
Effective Time shall automatically be converted into one validly issued, fully
paid and non-assessable share of common stock, $0.75 par value, of the Surviving
Corporation.
(e) ADJUSTMENT. The Exchange Ratio, all references to $9.00 in Section
2.07 hereof, the reference to 21,838,944 shares of Parent Common Stock contained
in Section 2.07(a) hereof and the reference to the per share cash dividend
amount contained in Section 5.02(f) hereof, shall be adjusted to reflect fully
the effect of any stock split, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock occurring after the date hereof and having a record or effective
date prior to the Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise
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be entitled to a fraction of a share of Parent Common Stock (after aggregating
all fractional shares of Parent Common Stock to be received by such holder)
shall receive from Parent an amount of cash (rounded down to the nearest whole
cent), without interest thereon, equal to the product of (i) such fraction and
(ii) the Closing Date Price.
For purposes hereof, the "CLOSING DATE PRICE" of a share of Parent Common
Stock shall be the closing sales price of a share of Parent Common Stock as
reported on the NYSE for the trading day immediately prior to the day during
which the Effective Time occurs.
Section 2.02 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall select a bank or trust company reasonably
acceptable to Company, which may be Parent's existing transfer agent, to act as
the exchange agent (the "Exchange Agent") in the Merger.
(b) PARENT TO PROVIDE MERGER CONSIDERATION. At the Closing, Parent shall
make available to the Exchange Agent for exchange in accordance with this
Article 2 certificates for the shares of Parent Common Stock issuable, and cash
payable, pursuant to Section 2.01(a) in exchange for outstanding shares of
Company Common Stock and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 2.01(f) and any dividends or distributions
to which holders of shares of Company Common Stock may be entitled pursuant to
Section 2.02(d). The shares of Parent Common Stock issuable pursuant to
Section 2.01(a) and the cash payable pursuant to Sections 2.01(a) and (f) and
Section 2.02(d) are referred to collectively as the "Merger Consideration."
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record as of the Effective
Time a certificate or certificates (the "Certificates") that immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive a pro rata portion of the
Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent shall reasonably specify)
and (ii) instructions for effecting the exchange of the Certificates for a pro
rata portion of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a pro rata portion
of the Merger Consideration in accordance with Section 2.01, and the Certificate
so surrendered shall forthwith be cancelled. Until so surrendered, each
outstanding Certificate will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 2.02(d) as to the payment of
dividends, to evidence only the ownership of the number of full shares of Parent
Common Stock and the aggregate Per Share Cash Amount into which the shares of
Company Common Stock evidenced by such Certificate shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 2.01(f) and any dividends or
distributions payable pursuant to Section 2.02(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable abandoned property, escheat or similar laws, following surrender of
any such Certificate, there shall be delivered to the record holder thereof,
(i) a certificate representing whole shares of Parent Common Stock and the
aggregate Per Share Cash Amount issuable and payable in exchange for such
Certificate, without interest, (ii) payments of the amount of dividends or other
distributions with a record date after the
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Effective Time then payable with respect to such whole shares of Parent Common
Stock and (iii) cash in lieu of any fractional shares in accordance with
Section 2.01(f).
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered or if any other portion of the
Merger Consideration is to be payable to a person other than the person to whom
such Certificate is registered, it will be a condition of the issuance and
payment thereof that the Certificate so surrendered will be properly endorsed,
accompanied by any documents required to evidence and effect such transfer and
otherwise be in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any applicable
transfer taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name, or the payment of any other portion of the
Merger Consideration to any person, other than that of the registered holder of
the Certificate surrendered, or shall provide evidence that any applicable
transfer taxes have been paid.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 2.02, none of the Exchange Agent, Parent, the Surviving Corporation nor
any other party hereto shall be liable to any person in respect of any Merger
Consideration for any amount properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) TERMINATION OF EXCHANGE AGENT. Any Merger Consideration made available
to the Exchange Agent pursuant to Section 2.02(b) and not exchanged within
twelve months after the Effective Time pursuant to this Section 2.02 shall be
returned by the Exchange Agent to Parent, which shall thereafter act as Exchange
Agent, and thereafter any holder of unsurrendered Certificates shall look as a
general creditor only to Parent for payment of any funds to which such holder
may be due, subject to applicable law.
Section 2.03 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration issued and paid in exchange of shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article 2.
Section 2.04 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
deliver in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration; provided, however, that Parent may, in its discretion and as a
condition precedent to such delivery, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
Section 2.05 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled, or shall be entitled to cause the Exchange Agent, to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as
it is required to deduct and withhold with respect to the making of such payment
under the Code and the rules and regulations promulgated thereunder, or any
provision of a Tax law. To the extent that amounts are so withheld by the
Surviving Corporation, Parent or the Exchange Agent, as the case may be, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect to which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be.
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Section 2.06 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary, any
issued and outstanding shares of Company Common Stock held by a person who has
demanded appraisal of such shares in accordance with Section 909 of the Maine
Law ("Dissenting Holder") and as of the Effective Time has neither effectively
withdrawn nor lost his right to such appraisal ("Dissenting Shares"), shall not
be converted into or represent a right to receive cash and/or Parent Common
Stock pursuant to Section 2.01(a) but such Dissenting Holder thereof shall be
entitled to only such rights in respect thereof as are granted by Section 909 of
the Maine Law.
(b) Notwithstanding the provision of subsection (a) of this Section, if any
Dissenting Holder who demands appraisal of his shares of Company Common Stock
under the Maine Law shall effectively withdraw or lose his right to appraisal,
then as of the Effective Time or the occurrence of such event, whichever later
occurs, such shares automatically shall be converted into and represent only the
right to receive cash and/or Parent Common Stock as provided in
Section 2.01(a), without interest thereon, upon surrender of the certificate or
certificates representing such shares.
(c) Company shall give Parent (i) prompt notice of any written demands for
appraisal or payment of the fair value of any shares of Company Common Stock,
withdrawals of such demands and any other related instruments served pursuant to
the Maine Law received by Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
Maine Law. Company shall not voluntarily make any payment with respect to any
demands for appraisal and shall not, except with the prior written consent of
Parent and Merger Subsidiary, settle or offer to settle any such demands.
Section 2.07 STOCK OPTION AND OTHER STOCK PLANS.
(a) As soon as practicable following the date of this Agreement, Parent and
Company shall take such action with respect to Company's 1998 Stock Option Plan,
Employee Stock Purchase Plan, 1988 Stock Plan and Stock Ownership Plan for
Outside Directors (collectively, the "Company Option Plans") as may be required
to effect the following provisions of this Section 2.07(a). At the Effective
Time, each option to purchase shares of Company Common Stock pursuant to the
Company Option Plans that is then outstanding, whether vested or unvested (each
a "Company Stock Option"), shall be assumed by Parent and converted into an
immediately exercisable option (or a new substitute option shall be granted)
(each, as so adjusted, an "Adjusted Option") to purchase the number of shares of
Parent Common Stock (rounded up to the nearest whole share) equal to (x) the
number of shares of Company Common Stock subject to such option multiplied by
(y) $79 divided by the Average Parent Price, at an exercise price per share of
Parent Common Stock (rounded down to the nearest penny) equal to (A) the former
exercise price per share of Company Common Stock under such option immediately
prior to the Effective Time divided by (B) $79 divided by the Average Parent
Price; provided, however, that if the Average Parent Price is less than $9.00,
the total number of shares of Parent Common Stock which may be issued pursuant
to the exercise of Adjusted Options during the one-year period following the
Effective Time (excluding Adjusted Options exercised by any Company employee
following the termination of his or her employment by the Company during such
one-year period) shall not exceed 21,838,944; provided, further, however, that
in the case of any Company Stock Option to which Section 421 of the Code applies
by reason of its qualification under Section 422 of the Code, the conversion
formula in this paragraph shall be adjusted, if necessary, to comply with
Section 424(a) of the Code. Except as provided above, the Adjusted Options shall
be subject to the same terms and conditions as were applicable to the converted
option immediately prior to the Effective Time. After the date hereof, the
Company shall determine (with the prior consent of Parent) the manner in which
the maximum number of shares specified above will be apportioned among holders
of Adjusted Options if the Average Parent Price is less than $9.00.
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(b) As soon as practicable after the Effective Time (but in no event more
than 30 days thereafter), Parent shall deliver to the holders of Company Stock
Options appropriate notices setting forth such holders' rights pursuant to the
respective Company Option Plans and the agreements evidencing the grants of such
Company Stock Options and stating that such Company Stock Options and agreements
shall be assumed by Parent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 2.07 after
giving effect to the Merger). Parent shall comply with the terms of the Company
Option Plans and ensure that the Company Stock Options that qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time.
(c) Parent shall take such actions as are reasonably necessary for the
assumption of the Company Option Plans pursuant to this Section 2.07, including
the reservation, issuance and listing of Parent Common Stock as is necessary to
effectuate the transactions contemplated by this Section 2.07. Parent shall
prepare and file with the SEC (as hereinafter defined) a registration statement
on Form S-8 or other appropriate form with respect to shares of Parent Common
Stock subject to Adjusted Options issued under such Company Option Plans and
shall use its reasonable best efforts to have such registration statement
declared effective immediately following the Effective Time and to maintain the
effectiveness of such registration statement or registration statements covering
such Adjusted Options (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Adjusted Options remain
outstanding.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent that:
Section 3.01 ORGANIZATION AND POWER. (a) Each of Company and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the requisite corporate or other power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Company.
For purposes of this Agreement, a "MATERIAL ADVERSE EFFECT" with respect to
Company or Parent, as the case may be, means a material adverse effect (i) on
the financial condition, business, properties, or results of operations of such
person and its Subsidiaries, taken as a whole, or (ii) on the ability of such
person to perform its obligations under or to consummate the transactions
contemplated by this Agreement, provided that none of the following shall
constitute a Material Adverse Effect: (i) occurrences affecting Company's or
Parent's or any of their respective Subsidiaries' businesses as a result of the
announcement of the execution of this Agreement; (ii) general economic
conditions; (iii) any changes generally affecting the industries in which
Company and its Subsidiaries or Parent and its Subsidiaries operate; or
(iv) changes in Company's business after the date hereof attributable solely to
actions taken by Parent.
(b) Section 3.01 of the disclosure schedule delivered by Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule")
sets forth a complete list of Company's Subsidiaries that are "significant
subsidiaries", as such term is defined in Section 1-02 of Regulation S-X under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "1934 Act") (each, a "Significant Subsidiary").
Company has heretofore
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delivered to Parent true and complete copies of Company's articles of
incorporation and bylaws as currently in effect.
Section 3.02 CORPORATE AUTHORIZATION. (a) The execution, delivery and
performance by Company of this Agreement and the consummation by Company of the
transactions contemplated hereby are within Company's corporate powers and,
except as set forth in the next succeeding sentence of this Section 3.02, have
been duly authorized by all necessary corporate action. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote on this Agreement (the "Company Requisite Vote") is the only
vote of any class or series of Company's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Company and constitutes a
valid and binding agreement of Company, enforceable against Company in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding at equity or at
law).
(b) The Board of Directors of Company (the "Company Board") has, by
unanimous vote of those present, duly and validly authorized the execution and
delivery of this Agreement and approved the consummation of the transactions
contemplated hereby, and taken all corporate actions required to be taken by the
Company Board for the consummation of the transactions, including the Merger,
contemplated hereby and has resolved to (i) deem this Agreement and the
transactions contemplated hereby, including the Merger, taken together,
advisable and fair to, and in the best interests of, Company and its
shareholders and (ii) recommend that the shareholders of Company approve and
adopt this Agreement. The Company Board has directed that this Agreement be
submitted to the shareholders of Company for their approval.
Section 3.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Company of this Agreement, and the consummation by Company of the
transactions contemplated hereby, require no action by or in respect of, or
filing with, any federal, state or local government or any court, administrative
agency or commission or other governmental agency or authority (a "Governmental
Authority") other than: (a) the filing of articles of merger with respect to the
Merger with the Secretary of State of the State of Maine and appropriate
documents with the relevant authorities of other states in which Company is
qualified to do business; (b) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and similar state antitrust statutes; (c) compliance with any applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "1933 Act"); (d) compliance with any
applicable requirements of the 1934 Act; (e) compliance with any other
applicable securities laws; (f) those that may be required solely by reason of
Parent's or Merger Subsidiary's (as opposed to any other third party's)
participation in the transactions contemplated by this Agreement; (g) actions or
filings which, if not taken or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Company; and (h) filings and
notices not required to be made or given until after the Effective Time.
Section 3.04 NON-CONTRAVENTION. Except as set forth on Section 3.04 of the
Company Disclosure Schedule, the execution, delivery and performance by Company
of this Agreement do not, and the consummation by Company of the transactions
contemplated hereby will not: (a) assuming receipt of the approval of
shareholders referred to in Section 3.02, contravene or conflict with the
articles of incorporation, bylaws or similar organizational documents of Company
or any of its Significant Subsidiaries; (b) assuming compliance with the matters
referred to in Section 3.03, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Company or its Subsidiaries;
(c) constitute a default (or an event which with notice, the lapse of time or
both would become a default) under or give rise to a
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right of termination, cancellation or acceleration of any right or obligation of
Company or any of its Subsidiaries or to a loss of any benefit to which Company
or any of its Subsidiaries is entitled under any provision of any agreement,
contract or other instrument binding upon Company or any of its Subsidiaries and
which either has a term of more than one year or involves the payment or receipt
of money in excess of $1,000,000 (a "Company Agreement") or any license,
franchise, permit or other similar authorization held by Company or any of its
Subsidiaries; or (d) result in the creation or imposition of any Lien on any
asset of Company or any of its Subsidiaries, except for such contraventions,
conflicts or violations referred to in clause (b) or defaults, rights of
termination, cancellation or acceleration, losses or Liens referred to in
clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on Company. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
Section 3.05 CAPITALIZATION OF COMPANY. (a) The authorized capital stock
of Company consists of 110,000,000 shares of Company Common Stock, 2,000,000
shares of preferred stock, no par value (the "Class A Serial Preferred Stock")
and 28,000,000 shares of preferred stock, par value $.01 per share (the
"Class B Serial Preferred Stock"). As of the close of business on August 16,
1999, 42,182,153 shares of Company Common Stock were issued and outstanding,
625,000 shares of Company Common Stock were reserved for issuance under
Company's Employee Stock Purchase Plan, 200,000 shares of Company Common Stock
were reserved for issuance under Company's 1998 Restricted Stock Plan (the
"Restricted Stock Plan"), 2,487,981 shares of Company Common Stock were reserved
for issuance pursuant to options previously granted pursuant to the Company
Stock Option Plans and no shares of Class A Serial Preferred Stock or Class B
Serial Preferred Stock were issued and outstanding. 2,000,000 shares of
Series A Junior Participating Preferred Stock have been designated from the
Class A Serial Preferred Stock and reserved for issuance pursuant to the Company
Rights Agreement. All the outstanding shares of Company's capital stock are, and
all shares which may be issued pursuant to the Company Stock Option Plans and
the Restricted Stock Plan will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and non-assessable.
Except (i) as set forth in this Section 3.05 or in Section 5.01 of the Company
Disclosure Schedule, (ii) for the transactions contemplated by this Agreement,
including those permitted in accordance with Section 5.01(f), (iii) for changes
since August 16, 1999 resulting from the exercise of employee and director stock
options outstanding on such date and (iv) for rights to purchase shares of
Series A Junior Participating Preferred Stock issuable pursuant to the Company
Rights Agreement, there are outstanding (x) no shares of capital stock or other
voting securities of Company, (y) no securities of Company convertible into or
exchangeable for shares of capital stock or voting securities of Company, and
(z) no options, warrants or other rights to acquire from Company, and no
preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of Company, obligating Company to issue, transfer or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Company or obligating
Company to grant, extend or enter into any such option, warrant, subscription or
other right, convertible security, agreement, arrangement or commitment (the
items in clauses (x), (y) and (z) being referred to collectively as the "Company
Securities"). None of Company or its Subsidiaries has any contractual obligation
to redeem, repurchase or otherwise acquire any Company Securities or any Company
Subsidiary Securities (as hereinafter defined), including as a result of the
transactions contemplated by this Agreement.
(b) Except as set forth in Section 3.05 of the Company Disclosure Schedule,
there are no voting trusts or other agreements or understandings to which
Company or any of its Subsidiaries is a party with respect to the voting of the
capital stock of Company or any of its Subsidiaries.
Section 3.06 CAPITALIZATION OF SUBSIDIARIES. Except as set forth in
Section 3.06 of the Company Disclosure Schedule, all of the outstanding shares
of capital stock of, or other ownership interests in,
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each Subsidiary of Company, is owned by Company, directly or indirectly, free
and clear of any consensual Lien (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests). There are no outstanding (i) securities of Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of Company, or
(ii) options or other rights to acquire from Company or any of its Subsidiaries,
and no other obligation of Company or any of its Subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for, any capital stock, voting
securities or ownership interests in, any Subsidiary of Company (the items in
clauses (i) and (ii) being referred to collectively as the "Company Subsidiary
Securities").
Section 3.07 SEC FILINGS. (a) Company has filed all required reports,
schedules, forms, statements and other documents with the Securities and
Exchange Commission (the "SEC") since June 30, 1997 (the "Company SEC
Documents").
(b) As of its filing date, each Company SEC Document filed pursuant to the
1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except to the extent that such statements have been modified or superseded by a
later filed Company SEC Document.
(c) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the 1933 Act as of the date
such registration statement or amendment became effective did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
except to the extent that such statements have been modified or superseded by a
later filed Company SEC Document.
Section 3.08 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Company
included in Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999 and its Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999 (the "Company 10-Q") have been prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of Company and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited interim financial statements). For purposes of this Agreement,
"Company Balance Sheet" means the consolidated balance sheet of Company as of
July 3, 1999 set forth in the Company 10-Q and "Company Balance Sheet Date"
means July 3, 1999.
Section 3.09 DISCLOSURE DOCUMENTS. Insofar as the information contained
therein relates solely to Company, neither the proxy statement of Company (the
"Company Proxy Statement") to be filed with the SEC in connection with the
Merger, nor any amendment or supplement thereto, will, at the date the Company
Proxy Statement or any such amendment or supplement is first mailed to
shareholders of Company or at the time such shareholders vote on the adoption
and approval of this Agreement, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company Proxy Statement will, when filed, comply as to form in
all material respects with the requirements of the 1934 Act. No representation
or warranty is made by Company in this Section 3.09 with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Merger Subsidiary for inclusion or incorporation by reference in the
Company Proxy Statement.
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Section 3.10 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Company for inclusion or incorporation by reference in the
Form S-4 (as hereinafter defined) or any amendment or supplement thereto will,
at the time the Form S-4 or any such amendment or supplement becomes effective
under the 1933 Act or at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Section 3.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement or as disclosed
in Section 3.11 of the Company Disclosure Schedule, since July 3, 1999, Company
and its Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had a Material Adverse Effect on Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Company, or any
repurchase, redemption or other acquisition by Company or any of its
Subsidiaries of any amount of outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Company or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Company or any
of its Subsidiaries that would materially increase the obligations of Company or
such Subsidiary under such security;
(d) (x) any incurrence or assumption by Company or any of its Subsidiaries
of any indebtedness for borrowed money other than under existing credit
facilities (or any renewals, replacements or extensions that do not increase the
aggregate commitments thereunder) (A) in the ordinary course of business
consistent with past practice (it being understood that any indebtedness
incurred prior to the date hereof in respect of capital expenditures shall be
considered to have been in the ordinary course of business consistent with past
practice) or (B) in connection with any acquisition or capital expenditure
permitted by Section 5.01 or (y) any guarantee, endorsement or other incurrence
or assumption of liability (whether directly, contingently or otherwise) by
Company or any of its Subsidiaries for the obligations of any other person
(other than any wholly owned Subsidiary of Company), other than in the ordinary
course of business consistent with past practice;
(e) any creation or assumption by Company or any of its Subsidiaries of any
consensual Lien on any material asset of Company or any of its Subsidiaries
other than in the ordinary course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or investment
in any person by Company or any of its Subsidiaries other than (i) any
acquisition permitted by Section 5.01, (ii) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of Company or
(iii) loans or advances to employees of Company or any of its Subsidiaries made
in the ordinary course of business consistent with past practice;
(g) (i) any contract or agreement entered into by Company or any of its
Subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by Company or any of its Subsidiaries
of any contract, license or other right (including any insurance policy naming
it as a beneficiary or a loss payable payee) that, individually or in the
aggregate, would have a Material Adverse Effect on Company, other than, in the
case of (i) and (ii), transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement;
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(h) any material change in any method of accounting or accounting principles
or practice by Company or any of its Subsidiaries, except for any such change
required by reason of a change in GAAP; or
(i) except for items permitted by Section 5.17, any (i) grant of any
severance or termination pay to any director, officer or employee of Company or
any of its Subsidiaries, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of Company or any of its
Subsidiaries, (iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of Company or any of its Subsidiaries other than, in the case of
clause (iv) only, increases prior to the date hereof in compensation, bonus or
other benefits payable to employees of Company or any of its Subsidiaries in the
ordinary course of business consistent with past practice or merit increases in
salaries of employees at regularly scheduled times in customary amounts
consistent with past practices.
