Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1996
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 Tuesday, May 14,
1996, at 9:30 a.m. The purpose of the Meeting will be to consider and act
upon the following:
1. Election of five Class III Directors to serve until the Annual Meeting
of Shareholders in 1999.
2. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending
December 28, 1996.
3. Such other business as may properly come before the Meeting and any
adjournment thereof.
The Board of Directors has fixed the close of business on March 19, 1996,
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
Clerk
Scarborough, Maine
April 1, 1996
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, 1996
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 14, 1996
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 Tuesday, May 14, 1996, 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, 1996.
VOTING SECURITIES OF THE COMPANY
As of March 19, 1996, there were outstanding and entitled to vote
42,295,329 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 19, 1996, will be entitled to vote at the Meeting.
Each of the following were beneficial holders of more than 5% of the
outstanding Common Stock of the Company at the close of business on March 19,
1996. 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) 10,835,921 25.6
115 King Street
Stellarton, Nova Scotia, Canada B0K 1S0
Sanford C. Bernstein & Co., Inc.(2) 2,142,269 5.1
One State Street Plaza
New York, New York 10004
<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 January 31, 1996 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 7, 1996 by Sanford C.
Bernstein & Co., Inc. with the Securities and Exchange Commission.
<PAGE>
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 7, and all
Directors and executive officers of the Company as a group, at the close of
business on March 19, 1996. 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
Bruce G. Allbright 2,000
William A. Andres 2,000
Robert D. Bolinder 10,000
Laurel Cutler 1,000
William T. End 3,000
Hugh G. Farrington 285,019(1)
James W. Gogan 21,600
Richard K. Lochridge 3,000
Renee M. Love 0
Claudine B. Malone 1,650
James L. Moody, Jr. 263,867(2)
Dr. Walter J. Salmon 135,790(3)
David F. Sobey 10,835,921(4) 25.6
Robert L. Strickland 3,000
Other Named Executive Officers
James J. Jermann 47,763(5)
Blythe J. McGarvie 1,147
Larry A. Plotkin 63,755(6)
All Executive Officers and Directors
as a Group 11,795,661(7) 27.9
<PAGE>
(1) Includes 1,430 shares owned by Mr. Farrington's wife. Also includes
77,326 shares that Mr. Farrington has the right to acquire within 60 days
by exercise of stock options.
(2) Includes 30,240 shares owned by Mr. Moody's wife. Also includes 66,694
shares that Mr. Moody has the right to acquire within 60 days by exercise
of stock options.
(3) Includes 1,800 shares owned by Dr. Salmon's wife.
(4) David F. Sobey, because of business and family relationships, may be
deemed to be the beneficial owner of some or all of 10,835,921 shares of
Hannaford Common Stock held by the Sobey Parties. David F. Sobey
expressly disclaims beneficial ownership of all except 36,110 of said
shares (See "Voting Securities of the Company," Page 1).
(5) Includes 2,361 shares owned by Mr. Jermann's wife. Also includes 25,903
shares that Mr. Jermann has the right to acquire within 60 days by
exercise of stock options.
(6) Includes 326 shares owned by Mr. Plotkin's children. Also includes
26,641 shares that Mr. Plotkin has the right to acquire within 60 days by
exercise of stock options.
(7) Includes 36,157 shares held by immediate family members. Also includes
274,295 shares acquirable within 60 days by exercise of stock options.
<PAGE>
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 III
Directors expires at the upcoming Meeting.
The nominees for election as Class III Directors at this Meeting are
Robert D. Bolinder, Laurel Cutler, Richard K. Lochridge and James L. Moody,
Jr., all of whom are the current Class III Directors, and Renee M. Love, who
has not previously served as a Director of the Company.
Ms. Cutler, Ms. Love and Messrs. Bolinder, Lochridge and Moody 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 five nominees for Class III
Directors. 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 19, 1996 and year first elected a
Director.
PRINCIPAL OCCUPATION DIRECTOR
NAME OR EMPLOYMENT AGE SINCE
CLASS I (TERM EXPIRES AT THE 1997 ANNUAL MEETING)
Bruce G. Allbright(1) Retired President, Dayton Hudson 67 1991
Corporation, Minneapolis, Minnesota
William A. Andres (2) Retired Chairman of the Board and 69 1986
Chief Executive Officer, Dayton
Hudson Corporation, Minneapolis,
Minnesota
William T. End(3) Managing Director, The Cornerstone 48 1995
Group, Freeport, Maine; Former Chief
Executive Officer, Lands' End, Inc.,
1992 to 1995; Executive Vice President,
L.L. Bean, Inc., 1979 to 1992.
