FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7603
HANNAFORD BROS. CO.
(Exact name of Registrant as specified in its charter)
Maine 01-0085930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
145 Pleasant Hill Road, Scarborough, Maine 04074
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 883-2911
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.75 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject
to such filing requirements in the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock, $.75 par value, held by
non-affiliates as of March 3, 1998, was $1,333,787,645. This calculation
assumes that all shares of Common Stock beneficially held by directors and
executive officers of the Registrant are owned by "affiliates".
As of March 3, 1998, there were 42,289,827 outstanding shares of Common
Stock, $.75 par value, the only authorized class of common stock of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
PART III: Proxy Statement for Annual Meeting of Shareholders to be held
on May 19, 1998.
Exhibit Index on Page: 55
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
Hannaford Bros. Co. (the "Registrant" or the "Company") was incorporated in
Maine in 1902 as the successor to a business established by the Hannaford
family in 1883. Its principal executive offices are located at 145 Pleasant
Hill Road, Scarborough, Maine 04074. Its telephone number is (207)
883-2911.
Approximately 25.6% of the outstanding shares of the Registrant's common
stock, par value $.75 per share, is owned by certain members of the Sobey
family of Stellarton, Nova Scotia, and certain companies and trusts
controlled by them (the "Sobey Parties").
Fiscal year 1997 consisted of 53 weeks of operations as compared to 52 weeks
in both 1996 and 1995. This anomaly occurs periodically since the Company
closes its fiscal year on the Saturday closest to December 31.
Consolidated sales and other revenues for 1997 were $3,226 million, an
increase of 9.1% over last year's sales and other revenues of $2,958
million. Identical store sales were up 0.4% for fiscal year 1997 as
compared to an increase of 3.2% in 1996. Comparable store sales were up
2.3% for fiscal year 1997.
A pre-tax, non-cash accounting charge of $40 million was recorded in the
fourth quarter. Most of this charge relates to a write-down in the value of
assets, including goodwill, in certain southeastern stores. The write-down
was prompted by SFAS No. 121 (Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of), which results in goodwill
being allocated on a store-by-store basis. SFAS No. 121 did not exist when
the Company entered the Southeast in 1994 (see Note 4 of Notes to
Consolidated Financial Statements).
The Registrant ships food and food-related products from its distribution
centers to an additional 21 independent retail food stores. Sales to these
wholesale accounts amounted to 2.1% of total sales in 1997. Other revenues
from such activities as home shopping, trucking, real estate and retail
services amounted to about 1.5% of total sales.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Registrant, through its operations and those of its subsidiaries, is
principally involved in the retail food business. The Registrant considers
its business a single segment under the applicable reporting rules. See
Item 8, Financial Statements and Supplementary Data.
<PAGE>
NARRATIVE DESCRIPTION OF THE BUSINESS
The Registrant is a multi-regional food retailer, with 148 supermarkets
located throughout Maine, New Hampshire and Vermont, and in parts of New
York, Massachusetts, Virginia, North Carolina and South Carolina. Its
stores are operated primarily under the names Shop 'n Save(R), Hannaford(R)
and Wilson's(SM). The Registrant offers consumers comprehensive product
variety and outstanding freshness and quality in perishables, at competitive
prices, from modern and convenient facilities. The Registrant also operates
100 pharmacies within the Registrant's supermarkets and combination stores.
Of the Registrant's 101 supermarkets in the northeastern region of the
United States, more than 75% are either new or have been expanded or
relocated in the past 10 years. During this period, a number of smaller
outdated facilities have been closed or sold.
The Registrant operates 47 supermarkets located in Virginia, North Carolina
and South Carolina. Eighteen of these stores were acquired by the
Registrant in July 1994, six were acquired in September 1995 and twenty-three
were newly constructed during 1995, 1996 and 1997. These stores range
in size from 16,300 to 48,700 square feet of selling area.
The Registrant operates 113 combination stores with selling areas ranging
from 22,300 to 61,700 square feet. These combination stores offer under one
roof the traditional all-department supermarket, together with other
services and expanded lines of general merchandise.
On January 16, 1998, the Registrant announced that it would close seven
non-core stores, two in South Carolina, four in North Carolina and one in
Virginia. These closings have occurred as of this filing.
In 1998, the Registrant expects to open several new stores in New York, New
Hampshire, North Carolina and Virginia and will expand or relocate a number
of others.
<PAGE>
The following tables set forth certain statistical information regarding the
Registrant's operations at the dates indicated:
FISCAL YEAR
NUMBER OF STORES 1993 1994 1995 1996 1997
Beginning 93 93 118 134 139
Opened 4 10 13 13 15
Closed (4) (5) (3) (7) (6)
Sold 0 0 0 (1) 0
Acquired 0 20 6 0 0
Ending 93 118 134 139 148
AVERAGE SQUARE FEET
OF SELLING AREA
PER STORE 29,800 30,100 31,100 32,300 33,400
TOTAL SQUARE FEET
OF SELLING AREA 2,771,000 3,547,000 4,166,000 4,490,000 4,947,130
<PAGE>
As illustrated by the foregoing tables, the Registrant has continued to
expand its food store operations.
During 1997, net selling square footage increased 10.2%. The Registrant
opened ten new food stores with selling areas ranging from 32,600 square
feet to 40,800 square feet, relocated five existing stores to larger, new
facilities and closed one store temporarily while it is being expanded.
