Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1994
To the Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
HANNAFORD BROS. CO., a Maine corporation, which will be held at the offices of
the Company, 145 Pleasant Hill Road, Scarborough, Maine, on Thursday, May 19,
1994, at 9:30 a.m. The purpose of the Meeting will be to consider and act
upon the following:
1. Election of four Class I Directors to serve until the Annual Meeting
of Shareholders in 1997.
2. Election of one Class II Director to serve until the Annual Meeting of
Shareholders in 1995.
3. Ratification of the appointment of Coopers & Lybrand as independent
auditors of the Company for the fiscal year ending December 31, 1994.
4. 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 21, 1994,
as the record date for the determination of shareholders entitled to receive
notice of, and vote at, the Meeting and any adjournment thereof.
By order of the Board of Directors
s/Peter B. Webster
Clerk
Scarborough, Maine
April 1, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE>
HANNAFORD BROS. CO.
145 PLEASANT HILL ROAD
SCARBOROUGH, ME 04074
APRIL 1, 1994
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1994
The accompanying proxy is solicited by the Board of Directors of HANNAFORD
BROS. CO. (the "Company") for use at the Annual Meeting of Shareholders (the
"Meeting") to be held at the offices of the Company, 145 Pleasant Hill Road,
Scarborough, Maine, at 9:30 a.m., on Thursday, May 19, 1994, and any
adjournment thereof. When such proxy is properly executed and returned, the
shares it represents will be voted at the Meeting in accordance with any
directions noted thereon; or in the absence of specific directions as to any
proposal, it will be voted in favor of each nominee and proposal identified
below. Any shareholder giving a proxy has the power to revoke it at any time
before it is voted. A proxy may be revoked by filing a written notice of
revocation with an Assistant Secretary of the Company, by submitting a duly
executed proxy bearing a later date or by revocation made in person at the
Meeting.
The proxy and this proxy statement are being mailed or delivered to
shareholders on or about April 1, 1994.
VOTING SECURITIES OF THE COMPANY
As of March 21, 1994, there were outstanding and entitled to vote
41,397,912 shares of Common Stock, par value $.75 per share. Each share of
Common Stock is entitled to one vote. Only shareholders of record at the
close of business on March 21, 1994, will be entitled to vote at the Meeting.
The following were beneficial holders of more than 5% of the outstanding
Common Stock of the Company at the close of business on March 21, 1994.
Unless indicated to the contrary, the persons or parties shown as beneficial
holders have the sole power to vote and dispose of the shares shown as owned
by them.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Holder Ownership of Class
Sobey Parties(1) 10,556,228 25.50
115 King Street
Stellarton, Nova Scotia, Canada B0K 1S0
Sanford C. Bernstein & Co., Inc.(2) 2,126,017 5.14
767 Fifth Avenue
New York, New York 10153<PAGE>
(1) The Sobey Parties include Donald R. Sobey, David F. Sobey, Empire Company
Limited, E.C.L. Investments Limited, the Pension Plan for Employees of
Sobeys Inc., the Deferred Profit Sharing Plan for Eligible Employees of
Sobeys Inc. and Pauljan Limited. The information regarding the ownership
of the Sobey Parties is given in reliance on information contained in the
Sobey Parties' latest Form 4 filing made on or about February 8, 1994 with
the Securities and Exchange Commission.
(2) Sanford C. Bernstein & Co., Inc. is a broker-dealer. The shares are held
for the account of discretionary clients who have the right to receive
dividends from, and the proceeds of, any sale of these shares and the
right to determine the voting of such shares. The information regarding
the ownership by Sanford C. Bernstein & Co., Inc. is given in reliance on
an amended Schedule 13G filed on or about February 11, 1994 by Sanford C.
Bernstein & Co., Inc. with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
The following table sets forth the beneficial ownership of Common Stock by
each Director, each other nominee for election as a Director, the other
executive officers named in the Summary Compensation Table on page 6, and all
Directors and executive officers of the Company as a group, at the close of
business on March 21, 1994. Except as otherwise indicated, each person owns
less than 1% of the outstanding Common Stock.
Shares of
Common Stock Percent of
Name Beneficially Owned Class
Directors/Nominees
<S> <C> <C>
Bruce G. Allbright 1,000
William A. Andres 2,000
Robert D. Bolinder 5,500
Laurel Cutler 0
Hugh G. Farrington 257,628(1)
James W. Gogan 21,600
William D. Ireland, Jr. 11,765(2)
Richard K. Lochridge 1,000
Claudine B. Malone 200
James L. Moody, Jr. 400,739(3)
Walter J. Salmon 135,790(4)
David F. Sobey 10,556,228(5) 25.50
Robert L. Strickland 0
<PAGE>
Other Named Executive Officers
Norman E. Brackett 36,478(6)
Roger W. Hoyt 111,109(7)
Larry A. Plotkin 56,080(8)
All Executive Officers and Directors
as a Group 11,689,445(9) 28.24
(1) Includes 51,776 shares that Mr. Farrington has the right to acquire within
60 days by exercise of stock options.
(2) Includes 6,805 shares owned by Mr. Ireland's wife.
(3) Includes 30,240 shares owned by Mr. Moody's wife. Also includes 92,637
shares that Mr. Moody has the right to acquire within 60 days by exercise
of stock options.
(4) Includes 1,800 shares owned by Dr. Salmon's wife.
(5) David F. Sobey, because of business and family relationships, may be
deemed to be the beneficial owner of some or all of 10,556,228 shares of
Hannaford Common Stock held by the Sobey Parties. David F. Sobey
expressly disclaims beneficial ownership of all except 35,178 of said
shares (See "Voting Securities of the Company," Page 1).
(6) Includes 10,223 shares that Mr. Brackett has the right to acquire within
60 days by exercise of stock options.
(7) Includes 19,672 shares owned by Mr. Hoyt's wife. Also includes 17,256
shares that Mr. Hoyt has the right to acquire within 60 days by exercise
of stock options.
(8) Includes 316 shares owned by Mr. Plotkin's children. Also includes 28,348
shares that Mr. Plotkin has the right to acquire within 60 days by
exercise of stock options.
(9) Includes 58,833 shares owned by immediate family members. Also includes
258,833 shares that executive officers have the right to acquire within 60
days by exercise of stock options.
</TABLE>
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide for a Board of
Directors of not fewer than seven nor more than eighteen members, as from time
to time may be determined by resolution of the shareholders or the Directors.
The Board of Directors is divided into three classes, each such class having a
three-year term of office with the term of office of one such class expiring
at the Annual Meeting of Shareholders each year. The term of the Class I
Directors expires at the upcoming Meeting.
<PAGE>
The nominees for election as Class I Directors at this Meeting are Bruce
G. Allbright, William A. Andres, James W. Gogan and Claudine B. Malone, all of
whom are the current Class I Directors. One Class II Director, William D.
Ireland, Jr., is retiring from the Board effective May 19, 1994. He has
reached the mandatory Director retirement age specified in the Articles of
Incorporation. Robert L. Strickland is a nominee for election as a Class II
Director at this meeting to replace Mr. Ireland.