James W. Gogan (4) President and Chief Executive 57 1988
Officer, Empire Company Limited,
Stellarton, Nova Scotia (Holding
Company)
<PAGE>
Claudine B. Malone(5) President, Financial & Management 59 1991
Consulting, Inc., McLean, Virginia
CLASS II (TERM EXPIRES AT THE 1998 ANNUAL MEETING)
Hugh G. Farrington(6) Chief Executive Officer since 51 1981
May 1992; President since 1984;
Executive Vice President
1981 to 1984; Senior Vice
President 1980 to 1981; Vice
President 1977 to 1980
Dr. Walter J. Salmon Stanley Roth, Sr., Professor 65 1964
(7) of Retailing, Graduate
School of Business Administration,
Harvard University, Boston,
Massachusetts
David F. Sobey(8) Chairman and Chief Executive 65 1981
Officer, Sobeys Inc., Stellarton,
Nova Scotia (Food Retailer)
Robert L. Strickland(9) Chairman of the Board, Lowe's 65 1994
Companies, Inc., Winston-Salem,
North Carolina
CLASS III (TERM EXPIRES AT THIS ANNUAL MEETING)
Robert D. Bolinder(10) Executive Vice President, 64 1984
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, Albertson's, Inc., Boise, Idaho
Laurel Cutler(11) Vice-Chairman and Global Director 69 1993
of Marketing Planning of FCB/Leber
Katz Partners, New York, New York
Richard K. Lochridge(12) President, Lochridge & Company, Inc. 52 1993
(Management Consulting), Boston,
Massachusetts
Renee M. Love Chairman and Chief Executive Officer, 50 --
(nominee for election) Omega Group, Inc. (Marketing consulting),
Bryn Mawr, Pennsylvania
James L. Moody, Jr. (13) Chairman of the Board since 1984; 64 1967
Chief Executive Officer from 1973 to
May 1992; President 1971 to 1984<PAGE>
(1) Mr. Allbright is a member of the Human Resources Committee of the Board.
He is also a Director of TCF Financial; G & K Services; and Noma
Industries Ltd.
(2) Mr. Andres is Chairperson of the Human Resources and Corporate Governance
Committees of the Board. He is also a member of the Executive Committee
of the Board. He is also a Director of Jostens, Inc. and Lowe's
Companies, Inc.
(3) Mr. End is a member of the Human Resources Committee of the Board. He is
also a Director of Gander Mountain, Inc. Prior to rejoining the Board in
1995, Mr. End served as a Hannaford Director from 1983 to 1993.
(4) Mr. Gogan is a member of the Audit and Finance Committees of the Board.
He is also a Director of Empire Company Limited and Wajax Limited.
(5) Ms. Malone is Chairperson of the Audit Committee of the Board and a
member of the Corporate Governance Committee of the Board. She is also a
Director of Hasbro, Inc.; Houghton Mifflin Company; The Limited, Inc.;
Union Pacific Resources; Dell Computer Corporation; Lowe's Companies,
Inc.; Lafarge Corporation; Mallinckrodt Group; Penn Mutual Life Insurance
Co.; and SAIC. She is a Trustee of the Massachusetts Institute of
Technology and is Chairman of the Federal Reserve Bank of Richmond.
(6) Mr. Farrington is a member of the Executive Committee of the Board.
(7) Dr. Salmon is Chairperson of the Executive Committee of the Board and a
member of the Finance and Corporate Governance Committees of the Board.
He is also a Director of Luby's Cafeterias, Inc.; Circuit City, Inc.; The
Neiman Marcus Group, Inc.; The Quaker Oats Company; and Harrah's
Entertainment, 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 member of the Audit Committee of the Board. He is
also a Director of Lowe's Companies, Inc. and T. Rowe Price Associates,
Inc.
(10) Mr. Bolinder is Chairperson of the Finance Committee and a member of the
Corporate Governance 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 Audit Committee of the Board. She is also
a Director FCB/Leber Katz Partners; True North Communications, Inc.; and
Quaker State Corp.
(12) Mr. Lochridge is a member of the Finance and Human Resources Committees
of the Board. He is also a Director of Dynatech Corporation.