During 1998, the Registrant expects to open eight new food stores, three of
which will be located in the northeastern market area and five in the
Southeast. The new stores will range from 32,000 square feet to 39,000
square feet of selling area. Also in the Southeast, the Registrant will
relocate two of its existing stores to new facilities and close seven stores
that have limited opportunity for profitable growth. It is expected that
net retail selling area will increase approximately 4.2% in 1998.
As part of its ongoing expansion program, the Registrant will also consider
the acquisition of additional supermarkets, if attractive opportunities
become available.
The Registrant's distribution facilities which support its retail operations
include:
1. An owned distribution facility in South Portland, Maine, which primarily
services certain store locations in Maine, New Hampshire and Massachusetts.
This facility warehouses grocery, fresh fruits and vegetables, frozen foods,
meat, and dairy products in approximately 521,000 square feet of floor area,
and has dock facilities for 89 highway trailers. This distribution center,
as well as the others, has a dedicated on-line computerized warehouse
management system, which efficiently controls the movement of product
through the facility and schedules labor for greater efficiency and
productivity. Productivity in the distribution facilities also has been
enhanced through the use of employee incentive payment programs.
2. An owned distribution center and office facility in Schodack, New York,
which primarily services certain store locations in New York, Vermont, New
Hampshire and Massachusetts. This facility warehouses grocery, fresh fruits
and vegetables, meat, dairy and frozen food products in approximately
489,000 square feet of floor area and has dock facilities for 129 highway
trailers. Although approvals have been received to expand this facility to
approximately 1,200,000 square feet, the Registrant has no current plans to
do so. This distribution center operates under a team management system
which the Registrant calls Socio-Technical Systems.
<PAGE>
3. An owned 200,000 square foot distribution facility in Winthrop, Maine.
This facility distributes health and beauty care products, specialty foods,
pharmaceuticals and some general merchandise to all of the Registrant's
retail outlets. This facility has converted from a conventional management
system to a team-based one similar to that used in the Schodack, New York,
distribution center.
4. An owned distribution center in Butner, North Carolina, which services
all of the Registrant's store locations in North Carolina, South Carolina
and Virginia. This facility warehouses grocery, fresh fruits and
vegetables, frozen foods, meat and dairy products in approximately 431,000
square feet of floor area and has dock facilities for 112 highway trailers.
This facility was opened in November 1996 and incorporates increased staging
areas for crossdocking, a mezzanine for slower moving items and other modern
distribution techniques. The site on which this distribution center is
located includes land for additional expansion of the distribution center to
approximately 750,000 square feet.
Hannaford Trucking Company, a wholly-owned subsidiary, transports
merchandise to and from the Registrant's distribution facilities and is
licensed as an irregular route common carrier with 48 state authority.
Hannaford Trucking Company also hauls products for third-party customers,
thereby reducing the number of miles that its trucks travel empty.
In the Boston, Massachusetts, market the Registrant is evaluating a home
shopping service called Hannaford's HomeRuns(R). Consumers shop from a
catalog, placing their order via phone, fax or the Internet. Orders are
selected at a dedicated fulfillment center and delivered the next day.
Prices are competitive with those in local supermarkets, and there is no
delivery charge on orders over $60.
Innovation in operating systems for competitive advantage is an important
component of the Registrant's strategy, and the Registrant is committed to
investing in new technology and the development of new systems. The
Registrant seeks to be an industry leader in the application of new
technology and systems to improve customer service, productivity and
financial information.
Raw materials, as such, are not essential to the business of the Registrant.
During 1997, the Registrant completed the conversion of its primary private
brand from "Shop 'n Save(R)" to "Hannaford(R)".
Seasonal business affects the Registrant's operations in that sales are
generally greater in the second half of the year than in the first. (See
Note 9 of Notes to Consolidated Financial Statements.)
<PAGE>
Inventory levels are maintained at distribution centers and all retail
locations in amounts adequate to minimize "out of stock" conditions.
Backlog is not material to the Registrant's business.
No material portion of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
At the retail level, the Registrant's supermarkets are in direct competition
with regional, national and local food and drug chains, as well as
"supercenters", some of which have greater resources than the Registrant,
and with other independent operators. In addition, certain of the
independent stores served by the Registrant as wholesale customers are
located in the same trade areas as the Registrant's own stores.
In its wholesale operations, the Registrant directly competes with other
regional wholesalers, some of which supply franchised retail outlets. The
loss of any one or a few of the wholesale customers would not have a
materially adverse effect on the Registrant. Wholesale sales are not
material.
No material expenditures were made during fiscal 1995, 1996 or 1997 on
research activities relating to new or improved products, services or
techniques.
The Registrant does not foresee that material capital outlays will be needed
nor that material increases in operating expenses will be incurred for the
purpose of compliance with any statutory requirement respecting
environmental quality.
As of January 3, 1998, the Registrant had approximately 7,500 full-time and
14,900 part-time employees.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
Neither the Registrant nor any of its subsidiaries engages in any operations
in foreign countries, nor is a material portion of sales and revenues
derived from retail customers in foreign countries.
<PAGE>
ITEM 2. PROPERTIES
The Registrant owns 59 of its 148 food stores and leases the remaining 89
locations. It owns all 4 of its distribution facilities and leases its
general office facility in Scarborough, Maine. The Registrant's properties
are located in Maine, New Hampshire, Vermont, northern Massachusetts,
eastern upstate New York, southern Virginia, North Carolina and northeastern
South Carolina. The Registrant believes that its properties are well
maintained and are appropriate for its business needs.
