Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1998
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 19, 1998, at 9:30 a.m. The purpose of the Meeting will be to
consider and act upon the following:
1. Election of four Class II Directors to serve until the Annual
Meeting of Shareholders in 2001.
2. Election of two Class I Directors to serve until the Annual Meeting
of Shareholders in 2000.
3. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors of the Company for the fiscal year ending
January 2, 1999.
4. A proposal to approve the 1998 Stock Option Plan.
5. A proposal to re-approve the 1993 Long Term Incentive Plan.
6. 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 24,
1998, 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 3, 1998
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 3, 1998
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 19, 1998
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 19,
1998, 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 4, 1998.
VOTING SECURITIES OF THE COMPANY
As of March 24, 1998, there were outstanding and entitled to vote
42,308,697 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 24, 1998, 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 24, 1998. 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) 2,212,427 5.2
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,
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, 1998,
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 24, 1998. 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 6,587(1)
Robert D. Bolinder 12,150(2)
William T. End 5,550(3)
Hugh G. Farrington 351,587(4)
James W. Gogan 21,600
Richard K. Lochridge 7,587(5)
Renee M. Love 3,150(6)
Claudine B. Malone 1,889
Robert J. Murray 2,000
Dr. Walter J. Salmon 135,560(7)
John Robert Sobey 0(8)
David F. Sobey 10,835,921(9) 25.6
Robert L. Strickland 3,000
Robert J. Tarr, Jr. 3,500(10)
Other Named Executive Officers
Richard A. Anicetti 42,430(11)
Paul A. Fritzson 43,207(12)
Ronald C. Hodge 36,409(13)
Blythe J. McGarvie 20,928(14)
Larry A. Plotkin 79,072(15)
<PAGE>
All Executive Officers and Directors
as a Group 11,699,638(15) 27.7
(1) Includes 4,587 shares that Mr. Allbright has the right to acquire
within 60 days by exercise of stock options.
(2) Includes 2,150 shares that Mr. Bolinder has the right to acquire
within 60 days by exercise of stock options.
(3) Includes 2,150 shares that Mr. End has the right to acquire
within 60 days by exercise of stock options.
(4) Includes 524 shares owned by Mr. Farrington's wife. Also includes
132,567 shares that Mr. Farrington has the right to acquire within 60
days by exercise of stock options.
(5) Includes 4,587 shares that Mr. Lochridge has the right to acquire
within 60 days by exercise of stock options.
(6) Includes 2,150 shares that Ms. Love has the right to acquire within
60 days by exercise of stock options.
(7) Includes 1,500 shares owned by Dr. Salmon's wife.
(8) John Robert 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. John Robert Sobey
expressly disclaims any beneficial ownership.
(9) 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).
(10) Includes 1,000 shares held in a family charitable trust.
(11) Includes 34,862 shares that Mr. Anicetti has the right to acquire
within 60 days by exercise of stock options.
(12) Includes 35,227 shares that Mr. Fritzson has the right to acquire
within 60 days by exercise of stock options.
(13) Includes 28,377 shares that Mr. Hodge has the right to acquire within
60 days by exercise of stock options.
(14) Includes 18,045 shares that Mrs. McGarvie has the right to acquire
within 60 days by exercise of stock options.
(15) Includes 10,368 shares owned by Mr. Plotkin's spouse and children.
Also includes 39,832 shares that Mr. Plotkin has the right to acquire
within 60 days by exercise of stock options.
(16) Includes 12,392 shares held by immediate family members. Also includes
379,509 shares which may be acquired 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 II Directors expires at the upcoming Meeting.
The nominees for election as Class II Directors at this Meeting are
Hugh G. Farrington, David F. Sobey, Robert L. Strickland and Robert J. Tarr,
Jr. Messrs. Farrington, Sobey and Strickland are current Class II Directors
who are standing for re-election. Mr. Tarr is a nominee as a new Director.
The nominees for election as Class I Directors at this meeting are Walter J.
Salmon and John Robert Sobey. Dr. Salmon is currently a Class II Director
and is standing for re-election into Class I for purposes of future Board
succession planning. Mr. Sobey is a nominee for election to succeed James
W. Gogan as one of the two designees of the Sobey Parties. Mr. Gogan will
be retiring from the Board effective May 19, 1998.
Messrs. Farrington, Salmon, D. Sobey, J. R. Sobey, Strickland and Tarr
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 II
Directors nor more than two nominees for Class I 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 24, 1998, and year first elected
a Director.
PRINCIPAL OCCUPATION DIRECTOR
NAME OR EMPLOYMENT AGE SINCE
CLASS I (TERM EXPIRES AT THE 2000 ANNUAL MEETING)
Bruce G. Allbright(1) Retired President, Dayton Hudson 69 1991
Corporation, Minneapolis, Minnesota
William T. End(2) Chairman and Chief Executive Officer, 50 1995
International Cornerstone Group,
Portland, Maine (Catalog Retailer);
Chief Executive Officer, Lands' End,
Inc., 1991 to 1995; Executive Vice
President, L.L. Bean, Inc., 1975
to 1991.
James W. Gogan(3) President and Chief Executive 59 1988
(Retiring May 19, 1998) Officer, Empire Company Limited,
Stellarton, Nova Scotia (Holding
Company)
<PAGE>
Claudine B. Malone(4) President, Financial & Management 61 1991
Consulting, Inc., McLean, Virginia
John Robert Sobey(5) President & Chief Operating Officer, 49 --
(nominee for election) Sobeys Inc., Stellarton, Nova Scotia
CLASS II (TERM EXPIRES AT THIS ANNUAL MEETING)
Hugh G. Farrington(6) Chief Executive Officer since 53 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 67 1964
of Retailing, Emeritus, Harvard
University Graduate School
of Business Administration,
Boston, Massachusetts
David F. Sobey(8) Chairman of the Board, 66 1981
Sobeys Inc., Stellarton,
Nova Scotia
Robert L. Strickland(9) Retired Chairman of the Board, 67 1994
Lowe's Companies, Inc., Winston-Salem,
North Carolina
Robert J. Tarr, Jr.(10) Consultant; formerly President, Chief 54 --
(nominee for election) Executive Officer and Chief Operating
Officer, Harcourt General, Inc. and
The Neiman Marcus Group, Inc., Boston,
Massachusetts from 1991 to 1997
CLASS III (TERM EXPIRES AT THE 1999 ANNUAL MEETING)
Robert D. Bolinder(11) President, Robert D. Bolinder 66 1984
Associates, Management Consultants,
Boise, Idaho; retired Executive
Vice President, Smith's Food and
Drug Centers, Inc., Salt Lake City,
Utah
Richard K. Lochridge(12) President, Lochridge & Company, Inc., 54 1993
Boston, Massachusetts (Management
Consulting)
Renee M. Love(13) Chairman and Chief Executive Officer, 52 1996
Omega Group, Inc., Bryn Mawr,
Pennsylvania (Strategic Consulting)
Robert J. Murray(14) Chairman and Chief Executive Officer, 56 --
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. End is Chairperson of the Human Resources Committee of the Board
and is a member of the Corporate Governance Committee of the Board.
Prior to rejoining the Board in 1995, Mr. End served as a Hannaford
Director from 1983 to 1993.
(3) 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.
(4) 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.
(5) Mr. J. R. Sobey is a Director of Empire Company Limited and Sobeys Inc.
(6) Mr. Farrington is a member of the Executive Committee of the Board.
(7) Dr. Salmon is Chairman of the Board, 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 Stores, Inc.; The Neiman Marcus Group,
Inc.; The Quaker Oats Company; Harrah's Entertainment, Inc; Cole
National Corporation; and PetsMart, Inc. He is also a Director of the
Tufts Health Plan and the Harvard Business School Publishing Company.
(8) Mr. D. Sobey is a member of the Executive Committee of the Board. He
is also a Director of Empire Company Limited; Sobeys Inc.; and
CHC Helicopter Corporation.
(9) Mr. Strickland is Chairperson of the Corporate Governance Committee of
the Board and is a member of the Human Resources and Executive
Committees of the Board. He is also a Director of Lowe's Companies,
Inc.; and T. Rowe Price Associates, Inc. He is Deputy Chairperson of
the Federal Reserve Bank of Richmond.
(10) Mr. Tarr is a Director of Houghton Mifflin Company; and John Hancock
Mutual Life Insurance Company.
