Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
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
Monday, May 12, 1997, at 10:30 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 2000.
2. Election of one Class III Director to serve until the Annual
Meeting of Shareholders in 1999.
3. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending
January 3, 1998.
4. To consider and act upon a proposal to increase the number of
shares of Common Stock that may be issued under the Hannaford
Bros. Co. Employee Stock Purchase Plan.
5. 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 14,
1997, 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, 1997
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, 1997
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 1997
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 10:30 a.m., on Monday, May 12,
1997, 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, 1997.
VOTING SECURITIES OF THE COMPANY
As of March 14, 1997, there were outstanding and entitled to vote
42,315,198 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 14, 1997, 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 14, 1997. 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) 2,163,239 5.1
One State Street Plaza
New York, New York 10004
<PAGE>
(1) The Sobey Parties include Donald R. Sobey, David F. Sobey, the Estate
of William M. Sobey, Empire Company Limited, E.C.L. Investments
Limited, Empire Holdings (U.S.) L.L.C., the Pension Plan for Employees
of Sobeys Inc., the Deferred Profit Sharing Plan for Eligible Employees
of Sobeys Inc. and Pauljan Limited. Information regarding ownership
by the Sobey Parties is given in reliance on their latest Form 5
filing, made on or about February 12, 1997, 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. Information
regarding ownership by Sanford C. Bernstein & Co., Inc. is given in
reliance on its amended Schedule 13G filed on or about January 30,
1997, 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 8, and
all Directors and executive officers of the Company as a group, at the
close of business on March 14, 1997. 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 4,437(1)
William A. Andres 2,000
Robert D. Bolinder 10,000
Laurel Cutler 3,437(2)
William T. End 3,000
Hugh G. Farrington 316,660(3)
James W. Gogan 21,600
Richard K. Lochridge 5,437(4)
Renee M. Love 500
Claudine B. Malone 1,889
James L. Moody, Jr. 215,574(5)
Dr. Walter J. Salmon 135,790(6)
David F. Sobey 10,835,921(7) 25.6
Robert L. Strickland 3,000
Other Named Executive Officers
Richard A. Anicetti 29,101(8)
Paul A. Fritzson 31,152(9)
Ronald C. Hodge 25,866(10)
Blythe J. McGarvie 8,575(11)
Larry A. Plotkin 67,748(12)
<PAGE>
All Executive Officers and Directors
as a Group 11,835,608(13) 28.0
<PAGE>
(1) Includes 2,437 shares that Mr. Allbright has the right to acquire
within 60 days by exercise of stock options.
(2) Includes 2,437 shares that Ms. Cutler has the right to acquire within
60 days by exercise of stock options.
(3) Includes 770 shares owned by Mr. Farrington's wife. Also includes
104,544 shares that Mr. Farrington has the right to acquire within 60
days by exercise of stock options.
(4) Includes 2,437 shares that Mr. Lochridge has the right to acquire
within 60 days by exercise of stock options.
(5) Includes 78,489 shares that Mr. Moody has the right to acquire within
60 days by exercise of stock options.
(6) Includes 1,800 shares owned by Dr. Salmon's wife.
(7) 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).
(8) Includes 22,307 shares that Mr. Anicetti has the right to acquire
within 60 days by exercise of stock options.
(9) Includes 24,746 shares that Mr. Fritzson has the right to acquire
within 60 days by exercise of stock options.
(10) Includes 21,413 shares that Mr. Hodge has the right to acquire within
60 days by exercise of stock options.
(11) Includes 6,884 shares that Mrs. McGarvie has the right to acquire
within 60 days by exercise of stock options.
(12) Includes 331 shares owned by Mr. Plotkin's children. Also includes
29,578 shares that Mr. Plotkin has the right to acquire within 60 days
by exercise of stock options.
(13) Includes 5,429 shares held by immediate family members. Also includes
354,338 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 I Directors expires at the upcoming Meeting.
