FOOD LION, INC.
2110 Executive Drive
P.O. Box 1330
Salisbury, North Carolina 28145-1330
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF FOOD LION, INC.:
The Annual Meeting of the Shareholders of Food Lion, Inc.
(the "Company") will be held at 10:00 a.m. on Thursday, May 4,
1995, at the Catawba College Keppel Auditorium, Salisbury, North
Carolina, for the following purposes, all as more fully described
in the accompanying Proxy Statement:
(1) To elect ten members to the Board of Directors;
(2) To consider and vote upon a proposal to ratify the
appointment of Coopers & Lybrand as independent
accountants for the fiscal year ending December 30,
1995;
(3) To consider and vote on a proposal to amend
Article 4, Section 6 of the Bylaws of the Company
relating to actions by the Board of Directors requiring
a Special Vote;
(4) To act upon the shareholder proposal included on
pages 17-19 of this Proxy Statement; and
(5) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
March 15, 1995 as the record date for the determination of
shareholders entitled to vote at the meeting and, accordingly,
only shareholders who are otherwise entitled to vote and who are
holders of record at the close of business on that date will be
entitled to notice of and to vote at the meeting. The transfer
books of the Company will not be closed. A Proxy Statement and
proxy card are enclosed herewith. You are urged to date, sign
and return the proxy card promptly in the envelope provided.
TOM E. SMITH
Chairman of the Board, President
and Chief Executive Officer
April 4, 1995
SHAREHOLDERS MAY REVOKE A PROXY UPON DELIVERY TO THE SECRETARY OF
THE COMPANY OF A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED
PROXY BEARING A LATER DATE. SHAREHOLDERS MAY ALSO REVOKE A PROXY
BY ATTENDING THE ANNUAL MEETING OF SHAREHOLDERS AND VOTING IN
PERSON.
FOOD LION, INC.
2110 Executive Drive
P.O. Box 1330
Salisbury, North Carolina 28145-1330
April 4, 1995
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the
Board of Directors of Food Lion, Inc. (the "Company") for use at
the Annual Meeting of Shareholders to be held at 10:00 a.m. on
May 4, 1995, at the Catawba College Keppel Auditorium, Salisbury,
North Carolina, and at any adjournment thereof (the "Annual
Meeting"). The entire cost of such solicitation will be borne by
the Company. In addition to solicitation by mail, arrangements
will be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxy materials to their principals, and
the Company may reimburse them for their expenses in doing so.
Personal solicitations may be conducted by directors, officers
and employees of the Company. This Proxy Statement and
accompanying proxy card will be mailed to shareholders on or
about April 4, 1995.
The shares represented by the accompanying proxy and
entitled to vote will be voted if the proxy card is properly
signed and received by the Company prior to the meeting. Where a
choice is specified on any proxy card as to the vote on any
matter to come before the meeting, the proxy will be voted in
accordance with such specification. Where no choice is
specified, the proxy will be voted for the election of the
persons nominated to serve as the directors of the Company named
in this Proxy Statement, for the proposal to ratify the
appointment of Coopers & Lybrand as independent accountants for
the fiscal year ended December 30, 1995, for approval of an
amendment to Article 4, Section 6 of the Bylaws of the Company
relating to actions by the Board of Directors that require a
Special Vote, against the shareholder proposal included on pages
17-19 of this Proxy Statement and in such manner as the persons
named on the enclosed proxy card in their discretion determine
upon such other business as may properly come before the Annual
Meeting.
VOTING SECURITIES OF THE COMPANY
The Company is authorized to issue and has outstanding (i)
non-voting shares of Class A Common Stock, par value $.50 per
share ("Class A Common Stock"), and (ii) voting shares of Class B
Common Stock, par value $.50 per share ("Class B Common Stock")
(collectively, the "common stock"). Holders of record of the
Class B Common Stock at the close of business on March 15, 1995
are entitled to vote at the Annual Meeting and are entitled to
one vote for each share held. At the close of business on March
15, 1995, there were 239,571,114 shares of Class B Common Stock
issued and outstanding and 244,141,726 shares of Class A Common
Stock issued and outstanding. Shares of Class A Common Stock
have no voting rights other than as provided by North Carolina
law.
The laws of North Carolina, under which the Company is
incorporated, in general provide that, in connection with the
election of directors, the persons receiving a plurality of the
votes cast will be elected as directors. Thus, the ten persons
who receive the highest number of votes at the meeting (assuming
a quorum is present) shall be deemed to have been elected. The
affirmative vote of a majority of the shares of Class B Common
Stock represented and entitled to vote at the Annual Meeting will
be required to ratify the appointment of independent accountants,
approve the amendment to the Bylaws of the Company described
herein, and approve the shareholder proposal included on pages 17-
19 of this Proxy Statement. Abstentions will be counted in
determining the existence of a quorum for the Annual Meeting, but
abstentions and non-votes, including broker non-votes, will not
be counted as votes in favor of or against the proposals
described above.
Etablissements Delhaize Freres et Cie "Le Lion" S.A.
("Delhaize") and its wholly owned subsidiary, Delhaize The Lion
America, Inc., a Delaware corporation ("Detla"), own, in the
aggregate, more than 50% of the outstanding shares of the
Company's Class B Common Stock. See "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Principal Shareholder."
The affirmative vote by Delhaize and Detla will guarantee the
passage of any of the proposals described above (and any other
proposals that require majority vote for passage). The Company
has been informed that Delhaize and Detla intend to vote for the
election of the ten nominees for director proposed herein under
"Proposal (1)--ELECTION OF DIRECTORS"; for Proposal (2),
ratifying the appointment of Coopers & Lybrand as independent
accountants for the fiscal year ending December 30, 1995; for
Proposal (3), approving the amendment to Article 4, Section 6 of
the Bylaws of the Company; and against the shareholder proposal
included on pages 17-19 of this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholder
The following information is furnished for each person known
by management of the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's Class B Common
Stock, the only voting security of the Company:
Amount and Nature
of Beneficial
Ownership as of Percent
Name and Address March 15, 1995 of Class
Etablissements Delhaize Freres et Cie
"Le Lion" S.A. ("Delhaize")
rue Osseghem, 53
1080 Brussels, Belgium 120,443,462(1) 50.3%
(1) Includes 63,352,780 shares held of record by Detla, as to
which Delhaize and Detla share voting and investment power.
Detla's address is Suite 2160, Atlanta Plaza, 950 East Paces
Ferry Road, Atlanta, Georgia 30326. Delhaize, Detla, and
the Company are parties to a Shareholders Agreement dated
September 15, 1994, which governs the voting of the shares
held by Delhaize and Detla in the election of directors and
other matters. The Shareholders Agreement expires on April
30, 2001, unless Delhaize's and Detla's aggregate ownership
of voting shares of the Company is reduced below 10%, in
which case the Shareholders Agreement would terminate at
that time. See "Shareholders Agreement" below.
Ownership of Management
The following information with respect to beneficial
ownership of shares of the Company's Class A Common Stock and
Class B Common Stock as of March 15, 1995 is furnished for each
director, nominee for director and named executive officer of the
Company, and for all directors and executive officers of the
Company as a group. The number of shares of common stock set
forth in the table below includes shares that may be acquired
within 60 days of March 15, 1995, but does not include shares of
common stock beneficially owned by Delhaize, as to which Messrs.
Beckers, de Cooman d'Herlinckhove, de Vaucleroy, LeClercq and
Stroobant are associated as further described herein. See
"Principal Shareholder" above for more information relating to
the ownership of Class B Common Stock by Delhaize. Unless
otherwise noted, each person has sole voting and investment power
of the shares beneficially owned by such person.
Class A Class B
Common Stock
Common
Stock
Name of Individual Amount and Percent Amount and Percent
or Number of Nature of of Nature of of
Persons in Group Beneficial Class Beneficial Class
Ownership Ownership
Pierre Olivier Beckers -- -- -- --
A. Edward Benner, Jr. 15,651(1) * 54,225 *
Dan A. Boone 20,989(2) * 15,180(2) *
Jacqueline Kelly -- -- 1,000 *
Collamore
William G. Ferguson -- -- -- --
Bernard W. Franklin 425 * -- --
E. Charles de Cooman -- -- -- --
d'Herlinckhove
Gui de Vaucleroy -- -- -- --
Margaret Kluttz 300 * 750 *
Jacques LeClercq 103,200 * 46,800(3) *
Eugene R. McKinley 130,894(4) * 50,239 *
Tom E. Smith 788,528(5) * 1,529,267(5) *
Philippe Stroobant 20,000 * -- --
John P. Watkins 27,195(6) * 30,000 *
-All directors and
executive officers as
a group (22 persons) 1,484,124(7) * 1,955,084 *
- ----------------------
* Indicates less than 1%.
(1) Includes 7,500 shares of Class A Common Stock that may be
acquired upon exercise of options granted under the Food
Lion, Inc. 1983 Employee Stock Option Plan.
(2) Includes (a) 250 shares of Class A Common Stock that may be
acquired upon exercise of options granted under the Food
Lion, Inc. 1991 Employee Stock Option Plan; (b) 200 shares
of Class A Common Stock held by Mr. Boone's wife; and (c)
405 shares of Class A Common Stock and 180 shares of Class B
Common Stock held by Mr. Boone's wife as custodian for their
children.
(3) Does not include 46 shares of Class B Common Stock held by
Mr. LeClercq's wife as custodian for their grandchildren.
(4) Includes (a) 7,500 shares of Class A Common Stock that may
be acquired upon exercise of options granted under the Food
Lion, Inc. 1983 Employee Stock Option Plan; and (b) 1,240
shares of Class A Common Stock held by Mr. McKinley's wife.
Does not include 13,620.98 units in the Profit Sharing
Retirement Plan of Food Lion, Inc. allocated to Food Lion
Class A Common Stock. The number of shares per unit in such
plan fluctuates daily based in part on the allocation of
cash to the fund. As of March 15, 1995, the 13,620.98 units
held by Mr. McKinley represented 15,217.19 shares of Class A
Common Stock.
(5) Includes (a) 30,000 shares of Class A Common Stock that may
be acquired upon exercise of options granted under the 1991
Employee Stock Option Plan of Food Lion, Inc.; and (b) 480
shares of Class A Common Stock and 203 shares of Class B
Common Stock held by Mr. Smith's wife; and excludes 432,512
shares of Class A Common Stock and 348,912 shares of Class B
Common Stock owned by trusts created by Mr. Smith for his
children and over which Mr. Smith exercises no voting or
investment power.