(11) Mr. Bolinder is Chairperson of the Finance Committee of the Board and a
member of the Corporate Governance Committee of the Board. He is also
a Director of Idaho Power Company.
(12) Mr. Lochridge is a member of the Executive, 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. Murray is a member of the Audit Committee of the Board. He is also
a Director of Allmerica Financial Corporation; Fleet National Bank;
LoJack Corporation; and New England Business Service, Inc.
<PAGE>
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND BOARD COMMITTEES
MEETINGS
During 1997 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 1997.
COMMITTEES
The Company has an Audit Committee, Human Resources Committee, Corporate
Governance Committee and Finance Committee, each consisting of
non-management members of the Board, and an Executive Committee, consisting
of management and non-management members. Each Committee is elected by the
Board of Directors.
The Audit Committee's function is to oversee the work of the Company's
internal and external auditors and to monitor the adequacy of the accounting
and internal control system. The Committee met on six occasions during
1997.
The Human Resources Committee reviews the compensation of the Directors
and senior executives and makes recommendations to the Board with respect to
proposed changes in compensation programs. The Committee has broad
discretion over the administration of various compensation plans of the
Company, and, in certain instances, has the authority to directly amend
benefit plans. The Committee met on five occasions during 1997.
The Corporate Governance Committee reviews various matters concerning
the Board's role 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. The Committee is also responsible for nominating
candidates for election to the Board and 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 five
occasions during 1997.
The Finance Committee oversees and makes recommendations to the Board
with respect to financial structure, dividend policy and related matters.
It also serves as the named fiduciary responsible for overseeing the
investment of the assets of the Company's tax-qualified retirement plans.
The Committee met on five occasions during 1997.
<PAGE>
The Executive Committee's 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 did not meet during
1997.
DIRECTORS' COMPENSATION
Each non-management Director 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. Hugh G. Farrington
(the only management member of the Board) 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.
Dr. Salmon also receives $76,000 per year, which covers his services as
Chairperson of the Board and Chairman of the Executive Committee, his Board
and committee meeting attendance fees and the additional consulting services
he provides.
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 paid
Omega Group, Inc. $48,800, plus reasonable out-of-pocket expenses to third
parties, for an assignment that was completed in 1997.
The Company maintains a Stock Ownership Plan for Outside Directors which
offers non-management Directors a potential source of performance-based
deferred compensation tied to the long-term performance of the Company as
measured by the price of its Common Stock.
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 leaves the Board before age 70, except 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
ceases to be a member of the Board.) 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
<PAGE>
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, 1,340; Mr. Bolinder, 2,828;
Mr. End, 1,094; Mr. Gogan, 2,649; Ms. Malone, 1,340; Dr. Salmon, 3,367;
and Mr. D. Sobey, 3,008.
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 leaves the Board or reaches age 70, whichever is later. All
payments from the Plan are made in cash.
For 1997 each non-management Director received an award under the Plan
equal to 1,400 performance shares. The number of performance shares
presently held by the non-management Directors are: Mr. Allbright,
7,600; Mr. Bolinder, 7,600; Mr. End, 4,300; Mr. Gogan, 7,600;
Mr. Lochridge, 7,600; Ms. Love, 2,600; Ms. Malone, 7,600; Mr. Murray,
1,200; Dr. Salmon, 7,600; Mr. D. Sobey 7,600; and Mr. Strickland, 5,900.
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 equal to 100%
of the closing price of Hannaford Common 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 acquired 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.
<PAGE>
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 retainer, 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 designate at the time of the deferral election 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.
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. The stock equivalents, stock options and stock deferral units,
described above, under the Stock Ownership Plan are 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 holdings of Hannaford stock and stock
options, see the table and accompanying notes on page 2.
<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(2) Compensation(3)
Position Year ($)(1) ($) Options (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
HUGH G. FARRINGTON 1997 428,077 213,847 30,981 111,462 2,625
President and 1996 400,000 175,000 29,630 75,591 2,625
Chief Executive Officer 1995 375,000 188,287 31,543 134,290 2,625
RICHARD A. ANICETTI 1997 203,846 101,779 6,256 23,926 6,000
Senior Vice President/Gen. 1996 185,000 80,938 37,367 13,043 6,000
Manager, Southeast 1995 157,404 79,370 12,146 12,813 6,000
Operations
PAUL A. FRITZSON 1997 203,846 101,779 6,256 23,931 2,625
Sr. Vice Pres., Marketing, 1996 185,000 80,938 37,367 16,022 2,625
Merchandising&Distribution 1995 157,404 79,370 12,146 27,300 2,625
RONALD C. HODGE 1997 203,846 101,779 8,717 24,060 2,625
Senior Vice President, 1996 185,000 80,938 37,367 13,362 2,625
Northeast Operations 1995 160,557 80,915 12,470 13,226 2,625
BLYTHE J. MCGARVIE 1997 203,846 101,779 7,946 22,424 2,625
Senior Vice President and 1996 185,000 80,938 6,597 8,680 2,625
Chief Financial Officer 1995 167,981 84,488 13,766 8,027 0
LARRY A. PLOTKIN 1997 203,846 101,779 6,256 25,650 2,625
Senior Vice President, 1996 189,000 82,688 6,739 20,163 2,625
Corporate Development 1995 181,600 91,181 7,353 34,857 2,625
(1) Reflects a 53 week fiscal year for 1997.
(2) Reflects payouts under the LONG-TERM INCENTIVE PLAN for the three-year award period ending in
the stated year.
(3) Reflects Company matching contributions allocated to each officer's account under the SAVINGS AND
INVESTMENT PLAN.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants to the named executive officers during the
past year. No stock appreciation rights ("SARs") were granted during this period.
Individual Grants(1)
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or Grant Date
Granted Employees in Base Price Expiration Present
Name (#) Fiscal year ($/Share) Date Value(2)
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 27,293 6.7% $34.625 05/12/07 $253,279
(3) 3,688 .1% 40.3125 05/13/01 27,881
Richard A. Anicetti 6,256 1.5% 34.625 05/12/07 58,056
Paul A. Fritzson 6,256 1.5% 34.625 05/12/07 58,056
Ronald C. Hodge 6,256 1.5% 34.625 05/12/07 58,056
(3) 1,207 42.25 05/13/01 9,572
(3) 1,254 42.25 05/14/02 11,775
Blythe J. McGarvie 6,256 1.5% 34.625 05/12/07 58,056
(3) 1,690 34.875 05/24/05 13,098
Larry A. Plotkin 6,256 1.5% 34.625 05/12/07 58,056
(1) All options were granted under the 1988 STOCK PLAN at 100% of market price at the date of grant.
All options (other than reload 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. Each reload option 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 one-half of the full stated option term. For
options expiring 5/12/07, assumes an interest rate of 6.85%, annual dividend yield of 1.55% and
volatility of 19.42%. For reload options expiring 5/13/01, 5/14/02 and 5/24/05, assumes an
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 through a surrender of Common
Stock. See note (1) above.
</TABLE>
<PAGE>
<TABLE>
<CAPTION> AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises by the named executive officers during
the past year and the value of such officers' unexercised options at January 3, 1998, 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 14,731 298,137 113,592 50,734 2,125,462 481,530
Richard A. Anicetti 0 0 30,578 41,424 507,591 425,826
Paul A. Fritzson 2,074 33,054 30,943 41,424 570,945 425,826
Ronald C. Hodge 5,753 119,529 24,093 43,885 427,338 427,364
Blythe J. McGarvie 2,204 17,908 13,761 12,344 213,925 120,107
Larry A. Plotkin 0 0 35,501 10,748 701,046 107,762
(1) Amounts in this column reflect the 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 market price of the Common Stock on January 2, 1998 ($42.875),
minus the exercise price of the option. All options were granted at 100% of market price on the
date of grant. The term "in-the-money" refers to options having an exercise price less than the
year-end market price.
</TABLE>
<PAGE>
<TABLE>
<CAPTION> LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table provides information on long term incentive awards granted to the named executive
officers. All awards were granted under the 1993 LONG TERM INCENTIVE PLAN and cover the three-year
performance period beginning in 1997.
ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, PERFORMANCE OR UNDER NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER OTHER PERIOD
RIGHTS(1)(#) UNTIL THRESHOLD(2) TARGET(2) MAXIMUM(2)
MATURATION OR ($) ($) ($)
PAYOUT
<S> <C> <C> <C> <C> <C>
Hugh G. Farrington 16.67% of Cash Fiscal 109,278 327,834 491,750
Compensation for 1997-1999
the Next 3 Years
Richard A. Anicetti 8% of Cash Fiscal 24,973 74,918 112,378
Compensation for 1997-1999
the Next 3 Years
Paul A. Fritzson 8% of Cash Fiscal 24,973 74,918 112,378
Compensation for 1997-1999
the Next 3 Years
Ronald C. Hodge 8% of Cash Fiscal 24,973 74,918 112,378
Compensation for 1997-1999
the Next 3 Years
Blythe J. McGarvie 8% of Cash Fiscal 24,973 74,918 112,378
Compensation for 1997-1999
the Next 3 Years
Larry A. Plotkin 8% of Cash Fiscal 24,973 74,918 112,378
Compensation for 1997-1999
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 based on after-tax cumulative earnings per share
(EPS) growth over the three-year period.
(2) "Threshold", "target" and "maximum" refer, respectively, to 33%, 100% and 150% of the
basic award. The target amount will be paid if the targeted EPS growth is achieved.
The threshold amount will be paid upon achievement of 67% of the targeted EPS growth.
The maximum amount will be paid upon achievement of 125% of the targeted EPS growth.
Since the actual award is a function of future compensation paid over three years,
the amount of a potential award cannot presently be determined. The amounts set forth
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 relevant performance goal. 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.
</TABLE>
<PAGE>
PENSION PLAN
The following table sets forth aggregate estimated annual benefits
payable upon retirement to employees under the RETIREMENT PLAN and the
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, as in effect through 1997.
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40 45
$ 50,000 $ 9,052 $ 12,070 $ 15,087 $ 18,104 $ 18,104 $ 18,104 $ 18,104
100,000 20,302 27,070 33,837 40,604 40,604 40,604 40,604
150,000 31,552 42,070 52,587 63,104 63,104 63,104 63,104
200,000 42,802 57,070 71,337 85,604 85,604 85,604 85,604
250,000 54,052 72,070 90,087 108,104 108,104 108,104 108,104
300,000 65,302 87,070 108,837 130,604 130,604 130,604 130,604
350,000 76,552 102,070 127,587 153,104 153,104 153,104 153,104
400,000 87,802 117,070 146,337 175,604 175,604 175,604 175,604
500,000 110,302 147,070 183,837 220,604 220,604 220,604 220,604
<PAGE>
Benefits 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. Benefits are based on
the assumption that payments are made in the form of a straight life
annuity. 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 29 years, Mr. Anicetti 15 years, Mr. Fritzson 20 years, Mr.
Hodge 17 years, Mrs. McGarvie 3 years and Mr. Plotkin 26 years.
The table does not reflect a recent plan amendment which became
effective January 1, 1998. Under the amendment, a participant's retirement
benefit as of December 31, 1997, will be expressed as a cash balance account
that includes an adjustment for participants who have fewer years to accrue
future benefits under the cash balance design. The new design includes an
annual contribution credit equal to 3% of compensation and monthly interest
credits at the one-year Treasury Bill rate plus 1/2 of 1%.
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 agreement for Mr. Farrington provides that if within 12 months
following a change in control, the Company terminates the employment of Mr.
Farrington, other than for good cause (as defined in the agreement), 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 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, he is entitled to continue participation
in the Company's insurance and certain employee benefit plans (excluding the
tax-qualified retirement plans) for a period of 36 months following
termination of employment, unless his continued participation in such plans
is provided for under the plans' retirement provisions. Further, upon such
termination, he is entitled to acceleration of payments under the DEFERRED
COMPENSATION PLAN, payment of the award earned under the HANNAFORD BROS. CO.
ANNUAL INCENTIVE PLAN prior to his termination, and to such benefits and
<PAGE>
rights as are provided under the Company's 1988 STOCK PLAN, 1998 STOCK
OPTION PLAN, 1993 LONG TERM INCENTIVE PLAN and SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN. For purposes of calculating any benefit payable under the
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, the number of his monthly
contribution credits is increased to reflect an additional 36 months of
participation.
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 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 continue
participation in the Company's insurance and certain employee benefit plans
(excluding the tax-qualified retirement plans) for a period of 24 months
following termination of employment, unless his or her continued
participation in such plans is provided for under the plans' retirement
provisions. Further, upon such termination, such officer is entitled to the
same acceleration of deferred compensation payments and payment of annual
incentive award as is provided under the agreement for Mr. Farrington, and
to such benefits and rights as are provided under the 1988 STOCK PLAN, 1998
STOCK OPTION PLAN, 1993 LONG TERM INCENTIVE PLAN and 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 or her monthly contribution credits is increased to
reflect an additional 24 months of participation.
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 outside
directors at the beginning of any 25-month period constituting less than a
majority of the Board of Directors at the end of such 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.
<PAGE>
The Board of Directors has authorized the creation of a separate trust
to secure the payment of benefits under the Employment Continuity
Agreements, THE NONQUALIFIED SAVINGS AND INVESTMENT PLAN 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 plans. 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
agreements and plans, 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. Farrington, Anicetti, Fritzson, Hodge,
Plotkin or Mrs. McGarvie, other than for good cause (as defined), or if any
of Messrs. 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 $1,966,500, $624,000, $624,000, $636,000, $624,000 and $624,000,
respectively, based on the current annual base salaries and basic awards for
each of those executive officers.
<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 that 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: 5; Senior Vice President: 3; Vice President: 2).
IN ADDITION,
- - Special benefits and perquisites for executives are minimized and based
on business necessity.
COMPENSATION STRUCTURE
Executive pay consists of base salary, annual incentives, stock options and
other long-term incentives, and 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 one-third of
total compensation for other senior officers.
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, 1997 salary levels corresponded
<PAGE>
to approximately the median level of surveyed companies. The salary of the
CEO is 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, 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 options that may be granted
is based on the executive's salary (CEO: 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: 16.67%; Senior Vice President: 8%; Vice President: 8% or 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 adjust 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.
RETIREMENT PLANS
Because current law limits the retirement benefits payable to executives
from tax-qualified plans, the Company maintains a Non qualified Supplemental
Executive Retirement Plan and a non-qualified Savings and Investment
(401(k)) Plan in addition to the tax-qualified pension and 401(k) plans.
The combined benefits from these plans equal the amount that would be
payable to executives under the tax-qualified plans, 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 Employee Stock Purchase Plan, and various health and welfare
benefit plans.
<PAGE>
COMPENSATION OF CEO IN 1997
SALARY
Hugh G. Farrington, CEO, received a 5.0% increase in salary to $420,000 per
year, effective January 1, 1997. The increase was based upon:
- his performance
- the desired mix of salary, short-term and long-term compensation
- a review of competitive data
ANNUAL INCENTIVE
Because the Company in 1997 achieved 100% of its annual profit objective,
Mr. Farrington, like other senior executives, received 100% of the target
award ($213,847), equal to 50% of salary paid in 1997 ($428,077 including
the 53rd week). Pursuant to its authority under the Plan, the Committee
determined 1997 profits without regard to a recent non-cash impairment
charge arising under SFAS No. 121.
LONG-TERM INCENTIVE PLAN
The Company's growth in earnings per share for the period 1995-1997 entitled
Mr. Farrington to a payout of 37.3% of the basic award ($111,462), paid 50%
in Company stock and 50% in cash. Pursuant to the Plan, earnings per share
excluded the effect of the recent non-cash impairment charge.
Mr. Farrington's basic award level for the next three-year period (1998-2000)
is set at 16.67% of his salary and annual incentive pay during that
period.
STOCK OPTION PLAN
In 1997, Mr. Farrington received a stock option grant equal to 225% of his
salary, entitling him to purchase 27,293 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
the level of compensation of the Chief Executive Officer in light of the
Board's annual performance evaluation.
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 15.
The Committee believes that the Company's compensation programs during 1997
have met our objectives.
Respectfully submitted,
WILLIAM T. END, Chairman
BRUCE G. ALLBRIGHT
RICHARD K. LOCHRIDGE
ROBERT L. STRICKLAND
<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
1992 1993 1994 1995 1996 1997
Hannaford Bros. Co. 100 98 118 116 163 211
S&P 500 100 110 112 153 189 252
Retail Food/Grocery 100 101 107 134 173 225
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. Kroger Company
American Stores Co. Marsh Supermarkets, Inc.