The nominees for election as Class I Directors at this Meeting are
Bruce G. Allbright, William T. End, James W. Gogan and Claudine B. Malone,
all of whom are current Class I Directors. One Class I Director, William
A. Andres, and two Class III Directors, Laurel Cutler and James L. Moody,
Jr., are retiring from the Board effective May 12, 1997. Ms. Cutler and
Mr. Andres have reached the mandatory Director retirement age specified in
the Articles of Incorporation. Mr. Moody is retiring from the Board for
personal reasons. Robert J. Murray is a nominee for election as a Class III
Director at this Meeting to replace James L. Moody, Jr.
Ms. Malone and Messrs. Allbright, End, Gogan and Murray 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 III 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 14, 1997, 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 68 1991
Corporation, Minneapolis, Minnesota
William A. Andres(2) Retired Chairman of the Board and 70 1986
(Retiring May 12, 1997) Chief Executive Officer, Dayton
Hudson Corporation, Minneapolis,
Minnesota
<PAGE>
William T. End(3) Managing Director, International 49 1995
Cornerstone Group, Portland, Maine
(Catalog Retailer); Formerly Chief
Executive Officer, Lands' End, Inc.,
1991 to 1995; Executive Vice President,
L.L. Bean, Inc., 1975 to 1991.
James W. Gogan(4) President and Chief Executive 58 1988
Officer, Empire Company Limited,
Stellarton, Nova Scotia (Holding
Company)
Claudine B. Malone(5) President, Financial & Management 60 1991
Consulting, Inc., McLean, Virginia
CLASS II (TERM EXPIRES AT THE 1998 ANNUAL MEETING)
Hugh G. Farrington(6) Chief Executive Officer since 52 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(7) Stanley Roth, Sr., Professor 66 1964
of Retailing, Graduate
School of Business Administration,
Harvard University, Boston,
Massachusetts
David F. Sobey(8) Chairman of the Board, 65 1981
Sobeys Inc., Stellarton,
Nova Scotia (Food Retailer)
Robert L. Strickland(9) Chairman of the Board, Lowe's 66 1994
Companies, Inc., Winston-Salem,
North Carolina
CLASS III (TERM EXPIRES AT THE 1999 ANNUAL MEETING)
Robert D. Bolinder(10) President, Robert D. Bolinder 65 1984
Associates, Management Consultants,
Boise, Idaho; Retired Executive
Vice President, Smith's Food and
Drug Centers, Inc., Salt Lake City,
Utah
Laurel Cutler(11) Vice-Chairman and Global Director 70 1993
(Retiring May 12, 1997) of Marketing Planning of FCB/Leber
Katz Partners, New York, New York
<PAGE>
Richard K. Lochridge(12) President, Lochridge & Company, Inc., 53 1993
Boston, Massachusetts (Management
Consulting)
Renee M. Love(13) Chairman and Chief Executive Officer, 51 1996
Omega Group, Inc., Bryn Mawr,
Pennsylvania (Strategic Consulting)
James L. Moody, Jr.(14) Chairman of the Board since 1984; 65 1967
(Retiring May 12, 1997) Chief Executive Officer from 1973 to
May 1992; President 1971 to 1984
Robert J. Murray(15) Chairman and Chief Executive Officer, 55 --
(nominee for election) New England Business Service, Inc.,
Groton, Massachusetts; Formerly Executive
Vice President of the North Atlantic
Group of The Gillette Company,
Boston, Massachusetts from 1991 to 1995
<PAGE>
(1) Mr. Allbright is a member of the Human Resources Committee of the
Board. He is also a Director of TCF Financial and G & K Services.
(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 Lowe's
Companies, Inc.
(3) Mr. End is a member of the Human Resources Committee of the Board.
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; and
SAIC. She is a Trustee of the Massachusetts Institute of Technology
and is Chairperson 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 and Corporate Governance
Committees 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.
(11) Ms. Cutler is a member of the Audit Committee of the Board. She is
also a Director of 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) Ms. Love is a member of the Audit Committee of the Board.
(14) 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.