Ms. Malone and Messrs. Allbright, Andres, Gogan and Strickland have
consented to serve as Directors if elected. Should any nominee become
unavailable for election (which is not presently anticipated), the
discretionary authority provided in the proxy may be exercised to vote for a
substitute. No proxy may be voted for more than four nominees for Class I
Directors nor more than one nominee as a Class II Director. Candidates
receiving the greatest number of votes cast will be elected to the Board.
(Abstentions and broker non-votes will not affect the tally of votes cast in
the election. A "non-vote" occurs when a broker, or other fiduciary, holding
shares for a beneficial owner votes on one proposal but lacks authority from
such owner to vote on another proposal.)
The following table sets forth for each Director or other nominee, his or
her name, principal occupations or employment for at least the past five
years, class of directorship, age on March 21, 1994 and year first elected a
Director.
Principal Occupation Director
Name or Employment Age Since
CLASS I (Term expires at this Annual Meeting)
Bruce G. Allbright(1) Retired President, Dayton Hudson 65 1991
Corporation, Minneapolis, Minnesota
William A. Andres (2) Retired Chairman of the Board and 67 1986
Chief Executive Officer, Dayton
Hudson Corporation, Minneapolis,
Minnesota
James W. Gogan (3) President, Empire Company Limited, 55 1988
Stellarton, Nova Scotia (Holding
Company)
Claudine B. Malone(4) President, Financial & Management 57 1991
Consulting, Inc., McLean, Virginia
CLASS II (Term expires at the 1995 Annual Meeting)
Hugh G. Farrington(5) Chief Executive Officer since 49 1981
May 1992; President since 1984;
Executive Vice President
1981 to 1984; Senior Vice
President 1980 to 1981; Vice
President 1977 to 1980
William D. Ireland, Jr. Trustee and Retired Chairman of 70 1971
(6) (Retiring May 19, the Board, Bank of New England Corp.,
1994) Worcester, Massachusetts
<PAGE>
Dr. Walter J. Salmon Stanley Roth, Sr. Professor 63 1964
(7) of Retailing and Senior Associate
Dean for External Relations, Graduate
School of Business Administration,
Harvard University, Boston,
Massachusetts
David F. Sobey(8) Chairman and Chief Executive 62 1981
Officer, Sobeys Inc., Stellarton,
Nova Scotia (Food Retailer)
Robert L. Strickland(9) Chairman of the Board, Lowe's 63 --
(nominee for election) Companies, Inc., Winston-Salem,
North Carolina
CLASS III (Term expires at the 1996 Annual Meeting)
Robert D. Bolinder(10) Executive Vice President of Corporate 62 1984
Planning and Development, Smith's Food
and Drug Centers, Inc., Salt Lake City,
Utah; President, Robert D. Bolinder
Associates, Management Consultants;
formerly Chief Financial and Administra-
tive Officer and Vice Chairman of the
Board, Albertsons, Inc., Boise, Idaho
Laurel Cutler(11) Vice-Chairman and Worldwide Director 67 1993
of Marketing Planning of FCB/Leber
Katz Partners, New York, New York
Richard K. Lochridge(12) President and Chief Executive Officer, 50 1993
Lochridge & Company, Inc. (Management
Consulting), Boston, Massachusetts
James L. Moody, Jr. Chairman of the Board since 1984; 62 1967
(13) Chief Executive Officer from 1973 to May
1992; President 1971 to 1984
(1) Mr. Allbright is Chairperson of the Investment Committee of the Board.
He is also a Director of TCF Financial; G & K Services; Sportstown,
Inc.; Player's Club International; Rose's Stores; Noma Industries Ltd.;
and Shopko, Inc.
(2) Mr. Andres is Chairperson of the Human Resources Committee of the Board.
He is also a Director of Jostens; International Multifoods; Lowe's
Companies, Inc.; and Scott Paper Company.
(3) Mr. Gogan is a member of the Audit Committee of the Board. He is a
Director of Crombie Insurance (U.K.) Limited; Barclays Bank of Canada;
Lawton's Drug Stores Limited; Halifax Developments Limited; Sobeys Inc.;
Empire Company Limited; Wajax Limited; and Atlantic Shopping Centres
Limited.
(4) Ms. Malone is Chairperson of the Audit Committee of the Board. She is
also a Director of Hasbro, Inc.; Houghton Mifflin Company; The Limited,
Inc.; Scott Paper Company; Union Pacific Corporation; Dell Computer
Corporation; and IMCERA Group, Inc. She is a Trustee of the
<PAGE>
Massachusetts Institute of Technology and The Dana Farber Cancer
Institute and is Deputy Chairman of the Federal Reserve Bank of
Richmond.
(5) Mr. Farrington is a member of the Executive Committee of the Board.
(6) Mr. Ireland is a member of the Executive Committee, the Audit Committee
and the Investment Committee of the Board. He is also a Director or
Trustee of several of the Colonial Group of Mutual Funds.
(7) Dr. Salmon is Chairperson of the Executive Committee of the Board and a
member of the Human Resources Committee. He is also a Director of
Luby's Cafeterias, Inc.; Circuit City, Inc.; Telxon Corp.; Neiman Marcus
Group, Inc.; The Quaker Oats Company; and Promus, Inc.
(8) Mr. Sobey is a member of the Executive Committee of the Board. He is
also a Director of Atlantic Shopping Centres Limited; Dominion Textile
Inc.; Empire Company Limited; Univa; Sobeys Inc.; T.R.A. Foods Limited;
CHC Helicopter Corporation; Lumsden Brothers Limited; and Versa Services
Limited.
(9) Mr. Strickland is a Director of Summit Communications; and T. Rowe Price
Associates, Inc.
(10) Mr. Bolinder is a member of the Human Resources Committee of the Board.
He is also a Director of Idaho Power Company; and Smith's Food and Drug
Centers, Inc.
(11) Ms. Cutler is a member of the Investment Committee of the Board. She is
also a Director of Foote, Cone & Belding Communications.
(12) Mr. Lochridge is a Director of Scott Paper Company; and Dynatech
Corporation.
(13) Mr. Moody is a member of the Executive Committee of the Board. He is
also a Director of Penobscot Shoe Co.; Sobeys Inc.; Hill's Stores
Company; UNUM Corporation; IDEXX Laboratories, Inc.; and a Trustee of
the Colonial Group of Mutual Funds.
<PAGE>
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND BOARD COMMITTEES
MEETINGS
During 1993 the Board of Directors of the Company held eight meetings.
Each Director attended 75% or more of the total Board and Committee meetings
he or she was eligible to attend in 1993.
COMMITTEES
The Company has an Audit Committee, Human Resources Committee, Investment
Committee and an Executive Committee elected by the Board of Directors from
its members.
The Audit Committee is made up of non-management members of the Board.
Its function is to oversee the work of the Company's internal and external
auditors and to assure the existence of an effective accounting and internal
control system. The Committee met on five occasions during 1993.
The Human Resources Committee, formerly known as the Compensation
Committee, is also made up of non-management members of the Board. It reviews
the compensation of the Directors and senior executives and makes
recommendations to the Board with regard to proposed changes in the various
compensation programs and, in certain instances, has the authority to directly
amend various benefit plans. The Human Resources Committee has broad
discretion over the administration of various compensation plans of the
Company. The Human Resources Committee met on nine occasions during 1993.