Food Lion, Inc. Penn Traffic Company
Fred Meyer, Inc. Ruddick Corporation
Giant Food, Inc. Safeway, Inc.
Great Atlantic & Pacific Tea Co. Weis Markets, Inc.
Hannaford Bros. Co. Winn Dixie Stores, Inc.
The list of companies included in the retail food and grocery index was
revised this year. Three companies, Smith's Food and Drug Centers, Inc.,
Riser Foods, Inc. and Vons Companies, Inc., which were previously included
in the index, are no longer publicly traded companies. Fred Meyer, Inc. has
been added.
For purposes of computing this index, the returns of the companies have
been weighted according to their 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
<PAGE>
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 and
to place one nominee of the Sobey Parties on the Executive Committee of the
Board. Presently, David F. Sobey and James W. Gogan serve as the Sobey
Parties' designees on the Board and David F. Sobey as the designee on the
Executive Committee. 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 LLP, outside counsel to the Company.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. were auditors for the fiscal year ended January
3, 1998, and subject to ratification by shareholders, have been appointed to
serve as auditors for the fiscal year ending January 2, 1999.
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 1998 STOCK OPTION PLAN
Subject to shareholder approval, the Board of Directors of the Company
has adopted the Hannaford Bros. Co. 1998 Stock Option Plan. The purpose of
the Plan is to provide associates of the Company and its subsidiaries with
incentives to increase their equity ownership in the Company and to aid the
Company in attracting and retaining executives and other associates of
outstanding ability. The 1998 Plan is intended to replace the 1988 Stock
Plan, under which the Company has been awarding stock options over the past
ten years.
Like the predecessor plan, the 1998 Plan provides the Human Resources
Committee of the Company broad discretion to grant incentive stock options,
nonqualified stock options, and stock appreciation rights ("SARs"). The
Committee will have the power to interpret the Plan and to establish rules
and regulations governing the administration of the Plan. The Committee
will also determine which associates of the Company and its subsidiaries
will be granted options or SARs. The Plan further provides that the
Committee may cancel an award in the event of an associate's failure to
comply with the terms of the award or misconduct. The following is a brief
description of different types of awards under the Plan.
OPTIONS. Incentive stock options and nonqualified stock options
are rights to purchase shares at a specified option price. These
options may be granted under the Plan at an option price not less than
100% of the fair market value of a share on the date of grant. The
terms of each option shall be set forth in an Option Agreement, and no
option may have an expiration date later than ten years from the date
of grant. Payment to the Company upon exercise of an option may be
made by check, Company stock or a combination thereof.
If a participant ceases to be an employee of the Company or
any subsidiary other than by reason of death or disability, any
incentive stock options which were exercisable by the participant on
the date of termination of employment may be exercised at any time
before their expiration date or within three months after the date of
termination, whichever is earlier, but only to the extent that the
options were exercisable when employment ceased. If a participant's
employment terminates because of disability, incentive stock options
which were exercisable on the date of termination may be exercised any
time before their expiration date, or within one year after the date of
termination of employment, whichever is earlier, but only to the extent
that the options were exercisable when employment ceased.
If a participant ceases to be an employee of the Company or any
subsidiary other than by reason of death, any nonqualified stock
option which is exercisable by the participant on the date of
termination may be exercised, as set forth in the Option Agreement, at
any time prior to the expiration date, but only to the extent that the
options were exercisable when employment ceased.
<PAGE>
In the event of a participant's death while employed by the
Company or any subsidiary, the participant's estate, or any person to
whom an incentive or nonqualified stock option passes by will or by the
laws of descent and distribution, may exercise the option within one
year after the date of death, to the extent the option was exercisable
by the participant prior to his or her death.
Unless an option qualifies as an incentive stock option, the
option holder generally will have ordinary income for federal income
tax purposes at the time of exercise, and the Company generally will
then have a corresponding deduction for compensation expense. The
income or deduction will equal the difference between the exercise
price and the then fair market value of the underlying shares. In
contrast, the holder of an incentive stock option generally will not be
taxed on the option at the time of exercise. If certain holding
periods and other conditions are met, the holder will instead have
capital gain or loss at the time of resale of the underlying shares,
equal to the difference between the resale price and the exercise
price; the Company will have no corresponding tax deduction.
STOCK APPRECIATION RIGHTS. SARs are the right to receive a
payment, the amount of which is a function of changes in the per share
value of the Company's stock. These rights may be granted under the
Plan at a grant price of at least 100% of the fair market value of a
share on the date of grant. Generally, the amount payable pursuant to
a stock appreciation right is determined by the difference between the
fair market value of a share on the date of exercise and the grant
price. Payments may be made in cash, shares or a combination thereof.
SARs may be granted in tandem with stock options.
Awards for 1998 under the new Plan have not yet been made by the Human
Resources Committee and are not currently determinable. Pursuant to SEC
requirements, the following table illustrates the type of benefits available
under the Plan, by describing equivalent stock options awarded during 1997
under the predecessor plan.
NEW PLAN BENEFITS
1998 STOCK OPTION PLAN
DOLLAR VALUE ($) IF STOCK
APPRECIATES FOR 10 YEARS AT NO. OF
NAME/POSITION 0%/YR. 5%/YR. 10%/YR. UNITS
Hugh G. Farrington 0 594,318 1,506,118 27,293
Larry A. Plotkin 0 136,227 345,227 6,256
Richard A. Anicetti 0 136,227 345,227 6,256
Paul A. Fritzson 0 136,227 345,227 6,256
Ronald C. Hodge 0 136,227 345,227 6,256
Blythe J. McGarvie 0 136,227 345,227 6,256
Executive Group 0 1,640,586 4,157,567 75,341
Non-Executive Director Group 0 0 0 0
Non-Executive Officer Employee Group 0 713,517 1,808,192 32,767
<PAGE>
A copy of the Plan is attached as Exhibit A. The affirmative vote of a
majority of the outstanding shares of Common Stock is needed to approve the
Plan. (For these purposes, abstentions and broker non-votes will have the
same effect as a vote against the Plan.) If approved by the shareholders,
the Plan will be effective as of February 13, 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PROPOSED 1998 STOCK OPTION PLAN.
RE-APPROVAL OF 1993 LONG TERM INCENTIVE PLAN
Under the Hannaford Bros. Co. 1993 Long Term Incentive Plan, which was
approved by shareholders in May of 1993, the Human Resources Committee
awards incentive compensation to selected key executives of the Company.
Awards are made for periods of at least three years, and the payout of each
award is contingent upon the Company achieving performance goals specified
by the Committee. The goals for an award period may be expressed in terms
of cumulative earnings per share, stock price, a combination thereof or a
similar quantifiable measure. A description of recent awards under the Plan
appears at pages 10 and 13 above.
Awards under the Plan are intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue
Code. Section 162(m) generally limits the tax deductibility of compensation
paid for any year to any of the executive officers named in the Summary
Compensation Table to $1,000,000. Qualifying performance-based compensation
is not subject to the deduction limit. For compensation to qualify as
performance-based, the material terms under which the compensation is to be
paid, including the performance goals, must be disclosed to and approved by
shareholders. Treasury Department regulations provide that if a
compensation committee has authority to change performance goals after
shareholder approval of a plan, the material terms of the plan must be
disclosed to and re-approved by shareholders no later than the first
shareholder meeting that occurs in the fifth year following the year in
which shareholders previously approved the plan.
Because the Plan permits the Human Resources Committee to set the
performance goals each year and because 1998 is the fifth year since
shareholders last approved the Plan, the Company is now seeking shareholder
re-approval of the Plan so that future awards will continue to constitute
performance-based compensation that is tax deductible by the Company.
The Human Resources Committee has determined the 1998 awards and
performance goals. The performance goals will be measured by the Company's
cumulative after-tax earnings per share growth for fiscal years 1998-2000.
Payouts under the Plan will depend upon future annual compensation levels
and therefore cannot presently be computed. Pursuant to SEC requirements,
the following table illustrates the benefits available under the Plan,
assuming that annual compensation levels increase by 4% per year.