(15) Mr. Murray is also a Director of Allmerica Financial Corporation;
Fleet National Bank; Lo Jack Corporation; and North American Mortgage
Company.
<PAGE>
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND BOARD COMMITTEES
MEETINGS
During 1996 the Board of Directors of the Company held six meetings.
Each Director attended 75% or more of the total Board and Committee
meetings he or she was eligible to attend in 1996.
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 seven occasions during 1996.
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
five occasions during 1996.
The Corporate Governance Committee is made up of non-management members
of the Board. The Committee reviews various matters concerning governance
of the Board and the relationship between the Board and senior management.
For example, the Committee makes recommendations on the composition of
Board committees, and is charged with overseeing the Board's processes for
evaluating performance of the Chairman of the Board and the Chief Executive
Officer. This year the Committee will be involved in selecting a new
Chairman of the Board, to replace Mr. Moody who retires May 12, 1997. The
Governance Committee is also responsible for nominating candidates for
election to the Board. In such capacity, the Committee will consider
suggestions from shareholders on Director nominations. Suggested nominees
will be evaluated on the basis of their qualifications and the long-range
objectives of the Company. See "Shareholder Proposals" at page 19 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 1996.
<PAGE>
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 1996.
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 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 17. The Committee met once during
1996.
DIRECTORS' COMPENSATION
Each non-management Director (other than Dr. Walter J. Salmon) is paid
an annual retainer of $24,000 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 13 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 an annual retainer of $20,000 and a $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 addition to her annual retainer and fees for Board and committee
meetings attended, the firm in which Renee M. Love serves as a principal
officer has a consulting arrangement with the Company. The Company has
paid Omega Group, Inc. $59,800, plus reasonable out-of-pocket expenses to
third parties, for an assignment that was completed in early 1997.
The Company maintains a Stock Ownership 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.
<PAGE>
PERFORMANCE SHARES. Under the 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 (with
adjustments to reflect reinvestment of 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. Allbright,
562; Mr. Andres, 1,986; Mr. Bolinder, 1,986; Mr. End, 1,034; Mr. Gogan,
1,817; Ms. Malone, 562; Dr. Salmon, 2,493; and Mr. Sobey, 2,155.
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.
For 1996 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, 8,000; Mr. Andres, 8,000; Mr. Bolinder, 8,000; Ms. Cutler,
6,400; Mr. End, 3,100; Mr. Gogan, 8,000; Mr. Lochridge, 6,400; Ms.
Love, 1,400; Ms. Malone, 8,000; Dr. Salmon, 8,000; Mr. Sobey 8,000; and
Mr. Strickland, 4,700. As described above, the ultimate value of the
performance shares will vary depending upon the future market price of
the Company's Common Stock.
The Plan also allows non-management Directors to receive stock options in
lieu of their annual retainers or to 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
<PAGE>
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.
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 through December 31, 1996.
Effective January 1, 1997, the plan provides for automatic
reinvestment of dividends.
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 ($) ($) Options (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
HUGH G. FARRINGTON 1996 400,000 175,000 29,630 75,591 2,625
President and 1995 375,000 188,287 31,543 134,290 2,625
Chief Executive Officer 1994 355,000 187,387 36,937 0 2,625
JAMES L. MOODY, JR. 1996 276,800 121,100 23,616 58,120 2,625
Chairman of the Board 1995 259,500 130,295 21,828 96,235 2,625
1994 245,700 129,693 25,565 0 2,625
LARRY A. PLOTKIN 1996 189,000 82,688 6,739 20,163 2,625
Senior Vice President, 1995 181,600 91,181 7,353 34,857 2,625
Corporate Development 1994 174,600 92,163 8,745 0 2,625
RICHARD A. ANICETTI 1996 185,000 80,938 37,367 13,043 6,000
Senior Vice President/Gen. 1995 157,404 79,370 12,146 12,813 6,000
Manager, Southeast 1994 141,000 74,427 7,062 0 2,457
Operations
PAUL A. FRITZSON 1996 185,000 80,938 37,367 16,022 2,625
Sr. Vice Pres., Marketing, 1995 157,404 79,370 12,146 27,300 2,625
Merchandising&Distribution 1994 141,300 74,585 7,077 0 2,465
RONALD C. HODGE 1996 185,000 80,938 37,367 13,362 2,625
Senior Vice President, 1995 160,557 80,915 12,470 13,226 2,625
Northeast Operations 1994 140,600 74,216 7,042 0 2,454
BLYTHE J. MCGARVIE 1996 185,000 80,938 6,597 8,680 2,625
Senior Vice President and 1995 167,981 84,488 13,766 8,027 0
Chief Financial Officer(3) 1994 15,866 8,375 0 0 0
(1) Reflects payouts under the LONG TERM INCENTIVE PLAN for the three-year award period ending in the
stated year.