The Company has no standing Nominating Committee. The Board has directed
that the Human Resources Committee shall be responsible for nominating members
of the Board of Directors. The Committee met on three occasions for this
purpose during 1993.
The Human Resources Committee will consider recommendations from
shareholders for future nominees for Directorships. Consideration of an
individual recommended will be made on the basis of his or her qualifications
and the long-range objectives of the Company. See "Shareholder Proposals and
Nominations" at page 17 below for a description of procedures by which a
shareholder may nominate one or more candidates for election to the Board.
The Investment Committee is made up of non-management members of the
Board. It serves as the named fiduciary responsible for the investment of
assets of the Company's RETIREMENT PLAN and SAVINGS AND INVESTMENT PLAN. The
Committee met on five occasions during 1993.
The Executive Committee consists of management and non-management members
of the Board. Its primary function is to act on behalf of the Board at times
when it is impractical to call a special meeting of the entire Board. The
<PAGE>
powers of the Executive Committee are limited by the By laws of the Company
and by applicable Maine law. For example, the Committee is not permitted to
amend the Articles of Incorporation or By laws of the Company or to adopt any
plan of merger or consolidation on behalf of the Board. Pursuant to an
amended Standstill Agreement, the Sobey Parties are entitled to designate one
member of the Executive Committee. See "Agreement with Sobey Parties," page
16. The Committee did not meet during 1993.
DIRECTORS' COMPENSATION
Each non-management Director is paid an annual retainer of $18,000 for
services as a Director. Non-management Directors (other than Dr. Walter J.
Salmon) receive fees of $1,000 for each Board meeting attended and $1,000 for
each committee meeting attended. Committee Chairpersons receive an additional
annual retainer of $2,500 for such services. James L. Moody, Jr. has a
compensation arrangement with the Company that covers, among other things, his
Board-related activities. See page 11 below. Hugh G. Farrington (the only
management member of the Board other than Mr. Moody) receives no additional
compensation for his services as a Director. All Directors are reimbursed for
any out-of-pocket expenses incurred in attending Board and committee meetings.
In addition to his annual retainer of $18,000 and his $2,500 annual
retainer as Chairman of the Executive Committee, Dr. Salmon receives $26,000,
per year which covers his Board and committee meeting attendance fees and
additional consulting services.
In 1991 the Company's shareholders approved the adoption of a Retirement
Plan for Outside Directors. In order to attract and retain independent
Directors of superior ability, the Plan offers non-management Directors a
potential source of retirement income tied to the long-term performance of the
Company as measured by the price of its Common Stock. The Plan is thereby
intended to further align the interests of the Directors and the shareholders.
Under that Plan, each non-management Director is credited annually with a
specified number of "performance shares," whose value will be determined over
a five-year "performance period." (In the event that a Director retires from
the Board of Directors before age 70, other than in the case of death or
disability, the performance period for each outstanding award will terminate
as of the date of retirement.) At the end of the performance period for a
given award, the number of performance shares is multiplied by the increase
(if any) in the trading price of the Common Stock over such period. The
resulting figure (in dollars) is then credited to a deferral account for the
Director, where it is treated as if it were invested in Common Stock of the
Company (receiving adjustment for dividends paid on such stock and changes in
the trading price of the stock). Generally, amounts credited to a Director's
deferral account will be paid to her or him in a lump sum or in monthly
installments over a period not to exceed 10 years. Payments may not begin
until the Director retires from the Board or reaches age 70, whichever is
later. All payments from the Plan are made in cash.
In 1993 each non-management Director received an award under the Plan
equal to 1,700 performance shares. As described above, the ultimate value of
such performance shares to these Directors will vary depending upon the future
market price of the Company's Common Stock.
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation paid to the named executive officers for the past three
years.
Long Term
Compensation
Annual Compensation Awards Payouts
Name and Securities LTIP All Other
Principal Salary(1) Bonus(2) Underlying Payouts(3) Compensation(4)
Position Year ($) ($) Options (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Farrington 1993 338,000 253,500 15,640 176,892 4,682
President and 1992 312,148 206,182 15,204 110,570 4,387
Chief Executive Officer(5) 1991 267,000 194,583 12,046 205,100 4,120
James L. Moody, Jr. 1993 234,000 175,500 10,652 194,080 3,932
Chairman of the Board(5) 1992 279,565 184,660 10,077 132,788 4,178
1991 336,000 244,868 15,906 257,515 4,637
Roger W. Hoyt 1993 177,500 71,000 5,124 47,918 3,104
Group Vice President, 1992 176,939 61,262 4,694 29,112 2,984
Retail Operations 1991 164,000 64,602 4,790 54,317 2,867
Larry A. Plotkin 1993 167,900 67,160 4,360 44,892 2,992
Senior Vice President, 1992 166,135 58,533 4,464 26,987 2,851
Development & Planning 1991 156,750 60,933 4,558 49,090 2,741
Norman E. Brackett 1993 163,400 65,360 4,944 38,202 2,894
Senior Vice President & 1992 135,965 47,904 3,845 22,425 2,333
Chief Financial Officer 1991 128,200 49,835 3,906 41,029 2,242
(1) Includes amounts deferred under the SAVINGS AND INVESTMENT PLAN or DEFERRED COMPENSATION PLAN and amounts withheld to
purchase stock under the 1982 EMPLOYEE STOCK PURCHASE PLAN.
(2) Reflects performance-based payments under the ANNUAL INCENTIVE PLAN, including amounts deferred under the DEFERRED
COMPENSATION PLAN.
(3) Reflects payouts under the LONG TERM INCENTIVE PLAN for the five-year award period ending in the stated year.
(4) Reflects Company matching contributions allocated to each officer's account under the SAVINGS AND INVESTMENT PLAN.
(5) Mr. Farrington has served as Chief Executive Officer of the Company since May 14, 1992. This position was held by
Mr. Moody prior to such date.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants to the named executive officers during the past year. No stock
appreciation rights ("SARs" ) were granted during this period.
Individual Grants(1)
Number of
Securities % of Total Potential Realizable Value
Underlying Options at Assumed Annual Rates of
Options Granted to Exercise or Stock Price Appreciation for Grant Date
Granted Employees in Base Price Expiration Option Term ($) Present
Name (#) Fiscal year ($/Share) Date 0% 5% 10% Value(2)
<S> <C> <C> <C> <C> <C><C> <C> <C>
Hugh G. Farrington 15,640 6.3% 22.25 05/19/03 0 218,866 554,657 174,869
James L. Moody, Jr. 10,652 4.3% 22.25 05/19/03 0 149,064 377,763 119,099
Roger W. Hoyt 5,124 2.1% 22.25 05/19/03 0 71,705 181,718 57,291
Larry A. Plotkin 4,360 1.8% 22.25 05/19/93 0 61,014 154,623 48,749
Norman E. Brackett 4,944 2.0% 22.25 05/19/93 0 69,186 175,334 55,278
All Optionees 247,504 100.0% 22.25 05/19/03 0 3,463,571 8,777,482 2,767,319
All Shareholders(3) N/A N/A N/A N/A 0 574,655,424 1,456,308,414 N/A
(1) All options were granted under the 1988 STOCK PLAN at 100% of market price at the date of grant. All options are fully
exercisable two years after grant (with half becoming exercisable one year after grant). The exercise price may be paid
in cash or by surrender of currently owned Common Stock (valued at 100% of market price). Payment in shares entitles the
holder to the grant of a "reload" option for that number of shares. The reload option has an exercise price equal to
100% of market price at the date of grant, generally becomes exercisable one year after grant, and carries the same
expiration date as the original option.