(6) Includes 3,000 shares of Class A Common Stock that may be
acquired upon exercise of options granted under the Food
Lion, Inc. 1983 Employee Stock Option Plan. Does not
include 7,838.50 units in the Profit Sharing Retirement Plan
of Food Lion, Inc. allocated to Food Lion class A Common
Stock. The number of shares per unit in such plan
fluctuates daily based in part on the allocation of cash to
the fund. As of March 15, 1995, the 7,838.50 units held by
Mr. Watkins represented 8,757.07 shares of Class A Common
Stock.
(7) Includes 60,000 shares of Class A Common Stock that may be
acquired upon exercise of options granted under the Food
Lion, Inc. 1983 Employee Stock Option Plan and the 1991
Employee Stock Option Plan of Food Lion, Inc. Does not include
26,406.24 units in the Profit Sharing Retirement Plan of
Food Lion, Inc. allocated to Food Lion Class A Common Stock.
The number of shares per unit in such plan fluctuates daily
based in part on the allocation of cash to the fund. As of
March 15, 1995, the 26,406.24 units held by all directors and
executive officers as a group represented 29,500.71 shares
of Class A Common Stock.
Shareholders Agreement
On September 15, 1994, Delhaize, Detla and the Company
entered into an agreement ("1994 Shareholders Agreement" or
"Shareholders Agreement") containing provisions regarding, among
other things, the nomination of candidates for election to the
Board of Directors, the voting of securities beneficially owned
by Delhaize and Detla for the election of directors, the role of
Tom E. Smith in the management of the Company and the voting
requirements applicable to specified actions by the Board of
Directors. The 1994 Shareholders Agreement supersedes a previous
shareholders agreement entered into in 1988 by Delhaize, Detla,
Mr. Smith and Ralph Ketner (the latter of whom ceased to be a
party to such Agreement as of May 5, 1994) and is effective until
April 30, 2001, unless Delhaize's and Detla's aggregate ownership
of voting shares of the Company is reduced below 10%, in which
case the Shareholders Agreement would terminate at that time.
The 1994 Shareholders Agreement provides for, subject to the
fiduciary duties of directors under North Carolina law or except
as the Board by Special Vote (as defined below, see "Proposal (3)
- -- Amendment to Article 4, Section 6 of the Bylaws Regarding
Actions by Special Vote") may otherwise direct, a Nominating
Committee of the Board of Directors to nominate the slate of
directors to be submitted to the shareholders for election to the
Board and persons to fill any vacancies on the Board that arise
from time to time. See "THE BOARD OF DIRECTORS." The Board had
previously established a Nominating Committee, but reconstituted
it in February 1995 to reflect the terms of the Shareholders
Agreement. See "RECENT BYLAW AMENDMENTS." Pursuant to the
Shareholders Agreement, the Nominating Committee will consist of
three persons, one of whom will be designated by Delhaize and
Detla, one of whom will be the Chief Executive Officer of the
Company or his designee from among the members of the Board of
Directors and one of whom will have no affiliation (other than
Board or Committee membership of the Company) with either Delhaize
or the Company. In addition,under the Shareholders Agreement,the
slate to be proposed for election to the Board of Directors will
consist of ten persons, four proposed by the Chief Executive
Officer of Delhaize, two proposed by the Chief Executive Officer
of the Company, and four who will have no affiliation (other than
Board or Committee membership of the Company) with either Delhaize
or the Company.The Agreement requires persons nominated to fill
vacancies to be selected in a corresponding manner.
The Shareholders Agreement also reflects a voting agreement
between Delhaize and Detla to vote in favor of the slate of
directors proposed by the Nominating Committee and approved by
the Board of Directors of the Company, and not to participate,
directly or indirectly, in any effort to cause cumulative voting
to be in effect for any election of directors of the Company.
In addition, the Shareholders Agreement provides that the
Bylaws of the Company shall be modified to abolish the Finance
Committee of the Board of Directors, and to require an
affirmative vote of at least 70% of the directors to approve
certain actions. Specifically, the Shareholders Agreement
provides that during the term thereof, the Bylaws shall require a
vote of at least 70% of the Company's Directors to: (a) approve
the nomination of any person for election to the Board of
Directors or elect a Chief Executive Officer other than Tom
Smith; (b) authorize any contract involving payment by the
Company of cash or property valued in excess of $500,000,
including, without limitation, the purchase, sale or leasing of
property or the incurring of indebtedness, except transactions
relating to the leasing or construction of stores, warehouses and
related facilities or any other transaction in the ordinary
course of business; (c) approve or authorize capital expenditures
of more than $500,000 in any one instance or $1,000,000 in the
aggregate in any fiscal year, except expenditures relating to the
leasing or construction of stores, warehouses and related
facilities or any other transaction in the ordinary course of
business; (d) authorize the issuance or sale of stock or other
securities of the Company (or subsidiary), or options or warrants
for or obligations convertible into such stock or securities,
except the issuance of stock options, stock or both, pursuant to
specified employee benefit plans of the Company; (e) sell or
otherwise dispose of a substantial part of the Company's assets
other than in the ordinary course of business; (f) amend the
charter or the Bylaws of the Company; or (g) approve for
submission to the shareholders of the Company a proposal for the
amendment of the Company's charter or the merger, consolidation,
reorganization, recapitalization or liquidation of the Company.
The Company's present Bylaws, reflecting provisions of
previous shareholders agreements, contain a Special Vote
requirement for specified Board actions that varies to some
degree from that contained in the 1994 Agreement and proposed
hereby. See "Proposal (3) -- Amendment to Article 4, Section 6 of
the Bylaws Regarding Actions by Special Vote." The 1994
Shareholders Agreement provides that the Special Vote requirement
contemplated thereby shall not be effective until approved by the
shareholders of the Company. One of the matters to be acted on at
the 1995 Annual Shareholders Meeting is a proposal to adopt an
amendment to the Bylaws reflecting the Special Vote requirements
described above and in further detail below under "Proposal (3) -
- - Amendment to Article 4, Section 6 of the Bylaws Regarding
Actions by Special Vote." Until shareholder approval of the
Special Vote provision is obtained, the corresponding provision
of the Company's present Bylaws remains in effect. See "Proposal
(3) -- Amendment to Article 4, Section 6 of the Bylaws Regarding
Actions by Special Vote." The Finance Committee also will remain
in existence until the shareholders approve the proposed
amendment to the Special Vote provision of the Bylaws. See
"RECENT BYLAW AMENDMENTS." Delhaize and Detla agree in the
Shareholders Agreement to vote their shares of common stock of
the Company in favor of the Bylaw amendment described above.
Proposal (1)
ELECTION OF DIRECTORS
Article 3, Section 2 of the Bylaws of the Company provides
for a minimum of eight and a maximum of ten directors, as such
number is established from time to time by the shareholders or
the Board of Directors of the Company. The Board of Directors
has set the number of directors at ten. The ten persons who
receive the highest number of votes at the meeting (assuming a
quorum is present) shall be deemed to have been elected. The ten
persons named below are nominated to serve on the Board of
Directors until the 1996 Annual Meeting of Shareholders and until
their successors are elected and qualified. Except for Mr.
Stroobant, each nominee is currently a director of the Company.
Each nominee for director has indicated that he or she is
willing and able to serve as a director if elected. However, if
any nominee should become unable to serve or will not serve, the
persons named on the enclosed proxy card will vote for such
substitute nominees as designated by the Board of Directors.
The age and a brief biographical description of each of the
ten nominees for director are set forth below.
PIERRE OLIVIER BECKERS (34)--Mr. Beckers is a member of the
Management Committee of Delhaize, a position he has held since
January 1990. Mr. Beckers has also served as Grocery Buying
Director (from 1988 to 1989) and Manager (from 1986 to 1988) of
that company. Mr. Beckers was first elected as a director in
1992 and is a member of the Finance Committee.
DR. JACQUELINE KELLY COLLAMORE (35)--Dr. Collamore is Associate
and Chief of Staff of Credit Suisse New York, which she joined in
February, 1993. Since January, 1994, she has also served as
Associate and Chief of Staff of Credit Suisse Private Banking.
Dr. Collamore is a member of the Management Committee for both
entities. Dr. Collamore was a consultant with Arthur D. Little
from 1991 to 1992, and was an independent business consultant
from 1986 to 1991. Dr. Collamore was a Lecturer of Marketing
from 1989 to 1992 at various colleges and universities. Dr.
Collamore was first elected as a director in 1994, and is a member
of the Audit Committee and the Stock Option Committee.
WILLIAM G. FERGUSON (67)--Mr. Ferguson has been a director of
Snow Aviation International, Inc. since 1988 and the executive
vice president since 1989. Mr. Ferguson is also a director of
Crestview Aerospace Corporation. Mr. Ferguson was Chairman and
CEO of TTI Systems, Inc. from 1977 through the sale of the
company to Transco Energy Company in 1986 and until he retired
from Transco in 1989. Mr. Ferguson was first appointed to the
Board on December 7, 1993. He is a member of the Audit
Committee and is Chairperson of the Senior Management
Compensation Committee.
DR. BERNARD W. FRANKLIN (42)--Dr. Franklin has been the President
of St. Augustine's College in Raleigh, North Carolina since March
1995. From July 1989 until March 1995, Dr. Franklin served as
President of Livingstone College and Hood Theological Seminary in
Salisbury, North Carolina. Dr. Franklin served as Vice President
of Student Affairs at Virginia Union University (from 1987 to
1989) and Assistant Vice President of Student Affairs at Johnson
C. Smith University (from 1985 to 1987). Dr. Franklin was first
elected as a director in 1993 and is a member of the Audit
Committee and is Chairperson of the Stock Option Committee.
E. CHARLES DE COOMAN d'HERLINCKHOVE (61)--Mr. de Cooman
d'Herlinckhove is, and has been for more than five years, a
director, officer and member of the Management Committee of
Delhaize. Mr. de Cooman d'Herlinckhove is the first cousin of
Mr. de Vaucleroy. Mr. de Cooman d'Herlinckhove was first elected
as a director in 1985.