The number of stores and facilities operated and the square feet of space at
January 3, 1998, consisted of:
SQUARE SQUARE FOOTAGE
FOOTAGE SELLING
UNITS GROSS AREA AREA
(in thousands)
Stores 148 6,915 4,947
Distribution and
administrative facilities 5 1,860 --
Total 153 8,775 4,947
The following table sets forth expiration dates of leased facilities,
assuming exercise of all renewal options:
LEASE ADMINISTRATIVE
EXPIRATION FOOD STORES FACILITIES
1998-2007 4
2008-2017 4
2018-thereafter 81 1
89 1
Further information concerning the Registrant's distribution facilities
appears under Item 1 at pages 5-6 above, which information is incorporated
herein by reference.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings, including ordinary routine
litigation incidental to the business, to which the Registrant is a party or
to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Executive Officers of the Registrant is set
forth below.
Under the by-laws of the Registrant, all Executive Officers hold office, at
the pleasure of the Board of Directors, until the Annual Meeting of the
Directors next following their election or until others are elected and
qualified in their stead.
There are no family relationships between any of the Executive Officers of
the Registrant nor were there any special arrangements or understandings
regarding the selection of any officer.
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
HUGH G. FARRINGTON 53 President 09/30/77
Chief Executive Officer
Mr. Farrington was elected President in 1984 and designated Chief Executive
Officer in 1992. He had held the position of Chief Operating Officer from
1984 to 1992. He had been Executive Vice President from 1981 until his
election as President. He has been employed by the Registrant in various
operating, supervisory and executive capacities since 1968.
RICHARD A. ANICETTI 40 Senior Vice President & 08/10/94
General Manager,
Southeast Operations
Mr. Anicetti was elected Senior Vice President and General Manager,
Southeast Operations in December 1995. He had been Senior Vice President,
Retail Operations for the southeast since 1994 and Vice President - Retail
Operations/General Manager, New Hampshire and Massachusetts from 1989 to
1994. He has been employed by the Registrant since 1980 in various retail
management capacities.
<PAGE>
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
PAUL A. FRITZSON 44 Senior Vice President, 01/02/92
Marketing, Merchandising
& Distribution
Mr. Fritzson was elected Senior Vice President, Marketing, Merchandising and
Distribution in December 1995. He had been Senior Vice President, Marketing
since 1994, Vice President - Marketing from 1992 to 1994 and Vice President,
General Merchandise from 1990 to 1992. He had served previously in various
staff and merchandising capacities since 1978.
THOMAS B. FURBER 36 Vice President 05/12/97
Mr. Furber was elected Vice President in December 1995. He has been
employed by the Registrant in various management capacities since June 1990.
ANDREW P. GEOGHEGAN, ESQ. 47 Senior Vice President, 09/14/87
Secretary & General Counsel
Mr. Geoghegan was elected Senior Vice President, Secretary and General
Counsel in May 1996. He joined the Registrant as Vice President, General
Counsel in September 1987. He was elected Secretary in 1992. From 1979 to
1987 he was in private law practice with the firm of Kassoy, Lopez &
Geoghegan Law Corporation, Beverly Hills, California, specializing in
corporate, tax and real estate law.
RONALD C. HODGE 50 Senior Vice President, 08/10/94
Northeast Operations
Mr. Hodge was elected Senior Vice President, Northeast Operations in
December 1995. He had been Senior Vice President, Retail Operations since
1994 and Vice President - Retail Operations/General Manager, New York and
Vermont from 1989 to 1994. He has been employed by the Registrant in
various retail management capacities since 1980.
<PAGE>
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
BLYTHE J. MCGARVIE 41 Senior Vice President, 11/14/94
Chief Financial Officer
Ms. McGarvie was elected Senior Vice President and designated Chief
Financial Officer in May 1995. She joined the Registrant as Senior Vice
President - Finance in November 1994. From 1991 to 1994 she was Chief
Administrative Officer for the Pacific Rim Group of Sara Lee Corporation.
From 1985 to 1991 she was employed by Kraft General Foods in various finance
positions.
LARRY A. PLOTKIN 47 Senior Vice President, 10/06/81
Corporate Development
Mr. Plotkin was elected Senior Vice President, Corporate Development in May
1995. He had been Senior Vice President, Development & Planning from 1992
to 1995, Senior Vice President, Development and Finance from 1990 to 1992,
Vice President from 1989 to 1990, Vice President Wellby Super Drug Stores
from 1987 to 1989 and Vice President Corporate Development from 1981 to
1987. He has been employed by the Registrant since 1972 in various real
estate capacities.
MICHAEL J. STROUT 43 Senior Vice President, 12/19/94
Human Resources
Mr. Strout rejoined the Registrant as Senior Vice President, Human Resources
in December 1994. From 1990 through 1994 he was Vice President - Human
Resources and later Senior Vice President - Human Resources at Tops Markets,
Inc., Buffalo, New York. From 1985 to 1990 Mr. Strout had been employed by
the Registrant in various Human Resource management positions.
