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 1,
1997, 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 on a proposal to ratify the
appointment of Coopers & Lybrand L.L.P. as independent
accountants for the fiscal year ending January 3, 1998;
and
(3) 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 20, 1997 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
March 31, 1997
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
March 31, 1997
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 1, 1997, 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 March 31, 1997.
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 L.L.P. as independent
accountants for the fiscal year ended January 3, 1998, 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 20, 1997
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
20, 1997, there were 232,902,364 shares of Class B Common Stock
issued and outstanding and 236,167,692 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, provide that, in connection with the election of
directors, the persons receiving a plurality of the votes cast
will be elected as directors. 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. Abstentions will be
counted in determining the existence of a quorum for the Annual
Meeting, but abstentions and 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"; and for
Proposal (2), ratifying the appointment of Coopers & Lybrand
L.L.P. as independent accountants for the fiscal year ending
January 3, 1998.
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 20, 1997 of Class
Etablissements Delhaize Freres et Cie
"Le Lion" S.A. ("Delhaize")
rue Osseghem, 53
1080 Brussels, Belgium 120,443,462(1) 51.7%
(1) Includes 63,352,780 shares held of record by Delhaize's
wholly owned subsidiary, Delhaize The Lion America, Inc., a
Delaware corporation ("Detla"). 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. 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 20, 1997 is furnished for each director, nominee for
director and Named Executive of the Company (as identified below under
"EXECUTIVE COMPENSATION--Summary Compensation Table,") 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 20, 1997, but
does not include shares of common stock beneficially owned by
Delhaize, as to which Messrs. Beckers, Coppieters, Stroobant and de
Vaucleroy 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 11,991(1) * 46,785 *
Jacqueline Kelly
Collamore -- -- 1,000 *
Jean-Claude Coppieters -- -- -- --
William G. Ferguson -- -- -- --
Bernard W. Franklin 425 * -- --
Joseph C. Hall, Jr. 103,655(2) * 62,033 (2) *
Margaret H. Kluttz 300 * 1,050 *
R. William McCanless 11,489 (3) * -- --
Eugene R. McKinley 47,761 (4) * 21,696 *
Tom E. Smith 761,110(5) * 1,529,267(5) *
Philippe Stroobant 20,000 * -- --
Gui de Vaucleroy -- -- -- --
All directors and
executive officers as
a group (22 persons) 1,146,329(6) * 1,688,007 *
- ----------------------
* Indicates less than 1%.
(1) Includes 4,491 restricted shares of Class A Common Stock
held pursuant to the 1996 Employee Stock Incentive Plan of
Food Lion, Inc.
(2) Includes (a) 6,930 shares of Class A Common Stock and 1,080
shares of Class B Common Stock held by Mr. Hall as custodian
for his children; (b) 300 shares of Class A Common Stock
held by Mr. Hall's wife as custodian for their children; (c)
1,008 shares of Class A Common Stock and 563 shares of Class
B Common Stock held jointly by Mr. Hall and his wife; (d)
5,400 shares of Class A Common Stock and 5,400 shares of
Class B Common Stock held by Mr. Hall's children; and (e)
13,679 restricted shares of Class A Common Stock held
pursuant to the 1996 Employee Stock Incentive Plan of Food
Lion, Inc.
(3) Includes (a) 1,500 shares of Class A Common Stock that may
be acquired upon exercise of options granted under the 1991
Employee Stock Option Plan; and (b) 9,850 restricted shares
of Class A Common Stock held pursuant to the 1996 Employee
Stock Incentive Plan of Food Lion, Inc.
(4) Includes (a) 1,492 shares of Class A Common Stock held by
Mr. McKinley's wife; (b) 4,261 restricted shares of Class A
Common Stock held pursuant to the 1996 Employee Stock
Incentive Plan of Food Lion, Inc.; and (c) shares
represented by 15,392 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 based in part on the allocation of cash to the
fund. As of March 20, 1997, the 15,392 units held by Mr.
McKinley represented 21,087 shares of Class A Common Stock.
(5) Includes (a) 45,000 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.; (b) 480
shares of Class A Common Stock and 203 shares of Class B
Common Stock held by Mr. Smith's wife; and (c) 47,031
restricted shares of Class A Common Stock held pursuant to
the 1996 Employee Stock Incentive Plan of Food Lion, Inc.;
and excludes 166,792 shares of Class A Common Stock and
348,912 shares of Class B Common Stock owned by trusts
created by Mr. Smith for his children and over which Mr.
Smith exercises no voting or investment power.
(6) Includes (a) 54,935 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.; (b) 113,485
restricted shares of Class A Common Stock held pursuant to
the 1996 Employee Stock Incentive Plan of Food Lion, Inc.;
and (c) shares represented by 23,097 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 based in part on the allocation of cash
to the fund. As of March 20, 1997, the 23,097 units held by
all directors and executive officers as a group represented
31,644 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 the parties to the Shareholders Agreement 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 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 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
Shareholders Agreement provides that the Nominating Committee
shall 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. The Shareholders Agreement
specifies that the slate to be proposed for election to the Board
of Directors shall 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 to 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.
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 1998 Annual Meeting of Shareholders and until
their successors are elected and qualified. 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 (36)--Mr. Beckers is a director of
Delhaize and has been for more than five years a member of the
Executive Committee of Delhaize. Mr. Beckers serves as a
director, President and Chief Operating Officer of Detla, a
wholly owned subsidiary of Delhaize. Since April 1995, Mr.