GUI DE VAUCLEROY (61)--Mr. de Vaucleroy is, and has been for more
than five years, a director of Delhaize. Since January 1, 1990,
Mr. de Vaucleroy has served as the President and Chief Executive
Officer of Delhaize and has also served that company as Chief
Operating Officer (from 1984 until 1989). Mr. de Vaucleroy is
the first cousin of Mr. de Cooman d'Herlinckhove. Mr. de
Vaucleroy was first elected as a director in 1975 and is a member
of the Audit Committee, Finance Committee, Nominating Committee,
and Senior Management Compensation Committee.
MARGARET KLUTTZ (51)-- Mrs. Kluttz was appointed Chairperson of
the North Carolina Rail Council in 1994. She has served on the
North Carolina Rail Commission since 1994, and the North Carolina
Board of Transportation since 1993. Mrs. Kluttz has served as
Mayor of the City of Salisbury, North Carolina since 1991 and has
been a member of the City Council since 1988. She was first
appointed to the Board of Directors on September 20, 1994
following the resignation of Dan A. Boone. Mrs. Kluttz is a
member of the Audit Committee and Chairperson of the Nominating
Committee.
TOM E. SMITH (53)--Mr. Smith is the President and Chief Executive
Officer of the Company and Chairman of the Board. He has held
the position of President since April 14, 1981 and the position
of Chief Executive Officer since January 1, 1986. He was elected
to the position of Chairman of the Board on May 10, 1990. Mr.
Smith was first elected as a director in 1973, is Chairperson of
the Executive Committee and the Finance Committee, and is a
member of the Nominating Committee.
PHILIPPE STROOBANT (42)--Mr. Stroobant is, and has been for more
than five years, a director and member of the Management
Committee of Delhaize. He has been a manager of Delhaize since
1983. If elected, this will be Mr. Stroobant's first term as a
director.
JOHN P. WATKINS (39)--Mr. Watkins is the Chief Operating Officer
and Senior Vice President of Operations of the Company, positions
he has held since May 6, 1993 and May 9, 1991, respectively. Mr.
Watkins, who has been an employee of the Company since 1977, has
also served as Director of Merchandising (from 1984 to 1988) and
Vice President of Merchandising (from 1988 to 1991). Mr. Watkins
was first elected as director in 1992 and is a member of the
Executive Committee and the Finance Committee.
THE BOARD OF DIRECTORS
The business of the Company is managed under the direction
of the Board of Directors, as provided by North Carolina law and
the Company's Bylaws. The Board of Directors has established an
Audit Committee, Executive Committee, Finance Committee,
Nominating Committee, Senior Management Compensation Committee,
and Stock Option Committee. Pursuant to a resolution adopted by
the Board of Directors on February 9, 1995, if the shareholders
approve the amendment to the Bylaws of the Company, described in
this Proxy Statement, then the Finance Committee will be
abolished. See "Shareholders Agreement," "RECENT BYLAW
AMENDMENTS," and "Proposal (3) -- Amendment to Article 4, Section
6 of the Bylaws Regarding Actions by Special Vote."
The Audit Committee recommends to the Board of Directors the
appointment of the Company's outside accountants and reviews the
scope and results of the audits by the Company's outside
accountants. The committee also reviews the scope and results of
audits by the Company's Internal Audit Department and other
matters pertaining to the Company's accounting and financial
reporting functions. The members of the Audit Committee, which
met three times during the fiscal year ended December 31, 1994,
are presently Jacques LeClercq (Chairperson), Bernard W.
Franklin, Gui de Vaucleroy, Jacqueline K. Collamore and William
G. Ferguson.
The Executive Committee serves as an advisory body to the
Board of Directors and the Chairman of the Board concerning the
daily business operations of the Company. Its functions include
periodic review of results of operations, sales projections,
capital expenditures, new policies and systems and other matters.
The members of the Executive Committee, which met twice during
the fiscal year ended December 31, 1994, are Tom E. Smith
(Chairperson), Jacques LeClercq and John P. Watkins.
The Board of Directors has maintained a Finance Committee,
consisting of the Company's Chairman of the Board, three
directors appointed by Delhaize and one director appointed by the
Company's President and Chairman of the Board, since 1988.
Pursuant to action of the Board of Directors on February 9, 1995,
and in keeping with the 1994 Shareholders Agreement, the Finance
Committee will be abolished if the shareholders approve the
proposed amendment to the Special Vote provisions of Article 4,
Section 6 of the Bylaws. See "Shareholders Agreement, " "RECENT
BYLAW AMENDMENTS" and "Proposal (3) -- Amendment to Article 4,
Section 6 of the Bylaws Regarding Actions by Special Vote." The
responsibilities of the Finance Committee have included adopting
the Company's five-year growth plan and its annual capital
expenditure budget and approving policies regarding the number,
size, location and format of stores and warehouses of the
Company. The members of the Finance Committee, which did not meet
during the fiscal year ended December 31, 1994, are presently Tom
E. Smith (Chairperson), Gui de Vaucleroy, Jacques LeClercq, John
P. Watkins and Pierre-Olivier Beckers.
Under the Company's Bylaws, as amended in February 1995, the
Board of Directors will maintain a Nominating Committee, which
must consist of three directors, one designated by Delhaize, one
by the Company's Chief Executive Officer and one who has no
affiliation(other than Board or Committee membership of the Company)
with either Delhaize or the Company.The Nominating Committee is
responsible for nominating the slate of directors to be submitted
to the shareholders for election,if approved by the Board,and for
nominating persons to fill vacancies that arise on the Board.
Under the Bylaws, as recently amended, the slate of directors
nominated by the Nominating Committee will consist of ten
persons, four of whom are proposed by Delhaize, two of whom are
proposed by the Chief Executive Officer of the Company and four
of whom have no affiliation (other than Board or Committee
membership of the Company)with either Delhaize or the Company.If any
director ceases to be a director of the Company,then the Nominating
Committee, subject to the Board's approval, shall nominate an
appropriate person to fill the vacancy, selected in a
corresponding manner (e.g., if a director proposed by Delhaize
ceases to be a director, then Delhaize shall propose the person
to fill the vacancy). Prior to the recent Bylaw amendments, the
members of the Nominating Committee were Gui de Vaucleroy,
Jacques LeClercq and Tom E. Smith (Chairperson).
The members of the Nominating Committee, reconstituted as
part of the 1994 Shareholders Agreement, are Tom E.Smith, Gui
de Vaucleroy and Margaret H. Kluttz (Chairperson). The Committee
will consider candidates suggested by shareholders in accordance
with the procedures set forth in the Company's Bylaws. See
"RECENT BYLAW AMENDMENTS." The Nominating Committee met once during
the fiscal year ended December 31, 1994.
In 1991, the Board of Directors of the Company established
the Senior Management Compensation Committee. This committee,
which consists of three nonemployee directors, is responsible for
reviewing and approving compensation for senior management of the
Company, including amounts allocated to participants under the
Company's Annual Incentive Bonus Plan described below under the
caption "REPORT ON EXECUTIVE COMPENSATION -- Incentive
Compensation." The members of the Senior Management Compensation
Committee, which met four times during the fiscal year ended
December 31, 1994, are presently William G. Ferguson
(Chairperson), Gui de Vaucleroy and Jacques LeClercq.
The Stock Option Committee administers the Food Lion, Inc.,
1983 Employee Stock Option Plan and the 1991 Employee Stock
Option Plan of Food Lion, Inc., selects the individuals who will
be awarded options under the 1991 plan and determines the timing,
pricing and amounts of options granted under this plan within the
terms of the plan. The members of the Stock Option Committee,
which met twice during the fiscal year ended December 31, 1994,
are presently Jacques LeClercq, Jacqueline K. Collamore, and
Bernard W. Franklin (Chairperson).
The Board of Directors met six times during the fiscal year
ended December 31, 1994. During that period, each incumbent
director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total
number of meetings held by all committees on which the director
served during the last fiscal year.
Compensation of Directors
The Company has agreed to pay Dr. Jacqueline K. Collamore,
Dr. Bernard W. Franklin, William G. Ferguson, and Margaret H.
Kluttz a quarterly fee of $6,500, a per board meeting fee of
$1,000 and reimbursement for all related travel expenses for
their service on the Board of Directors.
There are no other arrangements pursuant to which directors
of the Company are compensated for services as director.
Proposal (2)
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand, Charlotte, North Carolina,
has, upon the recommendation of the Audit Committee of the Board
of Directors, been selected by the Board of Directors of the
Company as independent accountants for the fiscal year ending
December 30, 1995, subject to ratification of that appointment by
the vote of a majority of the shares of Class B Common Stock
represented and entitled to vote at the Annual Meeting. Coopers
& Lybrand has acted as independent accountants for the Company
since 1973. Representatives of Coopers & Lybrand are expected to
be present at the Annual Meeting with the opportunity to make a
statement if they so desire and will also be available to respond
to appropriate questions.
The persons named on the accompanying proxy card intend to
vote in favor of the ratification of the appointment of Coopers &
Lybrand as independent accountants for the fiscal year ending
December 30, 1995, unless a contrary choice is indicated on the
enclosed proxy card. If no direction is made, the proxy will be
voted for Proposal (2). The affirmative vote of a majority of
the shares of Class B Common Stock represented and entitled to
vote at the Annual Meeting is necessary to ratify this
appointment. The Board of Directors unanimously recommends that
each shareholder vote FOR this proposal.
RECENT BYLAW AMENDMENTS
The Board of Directors adopted the following amendments to
the Company's Bylaws on February 9, 1995:
A new Article 2, Section 6, was added to the Bylaws,
requiring shareholders to give the Board advance notice of
matters proposed to be raised at a shareholder's meeting. In
order to raise a matter at a meeting, a shareholder must give
written notice to the Secretary of the Company at least 10 but no
more than 60 days before the meeting, unless fewer than 21 days'
notice of the meeting is given to shareholders, in which case the
notice given by the shareholder must be received by the Secretary
no fewer than 10 days after the date on which the notice of the
meeting was mailed to the shareholders. If a shareholder wishes
the Board to consider taking a position with respect to the
matter to be raised at the meeting, the notice given by the
shareholder must be received by the Secretary of the Company no
fewer than 90 nor more than 150 days before the meeting. The
notice must give a brief description of the business desired to
be brought before the meeting, the name and address of the
shareholder proposing the business, the classes and number of
shares owned by such shareholder and any material interest of the
shareholder in the business proposed to be brought before the
meeting. This provision is designed to facilitate the orderly
conduct of shareholders' meetings by the Board, and does not
require the Board to recommend the matter for adoption by the
shareholders or to give the shareholders notice of the proposal.