ANDREW N. WESTLUND 45 Vice President, 10/04/92
Distribution
Mr. Westlund was elected Vice President, Distribution in 1992. He served as
Vice President - Warehousing in 1992 after holding the position of Director,
Warehouse Operations-New York since his employment in 1989. He was
previously employed by Super Valu, Minneapolis, Minnesota as Warehouse
Manager.
<PAGE>
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Registrant has been listed on the New York Stock
Exchange since July 18, 1986. The following table sets forth the dividends
per share and the high and low sales prices of the Common Stock on the New
York Stock Exchange composite tapes during each quarter of 1996 and 1997.
QUARTERLY
SALE PRICE DIVIDENDS
HIGH LOW PER SHARE
1st Quarter, 1996 $29.375 $23.000 .120
2nd Quarter, 1996 33.125 27.000 .120
3rd Quarter, 1996 34.250 30.000 .120
4th Quarter, 1996 34.000 29.875 .120
1st Quarter, 1997 $36.000 $33.125 .135
2nd Quarter, 1997 36.250 30.500 .135
3rd Quarter, 1997 37.000 32.750 .135
4th Quarter, 1997 44.125 34.563 .135
There are approximately 17,000 record holders of the Common Stock. Fiscal
1997 was the forty-ninth consecutive year that dividends were paid on the
Common Stock and the thirty-fifth consecutive year that the aggregate
dividend paid per share (after adjusting for stock splits) has increased.
On February 13, 1998, the Board of Directors voted to increase the quarterly
dividend to $.15 per share for the dividend due to be paid on March 26,
1998. Future dividends will depend on the Registrant's earnings and
financial condition.
<PAGE>
Item 6. Selected Financial Data
<TABLE> FISCAL YEAR
<CAPTION> 1997 1996 1995 1994 1993
(In thousands except per share amounts)
EARNINGS STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Sales and other revenues................................. $3,226,433 $2,957,559 $2,568,061 $2,291,755 $2,054,889
Cost of sales............................................ 2,427,287 2,242,784 1,951,248 1,728,499 1,543,932
Gross margin............................................. 799,146 714,775 616,813 563,256 510,957
Selling, general and administrative expense.............. 635,355 568,033 481,017 437,548 399,437
Impairment loss.......................................... 39,950 - - - -
Operating profit......................................... 123,841 146,742 135,796 125,708 111,520
Interest expense, net.................................... 26,425 22,204 19,368 21,360 19,337
Earnings before income taxes............................. 97,416 124,538 116,428 104,348 92,183
Income taxes............................................. 37,769 49,333 46,227 42,060 37,578
Earnings before cumulative effect
of change in accounting principle...................... 59,647 75,205 70,201 62,288 54,605
Cumulative effect of accounting change................. - - - - 2,100
Net earnings............................................. $ 59,647 $ 75,205 $ 70,201 $ 62,288 $ 56,705
Per common share:
Earnings before cumulative effect of accounting change $ 1.41 $ 1.78 $ 1.67 $ 1.50 $ 1.33
Cumulative effect of accounting change................ - - - - .05
Basic earnings per share.............................. $ 1.41 $ 1.78 $ 1.67 $ 1.50 $ 1.38
Diluted earnings per share............................ $ 1.40 $ 1.76 $ 1.66 $ 1.49 $ 1.37
Cash dividends........................................ $ .54 $ .48 $ .42 $ .38 $ .34
January December December December January
3, 1998 28, 1996 30, 1995 31, 1994 1, 1994
BALANCE SHEET DATA: (Dollar amounts in thousands except per share data)
Working capital.......................................... $ 20,873 $ 21,796 $ 23,512 $ 42,707 $ 118,830
Total assets............................................. 1,227,190 1,183,727 961,830 877,605 795,355
Current maturities:
Long-term debt........................................ 18,155 14,213 11,246 14,409 7,180
Obligations under capital leases...................... 1,873 1,775 1,467 1,382 1,412
Long-term debt, excluding current maturities............. 235,850 227,525 150,648 153,687 156,716
Obligations under capital leases, excluding current
maturities............................................. 75,687 75,198 69,747 69,552 58,835
Redeemable preferred stock of a subsidiary............... - - - - 1,883
Shareholders' equity..................................... 601,029 569,156 518,677 454,475 396,715
Book value per share..................................... $ 14.22 $ 13.46 $ 12.26 $ 10.88 $ 9.63
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
This analysis of the Company's results of operations and financial condition
should be read in conjunction with the accompanying consolidated financial
statements, including the notes thereto, and the information presented in
the summary of selected financial data. All footnote references are to
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Overview
In 1997, the Company achieved increased sales of 9.1%. The increased sales
were achieved by expanding supermarket selling area by 10.2%, a 2.3%
increase in comparable store sales and an extra week of operations in the
current year. Fiscal year 1997 contained 53 weeks of operations as compared
to 52 weeks in 1996. A pre-tax, non-cash accounting charge of $40 million
was recorded in the fourth quarter of 1997. Most of this charge related to
a write-down in the value of assets, including goodwill, in certain
southeastern stores (Note 4). Consolidated net earnings for fiscal 1997
amounted to $60 million, down 20.7% from last year's $75 million. Before
the accounting charge, consolidated earnings for 1997 were $84 million or an
increase of 12.2% over 1996 earnings.