(2) Reflects Company matching contributions allocated to each officer's account under the SAVINGS AND
INVESTMENT PLAN.
(3) Mrs. McGarvie joined the Company on November 14, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants to the named executive officers during the past year. No stock
appreciation rights ("SARs" ) were granted during this period.
Individual Grants (1)
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or Grant Date
Granted Employees in Base Price Expiration Present
Name (#) Fiscal year ($/Share) Date Value(2)
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 29,630 5.8% $30.375 05/13/06 $353,782
James L. Moody, Jr. 20,504 4.0% 30.375 05/12/01 164,647
(3) 3,112 .1% 32.125 05/12/01 23,745
Larry A. Plotkin 6,739 1.3% 30.375 05/13/06 80,464
Richard A. Anicetti 6,597 1.3% 30.375 05/13/06 78,768
(4) 30,770 6.0% 32.50 12/02/06 373,240
Paul A. Fritzson 6,597 1.3% 30.375 05/13/06 78,768
(4) 30,770 6.0% 32.50 12/02/06 373,240
Ronald C. Hodge 6,597 1.3% 30.375 05/13/06 78,768
(4) 30,770 6.0% 32.50 12/02/06 373,240
Blythe J. McGarvie 6,597 1.3% 30.375 05/13/06 78,768
(1) All options were granted under the 1988 STOCK PLAN at 100% of market price at the date of grant.
Except as otherwise noted, all options are fully exercisable three years after grant (with one third
becoming exercisable each 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 the full stated option term. For options expiring
5/13/06, assumes an interest rate of 7.03%, annual dividend yield of 1.54% and volatility of 19.44%.
For options expiring 12/02/06, assumes an interest rate of 6.54%, annual dividend yield of 1.57% and
volatility of 19.36%. For option expiring 5/12/01, assumes an interest rate of 6.63%, annual dividend
yield of 1.54% and volatility of 19.44%. For reload option expiring 5/12/01, assumes interest rate of
6.18%, annual dividend yield of 1.57% and volatility of 19.36%.
(3) Reload option granted upon exercise of the underlying option though a surrender of Common Stock. See note (1) above.
(4) Non-qualified stock option which is fully exercisable 7 years after grant (with one-half becoming exercisable 5 years
after grant).
</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 28, 1996, 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 8,891 138,922 104,544 43,532 1,199,114 213,709
James L. Moody, Jr. 13,770 159,415 78,489 32,661 923,331 149,866
Larry A. Plotkin 5,112 69,651 29,578 10,415 354,916 52,400
Richard A. Anicetti 2,814 39,748 22,307 43,439 250,048 119,551
Paul A. Fritzson 1,407 18,819 24,746 43,439 278,974 119,551
Ronald C. Hodge 0 0 21,413 43,601 235,130 120,747
Blythe J. McGarvie 0 0 6,884 13,479 50,804 75,528
(1) Amounts in this column reflect the closing market price of the 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 Common Stock on December 28, 1996
($34.125), minus the exercise price of the option. All options were granted at 100% of market
price on the date of grant. The term "in-the-money" refers to options having an exercise price
less than the relevant market price.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table provides information on long term incentive awards granted during 1996 to the named executive officers.