(13) Mr. Moody is a member of the Executive Committee of the Board. He is
also a Director of Penobscot Shoe Co.; Staples, Inc.; 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 1995 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 1995, except William A. Andres who
attended 67%.
COMMITTEES
The Company has an Audit Committee, Human Resources Committee, Finance
Committee, Corporate Governance 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 1995.
The Human Resources 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
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 four occasions during 1995.
The Corporate Governance Committee is made up of non-management members of
the Board. It is responsible for the conduct of the Board and for the
nomination of new Directors. It 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" 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 Corporate
Governance Committee met on four occasions during 1995.
The Finance 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 Plans and makes
recommendations to the Board with respect to financial structure, dividend
policy and related matters. The Committee met on four occasions during 1995.
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 Bylaws of the Company and
by applicable Maine law. For example, the Committee is not permitted to amend
the Articles of Incorporation or Bylaws 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 1995.
DIRECTORS' COMPENSATION
Each non-management Director is paid an annual retainer of $20,000 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 $20,000 and his $2,500 annual
retainer as Chairperson of the Executive Committee, Dr. Salmon receives
$30,000 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, which 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.
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
at the end of the fiscal year in which the Director retires.) 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). The following
Directors hold the number of common stock equivalents indicated: Mr. Andres,
1,423; Mr. Bolinder, 1,423; Mr. End, 1,034; Mr. Gogan, 1,254; Dr. Salmon,
1,931; and Mr. Sobey, 1,592.
<PAGE>
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 1995 each non-management Director received an award under the Plan equal
to 1,600 performance shares. The total performance shares presently held by
the non-management Directors are as follows: Mr. Allbright, 8,200; Mr.
Andres, 8,200; Mr. Bolinder, 8,200; Ms. Cutler, 5,000; Mr. End, 1,700; Mr.
Gogan, 8,200; Mr. Lochridge, 5,000; Ms. Malone, 8,200; Dr. Salmon, 8,200; Mr.
Sobey 8,200; and Mr. Strickland, 3,300. As described above, the ultimate
value of the performance shares will vary depending upon the future market
price of the Company's Common Stock.
Effective January 1, 1996, these performance share provisions have been
incorporated, essentially without change, into the Stock Ownership Plan for
Outside Directors that was approved by the Company's shareholders in 1995.
Under the Plan, non-management Directors may also receive stock options in
lieu of their annual retainers or may defer their compensation, as described
below.
STOCK OPTIONS. Each non-management Director may elect to receive his
or her annual retainer in the form of a stock option rather than cash.
This election must be made by the Director before January 1 of the
relevant year, and cannot be made for less than the entire annual
retainer for that year. If so elected, the stock option is granted as
of the first trading day of the new year. The option entitles the
Director to purchase Common Stock at an exercise price per share equal
to 100% of the closing price of Hannaford stock on the New York Stock
Exchange as of the grant date. The number of shares covered by the
option is set by formula, and equals (i) three times the annual
retainer, divided by (ii) the closing price per share of the Common
Stock on the grant date. The exercise price is payable in cash or
previously owned stock (or any combination thereof) at the time of
exercise. The option becomes exercisable one year after the date of
grant, but will be forfeited if for any reason (other than a "change in
control event" as defined) the Director's service on the Board
terminates before December 31 of that year. (If the option is forfeited,
the Director will receive a cash payment for the portion of the annual
retainer earned through the termination date.) Each option will expire
ten years from the date of grant if not exercised.
DEFERRAL OF COMPENSATION. Each non-management Director may at any time
(but not more frequently than once a year) elect to defer receipt of
any director compensation (i.e., annual retainer, meeting fees,
committee chairperson fees, and consulting fees) that would otherwise
be paid to him or her in cash. The deferral period expires upon
termination of the Director's service on the Board. The Director must
elect at the outset whether the compensation deferred is ultimately to
be paid in stock or in cash.<PAGE>
STOCK DEFERRAL. Whenever the Director would otherwise receive
payment of compensation, the Company will credit to his or her
account that number of stock units which equals (i) the amount
deferred, divided by (ii) the closing price per share of the
Common Stock on the deferral date. Payout of the deferred amounts
will be made in the form of Common Stock (plus a cash payment
equal to the amount of dividends that would have been paid on
such stock over the deferral period).