<PAGE>
The following table sets forth for the years indicated the percentages which
selected items in the consolidated statements of earnings are to sales and
other revenues and the percentage change in the dollar values of such items
as compared to the indicated prior year:
PERCENTAGE OF SALES YEAR-TO-YEAR PERCENTAGE
AND OTHER REVENUES CHANGE IN DOLLAR VALUES
EXCEPT PER SHARE AMOUNTS FISCAL 1997 FISCAL 1996
FISCAL YEAR COMPARED TO COMPARED TO
1997 1996 1995 FISCAL 1996 FISCAL 1995
100.0% 100.0% 100.0% Sales and other revenues 9.1% 15.2%
24.8 24.2 24.0 Gross margin 11.8 15.9
Selling, general and
19.7 19.2 18.7 administrative expenses 11.9 18.1
1.3 - - Impairment loss - -
3.8 5.0 5.3 Operating profit (15.6) 8.1
0.8 0.8 0.8 Interest expense, net 19.0 14.6
3.0 4.2 4.5 Earnings before income taxes (21.8) 7.0
1.2 1.7 1.8 Income taxes (23.4) 6.7
1.8% 2.5% 2.7% Net earnings (20.7) 7.1
$1.41 $1.78 $1.67 Basic earnings per share (20.8) 6.6
$1.40 $1.76 $1.66 Diluted earnings per share (20.5) 6.0
$ .54 $ .48 $ .42 Cash dividends 12.5 14.3
<PAGE>
Sales
Sales and other revenues rose 9.1% in 1997, to $3,226 million, an increase
of $269 million over 1996 results. Sales from supermarkets that were open
in both periods presented, adjusted to exclude the 53rd week ("identical
store sales"), increased $11 million or 0.4%. Additional supermarket sales
of $248 million resulted from the net impact of new, expanded, relocated and
closed stores coupled with the 53rd week of operations in 1997. Fiscal year
1997 contained 53 weeks of operations as compared to 52 weeks in 1996. This
additional week accounted for approximately $58 million of the 1997 sales
increase. Other sales and revenues, which include wholesale, trucking, home
delivery, real estate and miscellaneous retail operations, increased $10
million. Comparable store sales, which include results from expanded and
relocated stores on a 52-week basis in both years presented, increased 2.3%
in 1997.
Identical store sales, adjusted to exclude the 53rd week, were down 0.2% in
the fourth quarter of 1997, while comparable store sales were up 1.6% in the
quarter. The Company attributes a portion of the identical store sales
decline in the last quarter to a very low inflation rate in food prices, the
current competitive environment and a decrease in the availability of food
stamps.
In 1996, sales and other revenues were $2,958 million, an increase of $390
million or 15.2% over 1995 results. Retail sales increased $372 million or
15.0%. Identical store sales reflected an increase of 2.5%. Other sales
and revenues, which include trucking, wholesale, real estate and
miscellaneous retail operations, increased $18 million in 1996.
Gross Margin
Gross margins increased in 1997 to 24.8% of sales and other revenues in
comparison to 24.2% in 1996. The 1997 increase is the result of improved
selling margins in certain of the Company's marketing territories coupled
with better operations in the Southeast, including the Company's new
distribution facility which began product delivery in November 1996. The
Company continues to focus on maintaining a competitive pricing strategy.
Gross margins increased in 1996 to 24.2% of sales and other revenues in
comparison to 24.0% in 1995.
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to 19.7% of sales and
other revenues in 1997 as compared to 19.2% in 1996. Payroll and payroll
related expenses, which exceeded 50% of selling, general and administrative
expenses in both years, increased as a percentage of sales in the current
year. In addition to rising payroll costs, the 1997 increase reflects
higher advertising costs and depreciation charges. The increases in these
components of selling, general and administrative expenses reflect the high
level of store openings in 1997 coupled with the continuing costs of
establishing the Company's position in the Southeast.
Selling, general and administrative expenses increased to 19.2% of sales and
other revenues in 1996 as compared to 18.7% in 1995. This increase is
principally the result of additional costs of establishing the Company's
position in its southeastern markets.
Impairment Loss
The Company recorded a non-cash charge of $40 million in the fourth quarter
of fiscal 1997 (Note 4). Expressed as a percentage of sales the impairment
loss was 1.3% of sales and other revenues. Approximately $24 million of the
impairment loss relates to supermarket assets and related costs for seven
southeastern stores in non-core markets that were closed in January 1998.
The remaining $16 million relates to supermarket assets which will continue
to be used in the operations of the Company.
Interest Expense, Net
Net interest expense expressed as a percentage of sales and other revenues
was 0.8% in all years presented.
Net interest expense in 1997 was $26 million, an increase of 19.0% from 1996
net interest expense of $22 million. This increase is primarily the result
of an increase of average debt levels coupled with a decrease in invested
cash which is reflected as a decrease in interest income.
Net interest expense in 1996 was $22 million, an increase of 14.6% from 1995
net interest expense of $19 million. This increase is primarily the result
of an increase in average debt levels coupled with a decrease in invested
cash.
<PAGE>
Income Taxes
The provision for income taxes includes both federal and state income taxes.
The effective tax rate decreased in 1997 to 38.8% from 39.6% in 1996 and
39.7% in 1995. These lower effective tax rates are the result of reductions
in the Company's overall state income tax rate. Assuming there are no
federal or state income tax rate changes, the Company expects the effective
tax rate for 1998 and thereafter to be in the 37.8% to 38.2% range.