<PAGE>
NEW PLAN BENEFITS
1993 LONG TERM INCENTIVE PLAN
DOLLAR VALUE ($) IF
COMPANY MEETS
NAME/POSITION THRESHOLD TARGET MAXIMUM NUMBER OF UNITS(1)
Hugh G. Farrington 112,564 341,103 511,655 16.67%
Richard A. Anicetti 25,712 77,915 116,783 8.00%
Paul A. Fritzson 25,712 77,915 116,873 8.00%
Ronald C. Hodge 26,207 79,414 119,121 8.00%
Blythe J. McGarvie 25,712 77,915 116,873 8.00%
Larry A. Plotkin 25,712 77,915 116,873 8.00%
Executive Group 61,150 185,302 277,953 8.00%
Non-Executive
Director Group 0 0 0 0
Non-Executive Officer
Employee Group 46,554 141,072 211,608 8.00% or 4.5%
(1) Percentage of Cash Compensation for the next three years.
For purposes of the foregoing table, "cash compensation" means the
participant's aggregate salary and bonus compensation over the three-year
award period ending in 2000. Company performance below the threshold goal
will result in no payout to participants.
Failure to obtain shareholder re-approval of the Plan would not change
the award formulas for 1998-2000 or succeeding periods, but instead could
affect the tax deductibility of payouts under the Plan where an executive's
compensation in a given year exceeds the limit provided under Section 162(m)
of the Code.
A copy of the Plan is attached as Exhibit B. The affirmative vote of a
majority of votes cast on this proposal is needed to re-approve the Plan.
(For these purposes, abstentions will be counted toward the tally of votes
cast; broker non-votes will not count as a vote cast.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RE-APPROVAL
OF THE 1993 LONG TERM INCENTIVE PLAN.
<PAGE>
SHAREHOLDER PROPOSALS
To be eligible for inclusion in the proxy materials for the 1999 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 5, 1998.
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 January
3, 1998, 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 assist in obtaining 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 19, 1998, or any adjournment thereof.
1. TO ELECT FOUR CLASS II 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)
Hugh G. Farrington, David F. Sobey, Robert L. Strickland
or Robert J. Tarr, Jr.
2. TO ELECT TWO 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)
Walter J. Salmon or John Robert Sobey
3. TO RATIFY THE APPOINTMENT OF AUDITORS FOR AGAINST ABSTAIN
4. TO APPROVE THE HANNAFORD
BROS. CO. 1998 STOCK OPTION PLAN FOR AGAINST ABSTAIN
5. TO RE-APPROVE THE HANNAFORD BROS.
CO. 1993 LONG TERM INCENTIVE PLAN FOR AGAINST ABSTAIN
6. 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, 4 and 5.
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
1997 Annual Report.
Dated 1998
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
HANNAFORD BROS. CO.
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to provide Employees of
Hannaford Bros. Co. and its Subsidiaries with additional incentives to
contribute to the success of the Company and to attract, reward and retain
Employees of outstanding ability.
2. DEFINITIONS. As used in this Plan, the following words and phrases
wherever capitalized shall have the following meanings unless the context
clearly indicates that a different meaning is intended:
(a) "Award" shall mean any Option or Stock Appreciation Right granted
pursuant to the Plan.
(b) "Award Agreement" shall mean a written instrument that specifies
the terms, conditions and restrictions of an Award and incorporates the
applicable provisions of the Plan and such additional provisions not
inconsistent therewith as the Committee shall determine.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as from time
to time amended.
(e) "Committee" shall mean the committee described in Section 3, which
shall have the authority to control and manage the administration of the
Plan.
(f) "Common Stock" shall mean common stock, par value, $.75 per
share, of the Company.
(g) "Company" shall mean Hannaford Bros. Co.
(h) "Disability" shall mean an Employee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. An Employee shall not be considered disabled
unless he or she furnishes proof of the existence of such Disability in
such form and manner, and at such times, as the Committee may require.
(i) "Employee" shall mean any person who is employed by the Company or
any Parent or Subsidiary.
<PAGE>
(j) "Fair Market Value" shall mean, with respect to Shares, the
closing price of Shares as reported on the New York Stock Exchange;
provided, however, that the Fair Market Value of the Shares to be issued
under any Incentive Stock Option shall be determined by the Committee in
accordance with the applicable requirements of subsections 422(b)(4) and
(c)(7) of the Code and the regulations issued thereunder.
(k) "Incentive Stock Option" shall mean an option granted to an
individual for any reason connected with his or her employment by a
corporation, if granted by the employer corporation or its Parent or
Subsidiary corporation, to purchase stock of any of such corporations, but
only if such option meets the requirements of Section 422 of the Code.
(l) "Nonqualified Stock Option" shall mean an Option granted under the
Plan that is not an Incentive Stock Option.
(m) "Option" shall mean a right granted under the Plan to purchase
Shares.
(n) "Optionee" shall mean an Employee who is granted an Option.
(o) "Parent" shall mean, for purposes of the Incentive Stock Option
provisions of the Plan, a parent company within the meaning of subsections
424(e) and (g) of the Code.
(p) "Plan" shall mean the Hannaford Bros. Co. 1998 Stock Option Plan.
(q) "Share" shall mean a share of Common Stock of the Company, as
adjusted in accordance with subsection 4(b).
(r) "Stock Appreciation Right" shall mean a right granted under
Section 8 to receive a payment, the amount of which shall be determined by
reference to the value of a Share.
(s) "Subsidiary" shall mean, for purposes of the Incentive Stock
Option provisions of the Plan, a subsidiary Company within the meaning of
subsections 424(f) and (g) of the Code, and for all other purposes of the
Plan, a Company of which Hannaford Bros. Co. owns directly or indirectly at
least fifty percent (50%) of the total combined voting power of all classes
of stock entitled to vote.
(t) "Treasury Shares" shall mean Shares that have been issued and
subsequently acquired by the Company, but have not been canceled or
retired.
<PAGE>
3. ADMINISTRATION.
(a) COMMITTEE MEMBERS. The Plan shall be administered by the members
of the Human Resources Committee of the Board who are not employees of the
Company or any Parent or Subsidiary and who otherwise qualify as
"non-employee directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and as "outside directors"
within the meaning of Code Section 162(m), as amended, and the regulations
thereunder. A majority of the members of the Committee shall constitute a
quorum, and the action of a majority of the members present at any meeting
at which a quorum is present shall be deemed the action of the Committee.
Any member may participate in a meeting of the Committee by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Further, any
action of the Committee may be taken without a meeting if all of the
members of the Committee sign written consents, setting forth the action
taken or to be taken, at any time before or after the intended effective
date of such action.
(b) POWERS. The Committee shall have the complete authority and
discretion to administer the Plan, including the following powers which
shall be exercised in accordance with the terms of the Plan:
(i) to determine the Employees to whom Awards shall be granted;
(ii) to determine the time or times at which Awards shall be
granted;
(iii) to determine the type or types of Awards to be granted;
(iv) to determine the terms, conditions and restrictions of each
Award;
(v) to make adjustments in accordance with subsection 4(b);
(vi) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(vii) to interpret the Plan and make all other determinations
deemed necessary or advisable for the administration of the Plan; and
(viii) to delegate to any officer of the Company the authority to
act for the Committee in such matters as the Committee may specify.
<PAGE>
Each determination, interpretation or other action taken pursuant to
the Plan by the Committee (or an officer of the Company acting under a
delegation of authority by the Committee) shall be final and conclusive for
all purposes and binding upon all persons, including the Company, its
Subsidiaries, the Board, the Committee, the Employees and their respective
successors in interest.
(c) SIGNATURES. The Committee may authorize any member thereof to
execute all instruments required in the administration of the Plan, and
such instruments may be executed by facsimile signature.
4. STOCK SUBJECT TO THE PLAN.
(a) LIMITATIONS. Subject to the provisions of subsection (b), the
maximum number of Shares available for grant under the Plan in each
calendar year shall be one and one-half percent (1.5%) of the total
outstanding Shares as of the first day of such year, provided that the
maximum aggregate number of Shares which may be issued under the Plan
pursuant to Incentive Stock Options shall be six million (6,000,000)
Shares. Any unused portion of the percentage limit for any calendar year
shall be carried forward and be made available for grants in succeeding
calendar years. Any Shares issued hereunder may consist, in whole or in
part, of authorized and unissued Shares or Treasury Shares.