(2) Computed under the Black-Scholes method based on a ten-year option term and assuming an interest rate of 7.5%, annual
dividend yield of 1.3% and volatility of .3136%.
(3) Potential realizable value for "All Shareholders" is computed through the relevant ten-year period on all shares of
Common Stock outstanding on May 19, 1993 (the grant date of the 1993 options), based upon the market price of the Common
Stock on that date ($22.25 per share).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises by the named executive officers during the past year and the
value of such officers' unexercised options at January 1, 1994, the last day of the Company's fiscal year. No SARs were
outstanding during this period.
Number of Value of
Securities Underlying Unexercised
Unexercised Options In-the-Money
Shares Acquired Value at FY-End (#) Options at FY-End ($)(2)
Name on Exercise (#) Realized(1) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Farrington 15,020 89,744 36,354 23,242 92,131 0
James L. Moody, Jr. 0 0 82,236 15,691 459,738 0
Roger W. Hoyt 0 0 12,347 7,471 14,002 0
Larry A. Plotkin 3,570 50,091 23,936 6,592 136,711 0
Norman E. Brackett 1,888 7,434 5,828 6,867 0 0
(1) Amounts in this column reflect the closing market price of the Company's Common Stock at the date of exercise, minus the
exercise price of the option. All options were granted as Incentive Stock Options under the 1985 INCENTIVE STOCK OPTION
PLAN or the 1988 STOCK PLAN at 100% of the market price on the date of grant.
(2) Amounts in this column reflect the closing market price of the Company's Common Stock on December 31, 1993 ($21.50),
minus the exercise price of the option. All options were granted at 100% of market price on the date of grant. The term
"in-the-money" refers to options having an exercise price less than the relevant market price.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table provides information on long term incentive awards granted during 1993 to the named executive officers.
All awards were granted under the 1993 LONG TERM INCENTIVE PLAN and cover the three-year performance period beginning in 1993.
Performance or Estimated Future Payouts
Number of Shares, Other Period Under Non-Stock Price-Based Plans
Units or Other Until Maturation Threshold(2) Target(2) Maximum(2)
Name Rights(1) (#) or Payout $ $ $
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 15% of Cash Compensation Fiscal 0 254,907 382,361
for the Next 3 Years 1993-1995
James L. Moody, Jr. 15% of Cash Compensation Fiscal 0 182,736 274,104
for the Next 3 Years 1993-1995
Roger W. Hoyt 9% of Cash Compensation Fiscal 0 72,327 108,491
for the Next 3 Years 1993-1995
Larry A. Plotkin 9% of Cash Compensation Fiscal 0 66,337 99,506
for the Next 3 Years 1993-1995
Norman E. Brackett 9% of Cash Compensation Fiscal 0 65,682 98,523
for the Next 3 Years 1993-1995
(1) The 1993 Plan provides for a "basic award" equal to a specified percentage of the employee's salary and annual incentive
compensation over a three-year award period. The "actual award" subject to payout is generally determined by multiplying
the basic award by a fraction, the numerator of which is the difference between the actual after-tax cumulative earnings
per share over the three-year period and the low performance goal for that period, and the denominator of which is the
difference between the high and low cumulative earnings per share goals set by the committee at the start of the period.
The non-management Directors may increase or decrease an employee's payout if they determine his or her performance to be
inconsistent with the amount of the award and further may adjust reported earnings per share for extraordinary or unusual
items of gain or loss.
(2) "Threshold" and "Target" refer, respectively, to the low and high performance goals for the three-year period beginning
in 1993. Subject to possible adjustment by the non-management Directors as described above, (i) there will be no payout
if earnings per share do not exceed the low goal, (ii) the payout will equal 100% of the target if earnings per share
equal the high goal, (iii) the payout will be a prorated amount of the target if earnings per share fall between the high
and low goals, and (iv) the payout will similarly be prorated (though not to exceed 150% of the target) if earnings per
share exceed the high goal. Since the actual award is a function of future compensation paid over three years, the
amount of a potential award cannot presently be accurately determined. The amounts set forth under Target and Maximum
are for illustrative purposes only and are computed on the assumptions that (i) cash compensation for each officer during
the award period increases by 4% per year and (ii) the Company meets or exceeds the high performance goal.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLES
The following tables set forth aggregate estimated annual benefits payable
upon retirement to employees under the RETIREMENT PLAN and the SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN, assuming various salary levels and various years of
service. Table I reflects benefits computed on the basis of a defined benefit
covered compensation formula adopted last year but effective as of January 1,
1989. Table II reflects benefits computed on the basis of the defined benefit
social security offset formula in effect before that date. Only executives
who had reached age 50 by January 1, 1989 and who met certain other conditions
as of that date are entitled to benefits under the prior formula. The
benefits of Messrs. Farrington, Plotkin and Brackett would be computed under
Table I, and the benefits of Messrs. Moody and Hoyt would be computed under
Table II.
Table I: Defined Benefit Covered Compensation Formula
Years of Service
<S> <C> <C> <C> <C> <C> <C> <C>
Remuneration 15 20 25 30 35 40 45
$ 50,000 9,547 12,728 15,910 19,092 19,092 19,092 19,092
100,000 20,797 27,728 34,661 41,593 41,593 41,593 41,593
150,000 32,042 42,728 53,411 64,093 64,093 64,093 64,093
200,000 43,297 57,728 72,161 86,593 86,593 86,593 86,593
250,000 54,547 72,728 90,911 109,093 109,093 109,093 109,093
300,000 65,797 87,728 109,661 131,593 131,593 131,593 131,593
350,000 77,047 102,728 128,411 154,093 154,093 154,093 154,093
400,000 88,297 117,728 147,161 176,593 176,593 176,593 176,593
Table II: Defined Benefit Social Security Offset Formula
Years of Service
Remuneration 15 20 25 30 35 40 45
$ 50,000 9,125 12,167 15,208 18,250 18,250 20,000 22,500
100,000 21,625 28,833 36,042 43,250 43,250 47,404 52,404
150,000 34,125 45,500 56,875 68,250 68,250 74,904 82,404
200,000 46,625 62,167 77,708 93,250 93,250 102,404 112,404
250,000 59,125 78,833 98,542 118,250 118,250 129,904 142,404
300,000 71,625 95,500 119,375 143,250 143,250 157,404 172,404
350,000 84,125 112,167 140,208 168,250 168,250 184,904 202,404
400,000 96,625 128,833 161,042 193,250 193,250 212,404 232,404
</TABLE>
<PAGE>
Benefits under either Table are calculated on the basis of (i) the
participant's years of service (as defined) and (ii) his or her annual covered
compensation averaged over the 60 months preceding his or her retirement date.