Net Earnings and Earnings Per Common Share
Net earnings decreased 20.7% in 1997 to $60 million or 1.8% of sales and
other revenues, a decrease of $15 million from 1996 net earnings of $75
million or 2.5% of sales and other revenues. This decrease is primarily the
result of the impairment loss that was booked in the fourth quarter of 1997.
Before the impairment loss, net earnings for 1997 would have been $84
million, an increase of 12.3% over the $75 million reported in 1996. This
increase is the result of increased sales and gross margin, partially offset
by an increase in selling, general and administrative expenses.
Net earnings for the fourth quarter of 1997 were $1 million, a decrease of
93.5% over 1996 fourth quarter net earnings of $21 million. Basic earnings
per common share exhibited a similar percentage decrease to $.03 for the
fourth quarter of 1997 versus $.50 for the fourth quarter of 1996. This
decrease is the result of the impairment loss. Before the impairment loss,
net earnings were $26 million, an increase of 23.8% over the $21 million
reported in 1996 and basic earnings per share were $.62, an increase of
24.0% over the $.50 reported in 1996.
Net earnings increased 7.1% in 1996 to $75 million or 2.5% of sales and
other revenues, an increase of $5 million from 1995 net earnings of $70
million or 2.7% of sales and other revenues. This increase is the result of
increased sales and gross margin, partially offset by an increase in
selling, general and administrative expenses.
Basic earnings per common share in 1997 were $1.41 as compared to $1.78 in
1996, a decrease of 20.8%. Diluted earnings per common share (Note 1J) were
$1.40 in 1997, a decrease of 20.5% from $1.76 reported for 1996. Before the
impairment charge, basic earnings per common share would have been $2.00 as
compared to $1.78 in 1996, an increase of 12.4%. Management estimates that
the extra week of operations in the fourth quarter of 1997 increased net
earnings by approximately $.04 per share. The Company is evaluating a home
shopping service in the Boston, Massachusetts market called Hannaford's
HomeRuns(R). This service generated a net loss of approximately $.11 per
share in 1997 and $.05 per share in 1996. Management will continue to
evaluate this business venture in 1998.
Basic earnings per common share in 1996 were $1.78 as compared to $1.67 in
1995, an increase of 6.6%. Diluted earnings per common share were $1.76 in
1996 as compared to $1.66 in 1995, an increase of 6.0%.
<PAGE>
Other Items and Impact of Inflation
Seasonal business affects the Company's operations in that sales are
generally greater in the second half of the year (Note 9).
In recent years, the impact of inflation on the Company's operating results
has been minimal, reflecting generally lower rates of inflation in the
economy. The Company's business is characterized by large purchases and
high sales volumes extended across diverse product lines, rapid inventory
turns and low profit margins. In this environment, vendor price changes are
typically passed on to the customer. The Company does not believe inflation
or deflation has significantly affected its competitive position in the
industry. However, since price changes do cause sales dollars to fluctuate,
the use of the LIFO method of accounting for inventories reduces the impact
of price changes on earnings by matching current costs with current
revenues.
During 1997, the Company accelerated its task of addressing the Year 2000
technology application issue. The Year 2000 issue is the result of computer
programs being written using two digits rather than four to define the
applicable year. Computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in system failure or miscalculations, causing disruptions
of operations. Management has developed a comprehensive Year 2000
compliance plan and initiated its implementation. The Company currently
anticipates that this comprehensive program will be successfully completed
in order to minimize any business interruptions resulting from this issue.
The Company currently expects that its cost to complete this work will not
be material to the Company's financial results.
CAPITAL RESOURCES AND LIQUIDITY
Overview
Measures of liquidity for each of the last three fiscal years are as
follows:
(Dollars in millions)
January 3, December 28, December 30,
1998 1996 1995
Cash and cash items $58 $43 $ 7
Working capital (FIFO inventory) $39 $39 $39
Unused lines of revolving credit $54 $48 $64
Unused lines of short-term credit $30 $35 $44
Current ratio (FIFO inventory) 1.15 1.16 1.23
<PAGE>
The Company continued to maintain a strong capital position at the end of
fiscal 1997. Cash and cash items increased $15 million to $58 million at
the end of the year. Lines of credit represent a continuing source of
capital and are available for purposes of short-term financing. At January
3, 1998, the Company had $38 million outstanding on its revolving lines of
credit. The Company is in a solid financial position to carry out its
current expansion and growth plans in 1998.
In February 1996, the Company authorized a program to repurchase up to $75
million in shares of Hannaford common stock over three years. The program
authorizes purchases on the open market and through privately negotiated
transactions. Shares repurchased by the Company are held as treasury shares
and are available to the Company for use in funding its stock based benefit
plans, and when authorized, for other corporate purposes. In 1997, the
Company reacquired approximately 400,000 shares at a cost of $14 million,
all of which were used to fund issuances under stock-based benefit plans.
Cash Flows from Operating Activities
Cash provided by operating activities was $190 million in 1997, a decrease
of $11 million from the $201 million provided in 1996. This decrease is
primarily attributable to a reduction in cash flows provided by net working
capital items partially offset by an increase in depreciation and
amortization. The impairment loss was a non-cash charge. Although it
impacted certain components of cash flows from operating activities, it has
no net impact on cash provided by operating activities.