Beckers has been Executive Vice President of the Executive
Committee of Delhaize in charge of international activities. He
has been a manager of Delhaize since 1986. Mr. Beckers was first
elected as a director of the Company in 1992 and is a member of
the Audit, Senior Management Compensation and Stock Option
Committees.
DR. JACQUELINE KELLY COLLAMORE (37)--Dr. Collamore manages a
corporate consulting practice in Bethesda, Maryland. Between
1993 and 1996, she held the positions, variously, of Associate
with Credit Suisse, Vice President and Chief of Staff of Credit
Suisse Asset Management, Inc., and Associate and Chief of Staff
of Credit Suisse Private Banking. Dr. Collamore was a consultant
with Arthur D. Little from 1991 to 1992, and was an independent
business consultant from 1986 to 1991. She was a Lecturer of
Marketing from 1989 to 1992 at various colleges and universities.
Dr. Collamore was first elected as a director in 1994, is a
member of the Stock Option Committee and is Chairperson of the
Audit Committee.
JEAN-CLAUDE COPPIETERS `t WALLANT(51)--Mr. Coppieters is and has
been for more than five years the Secretary of the Board of
Directors and a member of the Executive Committee of Delhaize.
He has been the Chief Financial Officer of Delhaize since 1974.
He is also a Director, Vice-President, Treasurer and Assistant
Secretary of Detla. Mr. Coppieters was first elected as a
director of the Company in 1996.
WILLIAM G. FERGUSON (69)--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
Digital Cockpits, Inc. Mr. Ferguson was Chairman and Chief
Executive Officer 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 (44)--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 Chairperson of the Stock Option Committee.
JOSEPH C. HALL, JR. (47)--Mr. Hall is Senior Vice President of
Operations and Chief Operating Officer of the Company, and has
held those positions since July 1, 1995. Mr. Hall joined the
Company in 1976 and has served as a Vice President since 1988.
Mr. Hall has variously held the positions of Vice President of
Purchasing, Vice President of Marketing, Vice President of
Operations - Southern Division and Vice President of Operations -
Central Division before assuming his current position. Mr. Hall
was first appointed to the Board on July 13, 1995.
MARGARET H. KLUTTZ (53)--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. Mrs.
Kluttz is a member of the Audit Committee and is Chairperson of
the Nominating Committee.
TOM E. SMITH (55)--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, and is a member of
the Nominating Committee.
PHILIPPE STROOBANT (44)--Mr. Stroobant is, and has been for more
than five years, a director and member of the Executive Committee
of Delhaize. On April 1, 1995, he was appointed Executive Vice
President of the Executive Committee of Delhaize in charge of
Belgian activities. Mr. Stroobant is a director of Detla and has
been a Manager of Delhaize since 1983. He was first elected as a
director of the Company in 1995.
GUI DE VAUCLEROY (63)--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 of the Executive
Committee 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 Chairman of the Board, Chief
Executive Officer and a director of Detla. Mr. de Vaucleroy was
first elected as a director in 1975 and is a member of the Audit,
Nominating and Senior Management Compensation Committees.
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, Nominating Committee, Senior Management
Compensation Committee, and Stock Option Committee.
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 28, 1996,
are presently Pierre-Olivier Beckers, Jacqueline K. Collamore
(Chairperson), William G. Ferguson, Bernard W. Franklin, Margaret
H. Kluttz and Gui de Vaucleroy.
Under the company's bylaws, the Nominating Committee must
consist of three directors, one director 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. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--
Shareholders Agreement." 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, 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, 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). The members of the Nominating Committee are Margaret H.
Kluttz (Chairperson), Tom E. Smith and Gui de Vaucleroy. The
Committee will consider candidates suggested by shareholders in
accordance with the procedures set forth in the Company's bylaws.
The Nominating Committee met once during the fiscal year ended
December 28, 1996.
The Senior Management Compensation 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 and the Key Executive Annual
Incentive Bonus Plan, both of which are described below under the
caption "REPORT ON EXECUTIVE COMPENSATION -- Incentive
Compensation." The members of the Senior Management Compensation
Committee, which met twice during the fiscal year ended December
28, 1996, are presently Pierre-Olivier Beckers, William G.
Ferguson (Chairperson) and Gui de Vaucleroy.
The Stock Option Committee administers the Food Lion, Inc.
1983 Employee Stock Option Plan, the 1991 Employee Stock Option
Plan of Food Lion, Inc., and the 1996 Employee Stock Incentive
Plan of Food Lion, Inc. This committee selects the individuals
who will be awarded options under each of these plans and
restricted stock under the 1996 Employee Stock Incentive Plan,
and establishes terms of options granted under such plans and the
restrictions on restricted stock awarded under the 1996 Employee
Stock Incentive Plan. See "REPORT ON EXECUTIVE COMPENSATION--
Stock Options." The members of the Stock Option Committee, which
met twice during the fiscal year ended December 28, 1996, are
presently Pierre-Olivier Beckers, Jacqueline K. Collamore and
Bernard W. Franklin (Chairperson).
The Board of Directors met seven times during the fiscal
year ended December 28, 1996. 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.
Compensation of Directors
The Company has agreed to pay Jacqueline K. Collamore,
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 directors.