Under certain conditions, however, a shareholder may request that
the Company include a proposal in the proxy materials of the
Company for action at a forthcoming shareholders' meeting. See
"Proposals of Shareholders."
The Board of Directors also amended the Bylaws to require
shareholders to give the Board advance notice of their intent to
nominate a person for election to the Board of Directors of the
Company at an annual or special meeting of the shareholders.
Under Article 3, Section 3 of the Bylaws, as amended, nomination
for election of any person to the Board of Directors may be made
by a shareholder if written notice of the proposed nomination is
delivered to the Secretary of the Company at the principal office
of the Company not fewer than 10 days nor more than 60 days prior
to the shareholders meeting, except that if fewer than 21 days'
notice of the meeting is given to shareholders, the written
notice given by the shareholder must be received by the Secretary
not later than the close of the tenth day following the day on
which notice was mailed to the shareholders. Notwithstanding the
foregoing, any shareholder who wishes the Board (or a duly
authorized committee thereof) to consider nominating for election
to the Board a person recommended by a shareholder must deliver
notice to, or mail it so that it is received by, the Secretary of
the Company no fewer than 90 nor more than 150 days prior to the
meeting. Any notice provided by a shareholder pursuant to
Article 3, Section 3 must set forth (a) the name and address of
the shareholder and the proposed nominee; (b) a representation
that the shareholder is a record holder of shares of the Company
entitled to vote at the meeting and intends to appear in person
or by proxy at the meeting to nominate the proposed nominee; (c)
a description of all arrangements or understandings between the
shareholder and each nominee and any other person (naming such
person) pursuant to which the nomination is to be made by the
shareholder; (d) such other information regarding the proposed
nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission if the nominee had been nominated by the Board; and
(e) the written consent of each proposed nominee to serve as the
director of the Company if elected. Article 3, Section 3 does
not require the Board to nominate or approve, as one of its
nominees, any person recommended to be so nominated by a
shareholder or to give the shareholders notice of any proposed
nomination by a shareholder. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
The Board adopted new Article 3, Section 4 of the Bylaws,
codifying the manner of electing directors specified by North
Carolina law. The provision specifies that, except with respect
to the filling of vacancies, directors shall be elected at the
annual meeting of shareholders and the persons who receive the
greatest number of votes at a meeting in which a quorum is
present shall be deemed to have been elected.
Article 3, Section 6 was amended to provide that vacancies
on the Board shall be filled in accordance with the provisions of
Article 5, Section 2, which relates to the directors to be
proposed by the Nominating Committee of the Board of Directors.
A new Article 5, Section 2 was adopted by the Board to conform
the Bylaws to the 1994 Shareholders Agreement. See "Shareholders
Agreement" and "THE BOARD OF DIRECTORS."
The Board also approved amendments to the Special Vote
provisions of Article 4, Section 6 of the Bylaws. See
"Shareholders Agreement." The amendments to this section will not
be effective until they are approved by the shareholders. One of
the items to be voted on at the 1995 Annual Shareholders Meeting
is the amendment to this section. See "Proposal (3) --
Amendment to Article 4, Section 6 of the Bylaws Regarding Actions
by Special Vote" and "Shareholders Agreement."
The Board also decreased the Special Vote requirement for
the creation of committees, appointment of directors to
committees and removal of directors from committees. Prior to
this amendment to the Bylaws, the Board was required to act with
respect to these matters by a vote of more than 80% of the number
of directors then serving. The amendment to the Bylaws allows
the Board to create committees, appoint directors to committees
and remove directors from committees by a vote of at least 70% of
the number of directors then serving. The Board also
conditionally approved the abolition of the Finance Committee in
accordance with the Shareholders Agreement. While this amendment
does not require shareholder approval and will not be acted upon
at the meeting, it will not be effective unless and until the
shareholders approve the proposed amendment to the Special Vote
provisions of Article 4, Section 6 as described above. See
"Shareholders Agreement" and "Proposal (3)--Amendment to Article
4, Section 6 of the Bylaws Regarding Actions by Special Vote."
Except as otherwise indicated herein, the foregoing
amendments became effective on adoption.
Proposal (3)
AMENDMENT TO ARTICLE 4, SECTION 6 OF THE BYLAWS
REGARDING ACTIONS BY SPECIAL VOTE
The Board of Directors has unanimously approved, subject to
shareholder approval, an amendment to Article 4, Section 6 of the
Bylaws. See "Shareholders Agreement." If approved by the
Shareholders, this proposed amendment would change the Special
Vote requirements for certain actions by the Board of Directors.
The affirmative vote of a majority of the shares of Class B
Common Stock of the Company represented and entitled to vote at
the Annual Meeting is necessary to approve the proposed
amendment.
Article 4, Section 6 of the Bylaws currently provides
as follows:
Section 6. Special Vote. The board of directors may not,
without an affirmative vote of more than 80% of the number
of directors fixed by these bylaws ("Special Vote"), be
empowered to authorize the corporation to:
(a) Elect a president and chief executive officer
and, after the 1990 annual meeting of shareholders, a
chairman of the board of directors, other than Tom E. Smith;
(b) Approve or authorize any contract not
approved by the Finance Committee involving a consideration
in excess of $500,000, including, without limitation,
leases, tenders, purchases and indebtedness except
transactions within the ordinary course of the corporation's
everyday business activities such as leases of stores,
warehouses and related facilities;
(c) Approve or authorize capital expenditures not
approved by the Finance Committee in excess of $500,000 in
any one case or $1,000,000 in the aggregate in any fiscal
year except transactions in the ordinary course of the
corporation's everyday business activities such as leases of
stores, warehouses and related facilities;
(d) Authorize the issuance or sale of stock or
any securities of the corporation or any subsidiary of the
corporation, or stock options, warrants or obligations
convertible into such stock or securities except with
respect to the grant of options pursuant to the
corporation's plans and the issuance of shares upon exercise
of such options;
(e) Increase in one year by more than 15% the
aggregate compensation payable by the corporation or its
subsidiaries to any officer or director;
(f) Sell or otherwise dispose of a substantial
part of the corporation's assets other than in the ordinary
course of business;
(g) Amend the bylaws of the corporation; or
(h) Recommend the amendment of the articles of
incorporation or the merger or consolidation of the
corporation with or into any other corporation or the
reorganization, recapitalization or liquidation of the
corporation.
Any Special Vote approving any such action may
specify other limitations which shall not be exceeded
without a further Special Vote.
The Board of Directors has proposed that Article 4, Section
6 of the Bylaws be amended, in keeping with the Shareholders
Agreement, to provide as follows:
"Section 6. Special Vote. The board of directors may not,
without an affirmative vote of at least 70% of the number of
directors fixed by these bylaws ("Special Vote"), be
empowered to authorize the corporation to:
(a) Approve the nomination of any person or
persons for election to the board of directors or elect a
chief executive officer other than Tom E. Smith;
(b) Authorize any contract involving payment by
the corporation of cash or property valued in excess of
$500,000, including, without limitation, the purchase, sale
or leasing of property or the incurring of indebtedness,
except transactions relating to the leasing or construction
of stores, warehouses and related facilities or any other
transaction in the ordinary course of business;
(c) Approve or authorize capital expenditures of
more than $500,000 in any one instance or $1,000,000 in the
aggregate in any fiscal year, except expenditures relating
to the leasing or construction of stores, warehouses and
related facilities or any other transaction in the ordinary
course of business;
(d) Authorize the issuance or sale of stock or
other securities of the corporation or any subsidiary of the
corporation, or options or warrants or obligations
convertible into such stock or securities, except the
issuance of stock options or stock or both, as the case may
be, pursuant to the corporation's 1981 Employee Stock Option
Plan, 1983 Employee Stock Option Plan, 1991 Employee Stock
Option Plan, Employee Stock Purchase Plan and Employee Stock
Ownership Plan and other employee benefit plans approved by
the board of directors;
(e) Sell or otherwise dispose of a substantial
part of the corporation's assets other than in the ordinary
course of business;
(f) Amend the charter or the bylaws of the
corporation; or
(g) Approve for submission to the shareholders of
the corporation for their approval a proposal for the
amendment of the corporation's charter or the merger or
consolidation of the corporation with or into any other
corporation or the reorganization, recapitalization or
liquidation of the corporation;
Any Special Vote approving any such action may
specify other limitations which shall not be exceeded
without a further Special Vote."
The proposed amendment would reduce the percentage vote
required for a Special Vote from "more than 80%" to "at least
70%" of the number of directors fixed by the Bylaws. Under the
current Bylaw provision, nine directors must approve an action in
order to satisfy the Special Vote requirement. The effect of the
proposed amendment to Article 4, Section 6 would be to allow the
Board of Directors to take action on matters that require a
Special Vote by the vote of seven rather than nine of the ten
directors, thereby providing added flexibility to the Board.
The proposed amendment to Article 4, Section 6(a) would
require a Special Vote (at least 70% of the Board) to approve the
nomination of any person(s) for election to the Board of
Directors or to elect a Chief Executive Officer other than Tom
Smith. The corresponding Section of the current Bylaws requires
that the Board approve by Special Vote (more than 80% of the
Board) the election of a President and Chief Executive Officer
and Chairman of the Board other than Tom Smith. As indicated,
the proposed amendment would require a Special Vote to approve
the nomination of any person(s) for election to the Board of
Directors, whereas the current Bylaw provisions allow the Board
to approve such nominations by regular vote in accordance with
Article 4, Section 5. Article 4, Section 5 of the Bylaws allows
the Board to act upon the vote of a majority of the directors
present at a meeting at which a quorum is present, except as
otherwise provided in the Company's Articles of Incorporation or
Bylaws.
The proposed amendment to Article 4, Section 6(b) of the
Bylaws would require a Special Vote to authorize contracts
involving payments in excess of $500,000 except those relating to
transactions conducted in the ordinary course of business. The
existing provision of the Bylaws excludes from this Special Vote
requirement any contracts approved by the Finance Committee. If
the amendments to Article 4, Section 6 of the Bylaws are
approved, the Finance Committee of the Board of Directors will be
abolished and the exclusion from the Special Vote requirement for
contracts approved by the Finance Committee will no longer be
applicable. See "Shareholders Agreement," "RECENT BYLAW
AMENDMENTS," and "BOARD OF DIRECTORS."