Section 3.12 NO UNDISCLOSED MATERIAL LIABILITIES. There have been no
liabilities or obligations (whether pursuant to contracts or otherwise) of any
kind whatsoever incurred by Company or any of its Subsidiaries since July 3,
1999, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities or obligations disclosed or provided for in the Company
Balance Sheet or in the notes thereto or in the Company SEC Documents filed
prior to the date hereof;
(b) liabilities or obligations which, individually and in the aggregate,
have not had and would not have a Material Adverse Effect on Company; or
(c) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby.
Section 3.13 LITIGATION. Except as disclosed in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of Company, threatened against
or affecting, Company or any of its Subsidiaries or any of their respective
properties which, individually or in the aggregate, would have a Material
Adverse Effect on Company.
Section 3.14 TAXES. Except as set forth on Section 3.14 of the Company
Disclosure Schedule:
(a) Company and each of its Subsidiaries, and each affiliated group (within
the meaning of Section 1504 of the Code) of which Company or any of its
Subsidiaries is or has been a member, has timely filed (or has had timely filed
on its behalf) or will file or cause to be timely filed, all material Tax
Returns required by applicable law to be filed by it prior to or as of the
Effective Time, and all such material Tax Returns are, or will be at the time of
filing, true, correct and complete in all material respects;
(b) Company and each of its Subsidiaries has paid (or has had paid on its
behalf) all Taxes shown due with respect to Tax Returns for periods ending prior
to or as of the Effective Time;
(c) The federal income Tax Returns of Company have been examined and settled
with the Internal Revenue Service (the "Service") (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all years through 1996;
(d) There are no material Liens or encumbrances for Taxes on any of the
assets of Company or its Subsidiaries (other than for current Taxes not yet due
and payable);
(e) Company and its Subsidiaries have complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes;
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(f) None of Company or its Subsidiaries is a party to any tax allocation,
tax sharing, tax indemnity or similar agreement (whether or not in writing),
arrangement or practice with respect to Taxes (including any adverse pricing
agreement, closing agreement or other agreement relating to Taxes with any
taxing authority), except among themselves;
(g) No federal, state, local or foreign audits or administrative proceedings
are presently pending with regard to a material amount of Taxes or a material
Tax Return of Company or its Subsidiaries and none of them has received a
written notice or has any knowledge (including the knowledge of any employees
responsible for Tax matters), of any proposed audit or proceeding;
(h) The Company Balance Sheet reflects an adequate reserve for all Taxes
payable by the Company and its Subsidiaries for all taxable periods through the
date of the Company Balance Sheet; and
(i) No payment which Company or its Subsidiaries is obligated to pay to any
director, officer, employee or independent contractor pursuant to the terms of
an employment agreement, severance agreement or otherwise will constitute an
excess parachute payment as defined in Section 280G of the Code.
(j) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, franchise, transfer and recording taxes, fees and
charges, and any other taxes, assessment or similar charges imposed by the
Service or any other taxing authority (whether domestic or foreign including any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)) (a "Taxing Authority"), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts, and any joint, several and/or transferee liabilities,
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
Section 3.15 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth in
Section 3.15(a) of the Company Disclosure Schedule, there are no material
employee benefit plans (including any plans for the benefit of directors or
former directors), arrangements, practices, contracts or agreements (including
employment agreements and severance agreements, incentive compensation, bonus,
stock option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained by Company, any of its
Subsidiaries or any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with Company would be deemed a "controlled group"
within the meaning of Section 4001(a)(14) of ERISA, or with respect to which
Company or any of its Subsidiaries has or may have a liability (the "Company
Benefit Plans"). Except as disclosed in Section 3.15(a) of the Company
Disclosure Schedule (or as otherwise permitted by this Agreement): (1) neither
Company nor any ERISA Affiliate has any formal plan or commitment, whether
legally binding or not, to create any additional Company Benefit Plan or modify
or change any existing Company Benefit Plan that would affect any employee or
terminated employee of Company or any ERISA Affiliate; and (2) since July 3,
1999, there has been no change, amendment, modification to, or adoption of, any
Company Benefit Plan, in each case, that has had, or would have, a Material
Adverse Effect on Company. Company has provided, or has caused to be provided,
to Parent (i) current, accurate and complete copies of all documents embodying
each Company Benefit Plan, including all amendments thereto, written
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interpretations thereof and trust or funding agreements with respect thereto;
(ii) the two most recent annual actuarial valuations, if any, prepared for each
Company Benefit Plan; (iii) the two most recent annual reports (Series 5500 and
all schedules thereto), if any, required under ERISA in connection with each
Company Benefit Plan or related trust; (iv) a statement of alternative form of
compliance pursuant to Department of Labor Regulation Section2520.104-23, if
any, filed for each Company Benefit Plan that is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA for a select group of management or
highly compensated employees; (v) the most recent determination letter received
from the IRS, if any, for each Company Benefit Plan and related trust which is
intended to satisfy the requirements of Section 401(a) of the Code; (vi) if the
Company Benefit Plan is funded, the most recent annual and periodic accounting
of such Company Benefit Plan assets; and (vii) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Benefit Plan.
(b) With respect to each Company Benefit Plan, except as disclosed in
Section 3.15(b) of the Company Disclosure Schedule or as would not, individually
or in the aggregate, have a Material Adverse Effect on Company: (i) if intended
to qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
non-exempt prohibited transaction within the meaning of Section 406 of ERISA has
occurred; (v) as of the date of this Agreement, no lien imposed under the Code
or ERISA exists; (vi) all contributions and premiums due (including any
extensions for such contributions and premiums) have been made in full; and
(vii) there are no actions, proceedings, arbitrations, suits or claims pending,
or to the knowledge of Company threatened (other than routine claims for
benefits), against Company or any ERISA Affiliate or any administrator, trustee
or other fiduciary of any Company Benefit Plan.
(c) None of the Company Benefit Plans has incurred any "accumulated funding
deficiency", as such term is defined in Section 412 of the Code, whether or not
waived.
(d) Except as disclosed in Section 3.15(d) of the Company Disclosure
Schedule, neither Company nor any ERISA Affiliate has incurred any liability
under Title IV of ERISA (including Sections 4063-4064 and 4069 of ERISA) that
has not been satisfied in full except as, individually or in the aggregate,
would not have a Material Adverse Effect on Company or that has not been
reflected on Company's consolidated financial statements.
(e) With respect to each Company Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA), except as specifically disclosed in
Section 3.15(e) of the Company Disclosure Schedule, no such plan provides
medical or death benefits with respect to current or former employees of Company
or any of its Subsidiaries beyond their termination of employment, other than as
may be required under Part 6 of Title I of ERISA and at the expense of the
participant or the participant's beneficiary and except as would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
(f) Except with respect to payments under the Agreements and programs
specified in Section 3.15(f) of the Company Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not entitle
any individual to severance pay or any tax "gross-up" payments with respect to
the imposition of any tax pursuant to Section 4999 of the Code or accelerate the
time of payment or vesting, or increase the amount, of compensation or benefits
due to any individual with respect to any Company Benefit Plan.
(g) Except as disclosed in Section 3.15(a) of the Company Disclosure
Schedule, there is no Company Benefit Plan that is a "multiemployer plan", as
such term is defined in Section 3(37) of ERISA, or which is covered by
Section 4063 or 4064 of ERISA.
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(h) Section 3.15(h) of the Company Disclosure Schedule identifies each
collective bargaining agreement to which Company or any of its Significant
Subsidiaries is a party and copies of each such agreement have been furnished to
or made available to Parent. Except as set forth on Section 3.15(h) of the
Company Disclosure Schedule, or except as would not, individually or in the
aggregate, have a Material Adverse Effect on Company, (i) there is no labor
strike, slowdown or work stoppage or lockout against Company or any of its
Significant Subsidiaries and (ii) there is no unfair labor practice charge or
complaint against or pending before the National Labor Relations Board. As of
the date of this Agreement, there is no representation, claim or petition
pending before the National Labor Relations Board and, to the knowledge of
Company, no material concerted effort relating to representation exists with
respect to the employees of Company or any of its Significant Subsidiaries.
Section 3.16 COMPLIANCE WITH LAWS; NO DEFAULT. Neither Company nor any of
its Subsidiaries is in violation of any statute, law, ordinance, regulation,
rule, judgment, decree, order, writ, injunction, permit or license or other
authorization or approval of any Governmental Authority applicable to its
business or operations, except for violations and failures to comply that have
not had and would not, individually or in the aggregate, result in a Material
Adverse Effect on Company.
Section 3.17 NO DEFAULT. Each Company Agreement is a valid, binding and
enforceable obligation of Company and in full force and effect, except where the
failure to be valid, binding and enforceable and in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect on
Company. None of Company or any of its Subsidiaries is in default or violation
of any term, condition or provision of (i) its respective articles of
incorporation or by-laws or similar organizational documents or (ii) except as
disclosed in Section 3.17 of the Company Disclosure Schedule, any Company
Agreement, except, in the case of clause (i) (with respect to organizational
documents that are partnership, joint venture or similar documents) and (ii),
for defaults or violations that, individually or in the aggregate, have not had
and would not have a Material Adverse Effect on Company. Company has all permits
and licenses necessary to carry on the business conducted by it as of the date
hereof, except where the failure to have such permit or license would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
Section 3.18 FINDERS' FEES. Except for Morgan Stanley & Co. Incorporated,
a copy of whose engagement agreement has been provided to Parent, no investment
banker, broker, finder, other intermediary or other person is entitled to any
fee or commission from Company or any of its Subsidiaries upon consummation of
the transactions contemplated by this Agreement.
Section 3.19 ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Company
SEC Documents filed prior to the date hereof, to the knowledge of Company:
(i) no notice, notification, demand, request for information, citation,
summons or order has been received by, no complaint has been filed against,
no penalty has been assessed against, and no investigation, action, claim,
suit, proceeding or review is pending or threatened by any person or
Governmental Authority against, Company or any of its Subsidiaries with
respect to any matters relating to or arising out of any Environmental Law
which, individually or in the aggregate, would have a Material Adverse
Effect on Company;
(ii) no Hazardous Substance has been discharged, disposed of, dumped,
injected, pumped, deposited, spilled, leaked, emitted or released at, on or
under any property now or, to the knowledge of Company, previously owned,
leased or operated by Company or any of its Subsidiaries, or any adjacent
properties, which circumstance, individually or in the aggregate, would have
a Material Adverse Effect on Company; and
(iii) there are no Environmental Liabilities that, individually or in
the aggregate, have had or would have a Material Adverse Effect on Company.
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(b) For purposes of this Section, the following terms shall have the
meanings set forth below:
(i) "Company" and its "Subsidiaries" shall include any entity which is,
in whole or in part, a predecessor of Company or any of its Subsidiaries;
(ii) "Environmental Laws" means any and all federal, state, local and
foreign law (including common law), treaty, judicial decision, regulation,
rule, judgment, order, decree, injunction, permit, or governmental
restrictions or any agreement with any governmental authority or other third
party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials;
(iii) "Environmental Liabilities" means any and all liabilities of or
relating to Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or
otherwise, which (A) arise under or relate to matters covered by
Environmental Laws and (B) arise from actions occurring or conditions
existing on or prior to the Effective Time; and
(iv) "Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, corrosive, reactive or otherwise
hazardous substance, waste or material, or any substance having any
constituent elements displaying any of the foregoing characteristics,
including, without limitation, petroleum, its derivatives, by-products and
other hydrocarbons, or any substance, waste or material regulated under any
Environmental Laws.
Section 3.20 OPINION OF FINANCIAL ADVISOR. Company has received the
opinion of Morgan Stanley & Co. Incorporated to the effect that, as of the date
of such opinion, the Merger Consideration to be received by the holders of
shares of Company Common Stock in connection with the Merger is fair to such
holders from a financial point of view.
Section 3.21 [INTENTIONALLY DELETED]
Section 3.22 TAKEOVER STATUTES. The Company Board has approved the Merger
and this Agreement, and such approval is sufficient to render inapplicable to
the Merger, this Agreement, and the transactions contemplated by this Agreement,
the shareholder voting requirements of Section 611-A of the Maine Law, assuming
however that neither Parent nor Merger Subsidiary has ever been a beneficial
owner of 25% or more of the outstanding voting stock of Company within the
meaning of Section 611-A. To the best of Company's knowledge, no other "fair
price", "moratorium", "control share acquisition" or other similar antitakeover
statute or regulation enacted under state or federal laws in the United States
(each, a "Takeover Statute") applicable to Company or any of its Subsidiaries is
applicable to the Merger or the other transactions contemplated hereby. The
stock purchase requirements of Section 910 of the Maine Law will not be
applicable to Parent or Merger Subsidiary so long as neither corporation
acquires (other than by reason of the Merger) voting power over 25% or more of
the outstanding voting stock of Company (or becomes a member of a group that has
such voting power).
Section 3.23 AFFILIATES. Section 3.23 of the Company Disclosure Schedule
sets forth each person who, as of the date hereof, is, to the best of Company's
knowledge, deemed to be an Affiliate of Company.
Section 3.24 COMPANY'S ARTICLES OF INCORPORATION. The provisions of
Company's Articles of Incorporation regarding transactions with controlling
persons will not, prior to the termination of this Agreement, apply to this
Agreement, the Merger or to the transactions contemplated hereby.
Section 3.25 COMPANY RIGHTS AGREEMENT. Prior hereto, Company has delivered
to Parent a true and complete copy of the Company Rights Agreement in effect on
the date hereof, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
"Distribution Date" as defined in the Company Rights Agreement or the triggering
of any other right or entitlement of the Company's shareholders under the
Company Rights Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Company that:
Section 4.01 ORGANIZATION AND POWER. (a) Each of Parent and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation or organization, and has the requisite corporate or other
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Parent and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(b) Section 4.01 of the disclosure schedule delivered by Parent to Company
prior to the execution of the Agreement (the "Parent Disclosure Schedule") sets
forth a complete list of Parent's Significant Subsidiaries. Parent has delivered
to Company true and complete copies of Parent's and Merger Subsidiary's articles
of incorporation and bylaws as currently in effect.
Section 4.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action, including by resolution
of the Board of Directors of Parent. No vote of any class or series of Parent's
capital stock is necessary in connection with the execution of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Merger Subsidiary and
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary, enforceable against Parent and Merger Subsidiary, as applicable, in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding at equity or at
law). The shares of Parent Common Stock to be issued pursuant to the Merger,
when issued in accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 4.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement, and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby, require no action, by or in respect of, or filing with, any Governmental
Authority other than: (a) the filing of articles of merger with respect to the
Merger with the Secretary of State of the State of Maine and appropriate
documents with the relevant authorities of other states in which Merger
Subsidiary is qualified to do business; (b) compliance with any applicable
requirements of the HSR Act and similar state antitrust statutes;
(c) compliance with any applicable requirements of the 1933 Act; (d) compliance
with any applicable requirements of the 1934 Act; (e) compliance with any other
applicable securities laws; (f) those that may be required solely by reason of
Company's (as opposed to any other third party's) participation in the
transactions contemplated by this Agreement; (g) actions or filings which, if
not taken or made, would not, individually or in the aggregate, have a Material
Adverse Effect on Parent; and (h) filings and notices not required to be made or
given until after the Effective Time.
Section 4.04 NON-CONTRAVENTION. Except as set forth on Section 4.04 of the
Parent Disclosure Schedule, the execution, delivery and performance by Parent
and Merger Subsidiary of this Agreement do not, and the consummation by Parent
and Merger Subsidiary of the transactions contemplated
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hereby will not: (a) contravene or conflict with the articles of incorporation,
bylaws or similar organizational documents of Parent or any of its Subsidiaries;
(b) assuming compliance with the matters referred to in Section 4.03, contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Parent or Merger Subsidiary; (c) constitute a default (or an event which with
notice, the lapse of time or both would become a default) under or give rise to
a right of termination, cancellation or acceleration of any right or obligation
of Parent or Merger Subsidiary or to a loss of any benefit to which Parent or
Merger Subsidiary is entitled under any provision of any agreement, contract or
other instrument binding upon Parent or Merger Subsidiary and which either has a
term of more than one year or involves the payment or receipt of money in excess
of $1,000,000 (a "Parent Agreement") or any license, franchise, permit or other
similar authorization held by Parent or Merger Subsidiary; or (d) result in the
creation or imposition of any Lien on any asset of Parent or Merger Subsidiary,
except for such contraventions, conflicts or violations referred to in
clause (b) or defaults, rights of termination, cancellation or acceleration,
losses or Liens referred to in clause (c) or (d) that would not, individually or
in the aggregate, have a Material Adverse Effect on Parent.
Section 4.05 CAPITALIZATION OF PARENT. (a) The authorized capital stock of
Parent consists of 1,500,000,000 shares of Parent Common Stock and 1,500,000,000
shares of Class B common stock, par value $0.50 per share ("Parent Class B
Common Stock"), and no shares of preferred stock. As of the close of business on
August 16, 1999, 239,853,031 shares of Parent Common Stock are issued and
outstanding, 4,048,781 shares of Parent Common Stock are reserved for additional
grants under option and other stock-based plans and 4,083, 203 shares of Parent
Common Stock are reserved for issuance pursuant to options previously granted
pursuant to Parent option plans. As of the close of business on August 16, 1999,
225,922,064 shares of Parent Class B Common Stock are issued and outstanding, no
shares are reserved for additional grants under option and other stock-based
plans and no shares of Parent Class B Common Stock are reserved for issuance
pursuant to options previously granted pursuant to Parent option plans. All the
outstanding shares of Parent's capital stock are, and all shares which may be
issued pursuant to Parent option plans will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in this Section 4.05, except for the
transactions contemplated by this Agreement (including those permitted in
Section 5.02(d)), and except for changes since August 16, 1999 resulting from
the exercise of employee and director stock options outstanding on such date, as
of the date hereof, there are outstanding (x) no shares of capital stock or
other voting securities of Parent, (y) no securities of Parent convertible into
or exchangeable for shares of capital stock or voting securities of Parent, and
(z) no options, warrants or other rights to acquire from Parent, and no
preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of Parent, obligating Parent to issue, transfer or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent or obligating
Parent to grant, extend or enter into any such option, warrant, subscription or
other right, convertible security, agreement, arrangement or commitment (the
items in clauses (x), (y) and (z) being referred to collectively as the "Parent
Securities"). None of Parent or its Subsidiaries has any contractual obligation
to redeem, repurchase or otherwise acquire any Parent Securities or any Parent
Subsidiary Securities, including as a result of the transactions contemplated by
this Agreement.
(b) Except as set forth in Section 4.05 of the Parent Disclosure Schedule,
there are no voting trusts or other agreements or understandings to which Parent
or any of its Subsidiaries is a party with respect to the voting of the capital
stock of Parent or any of its Subsidiaries.
Section 4.06 CAPITALIZATION OF SUBSIDIARIES. Except as set forth in
Section 4.06 of the Parent Disclosure Schedule, all of the outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary of Parent, is
owned by Parent, directly or indirectly, free and clear of any consensual
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Lien (including any restriction on the right to vote, sell or otherwise dispose
of such capital stock or other ownership interests). There are no outstanding
(i) securities of Parent or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in any of its Subsidiaries, or (ii) options or other rights to acquire
from Parent or any of its Subsidiaries, and no other obligation of Parent or any
of its Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable for,
any capital stock, voting securities or ownership interests in, any of its
Subsidiaries (the items in clauses (i) and (ii) being referred to collectively
as the "Parent Subsidiary Securities").