Cash provided by operating activities was $201 million in 1996, an increase
of $63 million over the $138 million provided in 1995. This increase is
primarily attributable to an overall decrease in net working capital items
coupled with improved results of operations and higher depreciation and
amortization. Inventories increased $34 million when comparing December 28,
1996 with December 30, 1995. This increase is attributable to additional
retail inventory in new stores coupled with higher warehouse inventory due
to the opening of the Company's new distribution facility in the Southeast.
Accounts payable, accrued expenses and other liabilities increased $78
million over the same period reflecting the overall growth of the Company's
operations.
<PAGE>
Cash Flows from Investing Activities
Cash used in investing activities decreased $60 million during 1997 to $157
million from $217 million in 1996. This decrease is primarily the result of
the Company's reduced capital investment in 1997 as evidenced by the
construction of a new distribution facility in the Southeast in 1996.
Capital investments totaled $168 million in 1997 and were composed of $153
million in additions to property, plant and equipment, $10 million in
deferred charges and computer software costs and $5 million in non-cash
capital lease additions. These 1997 capital investments were primarily
composed of costs incurred in building and equipping new and expanded
supermarkets and in improvements necessary to maintain current facilities
and systems.
Net retail selling space for supermarkets increased 10.2% in 1997 to
4,947,000 square feet at year-end, an increase of 457,000 square feet over
1996 year-end sales area. The Company opened seventeen supermarkets
including ten new stores, five relocations and two expansions, and
temporarily closed one supermarket as it undergoes a substantial expansion.
A number of 1997 supermarket construction starts will not be completed until
1998.
The number of supermarkets and square footage of selling area at year-ends
1997, 1996 and 1995 are summarized below:
SUPERMARKETS
Number of Square Footage
Units Selling Area
1997 148 4,947,000
1996 139 4,490,000
1995 134 4,166,000
<PAGE>
Newly constructed supermarkets in 1997, together with their square footage
of selling area, are listed below:
SQUARE FOOTAGE
LOCATION SELLING AREA
Northeast
Chelmsford, MA 35,000
Dracut, MA 30,000
Guilderland, NY 33,000
Rutland, VT 34,000
Southeast
Shallotte, NC 35,000
Danville, VA 41,000
Wilmington, NC (Murrayville Rd.) 35,000
Wilmington, NC (Carolina Beach) 41,000
Richmond, VA (Rt. 1 and Parham) 44,000
Charlotte, NC (Independence Blvd.) 41,000
Virginia Beach, VA (Shore Drive) 35,000
Virginia Beach, VA (Princess Anne) 40,000
Newport News, VA 37,000
Rock Hill, SC 40,000
Charlotte, NC (Eastland Mall) 41,000
Richmond, VA (Willow Lawn) 34,000
Virginia Beach, VA (Republic Drive) 40,000
During January 1998, the Company closed seven southeastern stores in
non-core markets with limited opportunity for profitable growth. These
closures will allow the Company to focus on its key southeastern market
regions in 1998. The Company plans to invest approximately $50 million in
new and remodeled stores in its key southeastern markets in 1998.
Cash used in investing activities increased $59 million during 1996 to $217
million from $158 million in 1995. This increase is primarily the result of
the Company's increased capital investment in 1996. Total capital
investments totaled $231 million in 1996 and were composed of $215 million
in additions to property, plant and equipment, $8 million in deferred
charges and computer software costs and $8 million in non-cash capital lease
additions. These 1996 capital investments were primarily composed of costs
incurred in building and equipping new and expanded supermarkets and in the
construction of a new distribution facility in the Southeast. The
distribution facility, located in Butner, North Carolina, began shipping
product in November 1996.
<PAGE>
Cash Flows from Financing Activities
Cash used in financing activities was $17 million in 1997 as compared to $51
million of cash provided by financing activities in 1996. This decrease in
cash flows of $68 million is principally the result of reduced proceeds from
the issuance of long-term debt. During 1997, the Company received $20
million of proceeds from a senior uncollateralized debt financing and $7
million of proceeds from borrowings on its revolving lines of credit.
During 1996, the Company received $75 million of proceeds from a senior
uncollateralized debt financing and $31 million of proceeds from borrowings
on its revolving line of credit. In 1997, the Company made payments of $14
million on its long-term debt as compared to $29 million in 1996. This
decrease of $15 million is the result of the Company, during 1996, utilizing
a portion of its long-term debt proceeds to repay $11 million on its
revolving lines of credit. In 1997, the Company purchased 400,000 shares of
common stock at a cost of $14 million. The majority of this repurchased
stock was used to fund the Company's stock based benefit plans with the
balance being held in treasury. These amounts were offset by proceeds of
$10 million received during 1997 from the issuance of approximately 399,000
shares of treasury stock. The Company paid $23 million in dividends to
common shareholders in 1997.
Quarterly cash dividends declared during 1997 totaled $.54 per common share,
an increase of 12.5% over the $.48 per share declared during 1996. This was
the thirty-fifth consecutive year that the aggregate dividend paid per
common share, after adjustment for stock splits and stock dividends, has
increased. Common stock dividend payments in 1997 represented 27.3% of net
earnings available to common shareholders before the impact of the non-cash
impairment loss. In February 1998, the Company declared an increased
quarterly dividend on its common stock of $.15 per share, payable March 26,
1998. The new quarterly dividend of $.15 per share represents an increase
of 11.1% over the $.135 per share paid in each quarter of 1997.