The effect of the proposed amendment to Article 4, Section
6(c) of the Bylaws would be similar to the proposed amendment to
Article 4, Section 6(b), discussed immediately above. The
proposed amendment would require a Special Vote to approve
capital expenditures, other than those in the ordinary course of
business, in excess of $500,000 in any one instance or $1,000,000
in the aggregate in any fiscal year. The existing Bylaw
provision is substantially the same as the proposed amendment
except that it allows for such expenditures without a Special
Vote if the expenditures are approved by the Finance Committee.
The proposed amendment would eliminate the reference to the
Finance Committee because the Finance Committee will be abolished
if the proposed amendment to Article 4, Section 6 is approved.
The proposed amendment to Article 4, Section 6(d)
specifically identifies the stock option plans, stock purchase
plan and stock ownership plan that the Company currently has in
place. The corresponding provision of the current Bylaws refers
generally to options granted pursuant to the Company's plans (and
shares issued upon exercise thereof).
The proposed amendments to Article 4, Section 6 of the
Bylaws would eliminate current Section 6(e) from the Special Vote
requirement. This section currently requires the Board of
Directors to act by Special Vote to approve the increase in any
one year by more than 15% of the aggregate compensation payable
by the Company or its subsidiaries to any officer or director.
If the proposed amendment is approved, then the Board of
Directors will be authorized to approve such increases in
compensation acting by regular vote in accordance with Article 4,
Section 5, as discussed above.
Proposed Article 4, Sections 6(f) and 6(g) are substantially
the same as the current Article 4, Sections 6(g) and 6(h). The
proposed changes would cause the language of the Bylaws to
conform to the Shareholders Agreement.
Pursuant to Article 9, Section 9 of the Bylaws and the
requirements of North Carolina law, shareholder approval of the
proposed amendment to Article 4, Section 6 of the Bylaws is
required because the Bylaw section proposed to be amended
previously was approved by the shareholders. In the Shareholders
Agreement, Delhaize and Delta have agreed to vote the securities
beneficially owned by them in favor of this proposed amendment to
the Bylaws. The vote of a majority of the shares of Class B
Common Stock outstanding will be required to approve the
amendment to the Bylaws. Since Delhaize and Detla own, in the
aggregate, more than 50% of the outstanding shares of the
Company's Class B Common Stock, this proposed amendment to the
Bylaws will be approved upon the affirmative vote of Delhaize and
Detla for the proposal. As a result, the vote by shareholders
other than Delhaize and Detla for or against the proposal will
not affect the outcome of the vote. It is the opinion of the
Board of Directors that it is in the best interest of the Company
and its shareholders to amend the Bylaws as proposed.
The accompanying Proxy, when properly dated and executed,
will be voted in the manner directed therein by the shareholder.
If no direction is made, the proxy will be voted for Proposal
(3). The vote of a majority of the shares of Class B Common
Stock outstanding will be required to approve the amendment to
the Bylaws. The Board of Directors recommends that each
shareholder vote FOR this proposal.
Proposal (4)
Shareholder Proposal
A proposal ("Proposal") has been submitted by a shareholder
with notice of an intention to present it for action at the
Annual Meeting to be held on May 4, 1995. The name and address
of the shareholder submitting the Proposal are Thomas S.
Lukenich, 7246 Rotherham Drive, Mechanicsville, Virginia 23111-
4826. Mr. Lukenich represents that he is the owner of 2,250
shares of Food Lion's Class B Common Stock.
The Board of Directors recommends a vote AGAINST the Proposal.
TEXT OF SHAREHOLDER PROPOSAL
"Whereas Food Lion, Inc. has set forth advances in the Grocery
Business in providing quality products and service to a loyal
following of customers and employees, the Stock Holders believe
it is time to break new ground.
Therefore, two employees; one full-time salaried, 1 hourly
salaried, should be added to the Board of Directors.
These positions or seats would be added to the now authorized
number of Board of Director members. These seats shall be
permanent.
These employee seats on the Board of Directors would be awarded
all privileges and benefits that the Board members currently
have.
Qualifying requirements of these proposed employee members on the
Board of Directors shall be five (5) years of continuous service,
and 1,000 shares of "B" Stock. The full-time salaried employee
would be below the "Regional Supervisor" category. The other
proposed Board of Directors member shall be an hourly wage
employee."
The following statement has been submitted by Thomas S. Lukenich
in support of this proposal:
"For the past eight and a half years I have been proud to be an
employee of Food Lion. There have been many changes, most of
them positive. Food Lion has always tried to put forward that we
are one "Big Family." To me Family means sharing. In quite a
few ways the Company has done that; Retirement Plan, Insurance
and other various benefits. Sharing also means responsibility,
and the desire of someone to take it on. In the past two years
the Company has seen to appoint both a minority and a female
member to the Board of Directors. Both of these have been very
positive additions. Food Lion has over 60,000 employees, and in
my heart, I believe it is time to have two employees on the
Board. There are several reasons for this:
1. Incentives for an employee to actively realize that
he/she could independently and individually put forth some
positive ideas; 2. More active movement in employees buying the
"B" stock; 3. The Company could advertise that they have
employees on the Board of Directors. This could possibly set a
standard for other companies to follow; and 4. It might reduce
the employee turnover rate.
I do realize there should be some restrictions. Some
suggestions are 1. Employee has to have five (5) years of
service; 2. The Employee has to have a minimum of 1,000 shares
of the "B" stock; 3. One employee should be full-time salaried,
one employee should be hourly salaried; and 4. The full-time
salaried employee would be at or below the regional supervisor
category in his/her responsibilities."
STATEMENT OF DIRECTORS AGAINST SHAREHOLDER PROPOSAL
The Board of Directors recommends a vote AGAINST the
proposal for the following reasons:
The Board acknowledges with appreciation the spirit of
teamwork reflected in this proposal. The success of Food Lion is
dependent on the efforts and input of each of its approximately
65,000 employees. Over the last several years, the Company has
worked to increase the diversity of the Board of Directors.
Consistent with that objective, the existing Board of Directors
includes two employee directors, Tom Smith and John Watkins, who
report to the Board on matters concerning the daily and long
range operations of the Company. The Board also includes four
representatives of Delhaize which, as a company, brings 127
years of experience in the supermarket industry to the management
of the Company. Neither Delhaize nor any of its representatives
on the Board receives any compensation from the Company (except
dividends as shareholder of the Company) for the Delhaize
representatives' service on the Board. Finally, the Company has
four directors who have no affiliation (other than Board or
Committee membership of the Company)with either Food Lion
or Delhaize, who bring a broad and diverse range of experience
to the Board.
The recent amendments to the Bylaws of the Company reflect
the Board's commitment to maintaining this balance on the Board.
Under the revised Bylaws, the Board will maintain a Nominating
Committee consisting of three directors, one designated by
Delhaize, one who is the Chief Executive Officer of the Company
or his designee, and one who has no affiliation (other than Board
or Committee membership of the Company) with either Delhaize or the
Company.The Nominating Committee will propose a slate of directors
to the Board,consisting of four persons proposed by the Chief Executive
Officer of Delhaize, two proposed by the Chief Executive Officer
of the Company and four who have no affiliation (other than Board
or Committee membership of the Company)with either Delhaize or the
Company. The Board will in turn evaluate the slate of directors proposed
by the Nominating Committee and, if it approves of the slate,
nominate the slate of directors for consideration by the
shareholders. The Nominating Committee and the Board may, within
this structure, include employees on the slate of directors
proposed to the shareholders for election to the Board. In
addition, shareholders may nominate persons for election to the
Board of Directors by following the procedures set forth in the
Company's Bylaws. See "RECENT BYLAW AMENDMENTS." The Board
believes that the existing structure is an effective way to
ensure the diversity of the Board and thereby to ensure that the
Board adequately represents all of its shareholders, including
its employee shareholders.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following sets forth information concerning the annual
and long-term compensation earned by the Chief Executive Officer
and four other officers of the Company (the "Named Executives")
for services rendered to the Company in all capacities for the
fiscal years ended December 31, 1994, January 1, 1994 and January
2, 1993:
Annual Compensation Long-Term
Compensation
Name and Principal Year Salary Bonus Other Options/ All
Position ($) Annual SARs Other
Comp. (#) Comp.(2)
($) (1)
Tom E. Smith 1994 661,584 286,686 73,362 -- 87,510
Chairman of the 1993 642,314 0 97,201 96,696
Board, 1992 628,788 282,955 153,228 96,844
President and
Chief
Executive Officer
John P. Watkins 1994 205,873 79,300 16,082 -- 20,951
Senior Vice 1993 196,071 25,389 11,674 30,000
President of 1992 180,175 72,069 13,801 30,000
Store Operations
and Chief
Operating Officer
Dan A. Boone 1994 180,343 69,465 15,287 4,500/0 20,951
Vice President of 1993 174,413 21,455 8,526 28,776
Finance, 1992 169,788 67,915 19,352 30,000
Chief Financial
Officer
and Secretary
A. Edward Benner, 1994 162,233 39,056 9,770 -- 20,951
Jr., 1993 157,509 12,747 7,202 23,214
Vice President 1992 153,174 38,293 9,467 30,000
of Systems
Eugene R. McKinley 1994 183,818 44,253 15,093 -- 20,951
Vice President of 1993 183,620 14,383 10,344 26,214
Human 1992 173,448 43,356 12,269 30,000
Resources
(1) Includes additional payments made to Messrs. Smith, Watkins,
Boone, Benner and McKinley in lieu of additional
contributions that would have been made under the Company's
non-contributory qualified profit sharing plan (the "Profit
Sharing Plan") but for certain limitations on such
contributions in the Internal Revenue Code. These payments
were, for Mr. Smith, $62,151 in 1994, $79,918 in 1993 and
$135,844 in 1992; for Mr. Watkins, $9,751 in 1994, $1,823 in
1993 and $6,079 in 1992; for Mr. Boone, $6,216 in 1994, $0
in 1993 and $9,818 in 1992; for Mr. Benner, $2,998 in 1994,
$0 in 1993; and $2,367 in 1992 and for Mr. McKinley, $5,784
in 1994, $0 in 1993 and $7,316 in 1992. See footnote (2),
below, for information relating to amounts contributed
during 1993 by the Company to the Profit Sharing Plan on
behalf of the Named Executives. Also includes amounts
reimbursed for executive medical expenses and financial
planning services, amounts deemed compensation under the
Company's Low Interest Loan Plan and amounts deemed
compensation in connection with an automobile furnished by
the Company to each of the Named Executives, and the value
of noncash personal benefits deemed additional compensation
for income tax purposes. Certain personal benefits which
did not, when aggregated with other personal benefits,
exceed the lesser of $50,000 and 10% of salary and bonus for
any of the Named Executives are not included.
