EXHIBIT 1
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 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 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 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 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.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Nail
Telephone: (000) 000-0000 x0000
Facsimile: (000) 000-0000
(b) If to Selling Stockholders, to:
Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
-and-
Xxxxxxx XxXxxxxx Stirling Scales
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx 000, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
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
xxxxxxxxxx, xxxxx, xxxxxxx 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]
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:_____________________________________
Name: __________________________________
Title:__________________________________
EMPIRE COMPANY LIMITED
By:____________________________________
Name: _________________________________
Title: ________________________________
E.C.L. INVESTMENTS LIMITED
By:____________________________________
Name:__________________________________
Title:_________________________________
SCHEDULE 1
STOCKHOLDERS HOLDINGS
Name of Stockholder Number of Shares
------------------- ----------------
Empire Company Limited 5,550,461
E.C.L. Investment Limited
Empire Company Limited 4,868,104