(As described at page 11 below, Mr. Moody's, Mr. Hoyt's and Mr. Brackett's
benefits are subject to further adjustment under agreements with the Company.)
For the named executive officers, covered compensation excludes incentive
compensation and is substantially identical to compensation reflected in the
"Salary" column of the Summary Compensation Table. The present years of
service for the named executive officers are as follows: Mr. Farrington 24
years, Mr. Moody 33 years, Mr. Hoyt 21 years, Mr. Plotkin 21 years and Mr.
Brackett 19 years.
Benefits shown in Table I are based on the assumption that payments are
made in the form of a straight life annuity. Benefits shown in Table II
assume that payments are made in the form of a life annuity with 60 monthly
payments guaranteed. For the named executive officers (and other participants
in the Supplemental Plan), the listed benefits are not subject to deduction
for Social Security or other offset amounts.
OTHER CONTRACTS WITH EXECUTIVE OFFICERS
Set forth below is a summary of other employment-related contracts with
the executive officers named in the Summary Compensation Table.
EMPLOYMENT CONTINUITY AGREEMENTS
The Company has Employment Continuity Agreements with each of the named
executive officers.
The Agreements for Messrs. Moody and Farrington are similar. If within 12
months following a change in control, the Company terminates the employment of
Mr. Moody or Mr. Farrington, other than for good cause (as defined in the
agreement), or Mr. Moody or Mr. Farrington voluntarily terminates employment
for good reason (as defined), he is entitled to a cash payment equal to (i)
300% of his annual base salary in effect on the date of the change in control
and (ii) 300% of the award he would have received for the year in which such
termination occurs, pursuant to the HANNAFORD BROS. CO. ANNUAL INCENTIVE PLAN,
assuming for such year that actual profit will equal budgeted profit (as those
terms are defined in the plan) and that the officer would have received an
individual performance award under the plan in an amount equal to 50% of his
company performance award. In addition, each is entitled to continued
participation in the Company's insurance and certain employee benefit plans
(excluding the RETIREMENT PLAN and the SAVINGS AND INVESTMENT PLAN) for a
period of 36 months following termination of employment. Further, upon such
termination, each is entitled to exercise, in full, all options granted under
the Company's 1985 INCENTIVE STOCK OPTION PLAN, and to acceleration of
payments under the DEFERRED COMPENSATION PLAN. Upon such termination, each is
also entitled to such benefits and rights as are provided under the Company's
1988 STOCK PLAN, 1980 AND 1993 LONG TERM INCENTIVE PLANS and SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN. For purposes of calculating any benefit payable
with respect to either under the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, the
number of his years of service is increased by three. In the event either
voluntarily terminates his employment without good reason (as defined) within
<PAGE>
six months following a change in control, he is entitled to receive the
benefits described above, adjusted as follows: (i) the amount of the cash
payment is reduced to 200% of annual base salary and 200% of the ANNUAL
INCENTIVE PLAN award, (ii) participation in the Company's insurance and
certain employee benefit plans is continued for a period of 24 months
following termination, and (iii) the number of years of service under the
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN is increased by two. The foregoing
benefits with respect to Mr. Moody have been supplemented somewhat under a
certain agreement dated February 11, 1991, which is described below.
For the other named executive officers, if within 12 months following a
change in control, the Company terminates the employment of the officer, other
than for good cause (as defined), or the officer voluntarily terminates
employment for good reason (as defined), such officer is entitled to a cash
payment, within thirty days of such termination, equal to (i) 200% of his
annual base salary in effect on the date of the change in control and (ii)
200% of the unadjusted basic award he or she would have received for the year
in which such termination occurs, pursuant to the HANNAFORD BROS. CO. ANNUAL
INCENTIVE PLAN, assuming for such year that actual profit will equal budgeted
profit (as those terms are defined in the plan) and that the Officer would
have received an individual performance award under the plan in an amount
equal to 50% of his or her company performance award. In addition, such
officer is entitled to continued participation in the Company's insurance and
certain employee benefit plans (excluding the RETIREMENT PLAN and the SAVINGS
AND INVESTMENT PLAN) for a period of 24 months following termination of
employment. Further, upon such termination, such officer is entitled to the
same exercise of options and acceleration of payments and awards as are
provided under the agreements for Messrs. Moody and Farrington. Upon such
termination, such officer is also entitled to such benefits and rights as are
provided under the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. For purposes of
calculating any benefit payable with respect to such officer under the
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, the number of his years of service is
increased by two. In the event the officer voluntarily terminates employment
without good reason (as defined) within six months following a change in
control, such officer is entitled to receive the benefits described above,
adjusted as follows: (i) the amount of the cash payment is reduced to 100% of
the officer's annual base salary and 100% of the ANNUAL INCENTIVE PLAN award;
(ii) participation in the Company's insurance and certain employee benefit
plans is continued for a period of 12 months following termination; and (iii)
the number of years of service under the SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN is increased by one.
Under these agreements, a "change in control" is defined to include (i)
the acquisition of 27% or more of the Company's voting stock by any party;
(ii) Hannaford's ceasing to be a publicly-held company; (iii) the number of
outside directors constituting less than a majority of the board of directors
within any 25-month period; (iv) the Company's shareholders approving any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property (other than
a merger or consolidation in which the holders of Common Stock immediately
prior to the merger or consolidation have substantially the same proportionate
ownership and voting control of the surviving corporation immediately after
the merger or consolidation); or (v) the Company's shareholders approve any
<PAGE>
sale, lease, exchange, liquidation or other transfer (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company. The agreements prohibit the payment of an amount that would cause
any portion of the amounts payable under the agreements to be non-deductible
under Section 280G of the Internal Revenue Code.
The Board of Directors has authorized the creation of a separate trust to
secure the payment of benefits under the Employment Continuity Agreements and
the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN in the event that the Company were
to undergo a change in control. Upon the occurrence of an event deemed to be
a change in control (as described above), the Company will be required to
place sufficient assets in the trust to cover its payment obligations under
such Agreements and such Plan. These trust assets will, however, remain
subject to the claims of other creditors of the Company. If and to the extent
that trust assets are insufficient to meet the Company's obligations under the
Employment Continuity Agreements and the SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN, the Company will be required to pay such benefits from its general
assets.
If within 12 months following a change in control, the Company were to
terminate the employment of Messrs. Moody, Farrington, Hoyt, Plotkin and
Brackett, other than for good cause (as defined), or Messrs. Moody,
Farrington, Hoyt, Plotkin and Brackett voluntarily terminate employment with
good reason (as defined), the Employment Continuity Agreements would provide
for cash severance payments of $1,105,650, $1,597,500, $553,800, $523,800 and
$535,200, respectively, based on the current annual base salaries and basic
awards for each of those executive officers.