All awards were granted under the 1993 LONG TERM INCENTIVE PLAN and cover the three-year performance period beginning in 1996.
ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER OTHER PERIOD
RIGHTS(1)(#) UNTIL THRESHOLD(2) TARGET(2) MAXIMUM(2)
MATURATION OR ($) ($) ($)
PAYOUT
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 16.67% of Cash Fiscal 0 312,222 468,334
Compensation for 1996-1998
the Next 3 Years
James L. Moody, Jr. 16.67% of Cash Fiscal 0 116,002 174,003
Compensation for 1996-1998
the Next 3 Years
Larry A. Plotkin 8% of Cash Fiscal 0 70,798 106,197
Compensation for 1996-1998
the Next 3 Years
Richard A. Anicetti 8% of Cash Fiscal 0 69,300 103,949
Compensation for 1996-1998
the Next 3 Years
Paul A. Fritzson 8% of Cash Fiscal 0 69,300 103,949
Compensation for 1996-1998
the Next 3 Years
Ronald C. Hodge 8% of Cash Fiscal 0 69,300 103,949
Compensation for 1996-1998
the Next 3 Years
Blythe J. McGarvie 8% of Cash Fiscal 0 69,300 103,949
Compensation for 1996-1998
the Next 3 Years
(1) The 1993 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 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 Human Resources Committee may decrease an executive officer's payout if
it determines 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 1996. 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 (except for Mr. Moody, who retires in 1997) 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. Anicetti,
Farrington, Fritzson, Hodge, Plotkin 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 9,182 12,242 15,303 18,364 18,364 18,364 18,364
100,000 20,432 27,242 34,053 40,864 40,864 40,864 40,864
150,000 31,682 42,242 52,803 63,364 63,364 63,364 63,364
200,000 42,932 57,242 71,553 85,864 85,864 85,864 85,864
250,000 54,182 72,242 90,303 108,364 108,364 108,364 108,364
300,000 65,432 87,242 109,053 130,864 130,864 130,864 130,864
350,000 76,682 102,242 127,803 153,364 153,364 153,364 153,364
400,000 87,932 117,242 146,553 175,864 175,864 175,864 175,864
450,000 99,182 132,242 165,303 198,364 198,364 198,364 198,364
500,000 110,432 147,242 184,053 220,864 220,864 220,864 220,864
Table II: Defined Benefit Social Security Offset Formula
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40 45
50,000 8,738 11,651 14,563 17,476 17,500 20,000 22,500
100,000 21,238 28,317 35,397 42,476 42,476 46,348 51,348
150,000 33,738 44,984 56,230 67,476 67,476 73,848 81,348
200,000 46,238 61,651 77,063 92,476 92,476 101,348 111,348
250,000 58,738 78,317 97,897 117,476 117,476 128,848 141,348
300,000 71,238 94,984 118,730 142,476 142,476 156,348 171,348
350,000 83,738 111,651 139,563 167,476 167,476 183,848 201,348
400,000 96,238 128,317 160,397 192,476 192,476 211,348 231,348
<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 13 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. Anicetti 15 years, Mr.
Farrington 28 years, Mr. Fritzson 19 years, Mr. Hodge 16 years, Mr. Moody
38 years, Mr. Plotkin 25 years and Mrs. McGarvie 2 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. The Tables do
not reflect a recent Plan amendment which becomes effective January 1,
1998.
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 unadjusted basic 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 acceleration of payments under the
DEFERRED COMPENSATION PLAN. Upon such termination, each is also entitled
<PAGE>
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
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 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.
<PAGE>
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 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, Anicetti, Fritzson,
Hodge, Plotkin or Mrs. McGarvie, other than for good cause (as defined), or
if any of Messrs. Moody, Farrington, Anicetti, Fritzson, Hodge, Plotkin or
Mrs. McGarvie were to voluntarily terminate employment with good reason (as
defined), the Employment Continuity Agreements would provide for cash
severance payments of $1,307,880, $1,890,000, $600,000, $600,000, $600,000,
$600,000 and $600,000, respectively, based on the current annual base
salaries and basic awards for each of those executive officers.