In the event that any Shares subject to an Award are forfeited, such
Shares shall, unless the Plan has been terminated, become available again
for grant and shall not be counted again for purposes of the foregoing
share limitation. In the event that any Option granted under the Plan
expires or terminates without the issuance of Shares or payment of other
consideration in lieu of such Shares, the unissued Shares subject to such
Option shall, unless the Plan has been terminated, become available for
other Awards, including other Options.
In the event that an Employee transfers stock issued by the Company in
full or partial payment of the option price of an Option granted under the
Plan, only the difference between (i) the number of Shares issued upon
exercise of the Option and (ii) the number of Shares transferred in payment
of the option price shall be counted for purposes of the foregoing
limitation on the maximum number of Shares available for grant under the
Plan. Notwithstanding the foregoing, the total number of Shares issued
pursuant to the exercise of an Incentive Stock Option shall be counted for
purposes of the foregoing special limitation on Shares issued pursuant to
Incentive Stock Options.
<PAGE>
(b) ADJUSTMENTS. If the number of Shares outstanding changes as a
result of a stock split or stock dividend, the Committee shall
proportionately adjust: (i) the maximum number of Shares available for
grant and the maximum aggregate number of Shares which may be issued under
Incentive Stock Options; (ii) the number of Shares to be issued under
Awards; (iii) the option price with respect to Shares subject to Options;
and (iv) the grant price with respect to Stock Appreciation Rights.
In the event of a merger or consolidation in which the Company is the
surviving company, or the acquisition by the Company of property or stock
of another company, or any reorganization, the Committee shall
appropriately adjust: (i) the number and class of Shares to be issued
under Awards; (ii) the option price of Shares subject to Options; and
(iii) the grant price with respect to Stock Appreciation Rights. Any
adjustments under this subsection (b) affecting Incentive Stock Options
shall be made so as to comply with the applicable provisions of Sections
422 and 424 of the Code.
5. ELIGIBILITY.
The Committee may, from time to time, designate Employees to whom
Options or Stock Appreciation Rights may be granted in accordance with the
terms of the Plan.
6. GRANTING OF AWARDS.
The Committee may grant more than one Award and more than one type of
Award to any Employee; provided that no Incentive Stock Option shall be
granted to any Employee who, at the time the Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary. For
purposes of applying the percentage limitation of the preceding sentence,
the ownership principles of subsection 424(d) of the Code shall apply. The
terms and conditions of Awards need not be the same with respect to each
Employee. An Employee who has been granted an Award may, if he or she is
otherwise eligible, be granted additional Awards before the exercising of
such prior Award.
In no event may an Employee during any five (5) year period be granted
Awards with respect to more than five hundred thousand (500,000) Shares,
subject to adjustment as provided in Section 4. The Committee may
condition the grant of an Award and the exercise of an Option or Stock
Appreciation Right on the attainment of performance goals. Performance
goals may be expressed in terms of earnings per Share, stock price, total
shareholder return, return on equity, or any similar quantifiable measures.
<PAGE>
7. OPTIONS.
(a) OPTION AGREEMENT. Each Option granted by the Committee shall be
evidenced by an Award Agreement ("Option Agreement"), specifying the Option
price, the number of Shares subject to the Option and such other terms,
conditions and restrictions as the Committee shall determine. In addition,
each Option shall be clearly identified as either an Incentive Stock Option
or a Nonqualified Stock Option.
(b) TERM OF OPTION. The term of each Option shall be set forth in
the Option Agreement, but in no event shall an Option be exercisable after
the expiration of ten (10) years from the date such Option is granted.
(c) OPTION PRICE. The option price for Shares to be issued under any
Option shall not be less than one hundred percent (100%) of the Fair Market
Value of such Shares on the date the Option is granted.
(d) NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner, other
than by will or by the laws of descent and distribution, and may be
exercised during the lifetime of the Optionee only by such Optionee.
Notwithstanding the preceding sentence to the contrary, the Committee may
permit the transfer of Nonqualified Stock Options to family members or
family trusts (and exercise by the transferee) to the extent Rule 16b-3
under the Securities Exchange Act of 1934 permits such transfers.
(e) MANNER OF EXERCISE. An Option granted under the Plan shall be
exercisable at such times and under such circumstances as shall be
permissible under the terms of the Plan and of the Option Agreement. An
Option shall be deemed to be exercised when the Optionee gives written
notice of such exercise to the Company in accordance with the terms of the
Option Agreement and the Company receives full payment for the Shares with
respect to which the Option is exercised. Payment shall be made by check
payable to the Company, delivery of stock issued by the Company or a
combination thereof, subject to the terms of the Option Agreement.
Stock transferred to the Company in full or partial payment for Shares
shall be valued at Fair Market Value on the date that such transfer is
recorded upon the books of the Company, following actual or constructive
delivery of such stock to the Company in a form suitable for transfer.
(f) TERMINATION OF EMPLOYMENT. In the event an Optionee ceases to be
employed by the Company or any Parent or Subsidiary, and is no longer
<PAGE>
employed by any of them, for any reason other than death or Disability,
such Optionee may, subject to the terms of the Option Agreement, exercise
an Option at any time prior to the expiration date of such Option (or, in
the case of an Incentive Stock Option, within three (3) months after the
date the Optionee's employment ceases, whichever is earlier), but only to
the extent the Optionee had the right to exercise such Option at the date
his or her employment ceased. An Optionee's employment shall be deemed
terminated on the date such Optionee's employer ceases to be a Parent or
Subsidiary.
(g) DISABLED OPTIONEE. In the event an Optionee who is disabled
ceases to be employed by the Company or any Parent or Subsidiary by reason
of such Disability, and is no longer employed by any of them, such Optionee
may, subject to the terms of the Option Agreement, exercise an Option at
any time prior to the expiration date of such Option (or, in the case of an
Incentive Stock Option, within one (1) year after the date such Optionee's
employment ceases, whichever is earlier), but only to the extent the
Optionee had the right to exercise such Option at the date his or her
employment ceased.
(h) DEATH OF OPTIONEE. In the event an Optionee dies while in the
employ of the Company or any Parent or Subsidiary, then to the extent that
the Optionee would have been entitled to exercise an Option immediately
prior to his or her death, such Option may be exercised by the estate of
such Optionee or by such person or persons to whom such Optionee's rights
pass by will or by the laws of descent and distribution at any time prior
to the expiration date of such Option or within one (1) year after the
death of the Optionee, whichever is earlier.
8. STOCK APPRECIATION RIGHTS.
(a) SAR AGREEMENT. Any Stock Appreciation Rights granted by the
Committee shall be evidenced by an Award Agreement ("SAR Agreement"),
specifying the grant price, the number of such rights, and such other
terms, conditions and restrictions as the Committee shall determine.
(b) TERM. The term of each Stock Appreciation Right shall be set
forth in the SAR Agreement, but in no event shall a Stock Appreciation
Right be exercisable after the expiration of ten (10) years from the date
such right is granted.
(c) AMOUNT OF PAYMENT. An Employee to whom a Stock Appreciation Right
has been granted shall be entitled to receive payment of an amount equal to
the excess of (i) the Fair Market Value of one (1) Share on the date of
<PAGE>
exercise of such right over (ii) the grant price of the right; provided
that the Fair Market Value of one (1) share with respect to a Stock
Appreciation Right that is not related to an Incentive Stock Option may be
determined at any time during a period before the date of exercise as
specified in the SAR Agreement.
(d) GRANT PRICE. The grant price of a Stock Appreciation Right shall
not be less than one hundred percent (100%) of the Fair Market Value of one
(1) Share on the date that the Stock Appreciation Right is granted.
(e) NONTRANSFERABILITY OF RIGHTS. Stock Appreciation Rights may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner, other than by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the Employee only by such Employee.
(f) MANNER OF EXERCISE. A Stock Appreciation Right granted under the
Plan shall be exercisable at such times and under such circumstances as
shall be permissible under the terms of the Plan and of the SAR Agreement.
A Stock Appreciation Right shall be deemed exercised when an Employee gives
written notice of such exercise to the Company in accordance with the terms
of the SAR Agreement.
(g) FORM OF PAYMENT. Payment with respect to the exercise of a Stock
Appreciation Right may be made in cash, Shares or a combination thereof, as
the Committee shall determine. To the extent that such payment is made in
Shares, the Shares shall be valued at Fair Market Value on the date of
payment.