AGREEMENT WITH MR. MOODY
Pursuant to an Agreement dated as of February 11, 1991, Mr. Moody agreed
that when he ceased to serve in the capacity of Chief Executive Officer of the
Company, which took place on May 14, 1992, he (i) would remain employed with
the Company on a reduced schedule through the date of the Annual Shareholders
Meeting in 1997 and (ii) would not accept employment with, or otherwise
provide services to, any entity that the Hannaford Board of Directors
determines to be in competition with the Company in its existing trading
areas. The Agreement provides that during this period, Mr. Moody would
receive salary at the initial base rate of $225,000 per year (as compared to
his salary of $336,000 per year immediately prior to the transition), subject
to later adjustment consistent with adjustments to the salaries of other
corporate officers of the Company. Solely for purposes of the SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN, Mr. Moody is credited with additional salary equal
to the difference between (i) his actual salary multiplied by
$336,000/$225,000, and (ii) his actual salary. The Agreement also provides
for continued participation by Mr. Moody in various employee benefit plans,
and for receipt of vacation benefits and other perquisites of employment.
<PAGE>
AGREEMENT WITH MR. HOYT
Mr. Hoyt has served as head of supermarket operations since 1971. In
order to assure Mr. Hoyt's continued employment with the Company for a
mutually agreeable period, not to extend past July 1, 1994, the Company by
agreement dated September 9, 1992, has agreed to pay Mr. Hoyt a supplemental
pension benefit in the amount of $99,041. It is intended that such payment
will be made through the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company
has also agreed in principle to provide Mr. Hoyt with insurance coverage
comparable to that offered in 1992 to other retiring executives. The manner
of providing this insurance coverage, and the resulting cost to the Company,
has yet to be determined.
AGREEMENT WITH MR. BRACKETT
Mr. Brackett has served as head of management services since 1974. In
order to assure Mr. Brackett's continued employment with the Company for a
mutually agreeable period, not to extend past December 31, 1995, the Company
by agreement dated September 9, 1992, has agreed to pay Mr. Brackett a
supplemental pension benefit in the amount of $83,503. It is intended that
such payment will be made through the SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN.
The Company has also agreed in principle to provide Mr. Brackett with
insurance coverage comparable to that offered in 1992 to other retiring
executives. The manner of providing this insurance coverage, and the
resulting cost to the Company, has yet to be determined.
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
CORPORATE GOVERNANCE
Executive compensation at Hannaford Bros. Co. is administered by the Human
Resources Committee under principles and plans approved by the Board of
Directors. The Committee, whose members are listed below, is composed
entirely of non-employee Directors. The Committee reviews and approves all
compensation arrangements for executive officers, including cash compensation,
stock grants, employment/severance agreements and special benefits where
applicable. Actions of the Committee are periodically reported to, and in
appropriate cases ratified by, the Board. Consistent with applicable laws and
regulations, several of the compensation plans administered by the Committee
have been expressly approved by the Company's shareholders.
The Committee reviews the performance of the Chief Executive Officer on at
least an annual basis. In setting executive compensation for the CEO and
other senior officers, the Committee seeks to ensure that compensation is
based on evaluations and judgments of performance (individual, Company and
business unit where applicable), is competitive in the marketplace in which
the Company competes for executives, and is aligned with business strategies
and shareholder interests. The Committee retains independent consultants for
advice on compensation matters and information on competitive practices. In
exercising its judgment on compensation matters, the Committee also considers
recommendations from management and the Board.
COMPENSATION PHILOSOPHY AND STRUCTURE
Overall, the same principles that govern the compensation of other
salaried associates apply to the compensation of the Company's executives.
Within this framework, the Committee believes that (a) executives should have
a greater portion of their compensation at risk than other associates, (b) a
significant portion of the executives' compensation should be tied to measures
of performance of the business as a whole, (c) in addition to rewards for
annual results, executives should be rewarded for achieving sustained long-
term results consistent with Company goals set by the Board in its business
planning process, (d) the interests of executives should be linked to those of
shareholders through the risks and rewards of Company stock ownership and
options, and (e) special benefits and perquisites for management should be
minimized and based on business necessity. To this end, executive
compensation is composed primarily of the following major elements: base
salaries, annual incentives, stock options and other long-term incentives, and
retirement benefits. The Committee reviews the Company's compensation
practices annually.
The Company sets compensation at levels it deems appropriate to attract
and retain high quality individuals. It uses surveys as a competitive
reference but does not determine its compensation practices according to
surveys alone. Surveys contain data on a variety of food industry and other
retail companies and are not tailored specifically for Hannaford. Therefore,
the companies included in the surveys do not necessarily match the companies
included in the stock price performance graph shown on page 15. As an
additional reference, the Committee reviews a report each year comparing the
<PAGE>
executive pay levels and financial performance for the previous year for
companies in the stock performance graph with comparable figures at Hannaford.
In determining appropriate salary levels, the Committee considers the
entire compensation package because it strives to maintain a significant
portion of compensation at risk. Base salaries for executives and other
salaried associates are established within salary ranges that reflect the
skills required and scope of responsibility for each position. The ranges are
determined through competitive analyses and may be adjusted from year to year
following a review of market data. Salary increases are based on individual
contribution and competitive remuneration. Overall, 1993 base salary levels
corresponded to approximately the 50th percentile of survey companies and the
mid-point of salary ranges.
The Committee pays annual incentives to executives through the ANNUAL
INCENTIVE PLAN. Incentive awards are earned based on achievement of annual
goals set by the Board. The goals are stated in terms of net income relative
to annual profit objectives established by the Board of Directors.
Individuals are assigned target awards expressed as a percentage of salary.
The target awards for 1993 represent levels used for several years. Actual
awards range from 0 - 125% of target depending upon overall company
performance against the goal. No awards are earned, however, unless the
Company attains at least 85% of the performance goal. Annual incentive awards
are paid in cash to recipients after the close of the fiscal year. Although
the Board can increase or decrease the payout to any participant if it
determines that the actual award is inconsistent with the individual's
performance, such adjustments have not been made for any named executive
officer in the last three fiscal years.
The Committee views stock options as an effective way to link the
interests of associates with those of shareholders. The Committee grants
stock options annually to executives and other salaried associates under the
1988 STOCK PLAN. These grants are based on guidelines adopted by the
Committee and expressed as a percentage of salary. Grant levels are compared
each year to current surveys published by compensation consultants to ensure
they are competitive. Together with salary and short and long term incentive
plan awards, stock options are designed to produce an overall competitive pay
package. Stock option grants for 1993 represent levels used for several
years. If the Company achieves its short and long term goals, long term
incentive plan awards and stock options are intended to comprise one-half of
the CEO's and Chairman's compensation and one-third of other senior officers'
compensation. Because the grants are regarded as part of a comprehensive and
competitive annual compensation program, the Committee does not take into
account grants made in prior years when making new grants. In addition to
awarding stock options to executives, the Committee has extended stock options
in recent years to key managers, including store managers. The award of
options to store managers demonstrates the conviction of management and the
Board that operating excellent stores is critical to the success of the
Company and that store managers serve a major role in achieving that
objective.