Proposal (2)
Appointment Of Independent Accountants
The firm of Coopers & Lybrand L.L.P., 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 January 3, 1998, 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 L.L.P. as independent accountants for the fiscal year
ending January 3, 1998, unless a contrary choice is indicated on
the enclosed proxy card. 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.
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 28, 1996, December 30, 1995, and
December 31, 1994.
<TABLE>
Long-Term Long-Term
Other Compensation Compenation
Annual Annual Restricted Options/
Compensation Comp. Stock Award(s) SARs
All Other
Name and Year Salary Bonus ($)(2) ($)(3) (#) Comp.(4)
Principal ($)(1)
Position
<S> <C> <C> <C> <C> <C> <C> <C>
Tom E. Smith 1996 781,395 385,756 24,478 346,854 246,607/0 269,863
Chairman of
the Board, 1995 709,371 307,363 29,182 - - 221,169
President and
Chief Executive
Officer 1994 661,584 286,686 11,211 - - 149,661
Joseph C.Hall,Jr. 1996 360,961 139,037 18,760 100,883 71,724/0 76,065
Senior Vice 1995 228,849 74,524 7,751 - 5000/0 40,749
President of
Operations and 1994 145,537 35,037 6,130 - - 20,951
Chief Operating
Operating
Officer
R. William 1996 259,893 100,107 10,787 72,644 51,647/0 55,157
McCanless
Senior Vice 1995 194,640 62,237 6,719 - 6,000/0 34,554
President of
Administration 1994 120,980 29,125 3,323 - - 17,412
,Chief
Administrative
Officer and
Secretary
A.Edward 1996 201,492 48,508 22,987 33,121 23,547/0 44,200
Benner, Jr.
Vice President 1995 184,519 44,413 11,739 - - 26,161
of Information
Technology and 1994 162,233 39,056 6,772 - - 23,949
Chief
Information
Officer
Eugene R. 1996 199,882 48,120 25,491 31,425 21,935/0 43,536
McKinley
Vice President 1995 193,078 46,479 17,063 - 5,000/0 36,648
of Human
Resources 1994 183,818 44,253 9,309 - - 26,735
</TABLE>
(1) Includes $95,000 and $230,000 that Mr. Smith earned in 1995
and 1996, respectively, and for which he elected to defer payment
until subsequent years.
(2) Includes amounts reimbursed for medical expenses, amounts
deemed compensation under the Company's Low Interest Loan Plan,
in connection with an automobile furnished by the Company to each
of the Named Executives, and in connection with life insurance
policies for the Named Executives, and the value of certain other
personal benefits.
(3) The dollar values of the restricted stock awards shown in
this column are based on the closing market price of the
Company's Class A Common Stock on the date of grant multiplied by
the number of shares awarded. The number and value of the
aggregate restricted stock holdings for each of the Named
Executives at the end of the last completed fiscal year (December
28,1996), representing shares of restricted stock granted under
the 1996 Employee Stock Incentive Plan, are as follows: for Mr.
Smith, 47,031 shares valued at $455,613; for Mr. Hall, 13,679
shares valued at $132,515; for Mr. McCanless, 9,850 shares valued
at $95,422; for Mr. Benner, 4,491 shares valued at $43,507; and
for Mr. McKinley, 4,261 shares valued at $41,278. The value of
such shares, all of which were granted in 1996, is based on the
closing stock price of the Company's Class A Common Stock on
December 27, 1996, the last trading day in fiscal year 1996. The
foregoing shares represent all shares of restricted stock granted
to each of the Named Executives during fiscal year 1996 and all
shares of restricted stock held by each of the Named Executives
pursuant to the 1996 Employee Stock Incentive Plan as of the end
of fiscal year 1996. The shares of restricted stock will vest
one-fourth on May 3, 1998, one- fourth on May 3, 1999, one-fourth
on May 3, 2000 and one-fourth on May 3, 2001. No dividends will
be paid on the restricted stock during the period in which the
shares are subject to restrictions under the 1996 Employee Stock
Incentive Plan.
(4) Includes $22,500 contributed by the Company on behalf of
each of the Named Executives under the Company's Profit Sharing
Plan during 1996. Amounts set forth in this column also include,
in 1995 and 1996, contributions to the Company's Profit Sharing
Restoration Plan on behalf of the Named Executives, and in 1994,
payments made directly to the Named Executives 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, $178,213 in 1996, $131,697 in 1995, and $62,151
in 1994; for Mr. Hall, $ 50,478 in 1996, $17,586 in 1995, and $0
in 1994; for Mr. McCanless, $ 29,570 in 1996, $11,391 in 1995,
and $0 in 1994; for Mr. Benner, $18, 613, in 1996, $ 2,998 in
1995, and $2,998 in 1994; and for Mr. McKinley, $ 17,949 in 1996,
$13,485 in 1995, and $5,784 in 1994. On May 4, 1995, the Board
of Directors adopted the Profit Sharing Restoration Plan,
pursuant to which excess profit sharing payments are credited to
an account on behalf of each participant. See "REPORT ON
EXECUTIVE COMPENSATION - Profit Sharing" below. Amounts set forth
in this column also include, for Mr. 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 1996 was approximately $66,064. The life insurance
policies are assigned to the Company as security for the amounts
advanced under the agreements and, upon the death of Mr. Smith
(or earlier termination of the policies), the Company is entitled
to receive directly from the insurance carrier an amount equal to
the sums advanced.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
The following table sets forth the number of shares of the
Company's Class A Common Stock covered by outstanding stock
options held by each of the Named Executives at December 28,
1996, and the value of "in-the-money" stock options at December
28, 1996 as determined by the spread between the exercise price
of such options and the closing price of shares of the Company's
Class A Common Stock, as reported by the NASDAQ National Market
System on such date. None of the Named Executives elected to
exercise any of his outstanding options during the fiscal year
ended December 28, 1996.