CASH DEFERRAL. Whenever the Director would otherwise receive
payment of compensation, the Company will credit the payment
amount to the Director's account and will thereafter credit the
account with interest at the rate paid on five-year Treasury
notes. This cash deferral feature of the Plan is virtually
identical to a cash deferral arrangement that has been available
to non-management Directors for many years.
The Company has established stock ownership guidelines for Directors. The
guidelines encourage each Director to acquire and maintain an interest in
Hannaford stock having a value of at least five times the annual retainer.
Stock options acquired under the Stock Ownership Plan will be counted toward
this target. The guidelines and the Stock Ownership Plan are intended to
further align the interests of the Directors and shareholders. For a
description of stock ownership of the Directors, see the table and
accompanying notes on page 2 above.
<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 Bonus Underlying Payouts(1) Compensation(2)
Position Year ($) ($) Options (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
HUGH G. FARRINGTON 1995 375,000 188,287 31,543 134,290 4,308
President and 1994 355,000 187,387 36,937 0 4,159
Chief Executive Officer 1993 338,000 253,500 15,640 176,892 4,682
JAMES L. MOODY, JR. 1995 259,500 130,295 21,828 96,235 3,441
Chairman of the Board 1994 245,700 129,693 25,565 0 3,338
1993 234,000 175,500 10,652 194,080 3,932
LARRY A. PLOTKIN 1995 181,600 91,181 7,353 34,857 2,863
Senior Vice President, 1994 174,600 92,163 8,745 0 2,805
Corporate Development 1993 167,900 67,160 4,360 44,892 2,992
JAMES J. JERMANN 1995 175,000 87,867 7,086 32,996 2,151
Senior Vice President, 1994 168,100 88,732 8,419 0 2,032
Merchandising 1993 155,000 62,000 4,944 41,360 2,236
BLYTHE J. MCGARVIE 1995 167,981 84,488 13,766 8,027 0
Senior Vice President and 1994 15,866 8,375 0 0 0
Chief Financial Officer(3) 1993 0 0 0 0 0
(1) Reflects payouts under the LONG TERM INCENTIVE PLAN for the three-year award period ending in the
stated year.
(2) Reflects Company matching contributions allocated to each officer's account under the SAVINGS AND
INVESTMENT PLAN.
(3) Mrs. McGarvie joined the Company on November 14, 1994.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants to the named executive officers during the past year. No stock
appreciation rights ("SARs") were granted during this period.
Individual Grants(1)
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or Grant Date
Granted Employees in Base Price Expiration Present
Name (#) Fiscal year ($/Share) Date Value(2)
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 31,543 7.2% 26.75 05/23/05 $312,591
James L. Moody, Jr. 21,828 5.0% 26.75 05/23/05 216,315
Larry A. Plotkin 7,353 1.7% 26.75 05/23/05 72,868
James J. Jermann 7,086 1.6% 26.75 05/23/05 70,222
Blythe J. McGarvie 13,766 3.2% 26.75 05/23/05 136,421
(1) All options were granted under the 1988 STOCK PLAN at 100% of market price at the date of grant.
All options are fully exercisable two years after grant (with half becoming exercisable one year
after grant). The exercise price may be paid in cash or by surrender of currently owned Common
Stock (valued at 100% of market price). Payment in shares entitles the holder to a "reload" option
for that number of shares. The reload option has an exercise price equal to 100% of market price at
the date of grant, generally becomes exercisable one year after grant, and carries the same
expiration date as the original option.
(2) Computed under the Black-Scholes method based on a ten-year option term and assuming an interest
rate of 6.61%, annual dividend yield of 1.6% and volatility of .1877%.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises by the named executive officers during the past year and the
value of such officers' unexercised options at December 30, 1995, the last day of the Company's fiscal year. No SARs were
outstanding during this period.
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY
SHARES ACQUIRED ON REALIZED AT FY-END (#) OPTIONS AT FY-END (2)($)
NAME EXERCISE (#) (1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Farrington 0 0 77,326 50,011 286,775 55,404
James L. Moody, Jr. 22,964 247,207 66,694 34,610 233,925 38,346
Larry A. Plotkin 4,908 68,865 26,641 11,725 125,453 13,116
James J. Jermann 0 0 24,550 11,295 98,003 12,627
Blythe J. McGarvie 0 0 0 13,766 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.