Section 4.07 SEC FILINGS. (a) Parent has filed all required reports,
schedules, forms, statements and other documents with the SEC since June 30,
1997 (the "Parent SEC Documents").
(b) As of its filing date, each Parent SEC Document filed pursuant to the
1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(c) Each Parent SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act as of the date such
registration statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent that such statements have been modified or superseded by a
later filed Parent SEC Document.
Section 4.08 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
included in Parent's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999 (the "Parent 10-K") and its Quarterly Report on Form 10-Q for
the fiscal quarter ended June 19, 1999 (the "Parent 10-Q") have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated Subsidiaries
as of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject to normal year-end adjustments in the
case of the unaudited interim financial statements). For purposes of this
Agreement, "Parent Balance Sheet" means the consolidated balance sheet of Parent
as of June 19, 1999 set forth in the Parent 10-Q and "Parent Balance Sheet Date"
means June 19, 1999.
Section 4.09 DISCLOSURE DOCUMENTS. (a) The Registration Statement on
Form S-4 of Parent (the "Form S-4") to be filed under the 1933 Act relating to
the issuance of Parent Common Stock in the Merger required to be filed with the
SEC in connection with the issuance of shares of Parent Common Stock pursuant to
the Merger and any amendments or supplements thereto, will, when filed, subject
to the last sentence of Section 4.09(b), comply as to form in all material
respects with the applicable requirements of the 1933 Act and the 1934 Act.
(b) Insofar as the information contained therein relates solely to Parent,
neither the Form S-4 nor any amendment or supplement thereto will at the time it
becomes effective under the 1933 Act or at the Effective Time contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. No
representation or warranty is made by Parent in this Section 4.09 with respect
to statements made or incorporated by reference therein based on information
supplied by Company for inclusion or incorporation by reference in any Parent
Disclosure Document.
Section 4.10 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent for inclusion or incorporation by reference in the Company
Proxy Statement or any amendment or supplement thereto will, at the date the
Company Proxy Statement or any amendment or supplement
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thereto is first mailed to shareholders of Company and at the time such
shareholders vote on the adoption and approval of this Agreement and the
transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 4.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Parent
SEC Documents filed prior to the date of this Agreement or as disclosed in
Section 4.11 of the Parent Disclosure Schedule, since June 19, 1999, Parent and
its Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had or would have a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent (other than
payment of Parent' regular quarterly cash dividend on Parent Common Stock) or
any repurchase, redemption or other acquisition by Parent or any of its
Subsidiaries of any amount of outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Parent or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Parent or any
of its Subsidiaries that would materially increase the obligations of Parent or
such Subsidiary under such security;
(d) (x) any incurrence or assumption by Parent or any of its Subsidiaries of
any indebtedness for borrowed money other than under existing credit facilities
(or any renewals, replacements or extensions thereof that do not materially
increase the commitments thereunder except to the extent of the amount required
to refinance any indebtedness for borrowed money of Parent and its Subsidiaries
as of the Closing Date) (A) in the ordinary course of business consistent with
past practices (it being understood that any indebtedness incurred prior to the
date hereof in respect of capital expenditures shall be considered to have been
in the ordinary course of business consistent with past practice) or (B) in
connection with any acquisition or capital expenditure permitted by
Section 5.02, or (y) any guarantee, endorsement or other incurrence or
assumption of liability (whether directly, contingently or otherwise) by Parent
or any of its Subsidiaries for the obligations of any other person (other than
any Subsidiary of Parent), other than in the ordinary course of business
consistent with past practice or in connection with obligations of Parent and
its Subsidiaries assumed at the Effective Time;
(e) any creation or assumption by Parent or any of its Subsidiaries of any
consensual Lien on any material asset of Parent or any of its Subsidiaries other
than in the ordinary course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or material
investment in any person by Parent or any of its Subsidiaries other than
(i) loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of Parent or (ii) loans or advances to employees of Parent or any
of its Subsidiaries made in the ordinary course of business consistent with past
practice;
(g) (i) any contract or agreement entered into by Parent or any of its
Subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by Parent or any of its Subsidiaries
of any contract, license or other right (including any insurance policy naming
it as a beneficiary or a loss payable payee) that, individually or in the
aggregate, would have a Material Adverse Effect on Parent, other than, in the
case of (i) and (ii), transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement; or
(h) any material change in any method of accounting or accounting principles
or practice by Parent or any of its Subsidiaries, except for any such change
required by reason of a change in GAAP.
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Section 4.12 NO UNDISCLOSED MATERIAL LIABILITIES. There have been no
liabilities or obligations (whether pursuant to contracts or otherwise) of any
kind whatsoever incurred by Parent or any of its Subsidiaries since June 19,
1999, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities or obligations (i) disclosed or provided for in the Parent
Balance Sheet or in the notes thereto, (ii) disclosed in the Parent SEC
Documents filed prior to the date hereof or (iii) disclosed in Section 4.12 of
the Parent Disclosure Schedule;
(b) liabilities or obligations which, individually and in the aggregate,
have not had and would not have a Material Adverse Effect on Parent; or
(c) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby.
Section 4.13 LITIGATION. Except as disclosed in the Parent SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of Parent, threatened against or
affecting, Parent or any of its Subsidiaries or any of their respective
properties which, individually or in the aggregate, would have a Material
Adverse Effect on Parent.
Section 4.14 TAXES. Except as set forth on Section 4.14 of the Parent
Disclosure Schedule:
(a) Parent and each of its Subsidiaries, and each affiliated group (within
the meaning of Section 1504 of the Code) of which Parent or any of its
Subsidiaries is or has been a member, has timely filed (or has had timely filed
on its behalf) or will file or cause to be timely filed, all material Tax
Returns required by applicable law to be filed by it prior to or as of the
Effective Time, and all such material Tax Returns are, or will be at the time of
filing, true, correct and complete in all material respects;
(b) Parent and each of its Subsidiaries has paid (or has had paid on its
behalf) all Taxes shown due with respect to Tax Returns for periods ending prior
to or as of the Effective Time;
(c) The federal income Tax Returns of Parent have been examined by and
settled with the Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired) for all years
through 1994;
(d) There are no material Liens or encumbrances for Taxes on any of the
assets of Parent or its Subsidiaries (other than for current Taxes not yet due
and payable);
(e) Parent and its Subsidiaries have complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes;
(f) None of Parent or its Subsidiaries is a party to any tax allocation, tax
sharing, tax indemnity or similar agreement (whether or not in writing),
arrangement or practice with respect to Taxes (including any adverse pricing
agreement, closing agreement or other agreement relating to Taxes with any
taxing authority), except among themselves;
(g) No federal, state, local or foreign audits or administrative proceedings
are presently pending with regard to a material amount of Taxes or a material
Tax Return of Parent or its Subsidiaries and none of them has received a written
notice or has any knowledge (including the knowledge of any employee responsible
for Tax matters) of any proposed audit or proceeding; and
(h) The Parent Balance Sheet reflects an adequate reserve for all Taxes
payable by Parent and its Subsidiaries for all taxable periods through the date
of the Parent Balance Sheet.
Section 4.15 EMPLOYEE BENEFITS, ERISA. (a) Except as set forth in
Section 4.15 of the Parent Disclosure Schedule, there are no material employee
benefit plans (including any plans for the benefit of directors or former
directors), arrangements, practices, contracts or agreements (including
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employment agreements and severance agreements, incentive compensation, bonus,
stock option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of ERISA), maintained by Parent, any
of its Subsidiaries or any ERISA Affiliate, that together with Parent would be
deemed a "controlled group" within the meaning of Section 4001(a)(14) of ERISA,
or with respect to which Parent or any of its Subsidiaries has or may have a
liability (the "Parent Benefit Plans"). Since June 19,1999, there has been no
change, amendment, modification to, or adoption of, any Parent Benefit Plan, in
each case, that has had, or would have, a Material Adverse Effect on Parent.
(b) With respect to each Parent Benefit Plan, except as would not,
individually or in the aggregate, have a Material Adverse Effect on Parent:
(i) if intended to qualify under Section 401(a), 401(k) or 403(a) of the Code,
such plan so qualifies, and its trust is exempt from taxation under
Section 501(a) of the Code; (ii) such plan has been administered in accordance
with its terms and applicable law; (iii) no breaches of fiduciary duty have
occurred; (iv) no non-exempt prohibited transaction within the meaning of
Section 406 of ERISA has occurred; (v) as of the date of this Agreement, no Lien
imposed under the Code or ERISA exists; (vi) all contributions and premiums due
(including any extensions for such contributions and premiums) have been made in
full; and (vii) there are no actions, proceedings, arbitrations, suits or claims
pending, or to the knowledge of Parent threatened (other than routine claims for
benefits), against Parent or any ERISA Affiliate or any administrator, trustee
or other fiduciary of any Parent Benefit Plan.
(c) None of the Parent Benefit Plans has incurred any "accumulated funding
deficiency", as such term is defined in Section 412 of the Code, whether or not
waived.
(d) Neither Parent nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA (including Sections 4063-4064 and 4069 of ERISA) that has not
been satisfied in full except as, individually or in the aggregate, would not
have a Material Adverse Effect on Parent or that has not been reflected on
Parent's consolidated financial statements.
(e) With respect to each Parent Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA), no such plan provides medical or death
benefits with respect to current or former employees of Parent or any of its
Subsidiaries beyond their termination of employment, other than as may be
required under Part 6 of Title I of ERISA and at the expense of the participant
or the participant's beneficiary and except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
(f) The consummation of the transactions contemplated by this Agreement will
not entitle any individual to severance pay or any tax "gross-up" payments with
respect to the imposition of any tax pursuant to Section 4999 of the Code or
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any individual with respect to any Parent
Benefit Plan.
(g) There is no Parent Benefit Plan that is a "multiemployer plan", as such
term is defined in Section 3(37) of ERISA, or which is covered by Section 4063
or 4064 of ERISA.
(h) Neither Parent nor any of its Significant Subsidiaries is a party to any
collective bargaining agreement. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (i) there is no labor
strike, slowdown or work stoppage or lockout against Parent or any of its
Significant Subsidiaries and (ii) there is no unfair labor practice charge or
complaint against or pending before the National Labor Relations Board. As of
the date of this Agreement, there is no representation claim or petition pending
before the National Labor Relations Board and, to the knowledge of Parent, no
material concerted effort relating to representation exists with respect to the
employees of Parent or any of its Significant Subsidiaries.
Section 4.16 COMPLIANCE WITH LAWS. Neither Parent nor any of its
Subsidiaries is in violation of any statute, law, ordinance, regulation, rule,
judgment, decree, order, writ, injunction, permit or license
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or other authorization or approval of any Governmental Authority applicable to
its business or operations, except for violations and failures to comply that
would not, individually or in the aggregate, result in a Material Adverse Effect
on Parent.
Section 4.17 NO DEFAULT. Each Parent Agreement is a valid, binding and
enforceable obligation of Parent and in full force and effect, except where the
failure to be valid, binding and enforceable and in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
None of Parent or any of its Subsidiaries is in default or violation of any
term, condition or provision of (i) its respective articles of incorporation or
by-laws or similar organizational documents or (ii) any Parent Agreement,
except, in the case of clauses (i) (with respect to organizational documents
that are partnership, joint venture or similar documents) and (ii), for defaults
or violations that, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Parent. Parent has all permits and licenses
necessary to carry on the business conducted by it as of the date hereof, except
where the failure to have such permit or license would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
Section 4.18 FINDERS' FEES. Except for JP Morgan & Co. Incorporated, a
copy of whose engagement agreement has been provided to Company, no investment
banker, broker, finder, other intermediary or other person is entitled to any
fee or commission from Parent or any of its Subsidiaries upon consummation of
the transactions contemplated by this Agreement.
Section 4.19 ENVIRONMENTAL MATTERS. (a) Except as set forth in the Parent
10-K, to the knowledge of Parent:
(i) no notice, notification, demand, request for information, citation,
summons or order has been received by, no complaint has been filed against,
no penalty has been assessed against, and no investigation, action, claim,
suit, proceeding or review is pending or, to the knowledge of Parent or any
of its Subsidiaries, is threatened by any person or Governmental Authority,
against Parent or any of its Subsidiaries with respect to any matters
relating to or arising out of any Environmental Law which, individually or
in the aggregate, would have a Material Adverse Effect on Parent;
(ii) no Hazardous Substance has been discharged, disposed of, dumped,
injected, pumped, deposited, spilled, leaked, emitted or released at, on or
under any property now or, to the knowledge of Parent, previously owned,
leased or operated by Parent or any of its Subsidiaries, or any adjacent
properties, which circumstance, individually or in the aggregate, would have
a Material Adverse Effect on Parent; and
(iii) to the knowledge of Parent, there are no Environmental Liabilities
that, individually or in the aggregate, have had or would have a Material
Adverse Effect on Parent.
(b) For purposes of this Section, capitalized terms used shall have the
meanings assigned to them in Section 3.19(b), except that in all cases the word
"Parent" shall be substituted for the word "Company".
Section 4.20 [INTENTIONALLY DELETED]
Section 4.21 TAKEOVER STATUTES. To the best of Parent's knowledge, no
Takeover Statute applicable to Parent or any of its Subsidiaries, is applicable
to the Merger or the other transactions contemplated hereby. Neither Parent nor
Merger Subsidiary has ever been a beneficial owner of 25% or more of the
outstanding Company Common Stock, within the meaning of Section 611-A of the
Maine Law.
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Section 4.22 AFFILIATES. Section 4.22 of the Parent Disclosure Schedule
sets forth each person who, as of the date hereof, is, to the best of Parent's
knowledge, deemed to be an Affiliate of Parent.
Section 4.23 MERGER SUBSIDIARY. Merger Subsidiary is a newly-formed direct
wholly-owned Subsidiary of Parent that has engaged in no business activities
other than as specifically contemplated by this Agreement.
Section 4.24 FINANCING. Parent has, as of the date hereof, and will have
as of the Effective Time, sufficient funds to make the cash payments required
pursuant to this Agreement. Parent has delivered to Company true, complete and
correct copies of the commitment letter of J.P. Morgan Securities Inc. and
Morgan Guaranty Trust Company of New York dated the date hereof to provide
Parent with the debt financing necessary to enable Parent to consummate the
transactions contemplated hereby (the "Commitment Letter"). Parent agrees to
promptly notify Company if at any time prior to the Closing Date it no longer
believes in good faith that it will be able to obtain financing substantially on
the terms described in the Commitment Letter.
ARTICLE 5
COVENANTS
Section 5.01 CONDUCT OF COMPANY. Company covenants and agrees that, from
the date hereof until the Effective Time, except as expressly provided otherwise
in this Agreement, including Sections 3.11 and 5.01 of the Company Disclosure
Schedule hereto, or as reasonably necessary for Company to fulfill its
obligations hereunder, Company and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use their
reasonable best efforts to preserve intact their business organizations and
relationships with customers, suppliers, creditors and business partners and
shall use their reasonable efforts to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the prior
written approval of Parent (which approval shall not be unreasonably withheld):
(a) Company will not adopt or propose any change in its articles of
incorporation or any material change in its bylaws, other than changes effected
to facilitate the Merger;
(b) Company will not, and will not permit any of its Subsidiaries to, adopt
a plan or agreement of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material reorganization
of Company or any of its Subsidiaries (other than a liquidation or dissolution
of any Subsidiary or a merger or consolidation between wholly owned
Subsidiaries);
(c) Company will not, and will not permit any of its Subsidiaries to, make
any investment in or acquisition of any business of any person or any material
amount of assets (other than inventory), except for (i) acquisitions for cash
not to exceed $1,000,000 per acquisition and $10,000,000 in the aggregate for
all acquisitions and (ii) without duplication, any capital expenditure permitted
by Section 5.01(j);
(d) Company will not, and will not permit any of its Subsidiaries to, sell,
lease, license, close, shut down or otherwise dispose of any assets (other than
inventory), except (i) pursuant to existing contracts or commitments listed on
Section 5.01 of the Company Disclosure Schedule or (ii) sales, leases, licenses,
closings, shutdowns or other dispositions of assets in the ordinary course of
business consistent with past practice;
(e) Company will not, and will not permit any of its Subsidiaries to,
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than (i) cash
dividends payable by Company in an aggregate amount not in excess of $.165 per
share
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per calendar quarter and (ii) dividends paid by any wholly owned Subsidiary of
Company to Company or any other Subsidiary of Company;
(f) Company will not, and will not permit any of its Subsidiaries to, issue,
sell, transfer, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Company or its Subsidiaries, other than (i) issuances
pursuant to the exercise of stock-based awards or options (including under the
plans described in Section 3.05(a)) outstanding on the date hereof,
(ii) issuances by any Subsidiary of Company to Company or any other Subsidiary
of Company and (iii) shares of Common Stock issuable pursuant to options granted
to newly hired management level employees in accordance with Company's past
practice;
(g) Company will not, and will not permit any of its Subsidiaries to,
redeem, purchase or otherwise acquire directly or indirectly any of Company's
capital stock;
(h) Company will not, and will not permit any of its Subsidiaries to, move
the location, close, shut down or otherwise eliminate Company's headquarters or
distribution centers or effect a general staff reduction at such headquarters or
distribution centers;
(i) Except in connection with investments or acquisitions permitted by
Section 5.01(c) or investments or acquisitions in the ordinary course of
business consistent with past practice, Company will not, and will not permit
any of its Subsidiaries to, (i) enter into (or commit to enter into) any new
lease (except pursuant to commitments for such lease entered into as of the date
hereof) or (ii) purchase or acquire or enter into any agreement to purchase or
acquire any real estate (except pursuant to commitments existing as of the date
hereof);
(j) Company will not, and will not permit any of its Subsidiaries to, make
or commit to make any capital expenditure (including for store remodelings,
store signage and information systems) except for individual capital expenditure
projects or items not exceeding $1,000,000 per project or item or $10,000,000 in
the aggregate for all projects and items and those projects or items committed
to or budgeted for prior to the date of this Agreement (all of which projects
and items are set forth in Section 5.01(j) of the Company Disclosure Schedule);
(k) Company will not, and will not permit any of its Subsidiaries to, change
any tax election, change any annual tax accounting period, change any method of
tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund or
consent to any extension or waiver (other than a reasonable extension or waiver)
of the limitations period applicable to any Tax claim or assessment, if any such
action in this clause (k) would have the effect of materially increasing the
aggregate Tax liability or materially reducing the aggregate tax assets of
Company and its Subsidiaries, taken as a whole;
(l) Company will not, and will not permit any of its Subsidiaries to,
increase the compensation or benefits of any director, officer or employee,
except for normal increases in the ordinary course of business consistent with
past practice (which increases shall not exceed, on an annual basis, 6% in the
aggregate for all directors, officers and employees) or as required under
applicable law or existing agreement or commitment;
(m) Company will not, and will not permit any of its Subsidiaries to,
accelerate any income, postpone any expense or reverse any reserve, except on a
basis consistent with past practice or as otherwise required by law;
(n) Company will not, and will not permit any of its Subsidiaries to, agree
or commit to do any of the foregoing; and
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(o) Company will not, and will not permit any of its Subsidiaries to, take
or agree or commit to take any action that would make any representation and
warranty of Company hereunder inaccurate in any material respect at, or as of
any time prior to, the Effective Time.