(h) RELATED OPTIONS. A Stock Appreciation Right may, but need not,
relate to an Option granted under Section 7. A Stock Appreciation Right
related to a Nonqualified Stock Option may be granted simultaneously with
the granting of such Option or at any time thereafter before the exercise
or termination of such Option. A Stock Appreciation Right related to an
Incentive Stock Option shall be granted at the same time such Option is
granted.
A Stock Appreciation Right related to the full number of Shares
subject to an Option shall terminate upon exercise or termination of the
Option to the extent such Option is exercised or terminated. A Stock
Appreciation Right related to less than the full number of Shares subject
to an Option shall not be affected by the exercise or termination of the
Option until such exercise or termination exceeds the number of Shares not
related to the Stock Appreciation Right; thereafter such right shall
terminate to the extent such Option is further exercised or terminated.
<PAGE>
To the extent that a Stock Appreciation Right related to an Option has
been exercised, such Option shall no longer be exercisable.
9. DEFERRED SHARES. An Employee may elect, in such manner and subject
to such terms and conditions as the Committee may prescribe, to defer the
receipt of profit Shares purchased by transferring previously acquired
Shares upon the exercise of a Nonqualified Stock Option. For purposes of
the Plan, "profit Shares" shall mean Shares representing the difference
between the number of previously acquired Shares transferred and the number
of Shares purchased.
10. CANCELLATION OF AWARDS. Notwithstanding any provision of the Plan
to the contrary, the Committee may cancel any Award, whether vested or not,
if at any time an Employee is not in compliance with the applicable terms
of the Award Agreement or in the event of a serious breach of conduct,
including but not limited to failure to comply with the terms of an
agreement not to compete with the Company or disclose confidential
information.
11. CHANGE IN CONTROL. Upon the occurrence of a Change in Control
Event, all then outstanding Options and Stock Appreciation Rights not
previously exercisable shall immediately become fully exercisable. For
purposes of this Section, each of the following events shall constitute a
Change in Control Event:
(a) Any person acquires beneficial ownership of securities of the
Company and is or thereby becomes a beneficial owner of securities
entitling such person to exercise twenty-seven percent (27%) or more of the
combined voting power of the Company's then outstanding stock.
For purposes of the Plan, "beneficial ownership" shall be determined
in accordance with Regulation 13D under the Securities Exchange Act of
1934, or any similar successor regulation or rule; and the term "person"
shall include any natural person, company, partnership, trust or
association, or any group or combination thereof, whose ownership of
securities of the Company would be required to be reported under such
Regulation 13D, or any similar successor regulation or rule.
(b) Within any twenty-five (25) month period, individuals who were
Outside Directors at the beginning of such period, together with any other
Outside Directors first elected as directors of the Company pursuant to
nominations approved or ratified by at least two-thirds (2/3) of the
Outside Directors in office immediately prior to such respective elections,
cease to constitute a majority of the Board.
<PAGE>
For purposes of the Plan, an "Outside Director" as of a given date
shall mean a member of the Board who has been a director of the Company
throughout the six (6) months prior to such date and who has not been an
employee of the Company at any time during such six (6) month period.
(c) The Company ceases to be a reporting company pursuant to Section
13(a) of the Securities Exchange Act of 1934 or any similar successor
provision.
(d) The Company's shareholders approve:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving Company or pursuant to which
shares of Common Stock would be converted into cash, securities or other
property, other than a merger or consolidation of the Company in which the
holders of the Common Stock immediately prior to the merger or
consolidation have substantially the same proportionate ownership and
voting control of the surviving Company immediately after the merger or
consolidation; or
(ii) 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.
Notwithstanding subparagraphs (i) and (ii) above, the term "Change in
Control Event" shall not include a consolidation, merger, or other
reorganization if upon consummation of such transaction all of the
outstanding voting stock of the Company is owned, directly or indirectly,
by a holding company, and the holders of Common Stock immediately prior to
the transaction have substantially the same proportionate ownership and
voting control of the holding company.
12. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Committee, without further approval of the
shareholders of the Company, may amend the Plan from time to time in such
respects as the Committee may deem advisable, provided that no amendment
shall become effective prior to ratification by the Board and approval by
shareholders if such amendment:
(i) increases the maximum aggregate number of shares which may
be issued pursuant to Incentive Stock Options; or
(ii) increases the maximum number of Shares that may be granted
to an Employee.
<PAGE>
(b) TERMINATION. The Board, without further approval of the
shareholders of the Company, may at any time terminate the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not adversely affect Awards already granted
without the written consent of the affected individual, and such Awards
shall remain in full force and effect as if the Plan had not been amended
or terminated.
13. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its
adoption by the Board or its approval by the shareholders of the Company,
whichever is later.
14. TERM OF PLAN. No Award shall be granted pursuant to the Plan
after ten (10) years from the earlier of the date the Plan is adopted or
the date the Plan is approved by shareholders. Awards granted prior to the
end of such period may extend beyond such period, except as otherwise
provided herein or in the Award Agreement.
15. ARBITRATION. Arbitration as hereinafter provided shall be the
exclusive remedy for resolving any claim or dispute arising under the Plan.
(a) Any arbitration under the Plan, and any related judicial
proceeding, shall be initiated and shall proceed pursuant to the provisions
of the Maine Uniform Arbitration Act (the "Act") and, to the extent
consistent with the Act, the then prevailing rules of the American
Arbitration Association (the "Association") for labor and employment
contracts. To initiate arbitration, demand shall be given in writing to
the Association and the other party no later than one year after the claim
arises. Any claim for which such demand is not made within one year after
the claim arises shall be barred and discharged absolutely.
(b) Any arbitration under the Plan shall be before a single
arbitrator, and an award in such arbitration may include only damages which
the arbitrator determines to be due under express provisions of the Plan
and applicable Award Agreement. The arbitrator shall have no authority to
award any other damages, including without limitation, consequential and
exemplary damages. Any award in arbitration shall be subject to
enforcement and appeal pursuant to the Act.
(c) The Company and the Employee shall share equally all costs and
fees charged by the Association or the arbitrator.
<PAGE>
16. MISCELLANEOUS.
(a) AWARD AGREEMENT. Upon executing an Award Agreement, an Employee
shall be bound by such Agreement and by the applicable provisions of the
Plan.
(b) EMPLOYMENT. The granting of an Award to an Employee shall not
give the Employee any right to be retained in the employ of the Company or
any Parent or Subsidiary, nor shall the existence of the Plan impair the
right of the Company or any Parent or Subsidiary to discharge or otherwise
deal with an Employee.
(c) TAX WITHHOLDING. The Company shall be authorized to withhold from
any Award granted, or payment due, under the Plan the amount of any taxes
required by law to be withheld because of such Award or payment and to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes.
(d) GOVERNING LAW. The Plan is established under and shall be
construed according to the laws of the State of Maine.
(e) HEADINGS. Paragraph headings are included solely for convenience
and shall in no event affect, or be used in connection with, the
interpretation of the Plan.
<PAGE>
Exhibit B
HANNAFORD BROS. CO.
1993 LONG TERM INCENTIVE PLAN
(as amended and restated, effective January 4, 1998)
1. PURPOSE. The purpose of this Plan is to provide additional
compensation as an incentive to selected key employees upon whose efforts
the continued successful and profitable operations of Hannaford Bros. Co.
are largely dependent, and to ensure the continued availability of the
services of selected key employees to Hannaford Bros. Co.
2. DEFINITIONS. As used in this Plan, unless the context clearly
indicates otherwise:
(a) "Actual Award" means the amount payable to a Participant pursuant
to Section 5.
(b) "Award Period" means a period of at least 3 fiscal years, as
designated by the Committee.
(c) "Basic Award" means the percentage of a Participant's
Compensation, not exceeding 25 percent, determined by the Committee
pursuant to Section 3.
(d) "Board" means the Board of Directors of Hannaford Bros. Co.;
provided, however, that in all instances in which the Board exercises any
discretion under the Plan with respect to the amount of an Actual Award,
"Board" means only those members of the Board of Directors of Hannaford
Bros. Co. who have not been employees of the Corporation or one of its
Subsidiaries.
(e) "Committee" means the Human Resources Committee of the Board.