(2) Amounts in this column reflect the closing market price of the Company's Common Stock on December 29,
1995 ($24.625), minus the exercise price of the option. All options were granted at 100% of market
price on the date of grant. The term "in-the-money" refers to options having an exercise price less
than the relevant market price.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table provides information on long term incentive awards granted during 1995 to the named executive officers.
All awards were granted under the 1993 LONG TERM INCENTIVE PLAN and cover the three-year performance period beginning in 1995.
ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER OTHER PERIOD
RIGHTS(1)(#) UNTIL THRESHOLD(2) TARGET(2) MAXIMUM(2)
MATURATION OR ($) ($) ($)
PAYOUT
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 16.67% of Cash Fiscal 0 290,270 435,406
Compensation for 1995-1997
the Next 3 Years
James L. Moody, Jr. 16.67% of Cash Fiscal 0 261,593 392,389
Compensation for 1995-1997
the Next 3 Years
Larry A. Plotkin 8% of Cash Fiscal 0 67,572 101,359
Compensation for 1995-1997
the Next 3 Years
James J. Jermann 8% of Cash Fiscal 0 64,899 97,349
Compensation for 1995-1997
the Next 3 Years
Blythe J. McGarvie 8% of Cash Fiscal 0 56,782 85,172
Compensation for 1995-1997
the Next 3 Years
(1) The Plan provides for a "basic award" equal to a specified percentage of the executive officer'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 Human Resources
Committee at the start of the period. The committee may decrease an executive officer's payout if
they determine his or her performance to be inconsistent with the amount of the award.
(2) "Threshold" and "Target" refer, respectively, to the low and high performance goals for the three-
year period beginning in 1995. Subject to possible adjustment by the Human Resources Committee as
described above, (i) there will be no payout if earnings per share do not exceed the low goal, (ii)
the target payout will equal 100% of the basic award 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 basic
award) 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>
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 in 1992 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 May 14, 1992 and who met certain other conditions as
of that date are entitled to benefits under the prior formula. The benefits
of Messrs. Farrington, Plotkin, Jermann and Mrs. McGarvie would be computed
under Table I, and the benefits of Mr. Moody would be computed under Table II.
Table I: Defined Benefit Covered Compensation Formula
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40 45
50,000 9,306 12,408 15,510 18,612 18,612 18,612 18,612
100,000 20,556 27,408 34,260 41,112 41,112 41,112 41,112
150,000 31,806 42,408 53,010 63,612 63,612 63,612 63,612
200,000 43,056 57,408 71,760 86,112 86,112 86,112 86,112
250,000 54,306 72,408 90,510 108,612 108,612 108,612 108,612
300,000 65,556 87,408 109,260 131,112 131,112 131,112 131,112
350,000 76,806 102,408 128,010 153,612 153,612 153,612 153,612
400,000 88,056 117,408 146,760 176,112 176,112 176,112 176,112
450,000 99,036 132,408 165,510 198,612 198,612 198,612 198,612
500,000 110,556 147,408 184,260 221,112 221,112 221,112 221,112
Table II: Defined Benefit Social Security Offset Formula
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40 45
50,000 8,903 11,871 14,838 17,806 17,806 20,000 22,500
100,000 21,403 28,537 35,672 42,806 42,806 46,648 51,648
150,000 33,903 45,204 56,505 67,806 67,806 74,148 81,648
200,000 46,403 61,871 77,338 92,806 92,806 101,648 111,648
250,000 58,903 78,537 98,172 117,806 117,806 129,148 141,648
300,000 71,403 95,204 119,005 142,806 142,806 156,648 171,648
350,000 83,903 111,871 139,838 167,806 167,806 184,148 201,648
400,000 96,403 128,537 160,672 192,806 192,806 211,648 231,648
<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
compensation averaged over the 60 months preceding his or her retirement date.
(As described at page 11 below, Mr. Moody'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 27 years, Mr. Moody 37
years, Mr. Jermann 18 years, Mr. Plotkin 24 years and Mrs. McGarvie 1 year.
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). 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, 1993 LONG TERM INCENTIVE PLAN 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
<PAGE>
years of service is increased by three. In the event either voluntarily
terminates his employment without good reason (as defined) within 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). 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 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
<PAGE>
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 approving any
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, Jermann, Plotkin or
Mrs. McGarvie, other than for good cause (as defined), or if any of Messrs.