<PAGE>
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
COMPENSATION PHILOSOPHY
Compensation should be:
- Aligned with the Company's business strategies and shareholder interests.
- Based on performance by the Company, the business unit (where
applicable), and the individual.
- Competitive in the marketplace in which the Company competes for
executives.
- Based on the same principles as apply to other salaried associates,
except that executives should have a greater portion of their
compensation at risk.
Therefore:
- A significant portion of compensation for executives is tied to measures
of performance of the business as a whole.
- Executive compensation is tied to both short- and long-term business
results. In addition to rewards for annual results, executives are
rewarded for achieving sustained long-term results.
- The interests of executives are linked to those of shareholders through
Company stock ownership and options. The Company has established stock
ownership guidelines for executives as a multiple of salary depending on
position (CEO and Chairman: 5; Senior Vice President: 3; Vice President:
2).
In addition,
- The Company has a minimal number of special benefits and perquisites for
executives compared with other companies, and those in place are based on
business necessity.
- The income tax deductibility of executive compensation is preserved to
the extent consistent with the Company's compensation philosophy.
COMPENSATION STRUCTURE
Executive pay consists of base salary, annual incentives, stock options and
other long-term incentives, and retirement benefits. If the Company
achieves its short- and long-term goals, long-term incentive plan awards
and stock options account for one-half of total compensation for the CEO
and Chairman, and one-third of total compensation for other senior
officers.
<PAGE>
SALARY: Salary ranges for each position reflect the skills required and the
scope of responsibility of that position. Salary increases are based on
individual performance and competitive data. Overall, 1996 salary levels
corresponded to approximately the median level of surveyed companies. The
salary of the CEO was below median because a greater portion of his
compensation is paid through performance-based awards.
ANNUAL INCENTIVE PLAN: If the Company achieves an annual performance goal
based on profit objectives set by the Board of Directors, its executives
receive target awards equal to 50% of their salary. Actual award payments
range from 0 to 125% of the targeted amount, depending on Company
performance. No awards are earned unless the Company attains at least 85%
of the performance goal. The Board may adjust the amount awarded to any
executive to reflect that individual's performance, but no such adjustment
has been made for the last three fiscal years.
STOCK OPTIONS: Executives receive stock options each year entitling them to
purchase shares of Hannaford stock at an option price equal to the fair
market value of the stock on the date of the grant. The number of shares
that may be purchased is based on the executive's salary (CEO and Chairman:
225%; Senior Vice President: 108%; Vice President: 50%).
LONG-TERM INCENTIVE PLAN: The long-term incentive plan rewards senior
executives for sustained growth in earnings per share (EPS) over a
designated three-year period. Actual award payments vary from 0 to 150% of
the "basic award" depending on the Company's growth in EPS relative to
performance goals. The basic award is expressed as a percentage of salary
and incentive pay for the three year period (CEO and Chairman: 16.67%;
Senior Vice President: 8%; Vice President: 4.5%). Executives receive 50%
of their award in Company stock which must be held for at least three
years, and the remainder in cash to meet tax withholding requirements. The
Committee may decrease any executive's payout if his or her performance is
inconsistent with the amount of the award, but no such adjustment has been
made for the last three fiscal years.
PENSIONS: Because current law limits the pension benefits payable to
executives from tax-qualified plans, the Company maintains a non-qualified
Supplemental Executive Retirement Plan in addition to the tax-qualified
Employees' Retirement Plan. The combined benefits from both plans equal
the amount that would be payable to executives under the tax-qualified
Employees' plan if no tax law limits were in place.
OTHER BENEFIT PLANS: Executives may participate in a number of other broad-
based benefit plans, including the Northeast or Southeast Savings and
Investment Plan (401(k) plans), the Employee Stock Purchase Plan, and
various health and welfare benefit plans.