(2) Includes $20,951 contributed by the Company on behalf of
each of the Named Executives under the Company's Profit
Sharing Plan during 1994. Amounts set forth in this column
also include, for Tom E. Smith, amounts advanced by the
Company to Mr. Smith pursuant to split dollar life insurance
agreements with Mr. Smith. Under these agreements, Mr.
Smith (or his assignee in the event of assignment) has an
interest in life insurance policies on his life in the
amount of $3,250,000 and is responsible for the payment of
premiums on such policies. Each year the Company advances
to Mr. Smith or his assignee the amount of the annual
premiums on such policies. The amount advanced during 1994
was approximately $66,559. The life insurance policies are
assigned to the Company as security for the amounts advanced
under the agreements and, upon the death of Mr. Smith (or
earlier termination of the policies), the Company is
entitled to receive directly from the insurance carrier an
amount equal to the sums advanced.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
The following table sets forth the number of shares of the
Company's Class A Common Stock covered by outstanding stock
options held by each of the Named Executives at December 31,
1994, and the value of "in-the-money" stock options at December
31, 1994 as determined by the spread between the option price and
the price of shares of the Company's Class A Common Stock, as
reported by the NASDAQ National Market System on such date. None
of the Named Executives elected to exercise any of their
outstanding options during the fiscal year ended December 31,
1994.
Number of Value of
Securities Unexercised
Underlying Options/SARs
Unexercised at FY-End ($)
Options/SARs
at FY-End (#)
Name Exercisable/ Exercisable/
Unexercisable Unexercisable(1)
Tom E. Smith 30,000/45,000 --
John P. Watkins 1,500/3,000 --
Dan A. Boone 250/5,000 --
A. Edward Benner, Jr. 5,000/2,500 --
Eugene R. McKinley 5,000/2,500 --
(1) All options held by Tom E. Smith, John P. Watkins, Dan
A. Boone, A. Edward Benner, Jr. and Eugene R. McKinley are
exercisable at prices that are more than the price of shares of
the Company's Class A Common Stock at December 31, 1994, as
reported by the NASDAQ National Market System.
Performance Graph
The graphs set forth below compare, for the five and ten
year periods indicated, the "cumulative shareholder return" to
owners of Food Lion Class A Stock as compared with the return of
the Standard & Poor's 500 Stock Index and of a group of nine
retail food chain stores consisting of Albertson's, Inc.,
American Stores Co., Bruno's, Inc., Giant Food, Inc. (Class A),
Great Atlantic & Pacific Tea Co., Kroger Co., Safeway, Inc., Vons
Companies, Inc. and Winn-Dixie Stores, Inc. (the "Peer Group
Index"). "Cumulative shareholder return" has been computed
assuming an investment of $100, at the beginning of the periods
indicated, in the Class A Common Stock of the Company and the
stock of the companies comprising the Standard & Poor's 500 Stock
Index and the Peer Group Index, and assuming the reinvestment of
dividends.
Data Points for Performance Graphs
Food Lion, Inc.
Five Year Performance Graph
1989 1990 1991 1992 1993 1994
Food Lion, 100.00 122.02 255.57 111.80 93.55 74.90
Inc.
S&P 500 Index 100.00 96.89 126.42 136.05 149.76 151.74
Peer Group 100.00 106.14 115.18 142.88 141.36 157.53
<TABLE>
Data Points for Performance Graphs
Food Lion, Inc.
Ten Year Performance Graph
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Food Lion, 100.00 150.65 232.01 503.25 395.74 463.40 565.42 1184.3 518.07 433.49 347.10
Inc.
S&P 500 100.00 131.73 156.32 164.52 191.85 252.64 244.79 319.38 343.71 378.35 383.35
Index
Peer Group 100.00 139.41 155.28 170.07 245.31 336.91 357.59 388.06 481.38 476.25 530.75
</TABLE>
Option/SAR Grants in Last Fiscal Year
Mr. Boone was granted an option to purchase 4,500 shares of
Class A Common Stock during the fiscal year ended December 31,
1994. No options were granted to any other Named Executives
during the fiscal year ended December 31, 1994.
Potential
Realizable
Value at
Assumed
Annual
Rates of
Stock Price
Appreciation
Individual for Option
Grants Term
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
or
Options/S Employees Base Expirat-
ARs in Price ion
Name Granted Fiscal Year ($/Sh) Date 5% ($) 10%($)
(#)
Tom E. Smith 0 --- --- --- --- ---
John P. Watkins 0 --- --- --- --- ---
Dan A. Boone 4,500 2.40% $5.91 9/24/99 $7,343 $16,226
A.Edward Benner,Jr.0 --- --- --- --- ---
Eugene R. McKinley 0 --- --- --- --- ---
Report of the Senior Management Compensation Committee, Stock
Option Committee and Board of Directors
REPORT ON EXECUTIVE COMPENSATION
The Company's policy with respect to executive compensation
has been designed to:
attract and retain qualified persons to serve as executive
officers of the Company;
adequately and fairly compensate executive officers in
relation to their responsibilities, capabilities, and
contributions to the Company and in a manner that is commensurate
with compensation paid by companies of comparable size or within
the Company's industry;
reward executive officers for the achievement of short-term
operating goals and for the enhancement of the long-term
shareholder value of the Company; and
align the interests of executive officers with those of the
Company's shareholders with respect to short-term operating
results.
The primary components of compensation paid by the Company
to executive officers are base salary and incentive compensation,
with incentive compensation broken down further into incentive
bonus payments, stock options and profit sharing. The
relationship of each principal component of compensation to the
Company's performance is discussed below.
Base Salary. Each year, the Compensation Committee reviews
and approves the base salaries to be paid by the Company during
the following year to members of senior management. Annual
adjustments to base salaries are determined based on a number of
factors, including the Company's performance and the executives'
contributions to the Company's performance.
In 1994, except for John P. Watkins, executives of the
Company, including Tom E. Smith, the Company's Chief Executive
Officer, received a base salary increase of approximately 3% from
the prior year, reflecting only a cost of living adjustment. Mr.
Watkins received a 5% increase, reflecting an increase in the
responsibilities of the Chief Operating Officer. In determining
1994 base salaries for management, including Mr. Smith, the
Committee gave the greatest weight to the financial performance
of the Company for 1993.
While considering adjustments to senior management base
salaries, the Compensation Committee took into account
information received from Hay Management Consultants, an
independent human resources consulting firm which the Company has
consulted since 1989 regarding executive compensation. Because
of the limited number of supermarket chains of similar size to
the Company, companies used for comparative purposes were
selected from companies in the food industry having sales of
between $1 billion and $7 billion (Alex Lee, BI-LO, Inc., First
National, Fleming, Hannaford Brothers, Hy-Vee Stores, Safeway,
Scrivner, Super K-Mart Center, Super Value, Supermarkets
General). Overall, the compensation paid by the Company,
including compensation paid to Mr. Smith, was set to fall within
the range of compensation paid by such other companies, with some
Food Lion employee compensation falling in each of the low,
middle and high ranges of the compensation information provided
by Hay Management Consultants.
During the last half of 1994, the new Chairman of the Senior
Management Compensation Committee asked Towers Perrin, an
independent consulting firm, to conduct a compensation review
focusing on compensation paid to the top fourteen executive
officers of the Company. The purposes of the review were
identified as follows: (1) to determine if Food Lion's executive
compensation practices are reasonable and competitive in light of
today's market, (2) to evaluate the structure of executive
compensation and the relative mix of components and (3) to verify
if an appropriate link is established between pay and
performance, consistent with the Company's compensation strategy
and in light of the Company's performance objectives.
Based on reports from Towers Perrin, the Compensation
Committee raised base salaries of certain executive officers for
1995, in some cases, significantly above 1994 levels. Towers
Perrin's analysis of industry practices was based on a
compilation of competitive compensation and benefit information
from published surveys of the retail grocery industry, proxy
statements for eleven specific competitors in the grocery
industry and four other large retailers, as well as Towers
Perrin's own compensation and benefit data sources. Base salary
levels, including base salaries for the Named Executives, were
found to be generally below competitive fiftieth percentile
levels. Based on the data and analysis provided by Towers
Perrin, at its December 5, 1994 meeting, the Senior Management
Compensation Committee set 1995 base salaries for the top five
executive officers as set forth below, with the intention of
paying base salaries to top executives which are generally
competitive with salaries paid by competitors at fiftieth
percentile levels:
1994 Base Salary 1995 Base Salary % Increase
Tom E. Smith $637,080 $684,868 7.50
John P. Watkins 198,248 278,100 40.28
Dan A. Boone 173,683 208,600 20.10
A. E. Benner, Jr. 156,225 178,510 14.26
E. R. McKinley 177,010 186,270 5.23
The Committee is continuing to study the Towers Perrin
reports (and, in certain cases, have more analyses completed) as
they relate to retirement, profit sharing, stock options and
other long term incentives, but as of the date of this proxy
statement, has made no decisions based on such reports other than
to raise the base salaries of certain executives.
The Company does not currently have a policy with respect to
qualifying compensation paid to executive officers under Section
162(m) of the Internal Revenue Code because, in 1994, no
executive's compensation was subject to the limitation. The
Company is currently evaluating the extent to which Section
162(m) may affect the manner in which compensation is determined
and the deduction for compensation paid to its executives in
future years.
Tom E. Smith's terms of employment, including the level of
his base salary, are set forth in an August 1, 1991 Employment
Agreement between Mr. Smith and the Company (the "Smith
Employment Agreement"). The Smith Employment Agreement set Mr.