Section 5.02 CONDUCT OF PARENT. From the date hereof until the Effective
Time, except as expressly provided otherwise in this Agreement, including
Section 5.02 of the Parent Disclosure Schedule or as reasonably necessary for
Parent to fulfill its obligations hereunder, Parent and its Subsidiaries shall
conduct their business in the ordinary course consistent with past practice and
shall use their reasonable best efforts to preserve intact their business
organizations and relationships with customers, suppliers, creditors and
business partners and shall use their reasonable efforts to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing but subject to the preceding sentence, from the date
hereof until the Effective Time, without the prior written approval of Company
(which approval shall not be unreasonably withheld):
(a) Parent will not adopt or propose any material change in its articles of
incorporation or any material change in its bylaws;
(b) Parent will not, and will not permit any of its Subsidiaries to,
(i) adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of Parent or any of its Subsidiaries (other than a liquidation or
dissolution of any wholly owned Subsidiary or a merger or consolidation between
wholly owned Subsidiaries) or (ii) make any material acquisition of the business
of any person (other than a wholly owned Subsidiary);
(c) Parent will not, and will not permit any of its Subsidiaries to, make
any investment in or acquisition of any business of any person or any material
amount of assets (other than inventory), except for (i) acquisitions not to
exceed $100,000,000 in the aggregate for all acquisitions and (ii) without
duplication, any capital expenditure permitted by Section 5.02(j);
(d) Parent will not, and will not permit any of its Subsidiaries to, sell,
lease, license, close, shut down or otherwise dispose of any assets (other than
inventory) in an amount that would be material to Parent and its Subsidiaries,
taken as a whole, except (i) pursuant to existing contracts or commitments or
(ii) sales, leases, licenses, closings, shutdowns or other dispositions of
assets in the ordinary course of business consistent with past practice;
(e) Parent will not, and will not permit any of its Subsidiaries to, issue,
sell, transfer, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Parent or its Subsidiaries, other than (x) issuances by any
Subsidiary of Parent to Parent or any other Subsidiary of Parent, (y) issuances
pursuant to the exercise of stock-based awards or options, including under the
plans described in Section 4.05(a), outstanding on the date hereof or granted as
contemplated in clause (z) below, and (z) any grant of options or other stock
based awards in respect of Parent Common Stock to employees or directors of
Parent or any of its Subsidiaries that could result in the issuance of not more
than 125% of the aggregate amount of shares of Parent Common Stock issuable
under all grants of options or other stock based awards during the fiscal year
ended January 2, 1999;
(f) Parent will not, and will not permit any of its Subsidiaries to,
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than (i) cash
dividends payable by Parent in an aggregate amount not in excess of $0.0504 per
share per calendar quarter, and (ii) dividends paid by any Subsidiary of Parent
to Parent or any other Subsidiary of Parent;
(g) Parent will not, and will not permit any of its Subsidiaries to, redeem,
purchase or otherwise acquire directly or indirectly any of Parent's capital
stock;
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(h) Parent will not, and will not permit any of its Subsidiaries to, move
the location, close, shut down or otherwise eliminate Parent's headquarters or
distribution centers or effect a general staff reduction at such headquarters or
distribution centers;
(i) except in connection with investments or acquisitions permitted by
Section 5.02(c) or investments or acquisitions in the ordinary course of
business consistent with past practice, Parent will not, and will not permit any
of its Subsidiaries to, (i) enter into (or commit to enter into) any new lease
(except pursuant to commitments for such lease entered into as of the date
hereof) or (ii) purchase or acquire or enter into any agreement to purchase or
acquire any real estate (except pursuant to commitments existing as of the date
hereof);
(j) Parent will not, and will not permit any of its Subsidiaries to, make or
commit to make any capital expenditure (including for store remodelings, store
signage and information systems) except for individual capital expenditure
projects or items not exceeding $15,000,000 per project or item or $100,000,000
in the aggregate for all projects and items and those projects or items
committed to or budgeted for prior to the date of this Agreement (all of which
projects and items are set forth in Section 5.02(j) of the Parent Disclosure
Schedule);
(k) Parent will not, and will not permit any of its Subsidiaries to, change
any tax election, change any annual tax accounting period, change any method of
tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund or
consent to any extension or waiver (other than a reasonable extension or waiver)
of the limitations period applicable to any Tax claim or assessment, if any such
action in this clause (l) would have the effect of materially increasing the
aggregate Tax liability or materially reducing the aggregate tax assets of
Parent and its Subsidiaries, taken as a whole;
(l) Parent will not, and will not permit any of its Subsidiaries to,
increase the compensation or benefits of any director, officer or employee,
except for normal increases in the ordinary course of business consistent with
past practice or as required under applicable law or existing agreement or
commitment;
(m) Parent will not, and will not permit any of its Subsidiaries to, agree
or commit to do any of the foregoing; and
(n) Parent will not, and will not permit any of its Subsidiaries to take or
agree or commit to take any action that would make any representation and
warranty of Parent hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time.
Section 5.03 SHAREHOLDER MEETING; PROXY MATERIALS; FORM S-4.
(a) Company shall cause a meeting of its shareholders (the "Company
Shareholder Meeting") to be duly called and held as soon as reasonably
practicable (subject to the receipt of all necessary approvals and subject to
the other transactions contemplated by this Agreement) after the date of this
Agreement for the purpose of voting on the approval and adoption of this
Agreement (the "Company Shareholder Approval"). Except as provided in the next
sentence, the Company Board shall recommend approval and adoption of this
Agreement by Company's shareholders. The Company Board shall be permitted to
(i) not recommend to Company's shareholders that they give the Company
Shareholder Approval or (ii) withdraw or modify in a manner adverse to Parent
its recommendation to Company's shareholders that they give the Company
Shareholder Approval, only if and to the extent that the Company Board, upon
receipt of a Superior Proposal (as hereinafter defined), and after consultation
with and based upon the advice of independent legal counsel, by a majority vote
determines in its good faith judgment that such action is necessary for the
Company Board to comply with its fiduciary duties to Company's shareholders
under applicable law. In connection with the Company Shareholder Meeting,
Company will (x) promptly prepare and file with the SEC, will use its reasonable
best efforts to have cleared by the SEC and will thereafter mail to its
shareholders as
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promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, (y) use its reasonable best efforts, subject to the
immediately preceding sentence, to obtain the Company Shareholder Approval and
(z) otherwise comply with all legal requirements applicable to such meetings.
(b) Parent shall promptly prepare and file with the SEC the Form S-4 with
respect to the Parent Common Stock issuable in connection with the Merger and
take any action required to be taken in connection with such issuance of Parent
Common Stock. Subject to the terms and conditions of this Agreement, Parent
shall use its reasonable best efforts to have the Form S-4 declared effective
under the 1933 Act as promptly as practicable after the Form S-4 is filed.
(c) Company and Parent shall each use their reasonable best efforts to cause
to be delivered to each other letters from their respective independent
accountants, dated a date within two business days before the effective date of
the Form S-4, in form reasonably satisfactory to the recipient and customary in
scope for comfort letters delivered by independent accountants in connection
with registration statements on Form S-4 under the Securities Act.
Section 5.04 ACCESS TO INFORMATION. (a) To the extent permitted by
applicable law, from the date hereof until the Effective Time, Company will give
Parent, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices,
properties, books and records of Company and its Subsidiaries, will furnish to
Parent, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request and will instruct Company's employees, auditors,
counsel and financial advisors to cooperate with Parent in its investigation of
the business of Company and its Subsidiaries; provided that no investigation
pursuant to this Section shall affect any representation or warranty given by
Company to Parent hereunder. The foregoing information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the letter agreement executed by Parent and Company as to confidentiality and
other matters (the "Parent Confidentiality Agreement").
(b) To the extent permitted by applicable law, from the date hereof until
the Effective Time, Parent will give Company, its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of Parent and its
Subsidiaries, will furnish to Company, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such persons may reasonably request and will instruct Parent's
employees, auditors, counsel and financial advisors to cooperate with Company in
its investigation of the business of Parent and its Subsidiaries; provided that
no investigation pursuant to this Section shall affect any representation or
warranty given by Parent to Company hereunder. Such information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the letter agreement executed by Company and Parent as to confidentiality and
other matters (the "Company Confidentiality Agreement").
Section 5.05 NO SOLICITATION. From the date hereof until the termination
hereof, Company will not and will cause its Subsidiaries and the officers,
directors, employees, investment bankers, consultants and other agents of
Company and its Subsidiaries not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal or any inquiry with respect thereto or engage in discussions or
negotiations with any person with respect thereto, or disclose any non-public
information relating to Company or any of its Subsidiaries or afford access to
the properties, books or records of Company or any of its Subsidiaries to, any
person that has made any Acquisition Proposal; provided that nothing contained
in this Section 5.05 shall prevent Company from furnishing non-public
information to, or entering into discussions or negotiations with, any person in
connection with an unsolicited bona fide Acquisition Proposal received from such
person that the Company Board determines in good faith is reasonably likely to
lead to a Superior Proposal, so long as
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prior to furnishing non-public information to, or entering into discussions or
negotiations with, such person, Company receives from such person an executed
confidentiality agreement with terms no less favorable to Company than those
contained in the Parent Confidentiality Agreement; provided, further that
nothing contained in this Agreement shall prevent the Company Board from
complying with Rule 14e-2 or 14d-9 under the 1934 Act with regard to an
Acquisition Proposal. Company will promptly notify (which notice shall be
provided orally and in writing and shall identify the person making such
Acquisition Proposal and set forth the material terms thereof) Parent, within
24 hours after receipt of any Acquisition Proposal or any request for nonpublic
information relating to Company or any of its Subsidiaries or for access to the
properties, books or records of Company or any of its Subsidiaries by any person
that may be considering making, or has made, an Acquisition Proposal if Company
is prepared to provide such person with access to such nonpublic information or
properties, books or records. Company shall give Parent two business days'
advance notice (which notice shall include the terms and conditions of such
proposal with respect to an Acquisition Proposal) of any definitive agreement
providing for an Acquisition Proposal to be entered into with any person or
entity making any such inquiry, offer or proposal. Company shall not be
permitted to terminate this Agreement pursuant to Section 7.01(d)(1) unless it
shall have satisfied the obligations of this Section 5.05 and prior to any such
termination, Company shall, and shall cause its financial and legal advisors to,
during the two business day period referenced in the preceding sentence,
negotiate in good faith with Parent to make such adjustments in the terms and
conditions of this Agreement as would enable Company to proceed with the
transactions contemplated herein. Company will, and will cause the other persons
listed in the first sentence of this Section 5.05 to, immediately cease and
cause to be terminated all discussions and negotiations, if any, that have taken
place prior to the date hereof with any parties with respect to any Acquisition
Proposal. Subject to compliance with their fiduciary duties, as determined in
good faith by the Company Board, and subject to the exceptions set forth in this
Section 5.05, the Company Board shall not authorize Company to waive any
standstill or confidentiality provisions contained in agreements to which
Company is a party or to which Company is subject, other than the Parent
Confidentiality Agreement.
For purposes of this Agreement, "Acquisition Proposal" means any bona fide
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of more than 25% of the aggregate assets of Company and
its Subsidiaries, taken as a whole, or more than 25% of the voting power of the
shares of Company Common Stock then outstanding or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the transactions contemplated by
this Agreement or the Stock Exchange Agreement. For purposes of this Agreement,
"SUPERIOR PROPOSAL" means any bona fide Acquisition Proposal on terms that the
Company Board determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation, taking into account all
the terms and conditions of the Acquisition Proposal, including any break-up
fees, expense reimbursement provisions and conditions to consummation) are more
favorable to Company's shareholders than this Agreement and the Merger taken as
a whole, and for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Company Board.
Section 5.06 NOTICE OF CERTAIN EVENTS. (a) Company and Parent shall
promptly notify each other of:
(i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement; and
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(iii) any notice of, or other communications relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by it or any of its Subsidiaries subsequent to the date of this
Agreement, under any Company Agreement.
(b) Company shall promptly notify Parent of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Company or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.13 or which relate to the
consummation of the transactions contemplated by this Agreement.
(c) Parent shall promptly notify Company of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Parent or any Subsidiary of
Parent which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 4.13 or which relate to the
consummation of the transactions contemplated by this Agreement.
Section 5.07 REASONABLE BEST EFFORTS. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement.
In furtherance and not in limitation of the foregoing, each party hereto agrees
to make an appropriate filing of a Notification and Report Form pursuant to the
HSR Act with respect to the transactions contemplated hereby as promptly as
practicable and in any event within ten business days of the date hereof and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and to take all other
actions reasonably necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(b) Each of Parent and Company shall, in connection with the efforts
referenced in Section 5.07(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other Antitrust Law (as defined below), use its reasonable best
efforts to (i) cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party; (ii) keep the other party
informed in all material respects of any material communication received by such
party from, or given by such party to, the Federal Trade Commission (the "FTC"),
the Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby; and (iii) permit the other party to review
any material communication given by it to, and consult with each other in
advance of any meeting or conference with, the FTC, the DOJ or any such other
Governmental Authority or, in connection with any proceeding by a private party,
with any other person, and to the extent permitted by the FTC, the DOJ or such
other applicable Governmental Authority or other person, give the other party
the opportunity to attend and participate in such meetings and conferences. For
purposes of this Agreement, "Antitrust Law" means the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.07(a) and (b), each of Parent and Company shall use its
reasonable best efforts to resolve such objections if any, as may be asserted
with respect to the transactions contemplated hereby under any Antitrust Law. In
connection with the foregoing, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging
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any transaction contemplated by this Agreement as violative of any Antitrust
Law, each of Parent and Company shall cooperate in all respects with each other
and use its respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this
Section 5.07 shall limit a party's right to terminate this Agreement pursuant to
Section 7.01(b)(i) or 7.01(c) so long as such party has up to then complied in
all material respects with its obligations under this Section 5.07.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Antitrust Law or if any suit is instituted by any
Governmental Authority or any private party challenging any of the transactions
contemplated hereby as violative of any Antitrust Law, each of Parent and
Company shall use its reasonable best efforts to resolve any such objections or
challenge as such Governmental Authority or private party may have to such
transactions under such Antitrust Law so as to permit consummation of the
transactions contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, each of Parent and Company (and, to the extent
required by any Governmental Authority, its respective Subsidiaries and
Affiliates over which it exercises control) shall be required to enter into a
settlement, undertaking, consent decree, stipulation or other agreement (each, a
"Settlement") with a Governmental Authority regarding antitrust matters in
connection with the transactions contemplated by this Agreement, including,
without limitation, any Settlement that requires Parent and/or Surviving
Corporation to hold separate (including by establishing a trust or otherwise) or
to sell or otherwise dispose of stores of Parent (and its Subsidiaries) and/or
Surviving Corporation (and its Subsidiaries).
Section 5.08 COOPERATION. Without limiting the generality of
Section 5.07, Parent and Company shall together, or pursuant to an allocation of
responsibility to be agreed between them, coordinate and cooperate (i) in
connection with the preparation of the Company Proxy Statement and the
Form S-4, (ii) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement, and (iii) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Company Proxy Statement or the Form S-4 and
seeking timely to obtain any such actions, consents, approvals or waivers.
Section 5.09 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect,
Parent and Company will consult with each other before issuing any press release
or making any SEC filing or other public statement with respect to this
Agreement or the transactions contemplated hereby and, except as may be required
by applicable law, will not issue any such press release or make any such SEC
filing or other public statement prior to such consultation and providing the
other party with a reasonable opportunity to comment thereon.
Section 5.10 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Company or Merger Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of Company or Merger Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
Section 5.11 AFFILIATES. Prior to the Closing Date, Company shall cause to
be delivered to Parent a letter identifying, to the best of Company's knowledge,
all persons who are, at the time of the Company Shareholder Meeting described in
Section 5.03(a), deemed to be "affiliates" of Company for
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purposes of Rule 145 under the 1933 Act (the "1933 Act Affiliates"). Company
shall use its reasonable best efforts to cause each person who is so identified
as a 1933 Act Affiliate to deliver to Parent on or prior to the Closing Date a
letter agreement substantially in the form of Exhibit B-2 to this Agreement.
Section 5.12 DIRECTOR AND OFFICER LIABILITY. Parent agrees that at all
times after the Effective Time, it shall, or shall cause the Surviving
Corporation and its Subsidiaries to indemnify each person who is now, or has
been at any time prior to the date hereof, an employee, agent, director or
officer of Company or of any of its Subsidiaries, its successors and assigns
(individually an "Indemnified Party" and collectively the "Indemnified
Parties"), with respect to any claim, liability, loss, damage, judgment, fine,
penalty, amount paid in settlement or compromise, cost or expense (including
reasonable fees and expenses of legal counsel), against any Indemnified Party in
his or her capacity as an employee, agent, officer or director of Company or its
Subsidiaries, whenever asserted or claimed, based in whole or in part on, or
arising in whole or in part out of, any facts or circumstances occurring at or
prior to the Effective Time whether commenced, asserted or claimed before or
after the Effective Time, including liability arising under the 1933 Act, the
1934 Act or state law. In the event of any claim, liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise, cost or
expense described in the preceding sentence, Parent shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties promptly after
statements are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred.
Parent shall, or shall cause the Surviving Corporation to, maintain in
effect for not less than six years after the Effective Time the current policies
of directors' and officers' liability insurance maintained by Company and its
Subsidiaries on the date hereof (provided that Parent may substitute therefor
policies with reputable and financially sound carriers having at least the same
coverage and amounts thereof and containing terms and conditions which are no
less advantageous to the persons currently covered by such policies as insured)
with respect to facts or circumstances occurring at or prior to the Effective
Time; provided that if the aggregate annual premiums for such insurance during
such six-year period shall exceed 300% of the per annum rate of the aggregate
premium currently paid by Company and its Subsidiaries for such insurance on the
date of this Agreement, then Parent shall cause the Surviving Corporation to,
and the Surviving Corporation shall, provide the most advantageous coverage that
shall then be available at an annual premium equal to 300% of such rate. Parent
agrees to pay all expenses (including fees and expenses of counsel) that may be
incurred by any Indemnified Party in successfully enforcing the indemnity or
other obligations under this Section 5.12. The rights under this Section 5.12
are in addition to rights that an Indemnified Party may have under the articles
of incorporation, bylaws, or other similar organizational documents of Company
or any of its Subsidiaries or the Maine Law. The rights under this Section 5.12
shall survive consummation of the Merger and are expressly intended to benefit
each Indemnified Party. Parent agrees to cause the Surviving Corporation and any
of its Subsidiaries (or their successors) to maintain in effect for a period of
six years the provisions of its articles of incorporation or bylaws or similar
organizational documents providing for indemnification of Indemnified Parties,
with respect to facts or circumstances occurring at or prior to the Effective
Time, to the fullest extent provided by law.
Section 5.13 OBLIGATIONS OF MERGER SUBSIDIARY. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
Section 5.14 LISTING OF STOCK. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued in connection
with the Merger to be approved for listing on the NYSE on or prior to the
Closing Date, subject to official notice of issuance.
Section 5.15 ANTITAKEOVER STATUTES. If any Takeover Statute is or may
become applicable to the Merger, each of Parent and Company shall take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms
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contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Merger.
Section 5.16 PARENT BOARD. Parent will take all necessary action
(including, without limitation, amending the stockholders' agreement between
Parent and Etablissements Delhaize Freres et Cie "Le Lion" S.A.) to cause Hugh
G. Farrington, from and after the date the Merger is consummated, to be
appointed (a) Vice Chairman of Parent, (b) a member of Parent's Executive
Committee and (c) a member of the Board of Directors of Parent.
Section 5.17 EMPLOYEE BENEFITS. (a) Following the Effective Time, Parent
shall, or shall cause the Surviving Corporation to (i) honor all obligations
under employment or severance agreements of Company or its Subsidiaries and
(ii) pay all benefits accrued through the Effective Time under employee benefit
plans, programs, policies and arrangements of Company or its Subsidiaries in
accordance with the terms thereof. In furtherance and not in limitation of the
foregoing, Parent agrees to provide, or cause the Surviving Corporation to
provide, employees of Company who continue to be employed by the Surviving
Corporation or its Subsidiaries as of the Effective Time ("Continuing
Employees") for a period of not less than two years following the Effective Time
with (A) annual compensation not less favorable than the annual compensation
which they were receiving immediately prior to the Effective Time, and
(B) benefits which, in the aggregate, are no less favorable than the benefits
provided to such employees immediately prior to the Effective Time. Nothing
herein shall require the continuation of employment of any of the Continuing
Employees for any period of time following the Effective Time. In addition to
the foregoing, for a period of two years following the Effective Time, Parent
shall, or shall cause the Surviving Corporation or its Subsidiaries to,
establish and maintain a plan to provide severance and termination benefits to
all non-union employees of Company and its Subsidiaries which are no less
favorable than the severance and termination benefits provided under Company's
plans and arrangements in effect as of the date of this Agreement. If Continuing
Employees are included in any benefit plan (including without limitation,
provision for vacation) of Parent or its Subsidiaries, the Continuing Employees
shall receive credit as employees of Company and its Subsidiaries for service
prior to the Effective Time with Company and its Subsidiaries to the same extent
such service was counted under similar Company Benefit Plans for purposes of
eligibility, vesting, eligibility for retirement and benefit accrual. If
Continuing Employees are included in any medical, dental or health plan other
than the plan or plans they participated in as of the Effective Time, any such
plans shall not include pre-existing condition exclusions, except to the extent
such exclusions were applicable under the similar Company Benefit Plan as of the
Effective Time, and shall provide credit for any deductibles and co-payments
applied or made with respect to each Continuing Employee in the calendar year of
the change. The rights under this Section 5.17 shall survive consummation of the
Merger and are expressly intended to benefit each Continuing Employee.