(f) "Compensation" means, effective with respect to Award Periods
commencing after December 2, 1996, the aggregate base salary and annual
incentive compensation earned by a Participant during an Award Period (or
during the portion of an Award Period for which he or she is a Participant)
for services rendered to the Corporation or one of its Subsidiaries,
without regard to any deferral of such amounts.
(g) "Corporation" means Hannaford Bros. Co.
(h) "Earnings Per Share" means earnings per share as reported in the
Consolidated Statement of Earnings in the Corporation's Annual Report, but
before any extraordinary items that the Board, in its sole discretion,
disregards for purposes of the Plan.
<PAGE>
(i) "Participant" means an employee of the Corporation or one of its
Subsidiaries to whom a Basic Award has been made under the Plan.
(j) "Performance Goal" means a growth objective established by the
Committee pursuant to Section 4.
(k) "Plan" means the Hannaford Bros. Co. 1993 Long Term Incentive
Plan, as it may be amended from time to time.
(l) "Subsidiary" means a corporation of which Hannaford owns directly
or indirectly at least 50 percent of the total combined voting power of all
classes of stock entitled to vote.
3. PARTICIPATION. The Committee shall: (a) designate which, if any,
employees of the Corporation or a Subsidiary shall be Participants for an
Award Period; (b) determine the duration of such Award Period; and (c)
award a Basic Award for each such Participant. The Basic Award of a
Participant who is promoted during an Award Period to a position with
respect to which a higher Basic Award is in effect shall adjust
automatically to reflect for the remainder of the Award Period the higher
Basic Award. The Committee may designate that a newly hired or newly
promoted employee of the Corporation or a Subsidiary shall be a Participant
for an Award Period that commenced prior to the date of such designation.
4. PERFORMANCE GOALS. The Committee shall establish both a low and a
high Performance Goal for each Award Period. The Performance Goals for any
Award Period need not be the same with respect to all Participants.
The Performance Goals for an Award Period shall be expressed in terms
of cumulative Earnings Per Share, stock price, a combination thereof or a
similar quantifiable measure. The low Performance Goal ("Low Goal") shall
represent, in the sole judgment of the Committee, at least minimally
acceptable performance. The high Performance Goal ("High Goal") shall
represent, in the sole judgment of the Committee, a challenging but
attainable goal.
5. ACTUAL AWARDS. The amount of the Actual Award, if any, that is
earned by a Participant during an Award Period shall be determined
initially as follows:
(a) if the Corporation's actual performance equals the Low Goal, the
Actual Award shall be the percentage of the Basic Award established by the
Committee at the beginning of the Award Period; and
<PAGE>
(b) if the Corporation's actual performance equals the High Goal, then
the Actual Award shall equal 100% of the Basic Award.
If actual performance exceeds the High Goal, in no event shall a
Participant's Actual Award exceed 150% of the Basic Award. Further, no
Actual Award shall be paid if the Corporation's actual performance is less
than the Low Goal. If the Corporation's actual performance exceeds the Low
Goal but does not equal the High Goal, then the Actual Award shall equal a
percentage (not less than the percentage established for attainment of the
Low Goal and not more than 100%) of the Basic Award as determined by the
Committee at the beginning of the Award Period.
The Committee shall have the right to adjust the Actual Award if it
finds such adjustment necessary to provide fair and equitable treatment of
the interests of both the Participants and the Corporation's shareholders.
The Board shall have the right to adjust the Actual Award of any
Participant, either increasing or decreasing the same, if in its sole
judgment the Actual Award is inconsistent with the Participant's
performance during the relevant Award Period, measured individually or as a
member of a group. In exercising this discretion, the Board may rely on
reports or other information furnished to it, either directly or through
the Committee, by the Chief Executive Officer of the Corporation.
6. PAYMENT OF ACTUAL AWARDS. The Actual Award earned by a Participant
shall be paid after the close of the final fiscal year of the relevant
Award Period. In the sole discretion of the Committee, an Actual Award may
be paid in cash, common stock of the Corporation at fair market value at
the time of payment, or any combination of cash and common stock. Payment
in the form of common stock may be subject to restrictions on transfer and
vesting and to such other terms, conditions and restrictions as the
Committee may determine in a separate written instrument.
Prior to the payment of any Actual Award, the Board shall review the
aggregate amount of all such Awards then payable to determine whether the
consolidated earnings and return on assets of the Corporation are adequate
to justify such payments. If in its sole judgment the Board determines
that such earnings or return are inadequate, it shall have the right to
disallow, in whole or in part, any Award, and the Corporation shall not
have any obligation to any Participant for any portion of an Award so
disallowed.
<PAGE>
7. TERMINATION OF EMPLOYMENT. If a Participant terminates employment
with the Corporation and its Subsidiaries during an Award Period because he
or she retires under the Hannaford Cash Balance Plan, becomes disabled or
dies, such Participant shall be entitled to an Actual Award based on his or
her during the portion of the Award Period that he or she was actively
employed. Any Actual Awards payable to a deceased Participant shall be
paid to his or her estate.
Upon a Participant's termination of employment for any reason other
than retirement or disability, the dates on which the Participant's Basic
Awards become Actual Awards under the Plan shall be accelerated to the last
day of the fiscal year in which the termination occurs. For purposes of
calculating the Participant's Actual Award for any Award Period curtailed
by reason of such acceleration, the Committee shall reestablish the High
and Low Performance Goals to reflect only the number of years in the
curtailed Award Period.
If a Participant's employment terminates during an Award Period for
any reason other than retirement, disability, or death, the Participant
shall forfeit any Actual Award otherwise payable, unless the Committee
determines that such Award shall be paid, in whole or in part, in
accordance with this Section.
8. ADMINISTRATION. This Plan shall be administered by the Committee.
The Committee shall have sole and complete discretion with respect to the
exercise of all permissive powers and authority granted to the Committee by
this Plan, and shall have sole and complete authority to construe and
interpret the Plan. All actions, determinations, and decisions of the
Committee shall be final, conclusive, and binding on all parties, unless
otherwise determined by the Board.
9. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Maine.
10. AMENDMENT OR TERMINATION OF PLAN. The Committee may amend or
terminate this Plan at any time; provided, however, that no such action
shall affect the rights of a Participant with respect to any Award to which
the Participant became entitled prior to the effective date of such action.
11. ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. Upon the
occurrence of a Change in Control Event, the dates on which Basic Awards
become Actual Awards under the Plan shall be accelerated to the date of
<PAGE>
such Event. For purposes of calculating Actual Awards for any curtailed
Award Period, the Committee shall reestablish the High and Low Performance
Goals to reflect only the number of years and full calendar months in the
curtailed Award Period.
Payment of an Actual Award determined pursuant to this Section shall
be made in a lump sum cash payment on or before the earlier of the
following dates: (i) 90 days after the Participant's employment with the
Corporation terminates; or (ii) 90 days after the close of the final fiscal
year of the relevant Award Period, without regard to any curtailment
pursuant to this Section.
If any acceleration or payment pursuant to this Section is, in the
sole judgment of the Committee as constituted prior to the occurrence of
the Change in Control Event, unnecessary to protect Participants' rights
under the Plan, the Committee may make such other adjustments (or make no
adjustments) as it deems appropriate to protect Participants' rights, in
lieu of the protections provided in this Section.
The term "Change in Control Event" shall have the meaning given such
term in the Hannaford Supplemental Executive Retirement Plan.
12. NONALIENATION OF BENEFITS. Awards under this Plan shall not be
subject to alienation, assignment, garnishment, attachment or levy of any
kind, and any attempt to cause an award to be so subjected shall not be
recognized.
13. EFFECTIVE DATE. This Plan was originally effective January 3,
1993. The effective date of this amendment and restatement of the Plan
shall be January 4, 1998.
14. TRANSITION RULES. If in any fiscal year a Participant is entitled
to payment of an Actual Award under this Plan and payment of an actual
award under the Company's 1980 Long Term Incentive Plan ("Prior Plan"), the
amount payable under this Plan for such year shall be reduced by the amount
paid under the Prior Plan for such year.
The Committee may designate that a newly hired or newly promoted
employee of the Corporation or a Subsidiary shall be a Participant for an
award period that commenced under the Prior Plan after 1988 and prior to
the original effective date of this Plan. In such event, the Participant's
Actual Award shall be determined based on the low and high performance
goals established by the Human Resources Committee under the Prior Plan for
such award period.