Moody, Farrington, Jermann, Plotkin or Mrs. McGarvie voluntarily terminate
employment with good reason (as defined), the Employment Continuity Agreements
would provide for cash severance payments of $1,245,600, $1,800,000, $819,000,
$850,500 and $832,500, 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 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 the fraction $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>
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 approved by the Company's shareholders.
With imput from the full Board, the Committee reviews the performance of
the Chief Executive Officer (the "CEO") and the Chairman of the Board (the
"Chairman") on 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, (Company, business unit
where applicable, and individual), is competitive in the marketplace in which
the Company competes for executives, and is aligned with the Company's
business strategies and shareholder interests. The Committee retains
independent consultants for advice on compensation matters and 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:
(1) The interests of executives should be linked to those of
shareholders through the risks and rewards of Company stock
ownership and options.
(2) 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.
(3) A significant portion of the executives' compensation should be
tied to measures of performance of the business as a whole.
(4) Executives should have a greater portion of their compensation
at risk than other associates.
(5) Special benefits and perquisites for management should be minimized
and based on business necessity.
<PAGE>
To further the goal of aligning the interests of executives with those of
shareholders, the Company has established stock ownership guidelines for
executives as a multiple of salary depending upon position (CEO/Chairman 5,
Senior Vice President 3, Vice President 2).
The Committee reviews the Company's compensation practices annually. The
Company sets compensation at levels it deems appropriate to attract, motivate
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
executive pay levels and financial performance for the previous year for
companies in the stock performance graph with comparable figures at Hannaford.
Executive compensation is composed primarily of the following major
elements; base salaries, annual incentives, stock options and other long term
incentives, and retirement benefits. 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, 1995 base salary levels corresponded to approximately the median of
survey companies. The salary of the CEO was below the median, reflecting a
policy of paying a relatively greater portion of his compensation through
performance-based awards rather than salary.
The Committee pays annual incentives to executives through the ANNUAL
INCENTIVE PLAN. Incentive awards are earned based on achievement of annual
goals 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 (50% for executive officers). 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
<PAGE>
1988 STOCK PLAN. These grants are based on stock option 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. 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 pharmacists and 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 provided through the 1993 LONG TERM
INCENTIVE PLAN, which is designed to reward senior executives for sustained
growth in earnings per share (EPS). Under this Plan, each year the Committee
sets high and low performance goals for growth in EPS over a designated award
period, currently three years to correspond to the Company's strategic
planning cycle. The Committee designates a "basic award", expressed as a
percentage of salary plus annual cash incentive earned during that period. If
the Company meets the high performance goal, the actual award equals the basic
award. If EPS 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. 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 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, prior to 1994, could increase or decrease
the payout to any participant if it determined that the actual award was
inconsistent with the individual's performance, such adjustments were not made
for any named executive officer in the last three fiscal years. Effective in
1994, the Committee can only decrease an executive officer's payout if it
determines his or her performance to be inconsistent with the amount of the
award.
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 generally to preserve the
<PAGE>
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 NORTHEAST AND SOUTHEAST
SAVINGS AND INVESTMENT PLANS (401(k) Plans), the EMPLOYEE STOCK PURCHASE PLAN,
and the Company's health and welfare benefit plans.
Legislation enacted in 1993 imposed 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 compensate executives based on performance. To
this end the Committee has taken action to ensure that awards under the 1988
STOCK PLAN and the 1993 LONG TERM INCENTIVE PLAN qualify as performance-based.
COMPENSATION ACTIONS IN 1995 FOR CEO AND RELATION TO COMPANY PERFORMANCE
Hugh G. Farrington, President, received a 5.6% increase in salary to
$375,000 per year, effective January 1, 1995. The increase was based upon 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 5.6% increase reflects his performance and the desired
compensation mix described below.
Mr. Farrington's target annual incentive for 1995 was 50% of his salary
representing a continuation of the level used in 1994. This target was
established as a result of a comprehensive review of the Company's senior
management compensation philosophy and mix conducted in 1993. The Company
performed well in 1995 achieving 100% of its net income goal. Consequently,
Mr. Farrington received an annual incentive payment of $188,288.
Mr. Farrington's annual cash compensation for 1995 (the sum of salary and
annual incentive) was $563,288. This represents a 3.9% increase over 1994.
By way of comparison, the Company's reported net income and earnings per share
increased by 12.7% and 11.3%, respectively, over 1994.