Other long term incentives are presently provided through the 1993 LONG
TERM INCENTIVE PLAN, which is designed to reward senior executives for
<PAGE>
sustained earnings growth. Under this Plan, each year the Committee sets high
and low performance goals for growth in earnings per share (EPS) over a
designated award period, currently three years. The Committee changed the
award period from five to three years beginning with the 1993 grants to
reflect a corresponding shift in the Company's strategic planning cycle. The
Committee also designates a "basic award", expressed as a percentage of salary
plus annual cash incentive earned during that period. Basic awards for 1993
represent levels used for several years, adjusted for the change to a three
year award period. If the Company meets the high performance goal, the actual
award equals the basic award. If earnings per share are less than or equal to
the low goal, the actual award is zero. A participant's actual award is
determined by multiplying his or her basic award by a fraction, the numerator
of which is the positive difference between actual EPS for the three years and
the low performance goal, and the denominator of which is the difference
between the high and low performance goals set by the Committee. Thus, if
performance exceeds the high performance goal, the actual award may exceed the
basic award, up to a Committee-imposed maximum of 150% of the basic award. It
is the Committee's current practice to pay approximately 50% of each award
earned in the form of Company stock which must be held for three years. The
balance of the award is paid in cash to meet income tax withholding
requirements. Although the Board can increase or decrease the payout to any
participant if it determines that the actual award is inconsistent with the
individual's performance, such adjustments have not been made for any named
executive officer in the last three fiscal years.
Executives receive pension benefits under the same tax-qualified plan (the
EMPLOYEES' RETIREMENT PLAN) available to other salaried associates of the
Company. Current tax law imposes limits on pension benefits payable to
executives from tax qualified plans. The Company therefore maintains a non-
qualified SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN to preserve the benefits that
would otherwise be lost under the qualified plan. The amount of benefits
payable under the supplemental plan equals the amount that would be payable
under the Company's qualified plan if there were no limits in place, offset by
the amount actually paid under the qualified plan.
The Company maintains a number of other broad-based employee benefit plans
in which salaried associates, including executives, are entitled to
participate. Examples of such plans include the SAVINGS AND INVESTMENT PLAN
(401(k) Plan), the 1982 EMPLOYEE STOCK PURCHASE PLAN, and the Company's health
and welfare benefit plans.
Legislation enacted in 1993 imposes new limits on the tax deductibility of
executive compensation. The Committee's policy is to maximize the tax
deductibility of executive compensation to the extent consistent with its
responsibility to effectively compensation executives based on performance.
The Committee is currently considering changes to qualify awards under the
1988 Stock Plan and the 1993 Long Term Incentive Plan as performance-based
under proposed regulations.
COMPENSATION ACTIONS IN 1993 AND RELATION TO COMPANY PERFORMANCE
Hugh G. Farrington, President, received a 4% increase in salary to
$338,000 per year, effective January 1, 1993. The increase was based upon
<PAGE>
1) a review of competitive data, 2) the state of the regional economy, 3) his
performance, 4) the desired mix of salary, short term and long term
compensation and 5) the merit increase program for executives and other
salaried associates. While no particular weight was assigned to any one
factor, the 4% increase represented a balance between the projected salary
increases for CEOs nationally and the performance of the regional economy.
Mr. Farrington's target annual incentive for 1993 was 75% of his salary.
This has been the established target for the Company's CEO over the past
several years. The Company performed well in 1993 achieving 100% of its net
income goal. Consequently, Mr. Farrington received an annual incentive
payment of $253,500.
Mr. Farrington's annual cash compensation for 1993 (the sum of salary and
annual incentive) was $591,500. This represents a 14.1% increase over 1992
and reflects the fact that Mr. Farrington served as Chief Executive Officer
for all of 1993 and only seven months of 1992. By way of comparison, the
Company's reported net income and earnings per share increased by 14.8% and
13.2%, respectively, over 1992.
Mr. Farrington received a long term incentive payment of $176,892 for the
1989-93 award period, paid 50% in the form of Company stock as described
above. For each of the executive officers named in the Summary Compensation
Table (including Mr. Farrington), award payouts under the Plan for this period
reflected earnings per share growth that exceeded the low performance goal set
by the Committee in 1988. Payouts were computed at 70.1% of the amount that
would have been paid had the high performance goal been attained.
Mr. Farrington received a stock option grant entitling him to purchase
15,640 shares of Hannaford stock at an option price equal to the fair market
value of the stock on the date of grant. The size of the option grant was set
at 95% of the midpoint of Mr. Farrington's salary range. This has been the
Company's established target for several years.
At the initiative of the CEO, a comprehensive review of the Company's
senior management compensation philosophy and mix was conducted during 1993.
As a result of this review, the Committee approved a change in the CEO's total
compensation mix for 1994 that would shift a portion of the total from annual
compensation (by reducing his annual incentive award opportunity) to long-term
compensation (by increasing his stock option grant guidelines). The result
will be to increase the portion of total compensation dependent on increases
in shareholder value.
<PAGE>
CONCLUSION
The Human Resources Committee believes that it is essential to attract and
retain qualified executives to manage the Company's business. The Committee
further believes that the caliber and motivation of its associates and the
quality of their leadership are two of the most important factors affecting
the Company's long-term performance. In order to advance the long-term
interests of shareholders, the Human Resources Committee strives to adopt
compensation programs that will (a) provide executives with direct and
substantial incentives to achieve long-term business objectives, and (b) tie
the executives' interests to the risks and rewards of owning Company stock.
The Committee believes that the Company's compensation programs during 1993
have met the objectives identified above.
Respectfully submitted,
William A. Andres, Chairman
Dr. Walter J. Salmon
Robert D. Bolinder
<PAGE>
<TABLE>
<CAPTION>
MARKET PRICE PERFORMANCE
OF THE COMPANY'S COMMON STOCK
The following graph provides information on the five year cumulative total
return on Hannaford Bros. Co. Common Stock as compared to the S&P 500 Index
and an index consisting of retail food and grocery companies having shares
listed on a national securities exchange. Amounts reflected in each case are
measured from January 1, 1988 and assume reinvestment of all dividends paid.
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Hannaford Bros. Co. 100 149 165 211 209 205
S&P 500 100 132 128 166 179 197
Retail Food/Grocery 100 133 141 155 188 189
Assumes $100 invested on January 1, 1988 in Hannaford Bros. Co. Common Stock,
the S&P 500 Index and the retail food and grocery index, with reinvestment of
all dividends.
</TABLE>
The retail food and grocery index includes the following companies:
Albertson's, Inc. Ruddick Corporation
American Stores Co. Riser Foods, Inc. (Class A)
Foodarama Supermarkets, Inc. Smith's Food and Drug Centers, Inc.
Great Atlantic & Pacific Tea Co. Stop and Shop Companies, Inc.
Giant Food, Inc. Safeway, Inc.
Hannaford Bros. Co. Uni Marts, Inc. (Class A)
Kroger Company Vons Companies, Inc.
Motts Holdings, Inc. Winn Dixie Stores, Inc.
Penn Traffic Company Weis Markets, Inc.
For purposes of computing this index, the returns of each company have been
weighted according to the companies' respective stock market capitalizations.