Smith's base salary initially at $528,575 and provides that such
base salary shall be competitive within the Company's industry as
determined annually based upon a consultant's report of industry
practices, but that Mr. Smith's base salary will not be reduced
in connection with any annual review of industry practices. The
Smith Employment Agreement further provides that Mr. Smith shall
be eligible to participate in the Company's incentive
compensation plan and other compensation plans of the Company and
that he shall be provided split dollar life insurance
arrangements in specified amounts. Except for base salary and
split dollar life insurance, the Smith Employment Agreement does
not deal in detail with any component of Mr. Smith's
compensation.
Incentive Compensation.
Incentive Bonus. A substantial portion of each
executive officer's compensation package is in the form of an
incentive bonus designed to reward the achievement of short-term
operating goals and long-term increases in shareholder value.
The Company's Incentive Bonus Plan, which was adopted by the
Company in 1982, is designed to offer an incentive to those
employees whose performance most directly affects the Company's
profitability, as determined by the Compensation Committee.
Under the terms of the Incentive Bonus Plan, each employee
selected for participation in the plan is assigned a maximum
potential bonus award which is computed by multiplying a
predetermined percentage rate ranging from 10% to 45%, depending
on the participant's position with the Company (the "Potential
Percentage Rate"), by each participant's salary (the "Potential
Bonus"). Under the plan, the total bonus payable each year for
all participants (the "Total Bonus") may not exceed the lesser of
(i) 2.1% of the Company's net income before taxes and certain
other adjustments in excess of a 15% return on average
shareholders' equity (the "ROE Bonus Amount") and (ii) the
aggregate of the Potential Bonus for all plan participants (the
"Maximum Bonus Amount"). One-half of each participant's bonus is
determined by multiplying one-half of such participant's
Potential Percentage Rate by such participant's salary (the
"Objective Bonus"). All or any of the remaining Total Bonus is
determined and allocated among participants in the discretion of
the Compensation Committee (the "Discretionary Bonus"). In
determining the Discretionary Bonus, the Compensation Committee
considers a number of factors, including contributions of each
participant during the year.
For the year ended December 31, 1994, each of the Named
Executives, including the Chief Executive Officer, received his
Potential Bonus, and the Total Bonus paid to participants under
the plan equaled the Maximum Bonus Amount. In determining the
Discretionary Bonus awarded to each executive, the Compensation
Committee sought to reward senior management for the Company's
financial performance during 1994 and for increasing the long-
term shareholder value of the Company. The Compensation
Committee found that the long-term shareholder value of the
Company increased during 1994 as a result of improved financial
performance of the Company in nearly every area, continued growth
of the Company, the renovation of numerous stores including the
addition of deli-bakeries, the reorganization of certain
management responsibilities and management's handling of the
closing of certain unprofitable stores (as announced in January
1994). In addition, the Compensation Committee considered to
what extent each participant met his personal goals established
at the beginning of the fiscal year by such participant and his
supervisor.
Stock Options. The Company has maintained two Stock
Option Plans pursuant to which options to purchase shares of the
Company's Class A Common Stock may be granted to key employees.
Generally, the exercise price of the options is the fair market
value of the underlying shares of stock as reported by the NASDAQ
National Market System on the date of grant, but the Stock Option
Committee has the discretion to set a higher exercise price.
Under the terms of the stock option plan in effect during 1994,
with respect to Section 16 Insiders (as defined in the plan,
which definition includes all of the Named Executives), the Stock
Option Committee has full and final authority, in its discretion,
to determine within the terms of the plan, the individuals to
receive options pursuant to the plan, the times or effective date
when options will be granted, the number of shares to be subject
to each option, the price at which options may be exercised and
the time(s) when, and the conditions, if any, under which, each
option may be exercisable. Effective April 1, 1994, the Board of
Directors amended the plan to provide quasi-automatic grants of
options to key employees who are not Section 16 Insiders (and
therefore not Named Executives). Subject to the conditions of
the plan, the grants occur upon an employee's promotion to
certain positions and upon completion of specified periods of
service in those positions. Pursuant to the amendment, the Stock
Option Committee may, in its discretion, grant options for shares
in excess of the minimum number that would automatically be
granted to Non-Section 16 Insiders, and may reduce or eliminate
grants to any Non-Section 16 Insider, or modify the eligibility
requirements for grants, but only on a prospective basis.
During 1994, options for 187,650 shares were granted under
the Option Plan to approximately 636 employees, including options
for 4,500 shares to Dan Boone. The Stock Option Committee set
the exercise price for such options at $5.9063 per share. The
options were granted to Mr. Boone to reward him for his years of
service to the Company. No options were granted to other Named
Executives during the fiscal year ended December 31, 1994.
Profit Sharing. The Company also maintains a Profit
Sharing Plan for employees pursuant to which the Company
contributes annually an amount of current or accumulated earnings
determined by the Board of Directors not exceeding the maximum
amount deductible for income tax purposes. Each employee of the
Company is generally eligible to participate in the Company's
Profit Sharing Plan as of the first day of the plan year in which
he or she completes 1,000 or more hours of service. The annual
contribution each year under the Profit Sharing Plan is
determined by the Board of Directors, but may not in any event
exceed 15% of the compensation paid or otherwise accrued during
the taxable year for each employee under the Profit Sharing Plan.
Tax-deferred contributions by the Company for the benefit of
highly compensated employees to the Profit Sharing Plan are
subject to certain limits imposed by the Internal Revenue Code of
1986, which limit was $30,000 during each of the last three
fiscal years. Contributions on behalf of executive officers in
excess of these limitations are paid in cash to the executive
officers following the end of each fiscal year. The Board of
Directors approved for 1994 a contribution to the Company's
Profit Sharing Plan equal to 12% of the 1994 wages of all
eligible employees.
This report is submitted by the Senior Management Compensation
Committee, the Stock Option Committee and the Board of Directors of
the Company, as to each of their respective areas of responsibility as
discussed in this Proxy Statement.
SENIOR MANAGEMENT
COMPENSATION COMMITTEE: STOCK OPTION COMMITTEE:
William G. Ferguson, Chairperson Dr. Bernard W. Franklin, Chairperson
Gui de Vaucleroy Dr. Jacqueline K. Collamore
Jacques LeClercq Jacques LeClercq
Board of Directors
Tom E. Smith, Chairman of the Board Dr. Bernard W. Franklin
Pierre Olivier Beckers E. Charles de Cooman, d'Herlinckhove
Dr. Jacqueline K. Collamore Jacques LeClercq
Margaret Kluttz John P. Watkins
Gui de Vaucleroy William G. Ferguson
Compensation Committee Interlocks and Insider Participation
The following persons served on the Senior Management
Compensation Committee during fiscal year 1994: William G.
Ferguson (Chairperson), Gui de Vaucleroy and Jacques LeClercq.
Messrs. Watkins and Smith, who are executive officers of the
Company, are members of the Company's Board of Directors and
participate in the decisions by the Board of Directors with
respect to annual contributions made by the Company to or for the
benefit of employees (including the Named Executives) under the
Company's Profit Sharing Plan.
Gui de Vaucleroy, who is a member of the Compensation
Committee, and Jacques LeClercq, who is a member of the
Compensation Committee and Stock Option Committee, are affiliated
with Delhaize. The Company has entered into two leases for the
operation of Company stores with a real estate venture in which
an indirect subsidiary of Delhaize owns a one-half interest. On
February 12, 1986, the Company entered into a 20-year lease with
Shipp's Corner Joint Venture, in which an indirect subsidiary of
Delhaize is a general partner, for the operation of a 25,000
square foot Company store located in a shopping center in
Virginia Beach, Virginia. The Company's store opened in December
1986. Additionally, on October 1, 1986, the Company entered into
a 20-year lease for the operation of a 25,000 square foot store
in Orange Park, Florida. An indirect subsidiary of Delhaize owns
a one-half interest in Debarry Place Joint Venture, which is
involved in the development of the Orange Park, Florida shopping
center. The store opened in September 1987. Under the terms of
the leases, the provisions of which the Company believes are no
more favorable than leases with third party lessors, the Company
is expected to make annual payments of $148,750 in fixed rent and
$6,250 in common area maintenance fees for the Virginia store and
$203,000 in fixed rent and $5,800 in common area maintenance fees
for the Florida store. In addition, each lease provides for an
additional annual payment to the lessor equal to the amount by
which 1% of the annual gross receipts of the leased premises
exceeds the fixed rent for the lease year. Each lease also
includes an option to extend the lease for up to four five-year
periods.
Employment Plans and Agreements
Employment Agreement with Tom E. Smith
On August 1, 1991, Tom E. Smith entered into an agreement
with the Company providing for his employment as President of the
Company (the "1991 Agreement"). The 1991 Agreement expires on
August 1, 2001, provides for Mr. Smith to receive a base salary
of not less than $528,575 per year, and authorizes the Board of
Directors (which has delegated its responsibility to the Senior
Management Compensation Committee) to increase such minimum
amount from time to time. The 1991 Agreement also entitles Mr.
Smith to participate in other compensation and benefit plans and
requires the Company to maintain split dollar life insurance for
Mr. Smith as described elsewhere in this Proxy Statement. See
"EXECUTIVE COMPENSATION, Summary Compensation Table." Mr. Smith
may elect to defer all or any portion of the cash compensation
payable to him pursuant to the 1991 Agreement.
The Company may terminate Mr. Smith's employment for Good
Cause, as defined in the 1991 Agreement, or as a result of a long-
term disability. The 1991 Agreement defines Good Cause as "(i)
willful misconduct of a material nature by Smith in connection
with the performance of his duties hereunder, (ii) drunkenness
or use of narcotics by Smith to the extent that it materially
affects his ability to perform his duties hereunder, (iii)
conviction of Smith of a felony or serious misdemeanor involving
moral turpitude, embezzlement or theft from the Company, (iv)
gross inattention to or dereliction of duty by Smith, or (v)
performance by Smith of any other willful acts that Smith knew or
reasonably should have known would be materially detrimental to
the business of the Company." If the Company terminates Mr.
Smith's employment for any such reason, or in the event of Mr.