Number of
Securities
Underlying
Unexercised Value of
Unexercised
Options/SARs Options/SARs
at FY - End at FY-End
(#) ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
Tom E.Smith 45,000/276,607 0/845,117
Joseph C.Hall,Jr. 0/76,724 0/245,702
R. William McCanless 1,500/59,147 2,339/187,676
A. Edward Benner,Jr. 0/28,547 0/89,917
Eugene R.McKinley 0/26,935 0/84,393
Performance Graph
The graphs set forth below compare, for the five and ten
year periods indicated, the "cumulative shareholder return" to
shareholders of the Company 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 $100 at the beginning of the periods
indicated in the common stock of the Company and the stock of the
companies comprising the Standard & Poor's 500 Stock Index and
the Peer Group Index, and assuming the reinvestment of dividends.
<TABLE>
12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Food Lion 100.00 216.91 170.57 199.73 243.71 510.46 223.30 186.84 149.60 169.81 294.62
S&P 500 100.00 105.25 122.73 161.62 156.60 204.31 219.88 242.04 245.24 337.39 414.86
Index
Peer 100.00 109.52 157.98 216.98 230.28 249.90 310.00 306.69 341.79 453.24 585.59
Group
12/91 12/92 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C> <C>
Food Lion 100.00 43.74 36.60 29.31 33.27 57.76
S&P 500 100.00 107.62 118.46 120.03 165.13 203.05
Index
Peer 100.00 124.05 122.73 136.77 181.37 234.33
Group
</TABLE>
Option/SAR Grants in last Fiscal Year
The following table sets forth the number of shares of the
Company's Class A Common Stock for which stock options were
granted to each of the Named Executives during the fiscal year
ended December 28, 1996.
<TABLE>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
Individual Grants
(a) (b) (c) (d) (e) (f) (g)
Number of % of
Securities Total
Underlying Options/ Exercise
Options/SARs SARs of
Granted to Base
Employees Price
in Expiration
Name Granted Fiscal ($/Sh) Date 5% ($) 10%
(#) Year ($)
<S> <C> <C> <C> <C> <C> <C>
Tom E. Smith 246,607 30.89 $7.375 5/03/06 1,143,787 2,898,581
Joseph C. Hall,Jr. 71,724 8.99 $7.375 5/03/06 332,662 843,033
R.William McCanless 51,647 6.47 $7.375 5/03/06 239,543 607,051
A. Edward Benner,Jr. 23,547 2.95 $7.375 5/03/06 109,213 276,768
Eugene R.McKinley 21,935 2.75 $7.375 5/03/06 101,736 257,820
</TABLE>
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:
reward executive officers for the achievement of short-term
operating goals and for the enhancement of the long-term
shareholder value of the Company;
align the interests of executive officers with those of the
Company's shareholders with respect to short-term operating
results;
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 within the
Company's industry to enable the Company to attract and retain
highly skilled and qualified senior management.
As in prior years, the Company worked with Towers Perrin, an
independent compensation consulting firm, to establish estimated
competitive compensation opportunities for the Company's senior
executives to ensure that the Company's compensation structure is
sufficiently competitive to attract and retain highly qualified
executives in all of its senior management positions. Towers
Perrin's competitive review and analysis of industry pay
practices was based on a compilation of competitive compensation
and benefit information from published surveys of the retail
grocery industry, proxy statements for 11 specific competitors in
the grocery industry selected on the basis of their revenues and
multi-store operational formats (Albertson's Inc.; American
Stores Co.; Fleming Companies, Inc.; Giant Food, Inc.; Great
Atlantic & Pacific Tea Co.; Hannaford Brothers Co.; Kroger;
Publix; Safeway; Supervalue, Inc.; and Winn-Dixie Stores, Inc.),
as well as Towers Perrin's own compensation and benefit data
sources. This compilation of competitive information is referred
to herein as the "Towers Perrin Competitive Data." In general,
total compensation (which included stock options and restricted
stock) for the Named Executives corresponded with the middle to
lower end of the Towers Perrin Competitive Data.
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, restricted stock and profit
sharing. The relationship of each principal component of
compensation to the Company's performance is discussed below.
Base Salary. Each year, the Senior Management 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 business
and financial performance and the executives' contributions to
the Company's performance.
At its December 1996 meeting, the Senior Management
Compensation Committee reviewed the base salaries of the Named
Executives taking into account their roles and performance
contributions, as well as the Company's overall competitive pay
positions, to determine appropriate increases to base salaries
for 1997. As a result of this review, the Committee increased
the 1997 base salary for each of the Named Executives in amounts
ranging from 3% to 39%. The Committee believes that these
increases and the resulting new base salaries are consistent with
overall Company and individual performance and the Company's
general strategy of paying base salaries competitive within the
industry to allow it to retain valued executives. These salary
actions are also consistent with the Committee's strategy over
the past three years to bring the Company's executive
compensation program more in line with competitive industry
practice.