<PAGE>
OTHER MATTERS RELATING TO
THE COMPANY'S DIRECTORS AND OFFICERS
REPORTS OF DIRECTORS, OFFICERS AND CERTAIN SHAREHOLDERS
Under Section 16(a) of the Securities Exchange Act of 1934, certain
persons associated with the Company (directors, executive officers and
beneficial owners of more than 10% of the outstanding Common Stock) are
required to file with the Securities and Exchange Commission and the New York
Stock Exchange various reports disclosing their ownership of Company
securities and changes in such ownership. To the Company's knowledge, all
requisite reports except one were filed in a timely manner. The Company is
aware of one officer who had inadvertently failed to timely report the sale of
3,364 shares of Common Stock. A corrective filing was made on Form 5.
AGREEMENT WITH SOBEY PARTIES
Since September 16, 1981, the Company and the Sobey Parties have been
parties to an agreement (the "Standstill Agreement"), which has been amended
and extended from time to time. On February 4, 1988, the Company and the
Sobey Parties further extended the term of such agreement and amended various
terms thereof.
Under the Standstill Agreement as amended and extended, the Sobey Parties
have agreed not to increase their percentage ownership of the Company's voting
stock above the current level of approximately 25.6% of the outstanding
shares, except in certain circumstances specified by the Standstill Agreement.
The Sobey Parties have also agreed that they will not purchase any shares of
the Company's voting stock except as contemplated by the Standstill Agreement,
engage in a proxy contest relating to election of the Company's directors or
certain other matters or enter into a voting trust agreement for the purpose
of acquiring control of the Company. In addition, the Sobey Parties are
restricted in their right to sell shares of the Company's voting stock owned
by them.
Under the Standstill Agreement, the Sobey Parties have certain rights to
purchase securities from the Company to maintain their percentage ownership of
the Company's voting stock and to maintain specified percentage ownership
margins between their percentage ownership and that of the next largest
shareholder. The specified margin is 13.5% (an arbitrary ownership margin
negotiated by the parties at the time of the original Standstill Agreement),
except that the margin is reduced to 5% in the case of certain shareholders
that enter into separate standstill agreements with the Company. In the event
that the Standstill Agreement permits the Sobey Parties to increase their
percentage ownership in excess of approximately 25.6%, the Sobey Parties are
required to place such excess shares in a voting trust pursuant to which the
shares will be voted in proportion to the votes of small shareholders
(generally, the holders of 5% or less of the Company's voting stock who are
not affiliated with management of the Company). In cases where the Sobey
Parties are entitled to purchase more than $5 million of shares from the
Company, the Sobey Parties have certain rights to defer the purchase of their
shares over specified periods of time ranging from 90 days to three years.
The Company has agreed to use its best efforts to cause two nominees of the
Sobey Parties to be elected as Directors of the Company. Presently, David F.
Sobey and James W. Gogan serve as the Sobey Parties' designees on the Board.
<PAGE>
The Company has also agreed to certain restrictions on its ability to issue
voting stock in connection with business acquisitions or otherwise to place
large blocks of voting stock in the hands of a single person or group. In
general, the Company has agreed not to sell voting stock to any person or
group that owns, or would thereby own, more than 10% of the outstanding voting
stock, except with the Sobey Parties' prior consent. In the case of business
acquisitions, such limit is increased to 15%, provided that the Company
obtains standstill agreements with such person or group and its controlling
person, if any. The Sobey Parties also have a right to prevent the Company
from entering into business acquisitions involving the issuance of as many
shares of the Company's voting stock as the Sobey Parties then own. Such
right is conditional on the Sobey Parties' delivery, at that time, of an offer
to sell all of their shares to the Company at specified market prices
(generally, the same prices being paid by third parties for the Company's
stock).
The Standstill Agreement will expire December 31, 1994, unless further
extended. The Agreement provides that its term will be automatically renewed
for successive one-year periods (but not beyond December 31, 1997) unless by
July 31 of a given year either the Company or any of the Sobey Parties gives
written notice of an intention not to further extend the term of the
Agreement. The Sobey Parties have certain rights to terminate the Standstill
Agreement, including the right to terminate in the event of certain tender
offers by third parties or the accumulation of 25% or more of the outstanding
voting shares of the Company by a third party.
OTHER
Peter B. Webster, Clerk and Assistant Secretary of the Company, and
Gregory S. Fryer, Assistant Secretary of the Company, are partners in the law
firm of Verrill & Dana, outside general counsel to the Company.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand were auditors for the fiscal year ended January 1, 1994,
and subject to ratification by shareholders, have been appointed to serve as
auditors for the fiscal year ending December 31, 1994.
Representatives of Coopers & Lybrand are expected to attend the Meeting
and to respond to appropriate questions from shareholders. The
representatives will have the opportunity to make a statement if they so
desire.
SHAREHOLDER PROPOSALS OR NOMINATIONS
To be eligible for inclusion in the proxy materials for the 1995 Annual
Meeting, a shareholder proposal for action to be taken at such Meeting must be
in proper written form addressed to the attention of the Chairman of the Board
and received at the Company's principal executive offices before December 1,
1994.
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The Company's bylaws provide that any shareholder wishing to propose one
or more candidates for election as a Director at the Annual Meeting of
Shareholders in a given year shall, not earlier than January 1 nor later than
February 28 of that year, provide written notice of such intended nomination
to the Secretary of the Company. Such notice shall identify each proposed
nominee and shall set forth the same information regarding the shareholder and
each nominee as would be required to be set forth in a proxy statement under
the proxy rules of the Securities and Exchange Commission. Upon receipt of
such notice, the Secretary shall forward a copy thereof to the Human Resources
Committee, which may consider whether to endorse the proposed candidate(s). A
shareholder who has satisfied these notice requirements shall thereafter be
entitled at the next Annual Meeting of Shareholders to place in nomination any
nominee so described, regardless of whether the Committee or the Board of
Directors has chosen to endorse the proposed candidate. This procedure for
nominations by shareholders is not intended to relieve any person from
obligations imposed under the proxy rules of the Securities and Exchange
Commission, or to obligate the Company to include in its proxy statement a
description of an intended Director nomination by a shareholder.
GENERAL
A copy of the Company's Annual Report for the fiscal year ended January 1,
1994, including financial statements, is enclosed herewith. It is not to be
regarded as proxy soliciting material. The cost of soliciting proxies on
behalf of the Board of Directors will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally, or by telephone or
other means of communication, by employees of the Company, none of whom will
receive additional compensation for such services or be specially hired for
such purposes. The Company will reimburse brokers and other custodians,
nominees and fiduciaries for out-of-pocket expenses reasonably incurred for
sending proxy materials to principals and obtaining their proxies. The
Company's transfer agent, Continental Stock Transfer & Trust Company, will
assist in the distribution of proxy material to nominee accounts and will
obtain their proxies. It is estimated that the fees and out-of-pocket
expenses of such firm, payable by the Company in connection with the
solicitation, will be approximately $1,000.
The Board of Directors is not aware of any matters to be brought before
the Meeting other than those set forth in this Proxy Statement. If any
further business is properly presented at the Meeting, the persons named in
the proxies will vote all shares represented according to their best judgment.
By order of the Board of Directors
s/Peter B. Webster
Clerk