For the 1993-1995 award period, Mr. Farrington received a long term
incentive payment of $134,290, 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 the period reflected EPS growth that exceeded the low performance goal set
by the Committee in 1992. Payouts were computed at 52.2% of the amount that
would have been paid had the high performance goal been attained.
<PAGE>
Under the 1993 LONG TERM INCENTIVE PLAN, Mr. Farrington was granted an
award to cover the three year performance period beginning in 1995. His basic
award represents 16.67% of his cash compensation during this period if the
Company achieves the cumulative EPS growth goal set for this award. The grant
reflects a continuation of the level used in 1994.
Mr. Farrington received a stock option grant in 1995 entitling him to
purchase 31,543 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 225% of Mr. Farrington's salary, reflecting a continuation of the
1994 grant level.
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. 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 1995 have
met the objectives identified above.
Respectfully submitted,
WILLIAM A. ANDRES, Chairman
BRUCE G. ALLBRIGHT
WILLIAM T. END
RICHARD K. LOCHRIDGE
<PAGE>
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.
DATA POINTS
1990 1991 1992 1993 1994 1995
Hannaford Bros. Co. 100 128 127 125 149 147
S&P 500 100 130 140 155 157 215
Retail Food/Grocery 100 128 127 124 134 169
Assumes $100 invested on December 31, 1990 in Hannaford Bros. Co. Common
Stock, the S&P 500 Index, and the retail food and grocery index, with
reinvestment of all dividends.
The retail food and grocery index includes the following companies:
Albertson's, Inc. Riser Foods, Inc.
American Stores Co. Ruddick Corporation
Food Lion, Inc. Safeway, Inc.
Giant Food, Inc. Smith's Food and Drug Centers, Inc.
Great Atlantic & Pacific Tea Co. Stop and Shop Companies, Inc.
Hannaford Bros. Co. Vons Companies, Inc.
Kroger Company Weis Markets, Inc.
Marsh Supermarkets, Inc. Winn Dixie Stores, Inc.
Penn Traffic Company
The list of companies included in the retail food and grocery index was
revised this year. One company, Bruno's, Inc., which was previously included
in the retail food/grocery index, is no longer a publicly traded company.
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 were filed in a timely manner, except that Mr. Strickland, a
Director, failed to timely report one purchase of 2,000 shares of Hannaford
Common Stock. This transaction has since been reported.
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
<PAGE>
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.
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, 1996, 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 counsel to the Company.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. were auditors for the fiscal year ended December
30, 1995, and subject to ratification by shareholders, have been appointed to
serve as auditors for the fiscal year ending December 28, 1996.
Representatives of Coopers & Lybrand L.L.P. 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.
<PAGE>
SHAREHOLDER PROPOSALS
To be eligible for inclusion in the proxy materials for the 1997 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 November 28,
1996.
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 Corporate
Governance 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 December
30, 1995, 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
Clerk
<PAGE>
PROXY CARD-----(FRONT)-------
HANNAFORD BROS. CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James L. Moody, Jr., Hugh G. Farrington and Blythe
J. McGarvie, or any one of them, proxies with full power of substitution, to
represent and vote all the shares of Common Stock of Hannaford Bros. Co. held
by the undersigned, at the Annual Meeting of Shareholders to be held May 14,
1996, or any adjournment thereof.
1. TO ELECT FIVE CLASS III DIRECTORS
FOR all nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nomi-
nee strike a line through the nominee's name below)
Robert D. Bolinder, Laurel Cutler, Richard K. Lochridge,
Renee M. Love or James L. Moody, Jr.
2. TO RATIFY THE APPOINTMENT OF AUDITORS FOR AGAINST ABSTAIN
3. In their discretion, upon such other matters
as may properly come before the meeting.
(To be signed on other side)
<PAGE>
--------(BACK)---------
THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREBY BY THE
UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1
and 2.
The undersigned hereby
revokes any proxy previously
given and acknowledges receipt
of the Notice of, and Proxy
Statement for, the aforesaid
meeting and a copy of the 1995
Annual Report.
Dated 1996
Signature(s)
Signature(s)
Executors, administrators,
trustees, partners, guardians,
attorneys and corporate
officers should add their
titles as such.
PLEASE MARK, SIGN AS YOUR NAME
APPEARS ABOVE, DATE AND RETURN
THE PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE