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 provides
that Mr. Smith's base salary will 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 compensation plans of the Company and that he shall be
provided split dollar life insurance in specified amounts.
Except for the base salary and split dollar life insurance, the
Smith Employment Agreement does not address in detail any
component of Mr. Smith's compensation. See also "Employment
Plans and Agreements--Senior Management Employment Agreements"
for discussion of employment agreements with Messrs. Hall and
McCanless.
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 Senior Management
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 in 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 15% return on average
shareholder's equity (the "ROE Bonus Amount") and (ii) the
aggregate of the Potential Bonus for all plan participants (the
"Maximum Bonus Amount"). A portion 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 at the discretion of
the Senior Management Compensation Committee (the "Discretionary
Bonus"). In determining the Discretionary Bonus, the Senior
Management Compensation Committee considers a number of factors,
including contributions of each participant toward the
accomplishment of business objectives during the year.
For the year ended December 31, 1996, each of the Named
Executives except the Chief Executive Officer (who participated
in a separate plan described below), 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 Senior
Management Compensation Committee sought to reward senior
management for the Company's financial performance during 1996
and for increasing long-term shareholder value of the Company.
The Senior Management Compensation Committee found that the
Company had substantially benefited during 1996 from improved
financial performance in a highly competitive industry, and
continued growth of the Company, including the acquisition during
1996 of Kash n' Karry Food Stores, Inc. In addition, the Senior
Management Compensation Committee considered to what extent each
participant met his or her personal goals established at the
beginning of the fiscal year by such participant and his or her
supervisor.
In December 1995, the Internal Revenue Service issued its
final regulations for Section 162(m) of the Internal Revenue Code
("IRC") covering the non-deductibility of compensation in excess
of $1,000,000 for the five highest-paid officers named in the
proxy statements of public companies. IRC Section 162(m)
provides for deductibility of "performance-based" compensation in
excess of $1,000,000 so long as it meets the requirements of
Section 162(m), which include, among other things, that the
compensation be paid through application of a shareholder-
approved plan.
At the Annual Meeting of Shareholders in May, 1996,
shareholders approved the Key Executive Annual Incentive Bonus
Plan which was designed to provide annual incentive compensation
opportunities that will qualify as performance-based under the
terms of IRC Section 162(m). Under the terms of the Plan, the
Senior Management Compensation Committee may designate certain
executive officers who may be affected by the terms of Section
162(m) to participate in the Plan. Executives who are designated
for participation in this Plan may not simultaneously participate
in the Company's Incentive Bonus Plan.
Participants in the Key Executive Plan are eligible to
receive bonuses if and only to the extent that pre-established
performance goals are met. The potential maximum bonus that each
participant in the Plan is eligible to receive will be set as a
fixed percentage of profit in excess of a return on average
equity threshold as pre-determined by the Senior Management
Compensation Committee. The Maximum bonus award that any
participant may receive in any single year under this plan is
$750,000. At the discretion of the Committee, actual bonuses
paid may be lower than the amounts generated by the formula, but
in no case may they be higher. In 1996, Mr. Smith was the only
executive designated to participate in the Key Executive Plan.
Stock Options. At the May 2, 1996 Annual Meeting, shareholders
approved amendments to the 1991 Employee Stock Option Plan, and
renamed the plan the 1996 Employee Stock Incentive Plan of Food
Lion, Inc. Like the Company's earlier stock option plans, the
1996 Employee Stock Incentive Plan provides the Stock Option
Committee full and final authority, in its discretion, to
determine within the terms of the plan the individuals to receive
awards pursuant to the plan, the times or effective dates when
awards will be granted, the number of shares subject to each
award, the exercise price for any stock options granted and the
time(s) when, and the conditions, if any, under which each award
may be vested and/or exercisable.
The 1996 Employee Stock Incentive Plan provides for grants
of stock options and/or restricted stock. Under the terms of
this plan, options to purchase shares of the Company's Class A
Common Stock, or awards of shares of Class A Common Stock subject
to certain vesting and other restrictions determined by the Stock
Option Committee, may be granted on an annual basis to key
employees. Grants to the Named Executives of stock options and
restricted stock under this Plan are made with reference to
competitive practice, the Company's overall goal of linking
executive compensation to the enhancement of long-term
shareholder value, and individual circumstances with respect to
executive recruitment and retention. Towers Perrin's
recommendations to the Stock Option Committee contemplated annual
grants of stock options and restricted stock to the Named
Executives in amounts comparable to the grants made in 1996,
assuming satisfactory Company and individual performance. During
1996, options for 931,715 shares of Class A Common Stock were
granted under the 1996 Employee Stock Incentive Plan to 497
employees.
Profit Sharing. The Company also maintains a Profit Sharing
Retirement Plan for employees pursuant to which the Company
contributes annually an amount of current or accumulated earnings
as determined by the Board of Directors but 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.
The Board of Directors approved for 1996 a contribution to the
Company's Profit Sharing Plan equal to 15% of the 1996 wages of
all eligible employees.
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, as amended. This limit was $30,000 during each of the last
three fiscal years. Contributions on behalf of executive
officers in excess of these limitations are credited to the
executives' accounts under the Company's Profit Sharing
Restoration Plan, which includes a credit of interest at a
variable rate equal to the 10-year Constant Maturity Treasury
yield in effect on the last day of the previous calendar quarter.
Each participant in the Profit Sharing Restoration Plan will
receive a single lump sum cash distribution in the amount of his
or her entire account balance on the first day of the month next
succeeding termination of employment with the Company.
Supplemental Executive Retirement Plan. The Company also
sponsors a Supplemental Executive Retirement Plan ("SERP") for
certain key employees including each of the Named Executives.
This plan provides a supplemental benefit that, combined with
benefits from the Profit Sharing and Profit Sharing Restoration
Plans, Deferred Compensation Agreements, and Social Security,
will provide estimated annual benefits at normal retirement (age
65) of up to 60% of the participant's final average compensation.
A participant's "final average compensation" means the annual
average of the participant's annual cash compensation (to include
base salary and incentive bonus) paid to the participant for the
five completed calendar years that immediately precede the year
in which payments of benefits under the plan are to begin. A
participant who retires on or after his normal retirement date,
and has completed 20 or more years of service to the Company will
receive an annual retirement benefit under the SERP payable as a
single life annuity that is equal to the difference between 60%
of his final average compensation and certain "benefit offsets."
The benefit offsets are the sum of: (1) the participant's annuity
under the Profit Sharing Plan; (2) the participant's annuity
under the Profit Sharing Restoration Plan; (3) the participant's
annuity under any Deferred Compensation Agreement with the
Company; and (4) the participant's Social Security benefit. Any
participant who retires on or after his normal retirement date
and has completed fewer that 20 years will receive a reduced
benefit in proportion to the participant's years of service. A
participant who retires prior to normal retirement age may be
entitled to reduced benefits under the Plan, depending on the
participant's age and years of service.
Based on currently available information and assumptions,
the estimated annual benefits under the SERP alone to the Named
Executives are $98,085 for Mr. Smith and $0 for Messrs. Hall,
McCanless, Benner and McKinley. The projected SERP benefits to
Messrs. Hall, McCanless, Benner and McKinley are $0 because it is
estimated that the benefit offsets will exceed 60% of the final
average compensation for each of these Named Executives. These
estimates may change from time to time depending on the projected
final average compensation and the projected value of the benefit
offsets for each of the Named Executives.
This report is submitted by the Senior Management Compensation
Committee, the Stock Option Committee and the Board of Directors of
the Company.
SENIOR MANAGEMENT
COMPENSATION COMMITTEE: STOCK OPTION COMMITTEE:
Pierre-Olivier Beckers Pierre-Olivier Beckers
William G. Ferguson, Chairperson Jacqueline K.Collamore
Gui de Vaucleroy Bernard W. Franklin,
Chairperson
Board of Directors
Pierre-Olivier Beckers Margaret H. Kluttz
Jacqueline K. Collamore Tom E. Smith, Chairman of the Board
William G. Ferguson Philippe Stroobant
Bernard W. Franklin Gui de Vaucleroy
Joseph C. Hall, Jr. Jean-Claude Coppieters `t Wallant
Compensation Committee Interlocks and Insider Participation
The following persons served on the Senior Management
Compensation Committee during fiscal year 1996: William G.
Ferguson (Chairperson), Pierre-Olivier Beckers and Gui de
Vaucleroy. Messrs. Hall and Smith, who are executive officers of
the Company, are members of the Company's Board of Directors and
participate in 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.
Mr. de Vaucleroy, who is a member of the Compensation
Committee, and Mr. Beckers, who is a member of the Compensation
and Stock Option Committees, 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 20,000 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 The 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.
Senior Management Employment Agreements
On February 27, 1997, the Company entered into employment
agreements (together, the "Employment Agreements" and
individually, the "Employment Agreement") with Joseph C. Hall,
Jr. and R. William McCanless (together, the "Executives" and
individually, the "Executive"). The Employment Agreements have
five year terms and shall automatically be extended for
additional periods of one year unless the Executive or the
Company gives the other party at least 180 days' written notice
prior to the expiration of the term. The Employment Agreement
with Mr. Hall provides for Mr. Hall's employment as Senior Vice
President of Operations and Chief Operating Officer of the
Company, and for payment to Mr. Hall of a base salary of not less
than $417,112 per year. The Employment Agreement with Mr.
McCanless provides for Mr. McCanless' employment as Senior Vice
President of Administration and Chief Administrative Officer of
the Company, and for payment to Mr. McCanless of a base salary of
not less than $347,593 per year. The Employment Agreements
authorize the Board of Directors to increase such minimum amounts
from time to time. Each Employment Agreement also entitles the
Executive to participate in other compensation and benefit plans
and requires the Company to maintain split dollar life insurance
for the Executive in the face amount of three and one-half times
the Executive's base salary if his death occurs prior to his
retirement (subject to certain conditions) and two times the
Executive's last base salary if his death occurs after
retirement. Each Executive may elect to defer some or all of his
bonus compensation and up to fifty percent of his base salary
payable to him pursuant to his Employment Agreement.
The Company may terminate each Executive's employment for
Cause, as defined in the Employment Agreements. The Employment
Agreements define Cause as (i) willful failure (other than by
reason of incapacity due to physical or mental illness) by the
Executive to perform his material duties thereunder and his
inability or unwillingness to correct such failure within thirty
days after receipt of such notice, (ii) conviction of the
Executive of a felony or plea of no contest to a felony, or (iii)
perpetration of a material dishonest act or fraud against the
Company or any affiliate thereof. The definition of "Cause"
expressly excludes any mistake of fact or judgment made by the
Executive in good faith with respect to the Company's business.
If the Company terminates the Executive's employment for Cause,
or the Executive's employment terminates due to his death, the
Company will no longer be required to make payments to the
Executive or his estate under his Employment Agreement, except
for compensation earned prior to such termination and pursuant to
plans, arrangements or agreements providing for payments after
termination of employment (including, in the case of the
Executive's death, payments pursuant to his Salary Continuation
Agreement with the Company. See "Employment Plans and Agreements-
- -Salary Continuation Agreements.") The Company or the Executive
may terminate the Executive's employment upon the Executive's
disability as specified in the Employment Agreements, in which
case, the Company shall pay the Executive a lump sum payment
equal to fifty percent of the present value of the future base
salary payable to the Executive during the remainder of his term
of employment under his Employment Agreement or for a period of
two years, whichever is longer.
The Executive may terminate his employment without liability
to the Company for Good Reason, as defined in the Employment
Agreements. Good Reason is defined as (i) a material diminution
of the professional responsibilities of the Executive, (ii)
assignment of inappropriate duties to the Executive, (iii)
failure of the Company to comply with compensation and benefits
obligations to the Executive, (iv) transfer of the Executive more
than 50 miles from Salisbury, North Carolina, without good
business reasons, as determined by the Company's Board of
Directors, (v) a purported termination of the Employment
Agreement by the Company other than in accordance with the terms
thereof, (vi) the occurrence of a Change in Control of the
Company, or (vii) failure of the Company to require any successor
to the Company to assume and comply with the Employment
Agreement. The Employment Agreements 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 as amended (the "Exchange Act"); provided
that a Change in Control of the Company shall be deemed to have
occurred if: (i) an acquisition (other than directly from the
Company) by a Person (as set forth in Sections 3(a)(2) and
13(d)(3) of the Exchange Act, excluding the Company or an
employee benefit plan of the Company or an entity controlled by
the Company's shareholders) results in the aggregate number of
shares of the Company's voting securities beneficially owned by
any other Person to exceed the 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.; (ii) at any time during the term of the Employment
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 are in office on the date of the Employment
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 (other than in
connection with an actual or threatened proxy contest) shall be
treated as Incumbent Company Directors; (iii) consummation of a
complete liquidation or dissolution of the Company or a merger,
consolidation or sale of all or substantially all of the
Company's assets (collectively, a "Business Combination") other
than a Business Combination in which all or substantially all of
the shareholders of the Company receive fifty percent or more of
the stock of the Company resulting from the Business Combination,
at least a majority of the board of directors of the resulting
corporation are Incumbent Company Directors and after which no
person or entity owns twenty percent or more of the stock of the
resulting corporation, who did not own such stock immediately
before the Business Combination; or (iv) occurrence of any of the
events described in (ii) or (iii) above to Delhaize, or the
acquisition by any Person of more than thirty percent of the
stock of Delhaize.
If either Executive terminates his employment for Good
Reason or if the Company terminates his employment (except for
"Cause" as defined above, or by reason of the Executive's
disability), the Company is required to maintain, for the
remaining term of employment or three years (whichever is
greater), all employee benefit plans in which the Executive was
entitled to participate immediately prior to the date of
termination or substantially similar benefits if such plans
prohibit the Executive's continued participation. In addition,
under the Employment Agreements, the Company would be required to
pay the Executive a lump sum equal to three (or the number of
years remaining under the Employment Agreement, whichever is
greater) times the Executive's current base salary.
Upon a Change in Control, or if the Executive's employment
terminates other than for Cause, all of the rights granted to the
Executive by the Company to own or acquire stock of the Company
(including stock options and restricted stock granted under the
1996 Employee Stock Incentive Plan or other plans) will
automatically vest upon the date of such Change in Control or
date of termination, provided however, that (assuming no
occurrence of a Change in Control) such rights shall not vest if
the Executive's employment is terminated for his failure
adequately to perform his duties under his Employment Agreement
as determined by an affirmative vote of at least seventy percent
of the Board of Directors of the Company.
The Employment Agreements prohibit the Executives, without
the written consent of the Board of Directors, from engaging in
any retail or wholesale grocery business directly competitive
with the business of the Company or any affiliate thereof in any
geographic area in which the Company or affiliate is operating at
the date of termination. This prohibition applies to the
Executives during the term of the Employment Agreements and for a
period of two years after their termination. The Employment
Agreements also place restrictions, for a period of two years
after termination of the Executive's employment, on his
recruitment or solicitation of employees or independent
contractors of the Company for the purpose of being employed by
the Executive or an entity on behalf of which the Executive is
acting as agent, representative or employee. If, however, the
Executive's employment is terminated prior to the first
anniversary of the date on which a Change in Control occurs, the
foregoing restrictions on competition and solicitation shall not
apply.
Under the Employment Agreements, the Company agrees to
indemnify the Executives to the fullest extent permitted under
North Carolina law from and against any losses, claims, damages,
costs and expenses suffered by the Executives as a result of the
fact that they are or were officers of the Company or are or were
serving at the request of the Company as officers, employees or
agents of an affiliate of the Company. Each Employment Agreement
also provides that in the event that any payments to which the
Executive is entitled are subject to tax imposed by Section 4999
of the Internal Revenue Code (the "Excise Tax"), the Company
shall pay the Executive an additional amount such that the net
amount retained by the Executive shall be equal to the amount to
which the Executive is entitled prior to deduction of the Excise
Tax.