(b) Upon the Effective Time, Company's Employee Stock Purchase Plan shall be
terminated with the effect that the then current offering period under such plan
will be terminated effective as of the Effective Time.
Section 5.18 STOCK EXCHANGE AGREEMENT. Parent has provided Company with a
true and complete copy of the Stock Exchange Agreement, a copy of which is
attached hereto as Exhibit B. Parent agrees that it will not amend or waive any
provision of the Stock Exchange Agreement without the prior written consent of
Company. Parent agrees that it will not issue consideration per share to the
Voting Shareholders under the Stock Exchange Agreement that (i) is greater than
the blended value of the Merger Consideration or (ii) consists of more than 86%
in cash.
Section 5.19 DEFINITIVE FINANCING DOCUMENTS. On or prior to the later of
(i) 10 days prior to the Company Shareholder Meeting or (ii) 120 days after the
date of this Agreement, Parent shall provide Company with substantially final
documentation relating to the debt financing described in the Commitment Letter
(the "Financing Documents") together with a written confirmation from Parent and
the lenders thereunder to the effect that they are prepared to enter into such
documentation upon the satisfaction or waiver of the conditions to the Merger.
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ARTICLE 6
CONDITIONS TO THE MERGER
Section 6.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of Company, Parent and Merger Subsidiary to consummate the Merger are subject to
the satisfaction (or waiver by the party for whose benefit the applicable
condition exists) of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have been
approved and adopted by the shareholders of Company by the Company Requisite
Vote;
(b) any applicable waiting period under the HSR Act relating to the
transactions contemplated by this Agreement shall have expired;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(d) the Form S-4 shall have been declared effective under the 1933 Act and
no stop order suspending the effectiveness of the Form S-4 shall be in effect
and no proceedings for such purpose shall be pending before or threatened by the
SEC; and
(e) the shares of Parent Common Stock to be issued in the Merger shall have
been approved for listing on the NYSE, subject to official notice of issuance.
Section 6.02 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or waiver by Parent) of the following
further condition:
(a) Company shall have performed in all material respects all of its
obligations and complied in all material respects with all of its covenants
hereunder required to be performed or complied with by it at or prior to the
Effective Time and (b) the representations and warranties of Company contained
in this Agreement (without considering any qualification as to materiality)
shall be true and correct at and as of the Effective Time, as if made at and as
of such time (other than representations and warranties that address matters
only as of a particular date, which shall be true and correct as of such date),
with only such exceptions as, individually or in the aggregate, have not had and
would not have a Material Adverse Effect on Company; and Parent shall have
received a certificate signed by an executive officer of Company to the effect
set forth in clauses (a) and (b).
Section 6.03 CONDITIONS TO THE OBLIGATIONS OF COMPANY. The obligations of
Company to consummate the Merger are subject to the satisfaction (or waiver by
Company) of the following further condition:
(a) Parent shall have performed in all material respects all of its
obligations and complied in all material respects with all of its covenants
hereunder required to be performed or complied with by it at or prior to the
Effective Time and (b) the representations and warranties of Parent contained in
this Agreement (without considering any qualification as to materiality) shall
be true and correct at and as of the Effective Time, as if made at and as of
such time (other than representations and warranties that address matters only
as of a particular date which shall be true and correct as of such date), with
only such exceptions as, individually or in the aggregate, have not had and
would not have a Material Adverse Effect on Parent; and Company shall have
received a certificate signed by an executive officer of Parent to the effect
set forth in clauses (a) and (b).
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ARTICLE 7
TERMINATION
Section 7.01 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the shareholders of Company):
(a) by mutual written consent of Company and Parent;
(b) by either Company or Parent,
(i) if the Merger has not been consummated by August 17, 2000 (the "End
Date"); or
(ii) if the Company Shareholder Approval shall not have been obtained by
reason of the failure to obtain the Company Requisite Vote at a duly held
meeting of shareholders or any adjournment thereof;
(c) by either Company or Parent (so long as such party has complied in all
material respects with its obligations under Section 5.07), if consummation of
the Merger would be prohibited by any law or regulation or if any injunction,
judgment, order or decree enjoining Company or Parent from consummating the
Merger is entered and such injunction, judgment, order or decree shall become
final and nonappealable;
(d) by Company:
(i) if the Company Board shall have received an Acquisition Proposal
which the Company Board has determined in good faith is a Superior Proposal;
provided that Company shall have given Parent at least forty-eight hours
advance actual notice of any termination pursuant to this
Section 7.01(d)(i) and shall have made the payment referred to in
Section 7.03(b) hereof;
(ii) upon a breach of any representation, warranty, covenant or
agreement of Parent, or if any representation or warranty of Parent shall
become untrue, in either case which breach or misrepresentation or warranty
shall not have been cured within 30 days following written notice from
Company such that the conditions set forth in Section 6.03(a) would be
incapable of being satisfied by the End Date; or
(iii) if Parent shall have failed to deliver to Company the Financing
Documents within the period described in Section 5.19.
(e) by Parent:
(i) if (x) the Company Board shall have failed to recommend or
withdrawn, or modified or changed in a manner adverse to Parent its approval
or recommendation of this Agreement or the Merger or shall have recommended
a Superior Proposal or (y) Company shall have entered into a definitive
agreement providing for a Superior Proposal with a person other than Parent
or its Subsidiaries (or the Company Board resolves to do any of the
foregoing); or
(ii) upon a breach of any representation, warranty, covenant or
agreement of Company, or if any representation or warranty of Company shall
become untrue, in either case which breach or misrepresentation or warranty
shall not have been cured within a reasonable period of time following
written notice from Parent such that the conditions set forth in
Section 6.02(a) would be incapable of being satisfied by the End Date (a
"Company Breach").
The party desiring to terminate this Agreement pursuant to clauses (b), (c),
(d) or (e) of this Section 7.01 shall give written notice of such termination to
the other party in accordance with Section 8.02, specifying the provision hereof
pursuant to which such termination is effected. Notwithstanding anything else
contained in this Agreement, (A) the right to terminate this Agreement
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under this Section 7.01 shall not be available to any party whose failure to
fulfill its obligations or to comply with its covenants under this Agreement in
all material respects has been the cause of, or resulted in, the failure to
satisfy any condition to the obligations of either party hereunder, and (B) no
party that is in material breach of its obligations hereunder shall be entitled
to any payment of any amount from the other party pursuant to Section 7.03(b).
Section 7.02 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 7.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreements
contained in this Section 7.02 and in Section 7.03 and in the Parent
Confidentiality Agreement and Company Confidentiality Agreement shall survive
the termination hereof and (b) no such termination shall relieve any party of
any liability or damages resulting from any willful material breach by that
party of this Agreement.
Section 7.03 PAYMENTS. (a) Except as otherwise specified in this
Section 7.03 or agreed in writing by the parties, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such cost or expense.
(b) If (x) Company shall terminate this Agreement pursuant to
Section 7.01(d)(i) hereof, or (y) Parent shall terminate this Agreement pursuant
to Section 7.01(e)(i) hereof (each such case of termination being referred to as
a "Trigger Event"), Company shall pay to Parent (by wire transfer of immediately
available funds not later than the date of termination of this Agreement) an
amount equal to $90,000,000 (the "Termination Fee"). Additionally, if Parent
terminates this Agreement pursuant to Section 7.01(e)(ii), and an Acquisition
Proposal has been made to Company after the date hereof, but prior to such
termination, and within twelve months after the termination of this Agreement
(A) a transaction constituting an Acquisition Proposal is consummated, or (B) a
definitive agreement for such a transaction is entered into by Company, then
Company shall pay to Parent the Termination Fee upon the consummation of any
such transaction or the execution of any such definitive agreement. Acceptance
by Parent of the Termination Fee shall constitute conclusive evidence that this
Agreement has been validly terminated and upon payment of such amount Company
shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement.
ARTICLE 8
MISCELLANEOUS
Section 8.01 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings specified in this Section 8.01:
(a) "know" or "knowledge" means, with respect to any party, the actual
knowledge of such party's executive officers, except as specified in
Section 3.14(g) and 4.14(g).
(b) "person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(c) "Subsidiary" means, when used with reference to any entity, any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other subsidiary of such party is a general or
managing partner or (ii) the outstanding voting securities or interests of
which, having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization, is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries.
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Section 8.02 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given:
if to Parent, to:
Food Lion, Inc.
2110 Executive Drive
Salisbury, NC 28147
Attention: General Counsel
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, TX 75201-4675
Attention: Ford Lacy
if to Company, to:
Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
Attention: Andrew P. Geoghegan
General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Stephen E. Jacobs
Raymond O. Gietz
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 8.02
and the appropriate telecopy confirmation is received or (b) if given by any
other means, when delivered at the address specified in this Section 8.02.
Section 8.03 ENTIRE AGREEMENT; NON-SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; THIRD PARTY BENEFICIARIES. (a) This Agreement (including any
exhibits hereto), the other agreements referred to in this Agreement and the
Parent Confidentiality Agreement and the Company Confidentiality Agreement
constitute the entire Agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to such
subject matter. None of this Agreement, the Parent Confidentiality Agreement,
the Company Confidentially Agreement or any other agreement contemplated hereby
or thereby (or any provision hereof or thereof) is intended to confer on any
person other than the parties hereto or thereto any rights or remedies (except
that Article 1 and Sections 5.12, and 5.17 are intended to confer rights and
remedies on the persons specified therein).
(b) The representations and warranties contained herein or in any schedule,
instrument or other writing delivered pursuant hereto shall not survive the
Effective Time.
Section 8.04 AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
Company and Parent or, in the case of a waiver, by the party against
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whom the waiver is to be effective; provided that after the adoption of this
Agreement by the shareholders of Company, there shall be made no amendment that
by law requires further approval by shareholders without the further approval of
such shareholders.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.05 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the written consent of the other parties hereto.
Section 8.06 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Maine (without regard to
principles of conflict of laws).
Section 8.07 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated by this Agreement may be
brought against any of the parties in any Federal court located in the State of
Maine, or any Maine state court located in Cumberland County, and each of the
parties hereto hereby consents to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the State of Maine. Without limiting the generality of
the foregoing, each party hereto agrees that service of process upon such party
at the address referred to in Section 8.01, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
Section 8.08 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 8.09 INTERPRETATION. When a reference is made in this Agreement to
a Section or Disclosure Schedule, such reference shall be to a Section of this
Agreement or to the Company Disclosure Schedule or Parent Disclosure Schedule as
applicable, unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation". The phrases "the date
of this Agreement", "the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to August 17, 1999.
Section 8.10 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. Upon such determination that any term, provision,
covenant or restriction of this Agreement is invalid, void, unenforceable or
against regulatory policy, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 8.11 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
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Agreement and to enforce specifically the terms and provisions of this Agreement
in any Federal court located in the State of Maine or any Maine state court, in
addition to any other remedy to which they are entitled at law or in equity.
Section 8.12 JOINT AND SEVERAL LIABILITY. Parent and Merger Subsidiary
hereby agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
<TABLE>
<S> <C> <C>
FOOD LION, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
Name: R. William McCanless
Title: President & Chief Executive Officer
HANNAFORD BROS. CO.
By: /s/ HUGH G. FARRINGTON
-----------------------------------------
Name: Hugh G. Farrington
Title: President and Chief Executive
Officer
FL ACQUISITION SUB, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
Name: R. William McCanless
Title: President & Chief Executive Officer
</TABLE>
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MORGAN STANLEY & CO., INCORPORATED
Annex B
August 17, 1999
Board of Directors
Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, Maine 04074
Members of the Board
We understand that Hannaford Bros. Co. ("Hannaford" or the "Company"), Food
Lion ("Parent") and FL Acquisition Sub, Inc., a wholly-owned subsidiary of
Parent ("Acquisition Sub") have entered into an Agreement and Plan of Merger,
dated August 17, 1999 (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of Acquisition Sub with and into Company.
Pursuant to the Merger, the Company will become a wholly-owned subsidiary of
Parent and each outstanding share of common stock, par value $0.75 per share
(the "Common Stock") of the Company, other than shares held in treasury or held
by Parent or as to which dissenters' rights have been perfected, will be
converted into the right to receive (i) $79.00 in cash or (ii) the number of
shares of Class A common stock of Parent ("Parent Common Stock") equal to $79.00
divided by (A) the Average Parent Price (as defined in the Merger Agreement) or
(B) $9.00, whichever is higher or (iii) a combination of cash and shares of
Parent Common Stock as determined in accordance with the Merger Agreement. The
terms and conditions of the Merger are more fully set forth in the Merger
Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Parent, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) reviewed information relating to certain strategic, financial and
operational benefits anticipated from the Merger, prepared by the
managements of the Company and the Parent, respectively;
(v) discussed the past and current operations and financial condition and
the prospects of the Company and the Parent, including information
relating to certain strategic, financial and operational benefits
anticipated from the Merger, with senior executives of the Company and
the Parent, respectively;
(vi) reviewed the reported prices and trading activity for the Common Stock
and the Parent Common Stock;
(vii) compared the financial performance of the Company and the Parent and
the prices and trading activity of the Common Stock and the Parent Common
Stock with that of certain other comparable publicly-traded companies and
their securities;
(viii)reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
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(ix) participated in discussions and negotiations among representatives of
the Company and Parent and their financial and legal advisors;
(x) reviewed the Stock Exchange Agreement, dated August 17, 1999, among
Empire Company Limited and E.C.L. Investments Limited (collectively, the
"Empire Shareholders") and Parent pursuant to which, immediately prior to
the closing of the Merger, the Empire Shareholders will exchange shares
of Common Stock for a combination of cash and Parent Common Stock;
(xi) reviewed the Merger Agreement dated August 17, 1999 and certain related
documents; and
(xii) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. In addition, we have assumed that the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement. We have not made
any independent valuation or appraisal of the assets or liabilities of the
Company, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent (except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission in
connection with the Merger). In addition, this opinion does not in any manner
address the prices at which the Parent's Common Stock will trade following
consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how shareholders of the Company should vote at the
shareholder's meeting to be held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ R. BRADFORD EVANS
-----------------------------------------
R. Bradford Evans
Managing Director
</TABLE>
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ANNEX C
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (this "Agreement") is entered into as of the
17(th) day of August, 1999, by and among Food Lion, Inc., a North Carolina
corporation ("Food Lion" or the "Company"), and each of the other parties listed
on the signature page hereof or their respective assigns (the "Selling
Stockholders").
RECITALS
WHEREAS, the Selling Stockholders desire to exchange the outstanding shares
of common stock, par value $0.75 per share (the "Hannaford Common Stock"), of
Hannaford Brothers Co., a Maine corporation ("Hannaford"), owned by them as set
forth on Schedule 1 hereof, on the terms and subject to the conditions set forth
in this Agreement.
WHEREAS, the Company, FL Acquisition Sub, Inc., a wholly-owned subsidiary of
the Company, and Hannaford have agreed to enter into an Agreement and Plan of
Merger dated the date hereof attached hereto as Exhibit A (the "Merger
Agreement").
WHEREAS, the Selling Stockholders have agreed, pursuant to a Voting
Agreement dated the date hereof, to vote the Hannaford Common Stock in favor of
the Merger (as defined in the Merger Agreement).
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Selling Stockholders have required that the Company enter into
this Agreement.
WHEREAS, capitalized terms used but not otherwise defined herein shall have
the meaning ascribed to such terms in the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and subject to the
conditions hereinafter set forth, the parties agree as follows:
1. EXCHANGE.
1.1 EXCHANGE. Subject to the terms and conditions of this Agreement,
immediately prior to Closing, the Selling Stockholders will exchange their
Hannaford Common Stock for aggregate consideration of $823,066,635 (the "Total
Consideration") determined and payable as follows:
(a) $365,000,000 (the "Share Consideration") payable in Class A common
stock, par value $.50 per share, of the Company (the "Food Lion Common
Stock"), with the number of such Food Lion Common Stock to be delivered by
the Company to the Selling Stockholders being calculated as 365,000,000
divided by the Average Parent Price or $9.00, whichever is greater; and
(b) an amount (the "Cash Consideration") equal to the difference between
the Total Consideration and the Share Consideration, payable by bank draft
drawn upon a major money center bank.
1.2 PAYMENT. At the closing, the Selling Stockholders shall deliver to the
Company certificates for the Common Stock duly endorsed in blank, or accompanied
by a stock power or stock powers duly executed in blank, in proper form for
transfer, and Food Lion shall issue and deliver to the Selling Stockholders the
cash set forth in Section 1.2 and the Share Consideration.
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1.3 TAXES. The Selling Stockholders will be responsible for all sales and
similar transfer taxes which may be due by the Selling Stockholders as a result
of the exchange of the Common Stock or any reconveyance as set forth in
Section 5 herein.
1.4 ADJUSTMENT.
(a) The Total Consideration shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Food Lion Common
Stock), reorganization, recapitalization or other like change with respect
to Food Lion Common Stock occurring after the date hereof and having a
record or effective date prior to the Effective Time.
(b) The Company agrees to give the Selling Stockholders written notice
five Business Days prior to the Closing of the number of shares of Food Lion
Common Stock outstanding as of the date of such notice and the number of
shares of Food Lion Common Stock which may be issuable under any outstanding
options, rights or other securities during such five-day period. Upon
receipt of such notice, the Selling Stockholders may elect to adjust,
upwards or downwards, the consideration set forth in Section 1.1(a) hereof
provided that:
(i) the Share Consideration shall in no event be less than
$315,000,000, subject to adjustment as set forth in subparagraph 1.4(d)
below; and
(ii) the Share Consideration shall in no event exceed $421,000,000.
(c) The Company agrees that if the Selling Stockholders give the Company
prior written notice at least five Business Days prior to the Effective
Date, the Company will adjust the manner in which the consideration provided
for in Paragraph 1.1, for some or all of the shares of Hannaford Common
Stock is paid so that the number of shares of Hannaford Common Stock or
fractions thereof acquired by the Company for cash and the number of shares
of Hannaford Common Stock or fractions thereof acquired by the Company for
Selling Stockholders' Shares should be as the Selling Stockholders so
direct.
(d) The Company shall notify the Selling Stockholders five Business Days
prior to the Closing of the number of options to acquire shares of either
Hannaford or the Company which have been exercised since the date of this
Agreement, whereupon the minimum Share Consideration set forth in
subparagraph (b)(i) above shall be adjusted upwards to reflect the issuance
of stock upon such exercise, provided that the Minimum Share Consideration
shall in no event exceed $321,717,524.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder represents, warrants and covenants to the Company as follows:
2.1 AUTHORITY. Such Selling Stockholder has the capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Such Selling Stockholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of such Selling Stockholder, enforceable against the Selling Stockholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law). Neither the execution and delivery of this Agreement, nor the
compliance with any of the provisions hereof, in each case by such Selling
Stockholder will (i) require any consent, approval, authorization or permit of,
registration, declaration or filing with or notification to, any U.S. or
Canadian Governmental Authority, except for filings on Schedule 13D under the
Exchange Act and under the HSR Act, (ii) result in a default (or an event which,
with notice or lapse of time or both, would become a default) or give rise to
any right of termination by any third party, cancellation, amendment or
acceleration under any contract or understanding, or result in the creation of a
Lien with respect to any
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of the shares of Hannaford Common Stock, (iii) require any material consent,
authorization or approval of any Person or Governmental Authority which has not
been obtained, or (iv) violate or conflict with any order or law applicable to
such Selling Stockholder or the shares of Hannaford Common Stock.