Smith's death, the Company will no longer be required to make
payments to Mr. Smith or his estate under the 1991 Agreement,
except pursuant to plans, arrangements or agreements providing
for payments after termination of employment. Mr. Smith may
terminate his employment without liability to the Company for
Good Reason, as defined in the 1991 Agreement. Good Reason
includes a breach of the 1991 Agreement by the Company, a
significant change in the nature or scope of Mr. Smith's
authority or duties or a "change in control" of the Company, as
such term is defined in the 1991 Agreement. The 1991 Agreement
defines "a change in control of the Company" as a change in
control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, a change in
control of the Company shall be deemed to have occurred if (i)
the aggregate number of shares of the Company's voting securities
beneficially owned by Etablissements Delhaize Freres et Cie "Le
Lion" S.A. ("Delhaize") and Delhaize "Le Lion" America, Inc. is
exceeded by the number of shares of the Company's voting
securities beneficially owned by any other person; (ii) at any
time during the term of the 1991 Agreement there is a change in
the composition of the Board of Directors of the Company
resulting in a majority of the directors of the Company who were
in office on the date of the 1991 Agreement ("incumbent Company
directors") no longer constituting a majority of the directors of
the Company; provided that, in making such determination, persons
who are elected to serve as directors of the Company and who are
approved by all of the directors in office on the date of such
election shall be treated as incumbent Company directors; or
(iii) at any time during the term of the 1991 Agreement there is
a change in the composition of the board of directors of Delhaize
resulting in a majority of the directors of Delhaize who were in
office on the date of the 1991 Agreement ("incumbent Delhaize
directors") not constituting a majority of the directors of
Delhaize; provided that, in making such determination, persons
who are elected to serve as directors of Delhaize and who are
approved by a majority of the directors in office on the date of
such election shall be treated as incumbent Delhaize directors.
If Mr. Smith terminates his employment for Good Reason, the
Company would be required to maintain, for the remaining term of
employment or three years (whichever is greater), all employee
benefit plans in which Mr. Smith was entitled to participate
immediately prior to the date of termination or substantially
similar benefits if such plans prohibited Mr. Smith's continued
participation. In addition, the 1991 Agreement would require the
Company to pay Mr. Smith a lump sum equal to the present value of
the future salary payable to Mr. Smith during the remaining term
of employment, assuming that Mr. Smith's annual salary on the
date of termination would continue for the remaining term. Such
payment, however, would be reduced if and to the extent that it
would be nondeductible by the Company because of section 280G of
the Internal Revenue Code of 1986 relating to "excess parachute
payments."
In the event of a termination of the 1991 Agreement by Mr.
Smith for Good Reason or by the Company other than for Good
Cause, Mr. Smith shall have the one-time right, exercisable
within 30 business days after such termination, to sell to the
Company, and if Mr. Smith exercises such right, the Company shall
be obligated to purchase from Smith up to 33% of his Class A
Common Stock and Class B Common Stock of the Company for a cash
purchase price per share equal to the average per share market
price for the preceding 30 business days.
The 1991 Agreement prohibits Mr. Smith, without the written
consent of the Company, from engaging in any retail or wholesale
grocery business directly competitive with the business of the
Company or any subsidiary in any geographic area in which the
Company or subsidiary is operating at the date of termination.
This prohibition applies to Mr. Smith during the term of the 1991
Agreement and for a period of three years after its termination.
Deferred Compensation Agreements
The Company has entered into deferred compensation
agreements with the President and Chief Executive Officer and all
Vice Presidents of the Company providing for the payment of
deferred compensation commencing on reaching age 65 (if employed
by the Company at such time) and continuing until their death or
for a period of ten years, whichever occurs later. Annual
payments pursuant to these agreements will be as follows: Mr.
Smith - $15,000, Mr. Watkins - $10,000, Mr. Boone - $10,000, Mr.
Benner - $10,000 and Mr. McKinley - $10,000.
Salary Continuation Agreements
The Company has entered into salary continuation agreements
with each of the Named Executives providing for payments to a
named beneficiary in the event of such executive's death prior to
attaining the age of 65 while employed by the Company. The
agreements are intended to encourage participants to continue
employment with the Company.
Payments for the first 12 months following death are fixed.
If death occurs prior to attaining the age of 55, payments after
the first 12 months following death are made through the month
the decedent would have attained the age of 65 or for a maximum
period of 24 years, whichever is less. If death occurs after 55
but prior to attaining the age of 65, payments after the first 12
months following death are made for a period of 9 years. Except
as provided above, all rights of the participant terminate upon
his reaching age 65 or on the date he retires or, for reasons
other than death, ceases to be an active employee of the Company.
The following table sets forth the amounts payable to the Named
Executives:
Subsequent
Monthly Payment Monthly Payments
First Twelve 24-year 9-year
Name of Individual Months Period Period
Tom E. Smith $36,774 $18,387 $14,710
John P. Watkins 11,226 5,613 4,490
Dan A. Boone 9,986 4,993 3,994
A. Edward Benner, Jr. 9,018 4,509 3,607
Eugene R. McKinley 10,218 5,109 4,087
Low Interest Loan Plan
The Company maintains a Low Interest Loan Plan to provide
low interest unsecured demand loans to certain officers and
employees of the Company. With minor exceptions, the total of
all loans outstanding to any one employee cannot exceed the
following percentages of the employee's annual salary: an amount
equal to 25% during the first year of participation in the Low
Interest Loan Plan, 50% during the second year, 75% during the
third year and 100% thereafter. Interest is payable in monthly
installments and may be paid through bi-monthly payroll
deductions from the borrower's salary. The rate of interest
charged is a rate equal to one half of the prime rate of Nations
Bank Corporation on the first business day of each calendar
quarter. Pursuant to the Low Interest Loan Plan, the principal
amount of a loan is payable on demand (or within 90 days after a
borrower leaves service with the Company). Participants must
supply a financial statement before receiving a loan under the
Low Interest Loan Plan, although no collateral is required.
The following table sets forth, with respect to the Named
Executives, the largest amounts outstanding under the plan during
the fiscal year ended December 31, 1994 and the amounts
outstanding as of March 15, 1995:
Largest Amount Amount
Outstanding Outstanding
Name of Individual During 1994 March 15, 1995
Tom E. Smith $-0- $ -0-
John P. Watkins $160,875 $160,875
Dan A. Boone $140,000 $140,000
A. Edward Benner, Jr. $153,500 $153,500
Eugene R. McKinley $170,500 $170,500
INFORMATION REGARDING DELHAIZE
Delhaize is the beneficial owner of approximately 38.2% and
50.3% respectively, of the outstanding Class A Common Stock and
Class B Common Stock of the Company. Delhaize, a Belgian
corporation founded in 1867, has its principal executive offices
at rue Osseghem, 53, 1080 Brussels, Belgium. Its shares are
listed on the Brussels Stock Exchange. Delhaize is engaged
primarily in the operation of supermarkets located in Belgium and
supplied by its own warehouse facilities, the operation of other
retail food outlets, and the packaging, distribution and sale of
wine, food and food products. Although a precise determination
cannot be made since its shares are not registered, its
management estimates that approximately 38% of the outstanding
stock of Delhaize is held by the descendants of the founders and
their relatives, including Messrs. Beckers, de Cooman
d'Herlinckhove, Stroobant and de Vaucleroy, who are nominated to
serve as directors of the Company and including Mr. LeClercq, who
is currently a director of the Company but who is not nominated
to serve as a director of the Company.
Delhaize is the owner of the lion logo which the Company
uses with its own trademarks pursuant to a nonexclusive license
agreement.
CERTAIN TRANSACTIONS
For information relating to certain transactions, see
"Executive Compensation--Compensation Committee Interlocks and
Insider Participation."
PROPOSALS OF SHAREHOLDERS
Under certain conditions, shareholders may request the
Company to include a proposal for action at a forthcoming meeting
of the shareholders of the Company in the proxy material of the
Company for such meeting. All proposals of shareholders intended
to be presented at the 1996 Annual Meeting of the Company must be
received by the Company no later than December 6, 1995 for
inclusion in the Proxy Statement and proxy card relating to such
meeting.
OTHER MATTERS
The management of the Company knows of no other business
which will be presented for consideration at the meeting.
However, if other matters are properly presented at the meeting,
it is the intention of the proxy holders named in the
accompanying proxy card to vote such proxies in accordance with
their best judgment.
By order of the Board of Directors.
TOM E. SMITH
Chairman of the Board,
President and Chief
Executive Officer
April 4, 1995
PROXY
FOOD LION, INC.
P.O. Box 1330, Salisbury, North Carolina 28145-1330
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints TOM E. SMITH and DAN A. BOONE, as
agents, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below,
all the shares of Class B Common Stock of Food Lion, Inc. held of
record by the undersigned on March 15, 1995 at the Annual Meeting
of the Shareholders to be held May 4, 1995 at 10:00 A.M. at the
Catawba College Keppel Auditorium, Salisbury, North Carolina, and
at any adjournment thereof.
The Board of Directors recommends a vote "FOR" all nominees
in Item 1 and "FOR" Proposals 2 and 3.
1. ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary below)
WITHHOLD AUTHORITY
to vote for all nominees listed below
Pierre-Olivier Beckers; Dr. Jacqueline K. Collamore; William
G. Ferguson; Dr. Bernard W. Franklin; Charles de Cooman
d'Herlinckhove; Gui de Vaucleroy; Margaret H. Kluttz; Tom E.
Smith; Philippe Stroobant; and John P. Watkins.
(Instruction: To withhold authority to vote for any
individual nominee, write that nominee's name on the space
provided below.)
Name(s):
2. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND,
INDEPENDENT ACCOUNTANTS, FOR THE YEAR ENDING DECEMBER 30, 1995:
For Against Abstain
3. PROPOSAL TO AMEND ARTICLE 4, SECTION 6 OF THE BYLAWS OF THE
COMPANY REGARDING ACTIONS BY SPECIAL VOTE.
For Against Abstain
The Board of Directors recommends a vote "AGAINST" Proposal 4.
4. SHAREHOLDER'S PROPOSAL CONCERNING EMPLOYEE REPRESENTATIVES
ON THE BOARD OF DIRECTORS.
For Against Abstain
IN THEIR DISCRETION, THE PROXY AGENTS ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
(CONTINUED ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
This proxy, when properly dated and executed, will be voted in
the manner directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted FOR all the nominees
for Director named above, FOR Proposals 2 and 3, and AGAINST
Proposal 4.
Please sign exactly as name appears below. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by the president or other authorized officer. If a
partnership, please sign in partnership name by an authorized
person.
Signature
Signature if held jointly
DATED: ,1995
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