<PAGE>
COMPENSATION OF CEO IN 1996
SALARY: Hugh G. Farrington, CEO, received a 6.7% increase in salary to
$400,000 per year, effective January 1, 1996. While no particular weight
was assigned to any factor, the increase was based upon:
- his performance as measured by Company profitabilty and his
achievement of goals discussed with the Board.
- the desired mix of salary, short-term and long-term compensation.
- a review of competitive data.
ANNUAL INCENTIVE: Because the Company performed well in 1996, achieving 94%
of its annual profit objective, Mr. Farrington, like other senior
executives, received 87.5% of the target award, equal to 43.8% of salary
($175,000).
LONG-TERM INCENTIVE PLAN: The Company's growth in earnings per share for
the period 1992-1996 entitled Mr. Farrington to a payout of 26.9% of the
basic award ($75,591, paid 50% in Company stock and 50% in cash).
Mr. Farrington's basic award level for the next three-year period
(1997-1999) is set at 16.67% of his salary and annual incentive
payment during that period.
STOCK OPTION PLAN: In 1996, Mr. Farrington received a stock option grant of
225% of his salary, entitling him to purchase 29,630 shares of Hannaford
stock at a price equal to the fair market value of the stock on the date of
grant.
GOVERNANCE
The Human Resources Committee of the Board of Directors reviews and
approves all compensation arrangements for executives. The Committee,
which consists entirely of non-employee Directors, retains independent
consultants for advice on compensation matters. It also considers
recommendations from management and the Board.
Each year, the Committee reviews the Company's compensation practices and
coordinates the performance review of the Chief Executive Officer and the
Chairman of the Board.
The Committee sets compensation at levels appropriate to attract and retain
high-quality individuals. For competitive reference, the Committee uses
surveys of executive compensation at a variety of food industry and other
retail companies, as well as comparisons of pay levels and financial
performance at companies included in the stock performance graph shown on
page 16.
<PAGE>
The Committee believes that the Company's compensation programs during 1996
have met our objectives.
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
1991 1992 1993 1994 1995 1996
Hannaford Bros. Co. 100 99 97 117 115 161
S&P 500 100 108 118 120 165 203
Retail Food/Grocery 100 99 97 104 132 173
Assumes $100 invested on December 31, 1991 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. Penn Traffic Company
American Stores Co. Riser Foods, Inc.
Food Lion, Inc. Ruddick Corporation
Giant Food, Inc. Safeway, Inc.
Great Atlantic & Pacific Tea Co. Smith's Food and Drug Centers, Inc.
Hannaford Bros. Co. Vons Companies, Inc.
Kroger Company Weis Markets, Inc.
Marsh Supermarkets, Inc. Winn Dixie Stores, Inc.
The list of companies included in the retail food and grocery index was
revised this year. One company, Stop and Shop Companies, Inc., which was
previously included in the 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.
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 May 14, 1996, 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
<PAGE>
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, 1998, unless further
extended. The Agreement provides that its term will be automatically
renewed for successive one-year periods (but not beyond December 31, 2000)
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 28, 1996, and subject to ratification by shareholders, have been
appointed to serve as auditors for the fiscal year ending January 3, 1998.
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>
PROPOSED AMENDMENT TO THE
HANNAFORD BROS. CO. EMPLOYEE STOCK PURCHASE PLAN
Originally adopted in 1982, the Company's Employee Stock Purchase Plan
permits eligible employees to purchase Common Stock through payroll
deductions. A total of 1,880,000 shares have been authorized from time to
time for issuance under the Plan (as adjusted for stock splits). To date,
a total of 1,794,780 shares have been issued under the Plan, leaving only
85,220 additional authorized shares.
Subject to shareholder approval, the Board of Directors has amended
the Plan to increase the total authorized shares by an additional 750,000,
thereby permitting continued use of the Plan during 1997 and future years.
If approved by the shareholders, the amendment will be effective as of
February 11, 1997 (the date of its adoption by the Board).