2.2 OWNERSHIP. The shares of Hannaford Common Stock owned by such Selling
Stockholder are validly issued, fully paid and non-assessable and owned
beneficially and of record by such Selling Stockholder. Such Selling Stockholder
will convey good and valid title to the shares of Hannaford Common Stock, free
and clear of any Liens.
2.3 INVESTMENT REPRESENTATION. Such Selling Stockholder is acquiring the
shares of Food Lion Common Stock for its own account, for investment purposes
only and not with a view to the distribution of the shares of Food Lion Common
Stock, except in compliance with the Securities Act of 1933, as amended.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents,
warrants and covenants to the Selling Stockholders as follows:
3.1 AUTHORITY. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of North Carolina and
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation of the transactions
contemplated hereby. The Company has duly and validly executed this Agreement
and this Agreement constitutes a legal, valid and binding obligation of Food
Lion, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law). Neither the execution and
delivery of this Agreement, the consummation by the Company of the transaction
contemplated hereby, nor the compliance by the Company with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of its Articles of Incorporation or Bylaws, (ii) require any consent, approval,
authorization or permit of, registration, declaration or filing with, or
notification to, any Governmental Authority except for filings on Schedule 13D
under the Exchange Act and under the HSR Act, (iii) result in a default (or an
event which, with notice or lapse of time or both, would become a default) or
give rise to any right of termination by any third party, cancellation,
amendment or acceleration under any contract or understanding, (iv) require any
material consent, authorization or approval of any Person or Governmental
Authority which has not been obtained, or (v) violate or conflict with any order
or law applicable to the Company.
3.2 OWNERSHIP. The shares of Food Lion Common Stock to be issued to the
Selling Stockholders hereunder upon issuance will be validly issued, fully paid
and nonassessable. As of the close of business on August 16, 1999, 239,853,031
shares of Food Lion Common Stock are issued and outstanding, 4,048,781 shares of
Food Lion Common Stock are reserved for additional grants under option and other
stock-based plans and 4,083,203 shares of Food Lion Common Stock are reserved
for issuance pursuant to options previously granted pursuant to Food Lion
options plans.
4. CONDITIONS TO CLOSING. The obligations of the parties hereto to consummate
the transactions contemplated hereby are subject to the parties to the Merger
Agreement having satisfied or waived the conditions set forth in the Merger
Agreement and the parties thereto agreeing that they are ready, willing and able
to close the Merger immediately following the Closing of the transaction
contemplated hereto.
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<PAGE>
5. RECONVEYANCE. If the transactions contemplated by this Agreement are
consummated and the Merger is not consummated, the parties hereto agree to use
their best efforts to take all actions necessary to unwind the transactions so
that the Parties are in the same position they were in prior to the closing of
the transactions contemplated hereby.
6. BOARD SEAT. The Company agrees to take all necessary action to cause a
representative of Empire Company Limited to be appointed a member of the Board
of Directors of the Company.
7. MISCELLANEOUS.
7.1 All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed given when so delivered in person, one
business day after delivery to an overnight courier, upon facsimile transmission
(with receipt confirmed by telephone or by automatic transmission report) or two
business days after being sent by registered or certified mail (postage prepaid,
return receipt requested), as follows:
(a) If to the Company, to:
Food Lion, Inc.
2110 Executive Drive
Salisbury, NC 28147
Attn: Lester C. Nail
Telephone: (704) 633-8250 x2305
Facsimile: (704) 639-1353
(b) If to Selling Stockholders, to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Milton G. Strom
Fax: (212) 735-2000
-and-
Stewart McKelvey Stirling Scales
1959 Upper Water Street
Suite 900, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: James M. Dickson
Facsimile No.: (902) 420-1417
Any party may by notice given in accordance with this Section 7.1 to the other
party designate another address or person for receipt of notices hereunder.
7.2 This Agreement shall be construed in accordance with and governed by the
internal laws of the State of Maine. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of any state or federal court in the State of
Maine or the State of Maine with respect to any suit, action, proceeding or
judgment relating to or arising out of this Agreement.
7.3 This Agreement may be amended, modified or supplemented only by written
agreement of the parties hereto.
7.4 This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
heirs, estates and permitted assigns. This
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<PAGE>
Agreement is not assignable without the prior written consent of the other party
hereto; PROVIDED, HOWEVER, that a party hereto may assign its rights to a direct
or indirect wholly-owned subsidiary of either of the Selling Stockholders.
7.5 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.6 This Agreement contains the entire agreement between the parties in
respect of the subject matter contained herein, and supersedes all prior
agreements, written or oral, with respect thereto.
7.7 If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
7.8 The parties hereto each acknowledge that, in view of the uniqueness of
the subject matter hereof, the parties hereto would not have an adequate remedy
at law for money damages in the event that this Agreement were not performed in
accordance with its terms, and therefore agree that the parties hereto shall be
entitled to specific enforcement of the terms hereof in addition to any other
remedy to which the parties hereto may be entitled at law or in equity.
[The next page is the signature page]
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<PAGE>
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective as
of the date first set forth above.
<TABLE>
<S> <C> <C>
FOOD LION, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
R. William McCanless
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EMPIRE COMPANY LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
E.C.L. INVESTMENTS LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
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<PAGE>
SCHEDULE 1
STOCKHOLDERS HOLDINGS
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES
- ------------------- ----------------
<S> <C>
Empire Company Limited...................................... 5,550,461
E.C.L. Investment Limited................................... 4,868,104
Empire Company Limited
</TABLE>
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<PAGE>
ANNEX D
VOTING AGREEMENT
This VOTING AGREEMENT (this "AGREEMENT"), dated as of August 17, 1999, is
entered into by and among Food Lion, Inc., a North Carolina corporation (the
"PARENT"), and the other parties listed on the signature page hereof or their
respective assigns (the "STOCKHOLDERS").
RECITALS:
A. The Parent, FL Acquisition Sub, Inc., a Maine corporation and a wholly
owned subsidiary of Parent ("MERGER SUB"), and Hannaford Brothers Co., a Maine
corporation (the "COMPANY"), have entered into an Agreement and Plan of Merger
of even date herewith (the "MERGER AGREEMENT"), pursuant to which the parties
thereto have agreed, upon the terms and subject to the conditions set forth
therein, to merge the Merger Sub with and into the Company Sub (the "MERGER").
B. As of the date hereof, each Stockholder is the owner of the number of
shares of Company Common Stock (the "SHARES") set forth opposite such
Stockholder's name on SCHEDULE 1 attached hereto.
C. As of the date hereof, the stockholders and the Company have entered
into a Stock Exchange Agreement with respect to the Shares.
D. In consideration of the Parent's agreement to enter into the Merger
Agreement, each of the Stockholders agrees to vote in favor of the Merger the
Shares.
E. Capitalized terms used but not otherwise defined herein and defined in
the Merger Agreement shall have the meanings given such terms in the Merger
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parent and the
Stockholders, intending to be legally bound, hereby agree as follows:
Section 1. VOTING OF SHARES.
1.1 VOTING AGREEMENT.
Each Stockholder hereby agrees to vote (or cause to be voted) the Shares, at
any annual, special or other meeting of the stockholders of the Company, and at
any adjournment or adjournments thereof, or pursuant to any consent in lieu of a
meeting or otherwise:
(i) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and any actions required in furtherance
thereof;
(ii) against any action or agreement that is reasonably likely to result
in a breach in any material respect of any covenant, representation or
warranty or any other obligation of the Parent under this Agreement or the
Merger Agreement; and
(iii) except for all such actions which may be permitted to the Company
under Section 5.01 of the Merger Agreement, against (a) any extraordinary
corporate transaction, such as a merger, rights offering, reorganization,
recapitalization or liquidation involving the Company or any of its
subsidiaries other than the Merger, (b) a sale or transfer of a material
amount of assets of the Company or any of its material subsidiaries or the
issuance of any securities of the Company or any subsidiary, (c) any change
in the Board of Directors of the Company other than in connection with an
annual meeting of the shareholders of the Company with respect to the slate
of directors proposed by the incumbent Board of Directors of the Company (in
which case they agree to vote for the slate proposed by the incumbent Board)
or (d) any action that is reasonably likely to
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<PAGE>
materially impede, interfere with, delay, postpone or adversely affect in
any material respect the Merger and the transactions contemplated by the
Merger Agreement.
Section 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each
Stockholder represents and warrants to the Parent as follows in each case as of
the date hereof:
2.1 BINDING AGREEMENT. Each Stockholder has the capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Each Stockholder has duly and validly executed and delivered this Agreement and
this Agreement constitutes a legal, valid and binding obligation of each
Stockholder, enforceable against the Stockholder in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
2.2 NO CONFLICT. Neither the execution and delivery of this Agreement, nor
the compliance with any of the provisions hereof, in each case by each
Stockholder will (i) require any consent, approval, authorization or permit of,
registration, declaration or filing with, or notification to, any Governmental
Authority, except for filings on Schedule 13D under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), (ii) result in a default (or an event
which, with notice or lapse of time or both, would become a default) or give
rise to any right of termination by any third party, cancellation, amendment or
acceleration under any contract or understanding, or result in the creation of a
Lien with respect to any of the Shares, (iii) require any material consent,
authorization or approval of any Person or Governmental Authority which has not
been obtained, or (iv) violate or conflict with any order or law applicable to
such Stockholder or the Shares.
2.3 OWNERSHIP OF SHARES. Each Stockholder is the record and beneficial
owner of such Stockholder's Shares free and clear of any Liens on the right to
vote such Shares. Each Stockholder holds exclusive power to vote such
Stockholder's Shares, subject to the limitations set forth in SECTION 1 of this
Agreement. The number of Shares set forth opposite each Stockholder's name on
SCHEDULE 1 represents all of the shares of capital stock of the Company
beneficially owned by each Stockholder.
2.4 ABSENCE OF CERTAIN AGREEMENTS. None of the Stockholders nor any of
their representatives has entered into any agreement, letter of intent or
similar agreement (whether written or oral) with any party other than the Parent
whereby such Stockholder has agreed to support, directly or indirectly, any
proposal or offer (whether or not in writing and whether or not delivered to the
stockholders of the Company generally) for a merger or other business
combination involving the Company or to acquire in any matter, directly or
indirectly, a material equity interest in, any voting securities of, or a
substantial portion of the assets of the Company, other than the transactions
contemplated by the Merger Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE PARENT. The Parent
represents and warrants to each Stockholder as follows, in each case as of the
date hereof:
3.1 BINDING AGREEMENT. The Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of North
Carolina and has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the Merger Agreement by the Parent and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of the Parent, and no other
corporate proceedings on the part of the Parent are necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement
by the Parent and the consummation of the transactions contemplated hereby and
thereby. The Parent has duly and validly executed this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization
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<PAGE>
or other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
3.2 NO CONFLICT. Neither the execution and delivery of this Agreement, the
consummation by the Parent of the transactions contemplated hereby, nor the
compliance by the Parent with any of the provisions hereof will (i) conflict
with or result in a breach of any provision of its Articles of Incorporation or
Bylaws, (ii) require any consent, approval, authorization or permit of,
registration, declaration or filing with, or notification to, any Governmental
Authority, (iii) result in a default (or an event which, with notice or lapse of
time or both, would become a default) or give rise to any right of termination
by any third party, cancellation, amendment or acceleration under any contract
or understanding, (iv) require any material consent, authorization or approval
of any Person or Governmental Authority which has not been obtained, or (v)
violate or conflict with any order or law applicable to the Company.
Section 4. TRANSFER AND OTHER RESTRICTIONS. For so long as the Merger
Agreement is in effect:
4.1 CERTAIN PROHIBITED TRANSFERS. Except for the Stock Exchange Agreement
between the parties hereto entered into as of the date hereof, each Stockholder
agrees not to:
(i) sell, transfer, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, assignment or other disposition of, such Stockholder's
Shares or any interest contained therein, other than sales, transfers,
assignments or other dispositions by a Stockholder to a direct or indirect
wholly-owned subsidiary of either Stockholder;
(ii) except as contemplated by this Agreement, grant any proxy or power
of attorney or enter into a voting agreement or other arrangement with
respect to such Stockholder's Shares, other than this Agreement; or
(iii) except as provided in the Hannaford-Sobey Voting Trust Agreement,
dated as of February 4, 1988, as amended, deposit such Stockholder's Shares
into a voting trust.
4.2 ADDITIONAL SHARES. Without limiting the provisions of the Merger
Agreement, in the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock of the Company on, of or affecting the Shares or (ii) any Stockholder
shall become the beneficial owner of any additional shares of Company Common
Stock or other securities entitling the holder thereof to vote or give consent
with respect to the matters set forth in SECTION 1 hereof, then the terms of
this Agreement shall apply to the shares of capital stock or other securities of
the Company held by any Stockholder immediately following the effectiveness of
the events described in clause (i) or the Stockholder becoming the beneficial
owner thereof, as described in clause (ii), as though they were Shares
hereunder. Each Stockholder hereby agrees, while this Agreement is in effect, to
promptly notify the Parent of the number of any new shares of Company Common
Stock acquired by the Stockholder, if any, after the date hereof.
Section 5. SPECIFIC ENFORCEMENT. Each of the parties hereto acknowledges
and agrees that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with the terms
hereof or were otherwise breached and that each party shall be entitled to seek
specific performance of the terms hereof, in addition to any other remedy that
may be available at law or in equity.
Section 6. TERMINATION. This Agreement shall terminate on the earlier of
(i) the termination of the Merger Agreement, (ii) the agreement of the parties
hereto to terminate this Agreement, (iii) consummation of the Merger and (iv)
the date such Stockholder ceases to own any Shares.
D-3
<PAGE>
Section 7. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given:
If to the Parent, to:
Food Lion, Inc.
2110 Executive Drive
Salisbury, North Carolina 28147
Attention: R. William McCanless
Facsimile No.: (704) 637-8803
With a copy to (such copy shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Richard L. Wyatt, Jr.
Facsimile No.: (202) 887-4288
If to the Stockholders, to:
Empire Company Limited
115 King Street
Stellarton, Nova Scotia B0K 1S0
Attention: President
Facsimile No.: (902) 755-6477
With a copy to (such copy shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Milton G. Strom
Facsimile No.: (212) 735-2000
Stewart McKelvey Stirling Scales
1959 Upper Water Street
Suite 900, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: James M. Dickson
Facsimile No.: (902) 420-1417
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this SECTION 7 and
the appropriate telecopy confirmation is received or (ii) if given by any other
means, when delivered at the address specified in this SECTION 7.
Section 8. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
Section 9. CONSIDERATION. This Agreement is granted in consideration of
the execution and delivery of the Merger Agreement by the Parent.
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<PAGE>
Section 10. AMENDMENT. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
Section 11. SUCCESSORS AND ASSIGNS. Except as provided in Section 4.1
hereof, this Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties hereto. This Agreement
will be binding upon, inure to the benefit of and be enforceable by each party
and such party's respective heirs, beneficiaries, executors, representatives and
permitted assigns.
Section 12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
Section 13. GOVERNING LAW. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Maine without giving effect to the provisions thereof relating to
conflicts of law.
Section 14. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable such provision shall be interpreted
to be only so broad as is enforceable.
Section 15. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 16. STOCKHOLDER CAPACITY. No Stockholder or designee of any
Stockholder who is or becomes during the term hereof a director or officer of
the Company makes any agreement or understanding herein in his or her capacity
as such director or officer. Each Stockholder signs solely in such Stockholder's
capacity as the record holder and beneficial owner of such Stockholder's Shares
and nothing herein shall limit or affect any actions taken by a Stockholder or
any designee of any Stockholder in his or her capacity as an officer or director
of the Company.
Section 17. FURTHER ASSURANCES. Each party hereto shall execute and
deliver such additional documents as may be necessary or desirable to consummate
the transactions contemplated by this Agreement.
Section 18. THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
expressed or implied, shall be construed to give any person other than the
parties hereto any legal or equitable right, remedy or claim under by reason of
this Agreement or any provision contained herein.
[The next page is the signature page.]
D-5
<PAGE>
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective as
of the date first set forth above.
<TABLE>
<S> <C> <C>
FOOD LION, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
R. William McCanless
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EMPIRE COMPANY LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
E.C.L. INVESTMENTS LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
D-6
<PAGE>
SCHEDULE 1
STOCKHOLDINGS
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES
- ------------------- ----------------
<S> <C>
Empire Company Limited.............................. 5,550,461
E.C.L. Investment Limited........................... 4,868,104
Empire Company Limited
</TABLE>
D-7
<PAGE>
ANNEX E
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of
August 17, 1999, among Food Lion, Inc., a North Carolina corporation (the
"COMPANY"), and each of the parties named on Exhibit A hereto (the
"STOCKHOLDERS").
RECITALS:
A. Pursuant to the Agreement and Plan of Merger (the "MERGER AGREEMENT")
dated as of even date herewith among the Company, Hannaford Bros. Co., a Maine
corporation, and FL Acquisition Sub, Inc., a Maine corporation and a
wholly-owned subsidiary of the Company and a related Stock Exchange Agreement
dated as of even date herewith (the "EXCHANGE AGREEMENT") among the Company and
certain of the Stockholders, the Stockholders will receive, at or immediately
after the Effective Time, shares of Class A Common Stock, par value $0.50 per
share (the "CLASS A COMMON STOCK"), of the Company.
B. In connection with the Merger Agreement, the Company has agreed to
register the Registrable Securities under the Securities Act (as such terms are
hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Stockholders hereby agree as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined herein
and defined in the Merger Agreement shall have the meanings given such terms in
the Merger Agreement. Unless the context otherwise requires, the terms defined
in this SECTION 1 shall have the meanings herein specified for all purposes of
this Agreement.
"AFFILIATE" shall mean any Person which directly or indirectly controls,
is controlled by, or is under common control with, the indicated Person. As
used in this definition, "control" (including, with correlative meanings,
"controlled by" and "under common control") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
interests or by contract).
"AGREEMENT" shall mean this Agreement, including all exhibits hereto, as
the Agreement may be from time to time amended, modified or supplemented.
"BOARD" shall mean the Board of Directors of the Company.
"BUSINESS DAY" shall mean a day on which banks in New York, New York are
open for business.
"CLASS A COMMON STOCK" shall have the meaning set forth in the recitals
hereto.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"COMPANY" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"DISADVANTAGEOUS CONDITION" shall have the meaning set forth in
SECTION 2(E).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
E-1
<PAGE>
"HOLDER" shall mean a Person who owns Registrable Securities and is
either (i) a Stockholder or (ii) a Person that (A) has agreed to be bound by
the terms of this Agreement as if such Person were a Stockholder and
(B)(x) is a Person (1) to whom a Stockholder has transferred Registrable
Securities or (2) with whom a Stockholder has entered into an agreement to
transfer Registrable Securities, in each case as part of a transaction
pursuant to which derivative securities relating to such Registrable
Securities will be offered for sale by such Person in a registered public
offering or (y) is (1) upon the death of any individual Stockholder, the
executor of the estate of such Stockholder or such Stockholder's heirs,
devisees, legatees or assigns or (2) upon the disability of any individual
Stockholder, any guardian or conservator of such Stockholder.
"MERGER AGREEMENT" shall have the meaning set forth in the recitals
hereto.
"PERSON" shall include all natural persons, corporations, business
trusts, associations, limited liability companies, partnerships, joint
ventures and other entities and governments and agencies and political
subdivisions.
"REGISTRABLE SECURITIES" shall mean (a) the number of shares of Class A
Common Stock issued to the Stockholders pursuant to the Merger Agreement or
the Exchange Agreement in exchange for their shares of Company Common Stock
set forth opposite such Stockholder's name on Exhibit A hereto, and (b) any
other shares of Class A Common Stock issued in respect of such shares (as a
result of stock splits, stock dividends, reclassifications,
recapitalizations or similar events); PROVIDED, HOWEVER, that shares of
Class A Common Stock which are Registrable Securities shall cease to be
Registrable Securities as soon as (i) such Registrable Securities have been
sold or otherwise disposed of pursuant to a registration statement that was
filed with the Commission and declared effective under the Securities Act,
(ii) as soon as all such Registrable Securities held by a Holder can be sold
in a single transaction pursuant to Rule 144 or Rule 145, or (iii) they
shall have been otherwise sold, transferred or disposed of by a Holder to
any Person that is not a Holder.
"RULE 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act, as such rule may be amended from time to time or any
successor rule thereto.
"RULE 145" shall mean Rule 145 promulgated by the Commission under the
Securities Act, as such rule may be amended from time to time or any
successor rule thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
"STOCKHOLDERS" shall have the meaning set forth in the introductory
paragraph of this Agreement.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
2. SHELF REGISTRATION UNDER THE SECURITIES ACT.
(a) SHELF REGISTRATION. The Company shall (i) prepare and cause to be
filed with the SEC as soon as practicable, but not later than two business
days after the Effective Time a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities Act
(the "Shelf Registration") covering all the Registrable Securities and
providing for the sale of the Registrable Securities by the Holders hereof
and (ii) use its reasonable best efforts to have such Shelf Registration
declared effective by the SEC as promptly as practicable thereafter.
(b) AMENDMENTS TO SHELF REGISTRATION. If the Shelf Registration ceases
to be effective for any reason at any time during the Effectiveness Period
for any reason (other than because of the sale of all of the Registrable
Securities covered thereby or Registrable Securities cease to be
E-2
<PAGE>
outstanding), the Company shall use its reasonable best efforts to obtain
the prompt withdrawal of any order suspending the effectiveness thereof or
take such other actions as may be necessary to reinstate the effectiveness
thereof.
(c) EFFECTIVENESS PERIOD. Subject to SECTION 2(E) hereof, the Company
shall use its reasonable best efforts to keep the Shelf Registration
continuously effective under the Securities Act from the date on which the
Initial Shelf Registration was declared effective by the SEC until the
earlier of (i) two years from the date of the Effective Time and (ii) such
time when there are no Registrable Securities outstanding (the
"Effectiveness Period"). If a Shelf Registration is filed, pursuant to
SECTION 2(B) hereof, the Company shall use its reasonable best efforts to
cause the Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously
effective for a period after such effectiveness equal to the Effectiveness
Period.
(d) SUPPLEMENTS AND AMENDMENTS. The Company shall file one or more
supplements or amendments to the Shelf Registration and the prospectus used
in connection therewith if (i) required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, (ii) otherwise required by the SEC, or (iii) requested to do
so in writing by any Holder of Registrable Securities to the extent
necessary to include such Holder as a selling securityholder in such
registration statement.
(e) CERTAIN DELAY RIGHTS.
(i) Notwithstanding any other provision of this Agreement to the
contrary, if the Company provides written notice to each Holder that in
the Company's good faith and reasonable judgment it would be materially
disadvantageous to the Company (because the sale of Registrable
Securities covered by such registration statement or the disclosure of
information therein or in any related prospectus or prospectus supplement
would materially interfere with any material acquisition, material
financing or other material event or transaction in connection with which
a registration of securities under the Securities Act for the account of
the Company is then intended or the public disclosure of which at the
time would be materially prejudicial to the Company) (a "Disadvantageous
Condition") for the Shelf Registration to be maintained effective, or to
be filed and become effective, and setting forth the general reasons for
such judgment, the Company shall be entitled to cause such registration
statement to be withdrawn or the effectiveness of such registration
statement terminated or, in the event no registration statement has yet
been filed, shall be entitled not to file any such registration statement
until such Disadvantageous Condition no longer exists (notice of which
the Company shall promptly deliver to each Holder). With respect to each
Holder, upon the receipt by such Holder of any such notice of a
Disadvantageous Condition if so directed by the Company by notice as
aforesaid, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
and prospectus supplements then covering such Registrable Securities at
the time of receipt of such notice as aforesaid. Notwithstanding anything
else contained in this Agreement, neither the filing nor the
effectiveness of the Shelf Registration may be delayed for more than a
total of seventy-five (75) days in a 360 day period pursuant to this
SECTION 2(E).
(ii) It shall be a condition precedent to the obligations of the
Company to register any of a Holder's Registrable Securities that such
Holder shall furnish to the Company, upon request, such information
regarding itself and, the Registrable Securities held by it as shall be
required to effect the registration of such Holder's Registrable
Securities.
E-3
<PAGE>
3. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of the Shelf Registration under the Securities Act
pursuant to this Agreement, the Company will give the Holders of Registrable
Securities registered under such registration statement, and one (1) counsel or
firm of counsel and one (1) accountant or firm of accountants representing all
the Holders of Registrable Securities to be registered under such registration
statement, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such Holders' counsel, to conduct a reasonable investigation
within the meaning of the Securities Act; PROVIDED, HOWEVER, that the foregoing
shall not require the Company to provide access to (or copies of) any
competitively sensitive information relating to the Company or its subsidiaries
or their respective businesses; and provided further that (i) each Holder and
their respective counsel and accountants shall have entered into a
confidentiality agreement reasonably acceptable to the Company and (ii) the
Holders and their counsel and accountants shall use their reasonable best
efforts to minimize the disruption to the Company's business and coordinate any
such investigation of the books, records and properties of the Company and any
such discussions with the Company's officers and accountants so that all such
investigations occur at the same time and all such discussions occur at the same
time.
4. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event any Registrable
Securities are included in a registration statement under this Agreement, to
the extent permitted by law, the Company will, and hereby does, indemnify
and hold harmless the seller of any Registrable Securities covered by such
registration statement, its directors and officers, and each other Person,
if any, who controls such seller or any such underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such seller or any such director or officer or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse
such seller and each such director, officer, and controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
seller expressly for use in the preparation thereof
(b) INDEMNIFICATION BY THE SELLERS. Each selling Holder of Registrable
Securities will, and hereby does, indemnify and hold harmless (in the same
manner and to the same extent as set forth in SECTION 4(A)) the Company,
each director of the Company, each officer of the Company and each other
Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or
alleged
E-4
<PAGE>
statement or omission or alleged omission was made in reliance upon written
information furnished to the Company by such selling Holders of Registrable
Securities expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement In no event shall the liability of any selling
Holder of Registrable Securities under this SECTION 4(B) be greater in
amount than the dollar amount of the proceeds received by such holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this SECTION 4, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action; provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this SECTION 4, except to
the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless based on the written advice of counsel to such
indemnified party a conflict of interest between such indemnified and
indemnifying parties exists in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. Any indemnifying party
against whom indemnity may be sought under this SECTION 4 shall not be
liable to indemnify an indemnified party if such indemnified party settles
such claim or action without the consent of the indemnifying party, which
such consent will not be unreasonably withheld, conditioned or delayed. The
indemnifying party may not agree to any settlement of any such claim or
action other than solely for monetary damages for which the indemnifying
party shall be responsible hereunder, the result of which any remedy or
relief shall be applied to or against the indemnified party, without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld. In any action hereunder as to which the indemnifying
party has assumed the defense thereof, the indemnified party shall continue
to be entitled to participate in the defense thereof, with counsel of its
own choice, but the indemnifying party shall not be obligated hereunder to
reimburse the indemnified party for the costs thereof.
(d) CONTRIBUTION.
(i) If the indemnification provided for in this SECTION 4 shall for
any reason be unavailable (other than in accordance with its terms) to an
indemnified party in respect of any loss, liability, cost, claim or
damage referred to therein, then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, liability,
cost, claim or damage (A) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
selling Holders of Registrable Securities on the other hand from the
offering of the Registrable Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the selling Holders
of Registrable Securities on the
E-5
<PAGE>
other hand in connection with the offering of the Registrable Securities
shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Registrable Securities (before
deducting expenses) received by the Company and the selling Holders of
Registrable Securities, respectively, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the
Company on the one hand and the selling Holders of Registrable Securities
on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or a selling Holder of Registrable
Securities and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by an indemnified party as a result
of the loss, cost, claim, damage or liability, or action in respect
thereof, referred to above in this SECTION 4(D) shall be deemed to
include, for purposes of this SECTION 4(D), any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. The Company and the
selling Holders of Registrable Securities agree that it would not be just
and equitable if contribution pursuant to this SECTION 7 were determined
by pro rata allocation or by any other method of allocation which does
not take account of equitable considerations referred to in this
paragraph. Notwithstanding any other provision of this SECTION 4, no
selling Holder of Registrable Securities shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such selling Holder of Registrable Securities
were offered to the public (net of any underwriting discount and
commissions, selling or placement agent or broker fees and commissions
and transfer taxes, if any, in connection with the sales of securities by
such selling Holder of Registrable Securities) exceeds the amount of any
damages which such selling Holder of Registrable Securities has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of SECTION 11(F) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
(ii) The obligations of the parties under this SECTION 4 shall be in
addition to any liability which any party may otherwise have to any other
party.
5. FORMS. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
6. MISCELLANEOUS.
(a) SPECIFIC ENFORCEMENT. Each of the parties hereto acknowledges and
agrees that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with the terms
hereof or were otherwise breached and that each party shall be entitled to
seek specific performance of the terms hereof, in addition to any other
remedy that may be available at law or in equity.
(b) TERMINATION. This Agreement shall terminate on the earlier of
(i) the termination of the Merger Agreement, (ii) the agreement of the
parties hereto to terminate this Agreement and (iii) the date such
Stockholder ceases to own any Registrable Securities.
E-6
<PAGE>
(c) NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing)
and shall be given:
if to the Company:
Food Lion, Inc.
2110 Executive Drive
Salisbury, North Carolina 28147
Attn: R. William McCanless
Fax: (704) 637-8803
with a copy to (such copy shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attn: Richard L. Wyatt, Jr.
Fax: (202) 887-4288
if to the Stockholders, at the addresses set forth on Exhibit A hereto,
with a copy to (such copy shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Milton G. Strom
Fax: (212) 735-2000
-and-
Stewart McKelvey Stirling Scales
1959 Upper Water Street
Suite 900, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: James M. Dickson
Facsimile No.: (902) 420-1417
or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
SECTION 6(C) and the appropriate telecopy confirmation is received or
(ii) if given by any other means, when delivered at the address specified in
this SECTION 6(C).
(d) ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
(e) WAIVERS AND AMENDMENTS. With the written consent of the Holders of
a Majority of the Registrable Securities, the obligations of the Company and
the rights of the Holders of the Securities under this Agreement may be
waived (either generally or in a particular instance, either retroactively
or prospectively and either for a specified period of time or indefinitely),
and with the
E-7
<PAGE>
same consent the Company, when authorized by resolution of its Board, may
enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of any supplemental agreement or modifying in any
manner the rights and obligations hereunder of the Holders of the Securities
and the Company; provided, however, that no such waiver or supplemental
agreement shall reduce the aforesaid proportion of Registrable Securities,
the Holders of which are required to consent to any waiver or supplemental
agreement, without the consent of the Holders of all of the Registrable
Securities. Upon the effectuation of each such waiver, consent or agreement
of amendment or modification, the Company shall promptly give written notice
thereof to the Holders of the Registrable Securities who have not previously
consented thereto in writing. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course
of dealing, but only by a statement in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought,
except to the extent provided in this SECTION 6(E). Each Stockholder
acknowledges that by operation of SECTION 6(E) hereof the Holders of a
Majority of the Registrable Securities will, subject to the limitations
contained in such SECTION 6(E), have the right and power to diminish or
eliminate certain rights of such Stockholder under this Agreement.
(f) RIGHTS OF HOLDERS INTER SE. Each Holder of Securities shall have
the absolute right to exercise or refrain from exercising any right or
rights which such Holder may have by reason of this Agreement, including,
without limitation, the right to consent to the waiver of any obligation of
the Company under this Agreement and to enter into an agreement with the
Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such Holder shall not incur any
liability to any other Holder or Holders of Securities with respect to
exercising or refraining from exercising any such right or rights.
(g) EXCULPATION AMONG STOCKHOLDERS AND HOLDERS. Each Stockholder
acknowledges that it is not relying upon any other Stockholder, or any
officer, director, employee, agent, partner or Affiliate of any such other
Stockholder, in making its decision to enter into this Agreement.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of
and be enforceable by each party and such party's respective heirs,
beneficiaries, executors, representatives and permitted assigns.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(j) GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Maine without giving effect to the provisions thereof relating to conflicts
of law.
(k) SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable such
provision shall be interpreted to be only so broad as is enforceable.
(l) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
E-8
<PAGE>
(m) FURTHER ASSURANCES. Each party hereto shall execute and deliver
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
(n) THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, shall be construed to give any Person other than the parties hereto
any legal or equitable right, remedy or claim under by reason of this
Agreement or any provision contained herein.
[Signature pages follow]
E-9
<PAGE>
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be executed as of the date first written above.
The Company:
<TABLE>
<S> <C> <C>
FOOD LION, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
R. William McCanless
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
The Stockholders:
<TABLE>
<S> <C> <C>
EMPIRE COMPANY LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
E.C.L. INVESTMENTS LIMITED
By: /s/ PAUL D. SOBEY
-----------------------------------------
Paul D. Sobey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ A. D. ROWE
-----------------------------------------
A. D. Rowe
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PENSION PLAN FOR EMPLOYEES OF SOBEYS INC.
By: /S/ PAUL D. SOBEY
Name: Paul D. Sobey
Title: Director
</TABLE>
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<PAGE>
The Stockholders: (cont'd.)
<TABLE>
<S> <C> <C>
SOBEYS INC. MASTER TRUST INVESTMENT FUND
By: /S/ A.D. ROWE
Name: A.D. Rowe
Title: Executive Vice President and Chief
Financial Officer
/s/ DAVID F. SOBEY
---------------------------------------------
David F. Sobey
</TABLE>
E-11
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMPANY COMMON STOCK
TO BE EXCHANGED UNDER
THE MERGER AGREEMENT
NAME OF STOCKHOLDER ADDRESS OR EXCHANGE AGREEMENT
- ------------------- ------- ---------------------
<S> <C> <C>
Empire Company Limited 115 King Street 5,550,461
Stellarton, Nova Scotia
Canada BOK 150
E.C.L. Investments Limited 115 King Street 4,868,104 (A)
Stellarton, Nova Scotia
Canada BOK 150
Pension Plan for Employees of 115 King Street 366,428
Sobeys, Inc. Stellarton, Nova Scotia
Canada BOK 150
Sobeys Inc. Master Trust 115 King Street 14,819
Investment Fund....................... Stellarton, Nova Scotia
Canada BOK 150
</TABLE>
- ------------------------
(A) E.C.L. Investment Limited and Empire Company Limited share ownership of
4,868,104 shares.
E-12
<PAGE>
ANNEX F
SECTION 908. RIGHT OF SHAREHOLDERS TO DISSENT
1. Except as provided in subsections 3 and 4, any shareholders of a domestic
corporation, by complying with section 909, shall have the right to dissent from
any of the following corporate actions:
A. Any plan of merger or consolidation in which the corporation is
participating; or
B. Any sale or other disposition, excluding a mortgage or other security
interest, of all or substantially all of the property and assets of the
corporation not made in the usual and regular course of its business,
including a sale in liquidation, but not including a sale pursuant to an
order of a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective
interests within one year after the date of sale; or
C. Any other action as to which a right to dissent is expressly given by
this Act.
2. A shareholder may dissent as to less than all of the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
3. There shall be no right of dissent in the case of shareholders of the
surviving corporation in a merger
A. If such corporation is, on the date of filing of the articles of
merger, the owner of all the outstanding shares of the other corporations,
domestic or foreign, which are parties to the merger,
B. If a vote of the shareholders of such surviving corporation was not
necessary to authorize such merger.
4. There shall be no right of dissent in the case of holders of any class or
series of shares in any of the participating corporations in a merger or
consolidation, which shares were, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the plan of merger or consolidation was to be voted on,
either:
A. Registered or traded on a national securities exchange;
B. Registered with the Securities and Exchange Commission pursuant to
section 12(g) of the Act of Congress known as the Securities Exchange Act of
1934, as the same has been or may hereafter be amended, being Title 15 of
the United States Code Annotated, Section 781(g);
unless the articles of incorporation of that corporation provide that there
shall be a right of dissent.
5. The exceptions from the right of dissent provided for in subsection 3,
paragraph B and in subsection 4 shall not be applicable to the holders of a
class or series of shares of a participating corporation if, under the plan of
merger or consolidation, such holders are required to accept for their shares
anything, except:
A. Shares of the surviving or new corporation resulting from the merger
or consolidation, or such shares plus cash in lieu of fractional shares;
B. Shares, or shares plus cash in lieu of fractional shares, of any
other corporation, which shares were, at the record date fixed to determine
the shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the plan of merger or consolidation was acted upon,
either:
(1) Registered or traded on a national securities exchange; or
F-1
<PAGE>
(2) Held of record by not less than 2,000 shareholders; or
C. A combination of shares, or shares plus cash in lieu of fractional
shares, as set forth in paragraphs A and B.
SECTION 909. RIGHT OF DISSENTING SHAREHOLDERS TO PAYMENT FOR SHARES
1. A shareholder having a right under any provision of this Act to dissent
to proposed corporate action shall, by complying with the procedure in this
section, be paid the fair value of his shares, if the corporate action to which
he dissented is effected. The fair value of shares shall be determined as of the
day prior to the date on which the vote of the shareholders, or of the directors
in case a vote of the shareholders was not necessary, was taken approving the
proposed corporate action, excluding any appreciation or depreciation of shares
in anticipation of such corporate action.
2. The shareholder, whether or not entitled to vote, shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to the proposed
corporate action. No such objection shall be required from any shareholder to
whom the corporation failed to send notice of such meeting in accordance with
this Act.
3. If the proposed corporate action is approved by the required vote and the
dissenting shareholder did not vote in favor thereof, the dissenting shareholder
shall file a written demand for payment of the fair value of his shares. Such
demand
A. Shall be filed with the corporation or, in the case of a merger or
consolidation, with the surviving or new corporation; and
B. Shall be filed by personally delivering it, or by mailing it via
certified or registered mail, to such corporation at its registered office
within this State or to its principal place of business or to the address
given to the Secretary of State pursuant to section 906, subsection 4,
paragraph B; it shall be so delivered or mailed within 15 days after the
date on which the vote of shareholders was taken, or the date on which
notice of a plan of merger of a subsidiary into a parent corporation without
vote of shareholders was mailed to shareholders of the subsidiary; and
C. Shall specify the shareholder's current address; and
D. May not be withdrawn without the corporation's consent.
4. Any shareholder failing either to object as required by subsection 2 or
to make demand in the time and manner provided in subsection 3 shall be bound by
the terms of the proposed corporate action. Any shareholder making such
objection and demand shall thereafter be entitled only to payment as in this
section provided and shall not be entitled to vote or to exercise any other
rights of a shareholder.
5. The right of a shareholder otherwise entitled to be paid for the fair
value of his shares shall cease, and his status as a shareholder shall be
restored, without prejudice to any corporate proceedings which may have been
taken during the interim,
A. If his demand shall be withdrawn upon consent, or
B. If the proposed corporate action shall be abandoned or rescinded, or
the shareholders shall revoke the authority to effect such action, or
C. If, in the case of a merger, on the date of the filing of the
articles of merger the surviving corporation is the owner of all the
outstanding shares of the other corporations, domestic and foreign, that are
parties to the merger, or
D. If no action for the determination of fair value by a court shall
have been filed within the time provided in this section, or
F-2
<PAGE>
E. If a court of competent jurisdiction shall determine that such
shareholder is not entitled to the relief provided by this section.
6. At the time of filing his demand for payment for his shares, or within
20 days thereafter, each shareholder demanding payment shall submit the
certificate or certificates representing his shares to the corporation or its
transfer agent for notation thereon that such demand has been made; such
certificates shall promptly be returned after entry thereon of such notation. A
shareholder's failure to do so shall, at the option of the corporation,
terminate his rights under this section, unless a court of competent
jurisdiction, for good and sufficient cause shown, shall otherwise direct. If
shares represented by a certificate on which notation has been so made shall be
transferred, each new certificate issued therefor shall bear a similar notation,
together with the name of the original dissenting holder of such shares, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which the original dissenting shareholder had after
making demand for payment of the fair value thereof.