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 to each of the Named Executives pursuant to these
agreements will be as follows: Mr. Smith - $15,000, Mr. Hall-
$10,000, Mr. McCanless- $10,000, Mr. McKinley - $10,000 and Mr.
Benner - $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 at or
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 pursuant to the arrangements described
above:
Subsequent
Monthly Payment
Monthly Payments
First Twelve 24-year 9-year
Name of Individual Months Period (1) or Period
Tom E. Smith $55,756 $-- $22,302
Joseph C. Hall, Jr. 25,267 12,634 10,107
R. William McCanless 21,056 10,528 8,422
A. Edward Benner, Jr. 14,104 -- 5,642
Eugene R. McKinley 11,989 -- 4,796
(1) Based on Mr. Smith's and Mr. Benner's current age of 55 and
Mr. McKinley's current age of 63, none of them is eligible to
receive payments under the 24-year period calculation.
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
NationsBank 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 Board of Directors has determined that the Low
Interest Loan Plan will be terminated as of December 31, 1997 and
no further loans will be extended under the plan as of that date.
The following table sets forth, with respect to the Named
Executives, the largest amounts outstanding under the plan during
the fiscal year ended December 28, 1996 and the amounts
outstanding as of March 20, 1997:
Amount
Largest Amount Outstanding
Outstanding
Name of Individual During 1996 March 20, 1997
Tom E. Smith $-0- -0-
Joseph C. Hall, Jr. $-0- -0-
R. William McCanless $77,250 -0-
Eugene R. McKinley $170,500 $170,500
A. Edward Benner, Jr. $ 177,700 $177,700
INFORMATION REGARDING DELHAIZE
Delhaize is the beneficial owner of approximately 39.5% and
51.7% 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 35% of the outstanding
stock of Delhaize is held by the descendants of the founders and
their relatives, including Messrs. Beckers, Stroobant and de
Vaucleroy. 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
Pursuant to Rule 14a-8, under the Securities Exchange Act of
1934, 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 1998 Annual Meeting of the Company must be
received by the Company no later than December 1, 1997 for
inclusion in the Proxy Statement and proxy card relating to such
meeting. Subject to any rights that a shareholder has, pursuant
to Rule 14a-8, to have a proposal included in the Proxy
Statement, if a shareholder wishes to raise a matter at a
shareholders' meeting, or if a shareholder wishes to nominate a
person for election to the Board of Directors of the Company at
an annual or special meeting, the shareholder is required by the
Company's bylaws to 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. If fewer than 21 days' notice of the meeting is
given to shareholders, the notice by the shareholder must be
received by the Secretary no more than 10 days after the date on
which the notice of the meeting is mailed to shareholders. The
Company's bylaws should be consulted for the specific
requirements for raising matters at shareholders' meetings and
for nominating persons to the Board of Directors.
OTHER MATTERS
The management of the Company knows of no other business
that will be presented for consideration at the meeting.
However, if other matters are properly presented at the meeting,
it is the intention of the proxy holders named in the
accompanying proxy card to vote such proxies in accordance with
their best judgment.
A shareholder proposal has been omitted from this proxy
statement without objection from the staff of the Securities and
Exchange Commission.
By order of the Board of Directors.
TOM E. SMITH
Chairman of the Board,
President and Chief
Executive Officer
March 31, 1997
APPENDIX A
Food Lion, Inc.
This Proxy is Solicited on Behalf of the
Board of Directors of Food Lion, Inc.
The undersigned, having received the Notice of Meeting and
Proxy Statement, hereby appoints Tom E. Smith and R. William
McCanless, and each of them, as proxies with full power of
substitution, for and in the name of the undersigned, to vote all
shares of Class B Common Stock of Food Lion, Inc. owned of record
by the undersigned on the matters listed on the reverse side
hereof and, in their discretion, on such other matters as may
properly come before the Meeting of Shareholders to be held at
the Catawba College Keppel Auditorium, Salisbury, North Carolina
on May 1, 1997 at 10:00 a.m., and any adjournments or
postponements thereof.
If you plan to attend the Meeting of Shareholders in person,
please mark the appropriate box on the reverse side of this card.
You are encouraged to specify your choices by marking the
appropriate boxes, SEE REVERSE SIDE, but you need not mark any
boxes if you wish to vote in accordance with the Board of
Directors' recommendations. The proxies cannot vote your shares
unless you sign and return this card.
Please mark your 8724
votes as in this
example.
This proxy when properly 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 of the Board of
Directors' nominees and "FOR" Proposal 2. The proxies are
authorized to vote upon such other business as may properly come
before the Meeting unless otherwise specified herein.
The Board of Directors recommends a vote FOR all Proposals.
FOR WITHHELD
1.Election of Pierre-Olivier Beckers, Dr.Jacqueline Kelly
Directors Collamore, Jean-Claude Coppieters `t Wallant,
William G. Ferguson, Dr. Bernard W. Franklin,
Joseph C. Hall, Jr., Margaret H. Kluttz,
Tom E. Smith, Philippe Stroobant, Gui de Vaucleroy
For, except vote withheld from the following nominee(s):
2. Ratification of the FOR AGAINST ABSTAIN
appointment of Coopers & Lybrand LLP
as the independent accoutants.
YES NO
Do you plan to attend the
Meeting of Shareholders
in person?
SIGNATURE(S) ______________________________ DATE ____________, 1997
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