Pursuant to SEC requirements, the following table sets forth certain
information concerning shares acquired under the Plan in 1996. The
amendment described above would not have affected the value or amount of
awards made for 1996. For purposes of this table, the value of each unit
is $11.919, representing the amount by which the fair market value per
share of the Common Stock on the exercise date exceeded the exercise price
of an award. Due to the nature of the Plan, the value and amount of awards
for 1997 cannot presently be determined.
NEW PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED)
DOLLAR VALUE ($) NO. OF UNITS
(SHARES)
Hugh G. Farrington 10,870 912
James L. Moody, Jr. 7,521 631
Larry A. Plotkin 5,137 431
Richard A. Anicetti 5,030 422
Paul A. Fritzson 5,030 422
Ronald C. Hodge 5,030 422
Blythe J. McGarvie 5,018 421
All Executive Officers as a Group 58,857 4,938
All Non-Executive
Directors as a Group 0 0
All Non-Executive
Officers as a Group 37,593 3,154
A copy of the proposed amendment is attached as Exhibit A. The
affirmative vote of a majority of the outstanding shares of Common Stock of
the Company is needed to approve the foregoing amendment. (Abstentions and
broker non-votes will have the same effect as a vote against the proposal.)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
SHAREHOLDER PROPOSALS
To be eligible for inclusion in the proxy materials for the 1998 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 Secretary of
the Company and received at the Company's principal executive offices by
December 2, 1997.
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 28, 1996, 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.
<PAGE>
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 Hugh G. Farrington, Andrew P. Geoghegan 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 12, 1997, or any adjournment thereof.
1. TO ELECT FOUR CLASS I 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)
Bruce G. Allbright, William T. End, James W. Gogan
or Claudine B. Malone.
2. TO ELECT ONE CLASS III DIRECTOR
FOR Robert J. Murray
WITHHOLD AUTHORITY to vote for Robert J. Murray
3. TO RATIFY THE APPOINTMENT OF AUDITORS FOR AGAINST ABSTAIN
4. TO APPROVE THE AMENDMENT TO THE HANNAFORD
BROS. CO. EMPLOYEE STOCK PURCHASE PLAN FOR AGAINST ABSTAIN
5. 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, 2, 3 and 4.
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 1996 Annual Report.
Dated 1997
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
<PAGE>
Exhibit A
FOURTH AMENDMENT
TO THE
HANNAFORD BROS. CO.
EMPLOYEE STOCK PURCHASE PLAN
This Fourth Amendment to the Hannaford Bros. Co. Employee Stock
Purchase Plan (the "Plan"), as amended and restated effective October 19,
1994, and thereafter amended effective February 7, 1995, August 20, 1995
and October 2, 1996, is made with reference to the following premises:
WHEREAS, Hannaford Bros. Co. (the "Corporation") established and
maintains the Plan to offer employees an opportunity to invest in its
common stock; and
WHEREAS, Section 13 of the Plan authorizes the Board of Directors of
the Corporation, subject to the approval of stockholders, to amend the Plan
from time to time to increase the maximum aggregate number of shares which
may be issued under options granted; and
WHEREAS, the Board of Directors desires to so amend the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The terms used in this Amendment shall have the meanings set forth
in the Plan, unless the context indicates otherwise.
2. Section 4 is hereby amended to read as follows:
"4. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 12, the maximum aggregate number of Shares which may
be issued under Options granted under the Plan shall be equal
to the sum of the following:
(a) the sixty thousand (60,000) Shares authorized when the
Plan was first approved by shareholders, as such number
was thereafter adjusted in accordance with Section 12; and
<PAGE>
(b) the four hundred thousand (400,000) Shares authorized when
the Plan was amended effective February 2, 1989, as such
number was thereafter adjusted in accordance with Section
12; and
(c) seven hundred fifty thousand (750,000) shares.
In the event that any Option granted under the Plan expires
or terminates for any reason, without having been exercised in
full, the Shares subject to, but not issued under, such Option
shall become available for other Options, unless the Plan
shall have been terminated."
3. This Amendment shall be effective February 11, 1997, if
subsequently approved by stockholders in accordance with Section
13 of the Plan.
