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STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (this "Agreement") is entered into as of
the 17th 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
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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.
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
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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 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
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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.
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
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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
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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.
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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 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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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.
FOOD LION, INC.
By: /s/ R. William McCanless
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Name: R. William McCanless
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Title: President and Chief Executive Officer
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EMPIRE COMPANY LIMITED
By: /s/ Paul D. Sobey
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Name: Paul D. Sobey
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Title: President and CEO
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By: /s/ A. D. Rowe
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Name: A. D. Rowe
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Title: Senior V.P. & CFO
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E.C.L. INVESTMENTS LIMITED
By: /s/ Paul D. Sobey
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Name: Paul D. Sobey
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Title: President and CEO
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By: /s/ A. D. Rowe
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Name: A. D. Rowe
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Title: Senior V.P & CFO
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SCHEDULE 1
STOCKHOLDERS HOLDINGS
Name of Stockholder Number of Shares
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Empire Company Limited 5,550,461
E.C.L. Investment Limited 4,868,104
Empire Company Limited