7. Within the time prescribed by this subsection, the corporation, or, in
the case of a merger or consolidation, the surviving or new corporation,
domestic or foreign, shall give written notice to each dissenting shareholder
who has made objection and demand as herein provided that the corporate action
dissented to has been effected, and shall make a written offer to each such
dissenting shareholder to pay for such shares at a specified price deemed by
such corporation to be the fair value thereof. Such offer shall be made at the
same price per share to all dissenting shareholders of the same class. The
notice and offer shall be accompanied by a balance sheet of the corporation the
shares of which the dissenting shareholder holds, as of the latest available
date and not more than 12 months prior to the making of such offer, and a profit
and loss statement of such corporation for the 12 months' period ended on the
date of such balance sheet. The offer shall be made within the later of 10 days
after the expiration of the period provided in subsection 3, paragraph B, for
making demand, or 10 days after the corporate action is effected; corporate
action shall be deemed effected on a sale of assets when the sale is
consummated, and in a merger or consolidation when the articles of merger or
consolidation are filed or upon which later effective date as is specified in
the articles of merger or consolidation as permitted by this Act.
8. If within 20 days after the date by which the corporation is required, by
the terms of subsection 7, to make a written offer to each dissenting
shareholder to pay for his shares, the fair value of such shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made within 90 days after the date on which such corporate action was
effected, upon surrender of the certificate or certificates representing such
shares. Upon payment of the agreed value the dissenting shareholder shall cease
to have any interest in such shares.
9. If within the additional 20-day period prescribed by subsection 8, one or
more dissenting shareholders and the corporation have failed to agree as to the
fair value of the shares:
A. Then the corporation may, or shall, if it receives a demand as
provided in subparagraph (1), bring an action in the Superior Court in the
county in this State where the registered office of the corporation is
located praying that the fair value of such shares be found and determined.
If, in the case of a merger or consolidation, the surviving or new
corporation is a foreign corporation without a registered office in this
State, such action shall be brought in the county where the registered
office of the participating domestic corporation was last located. Such
action:
(1) Shall be brought by the corporation, if it receives a written
demand for suit from any dissenting shareholder, which demand is made
within 60 days after the date on which the corporate action was effected;
and if it receives such demand for suit, the corporation shall bring the
action within 30 days after receipt of the written demand; or,
F-3
<PAGE>
(2) In the absence of a demand for suit, may at the corporation's
election be brought by the corporation at any time from the expiration of
the additional 20-day period prescribed by subsection 8 until the
expiration of 60 days after the date on which the corporate action was
effected;
B. If the corporation fails to institute the action within the period
specified in paragraph A, any dissenting shareholder may thereafter bring
such an action in the name of the corporation;
C. No such action may be brought, either by the corporation or by a
dissenting shareholder, more than 6 months after the date on which the
corporate action was effected;
D. In any such action, whether initiated by the corporation or by a
dissenting shareholder, all dissenting shareholders, wherever residing,
except those who have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to the proceeding as an action
against their shares quasi in rem. A copy of the complaint shall be served
on each dissenting shareholder who is a resident of this State as in other
civil actions, and shall be served by registered or certified mail, or by
personal service without the State, on each dissenting shareholder who is a
nonresident. The jurisdiction of the court shall be plenary and exclusive;
E. The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, has
satisfied the requirements of this section and is entitled to receive
payment for his shares; as to any dissenting shareholder with respect to
whom the corporation makes such a request, the burden is on the shareholder
to prove that he is entitled to receive payment. The court shall then
proceed to fix the fair value of the shares. The court may, if it so elects,
appoint one or more persons as appraisers to receive evidence and recommend
a decision on the question of fair value. The appraisers shall have such
power and authority as shall be specified in the order of their appointment
or an amendment thereof;
F. All shareholders who are parties to the proceeding shall be entitled
to judgment against the corporation for the amount of the fair value of
their shares, except for any shareholder whom the court shall have
determined not to be entitled to receive payment for his shares. The
judgment shall be payable only upon and concurrently with the surrender to
the corporation of the certificate or certificates representing such shares.
Upon payment of the judgment, the dissenting shareholder shall cease to have
any interest in such shares;
G. The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable in all the circumstances, from
the date on which the vote was taken on the proposed corporate action to the
date of payment. If the court finds that the refusal of any shareholder to
accept the corporate offer of payment for his shares was arbitrary,
vexatious or not in good faith, it may in its discretion refuse to allow
interest to him;
H. The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court may
deem equitable against any or all of the dissenting shareholders who are
parties to the proceeding to whom the corporation shall have made an offer
to pay for the shares, if the court shall find that the action of such
shareholders in failing to accept such offer was arbitrary or vexatious or
not in good faith. Such expenses shall include reasonable compensation for
and reasonable expenses of the appraisers, but shall exclude the fees and
expenses of counsel for any party and shall exclude the fees and expenses of
experts employed by any party, unless the court otherwise orders for good
cause. If the fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay therefor, or if no offer was
made, the court in its discretion may award to any shareholder who is a
party to the proceeding such sum as the court may determine to be reasonable
compensation to any expert or
F-4
<PAGE>
experts employed by the shareholder in the proceeding, and may, in its
discretion, award to any shareholder all or part of his attorney's fees and
expenses;
I. At all times during the pendency of any such proceeding, the court
may make any and all orders which may be necessary to protect the
corporation or the dissenting shareholders, or which are otherwise just and
equitable. Such orders may include, without limitation, orders:
(1) Requiring the corporation to pay into court, or post security
for, the amount of the judgment or its estimated amount, either before
final judgment or pending appeal;
(2) Requiring the deposit with the court of certificates representing
shares held by the dissenting shareholders;
(3) Imposing a lien on the property of the corporation to secure the
payment of the judgment, which lien may be given priority over liens and
incumbrances contracted after the vote authorizing the corporate action
from which the shareholders dissent;
(4) Staying the action pending the determination of any similar
action pending in another court having jurisdiction.
10. Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this section
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
11. The objection required by subsection 2 and the demand required by
subsection 3 may, in the case of a shareholder who is a minor or otherwise
legally incapacitated, be made either by such shareholder, notwithstanding his
legal incapacity, or by his guardian, or by any person acting for him as next
friend. Such shareholder shall be bound by the time limitations set forth in
this section, notwithstanding his legal incapacity.
12. Appeals shall lie from judgments in actions brought under this section
as in other civil actions in which equitable relief is sought.
13. No action by a shareholder in the right of the corporation shall abate
or be barred by the fact that the shareholder has filed a demand for payment of
the fair value of his shares pursuant to this section.
F-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contain specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, the statutes provide that
(i) a corporation must indemnify a director or officer who is wholly successful
in his or her defense of a proceeding to which such person is a party because of
his or her status as such, unless limited by the articles of incorporation, and
(ii) a corporation may indemnify a director or officer if he or she is not
wholly successful in such defense, if it is determined as provided by statute
that the director or officer meets a certain standard of conduct, provided that
when a director or officer is liable to the corporation or is adjudged liable on
the basis that personal benefit was improperly received by him or her, the
corporation may not indemnify him or her. A director or officer of a corporation
who is a party to a proceeding also may apply to the courts for indemnification,
unless the articles of incorporation provide otherwise, and the court may order
indemnification under certain circumstances set forth in the statute. A
corporation may, in its articles of incorporation or bylaws or by contract or
resolution, provide indemnification in addition to that provided by statute,
subject to certain conditions.
The Registrant's bylaws provide for the indemnification of any director or
officer of the Registrant against liabilities and litigation expenses arising
out of his or her status as such, excluding (i) any liabilities or litigation
expenses relating to activities which were at the time taken known or believed
by such person to be clearly in conflict with the best interests of the
Registrant and (ii) that portion of any liabilities or litigation expenses with
respect to which such person is entitled to receive payment under any insurance
policy other than a directors' and officers' insurance policy maintained by the
Registrant.
The Registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the Registrant to the fullest extent
permitted by law.
The Registrant maintains directors' and officers' liability insurance, under
which any controlling person, director or officer of the Registrant is insured
or indemnified against certain liabilities which he or she may incur in his or
her capacity as such.
The merger agreement provides that Delhaize America will, or will cause
Hannaford to, indemnify each person who was an employee, agent, director or
officer of Hannaford or its subsidiaries prior to August 17, 1999, with respect
to any claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost or expense, including reasonable fees and
expenses of counsel, against any such person in their capacity as an employee,
agent, officer or director of Hannaford or its subsidiaries, based in whole or
in part, or arising in whole or in part out of, any facts or circumstances
occurring at or prior to the merger.
Delhaize America will also cause Hannaford to maintain Hannaford's existing
directors' and officers' liability insurance policy (or a policy with
substantially similar coverage) for not less than six years after the merger but
only to the extent related to facts or circumstances occurring at or prior to
the merger, provided that the aggregate annual premium for maintaining such
insurance during the six year period does not exceed 300% of the per annum
aggregate premium paid by Hannaford on August 17, 1999, in which case Delhaize
America will cause Hannaford to provide the most advantageous coverage then
available at an annual premium of 300% of such rate.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of August 17, 1999,
among Delhaize America, Hannaford and FL Acquisition Sub,
Inc., as amended (included as Annex A).
3.1 -- Articles of Incorporation of Delhaize America, together with
all amemdments thereto (through May 5, 1998) (incorporated
herein by reference to Exhibit 3(a) of Delhaize America's
Annual Report on Form 10-K dated March 24, 1992).
3.2 -- Articles of Amendment to Articles of Incorporation of
Delhaize America (incorporated herein by reference to
Exhibit 3.1 to Delhaize America's Current Report on Form
8-K, filed with the SEC on September 17, 1999).
3.3 -- Bylaws of Delhaize America (incorporated herein by reference
to Exhibit 3.2 to Delhaize America's Current Report on Form
8-K filed with the SEC on September 17, 1999).
5.1 -- Opinion of Robinson, Bradshaw & Hinson, P.A. regarding
validity of the securities to be registered.*
23.1 -- Consent of Robinson, Bradshaw & Hinson, P.A. (included in
the opinion filed as Exhibit 5.2 to this Registration
Statement).*
23.2 -- Consent of Independent Accountants, PricewaterhouseCoopers,
LLP (for Delhaize America).
23.3 -- Consent of Independent Accountants, PricewaterhouseCoopers,
LLP (for Hannaford).
23.4 -- Consent of Morgan Stanley & Co. Incorporated.
24.1 -- Powers of Attorney (included in the signature page of this
Registration Statement).
99.1 -- Voting Agreement, dated August 17, 1999, among Delhaize
America, Empire Company Limited and E.C.L. Investment
Limited (included as Annex D).
99.2 -- Stock Exchange Agreement, dated August 17, 1999, among
Delhaize America, Empire Company Limited and E.C.L.
Investment Limited. (included as Annex C).
99.3 -- Registration Rights Agreement, dated August 17, 1999, among
Delhaize America, Empire Company Limited, E.C.L. Investments
Limited, Pension Plan for Employees of Sobeys, Inc. and
Sobeys Inc. Master Trust, Investment Fund (included as Annex
E).
99.4 -- Form of Proxy Card for Special Meeting.
99.5 -- Letter dated November 17, 1999, from PricewaterhouseCoopers,
LLP to Securities and Exchange Commission.
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of
II-2
<PAGE>
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
(2) that every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof;
(3) to respond to requests for information that is incorporated by
reference into this Proxy Statement/Prospectus pursuant to Item 4, 10(b), 11
or 13 of this form, within one business day of receipt of such request, and
to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request;
(4) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective;
(5) the undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be initial BONA FIDE offering
thereof;
(6) the undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934, and, where interim financial information required to
be presented by Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Salisbury, North
Carolina, on November 17, 1999.
<TABLE>
<S> <C> <C>
DELHAIZE AMERICA, INC.
By: /s/ R. WILLIAM MCCANLESS
-----------------------------------------
R. William McCanless
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>
KNOW ALL BY THESE PRESENTS, that each of the undersigned directors and
officers of Delhaize America, Inc. hereby constitutes and appoints R. William
McCanless and Joseph C. Hall, and each of them, his true and lawful
attorney-in-fact and agent, with full power to act without the other and with
full power of substitution and resubstitution, for him and on his behalf and in
his name, place and stead, in any and all capacities, to sign, execute and file
with the Securities and Exchange Commission and any state securities regulatory
board or commission any documents relating to the proposed issuance and
registration of the securities offered pursuant to this Registration Statement
on Form S-4 under the Securities Act, including any and all amendments
(including post-effective amendments and amendments thereto) to this
Registration Statement on Form S-4 and any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act, with all exhibits and any and all documents required to be filed
with respect thereto with any regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on November 17, 1999.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ R. WILLIAM MCCANLESS President and Chief Executive Officer,
------------------------------------------- Director
R. William McCanless (Principal Executive Officer)
/s/ PIERRE-OLIVIER BECKERS
------------------------------------------- Chairman of the Board, Director
Pierre-Olivier Beckers
/s/ DR. JACQUELINE K. COLLAMORE
------------------------------------------- Director
Dr. Jacqueline K. Collamore
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ JEAN-CLAUDE COPPIETERS T' WALLANT
------------------------------------------- Director
Jean-Claude Coppieters t' Wallant
/s/ WILLIAM G. FERGUSON
------------------------------------------- Director
William G. Ferguson
/s/ DR. BERNARD W. FRANKLIN
------------------------------------------- Director
Dr. Bernard W. Franklin
/s/ JOSEPH C. HALL
------------------------------------------- Director, Senior Vice President of Operations
Joseph C. Hall
/s/ MARGARET H. KLUTTZ
------------------------------------------- Director
Margaret H. Kluttz
/s/ DOMINIQUE RAQUEZ
------------------------------------------- Director
Dominique Raquez
/s/ PIERRE DUMONT
------------------------------------------- Director
Pierre Dumont
/s/ LAURA KENDALL Vice President of Finance, Chief Financial
------------------------------------------- Officer
Laura Kendall (Principal Accounting Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of August 17, 1999,
among Delhaize America, Hannaford and FL Acquisition Sub,
Inc., as amended (included as Annex A).
3.1 -- Articles of Incorporation of Delhaize America, together with
all amemdments thereto (through May 5, 1998) (incorporated
herein by reference to Exhibit 3(a) of Delhaize America's
Annual Report on Form 10-K dated March 24, 1992).
3.2 -- Articles of Amendment to Articles of Incorporation of
Delhaize America (incorporated herein by reference to
Exhibit 3.1 to Delhaize America's Current Report on Form
8-K, filed with the SEC on September 17, 1999).
3.3 -- Bylaws of Delhaize America (incorporated herein by reference
to Exhibit 3.2 to Delhaize America's Current Report on Form
8-K filed with the SEC on September 17, 1999).
5.1 -- Opinion of Robinson, Bradshaw & Hinson, P.A. regarding
validity of the securities to be registered.*
23.1 -- Consent of Robinson, Bradshaw & Hinson, P.A. (included in
the opinion filed as Exhibit 5.2 to this Registration
Statement).*
23.2 -- Consent of Independent Accountants, PricewaterhouseCoopers,
LLP (for Delhaize America).
23.3 -- Consent of Independent Accountants, PricewaterhouseCoopers,
LLP (for Hannaford).
23.4 -- Consent of Morgan Stanley & Co. Incorporated.
24.1 -- Powers of Attorney (included in the signature page of this
Registration Statement).
99.1 -- Voting Agreement, dated August 17, 1999, among Delhaize
America, Empire Company Limited and E.C.L. Investment
Limited (included as Annex D).
99.2 -- Stock Exchange Agreement, dated August 17, 1999, among
Delhaize America, Empire Company Limited and E.C.L.
Investment Limited. (included as Annex C).
99.3 -- Registration Rights Agreement, dated August 17, 1999, among
Delhaize America, Empire Company Limited, E.C.L. Investments
Limited, Pension Plan for Employees of Sobeys, Inc. and
Sobeys Inc. Master Trust, Investment Fund (included as Annex
E).
99.4 -- Form of Proxy Card for Special Meeting.
99.5 -- Letter dated November 17, 1999, from PricewaterhouseCoopers,
LLP to Securities and Exchange Commission.
</TABLE>
- ------------------------
* To be provided by amendment.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Delhaize America, Inc. of our report dated
February 10, 1999 relating to the financial statements, which appears in
Delhaize America, Inc.'s 1998 Annual Report to Shareholders, which is
incorporated by reference in its Annual Report on Form 10-K for the fiscal
year ended January 2, 1999, as amended by Amendment No. 1 to Annual Report on
Form 10-K/A. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
November 12, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Form S-4 of Delhaize America, Inc. of our report dated
January 21, 1999 relating to the financial statements appearing in Hannaford
Bros. Co.'s Annual Report on Form 10-K for the fiscal year ended January 2,
1999. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Portland, Maine
November 12, 1999
<PAGE>
Exhibit 23.4
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
We hereby consent to the use of our opinion letter dated August 17, 1999
to the Board of Directors of Hannaford Bros. Co. (the "Company") attached as
Annex B to Hannaford's Proxy Statement/Prospectus which forms a part of this
Registration Statement on Form S-4 of Delhaize America, Inc. (the
"Prospectus") and to the references to our firm in the Prospectus under the
headings ["Chapter One-The Merger-Summary-Opinion of Hannaford's Financial
Advisor."] In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder and we do not thereby admit
that we are experts with respect to any part of the Registration Statement
under the meaning of the term "expert" as used in the Securities Act.
MORGAN STANLEY & CO. INCORPORATED
BY: /S/ R. Bradford Evans
-------------------------------------
Managing Director
New York, New York
November 15, 1999
<PAGE>
Exhibit 99.4
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS ON ___________, 1999.
The undersigned hereby appoints Hugh G. Farrington, ___________ and
____________, and each of them, proxies, with the powers the undersigned would
possess if personally present, and with full power of substitution, to vote all
common shares of the undersigned in Hannaford Bros. Co. at the Hannaford Bros.
Co. Special Meeting of Shareholders, to be held on __________, 1999 at 10:00
a.m., Eastern Standard Time, at ______________ __________________________, and
at any adjournments or postponements thereof, upon all subjects that may
properly come before the Special Meeting including the matters described in the
Proxy Statement furnished herewith, subject to any directions indicated on the
reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR
APPROVAL OF THE ADOPTION OF THE AMENDED AND RESTATED AGREEMENT AND PLAN OF
MERGER, DATED AS OF AUGUST 17, 1999, BY AND AMONG HANNAFORD BROS. CO. DELHAIZE
AMERICA, INC. AND FL ACQUISITION SUB, INC., IN ACCORDANCE WITH THE DIRECTORS'
RECOMMENDATION, AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY
COME BEFORE THE SPECIAL MEETING. Your vote for approval of the Amended and
Restated Agreement and Plan of Merger may be indicated on the reverse.
ADMISSION TICKET ON REVERSE DETACH HERE
/X/ Please mark votes as in this sample.
THE HANNAFORD BROS. CO. DIRECTORS RECOMMEND A VOTE "FOR" ITEM 1. To vote your
shares for approval of the Amended and Restated Agreement and Plan of Merger,
dated as of August 17, 1999, by and among by and among Hannaford Bros. Co.,
Delhaize America, Inc. and FL Acquisition Sub, Inc., mark the "FOR" box on item
"1." To vote against approval of the adoption of the Amended and Restated
Agreement and Plan of Merger, mark the "AGAINST" box. To abstain from voting for
approval of the Amended and Restated Agreement and Plan of Merger, mark the
"ABSTAIN" box. 1.
Item 1. Approval of the adoption of the Agreement and Plan of Merger.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Mark here for address change [ ]
Signature: ____________ Date: _______
PLEASE SIGN THIS PROXY AND RETURN PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING.
<PAGE>
Exhibit 99.5
November 17, 1999
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Commissioners,
We are aware that our reports dated April 21, 1999, July 21, 1999 and
October 20, 1999 on our reviews of interim financial information on Hannaford
Bros. Co. for the three-month periods ended April 3, 1999 and April 4, 1999,
the six-months period ended July 3, 1999 and July 4, 1998 and the nine-month
periods ended October 2, 1999 and October 3, 1998 and included in the
Company's quarterly reports on form 10-Q for the quarters then ended are
incorporated by reference in its Registration Statement dated November 17,
1999.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