Cash provided by financing activities was $51 million in 1996, an increase
of $66 million from the $15 million of cash used in financing activities in
1995. This increase is the result of proceeds from the issuance of
long-term debt partially offset by payments of long-term debt and purchases
of treasury stock.
<PAGE>
1998 Capital Program
Total capital expenditure commitments are projected to be in excess of $140
million in 1998, primarily for new store constructions, store relocations
and expansions, equipment, vehicles and other asset expenditures. During
1998, this program will be subject to continuing change and review as
conditions warrant. Net square footage of retail selling space is expected
to increase by approximately 4% during 1998. Excluding the impact of the
seven closed supermarkets, the Company's expansion program would yield an
increase in retail square footage of approximately 8% during 1998. A number
of projects scheduled to start in 1998 will not be completed until 1999.
The 1998 capital program is expected to be financed by internally generated
funds, long-term debt and leases.
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company or statements made by
its associates may contain forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995. Examples of such
statements in this report include those concerning the Company's expected
future tax rates, Year 2000 technology application issue, construction
schedules and capital expenditures. The Company cautions investors that
there can be no assurance that actual results or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors and risks including, but
not limited to the following:
(1) Hannaford's future operating results are dependent on its ability to
achieve increased sales and to control expenses. Factors such as lower than
expected inflation, product cost fluctuations particularly in perishable
categories, changes in product mix or the use of promotional items, both of
which may affect pricing strategy, continued or increased competitive
pressures from existing competitors and new entrants, including price
cutting strategies, and deterioration in general or regional economic
conditions are all factors which could adversely affect sales projections.
Other components of operating results could be adversely affected by state
or federal legislation or regulation that increases costs, increases in
interest rates or the Company's cost of borrowing, increases in labor rates
due to low unemployment or other factors, unanticipated costs related to the
opening and closing of stores or the inability to control various expense
categories.
(2) Hannaford's future growth is dependent on its ability to expand its
retail square footage. Increases in interest rates or the Company's cost of
capital, the unavailability of funds for capital expenditures and the
inability to develop new stores or convert existing stores as rapidly as
planned are all risks to the Company's projected future expansion.
<PAGE>
(3) Adverse determinations with respect to pending or future litigation or
other material claims against Hannaford could affect actual results.
(4) The costs of the Year 2000 issue and its action plan are management's
best estimates, which were derived using assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ from
those plans.
Furthermore, the market price of Hannaford common stock could be subject to
fluctuations in response to quarter to quarter variations in operating
results, changes in analysts' earnings estimates, market conditions in the
retail sector, especially in the supermarket industry, as well as general
economic conditions and other factors external to Hannaford.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Presented below are the Registrant's Consolidated Balance Sheets,
Consolidated Statements of Earnings, Consolidated Statements of Changes in
Shareholders' Equity, Consolidated Statements of Cash Flows and accompanying
Notes to Consolidated Financial Statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Hannaford Bros. Co.:
We have audited the consolidated financial statements of Hannaford Bros. Co.
and Subsidiaries listed in Item 8 of this Form 10-K. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hannaford
Bros. Co. and Subsidiaries as of January 3, 1998 and December 28, 1996, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended January 3, 1998, in conformity with
generally accepted accounting principles.
s/Coopers & Lybrand
Portland, Maine
January 21, 1998
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
January 3, December 28,
1998 1996
Current assets:
Cash and cash items $ 57,663 $ 42,505
Accounts receivable, net 14,918 17,384
Inventories (note 1C) 188,767 191,658
Prepaid expenses 7,801 5,834
Deferred income taxes (note 8) 6,912 4,589
Total current assets 276,061 261,970
Property, plant and equipment, net
(notes 1D, 2 and 4) 777,909 723,176
Leased property under capital leases, net
(note 3) 58,516 59,918
Other assets:
Goodwill, net (notes 1F and 4) 67,552 95,654
Deferred charges, net (note 1G) 28,724 26,332
Computer software costs, net (note 1H) 16,551 13,658
Miscellaneous assets 1,877 3,019
Total other assets 114,704 138,663
$1,227,190 $1,183,727
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except share amounts)
January 3, December 28,
1998 1996
Current liabilities:
Current maturities of long-term debt (note 2) $ 18,155 $ 14,213
Obligations under capital leases (note 3) 1,873 1,775
Accounts payable 182,252 177,895
Accrued payroll 25,526 22,554
Other accrued expenses 24,553 21,205
Income taxes 2,829 2,532
Total current liabilities 255,188 240,174
Deferred income tax liabilities (note 8) 18,265 23,757
Other liabilities 41,171 47,917
Long-term debt (note 2) 235,850 227,525
Obligations under capital leases (note 3) 75,687 75,198
Shareholders' equity (notes 5 and 7):
Class A Serial Preferred stock, no par,
authorized 2,000,000 shares - -
Class B Serial Preferred stock, par value
$.01 per share, authorized 28,000,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000,000 shares;
January 3, 1998: Issued 42,338,316
shares, outstanding 42,279,483 shares.
December 28, 1996: Issued, 42,338,316
shares, outstanding 42,280,695 shares. 31,754 31,754
Additional paid-in capital 115,130 119,399
Preferred stock purchase rights 423 423
Retained earnings 456,063 419,459
603,370 571,035
Less common stock in treasury
(January 3, 1998: 58,833 shares at cost,
December 28, 1996: 57,621 shares at cost) 2,341 1,879
Total shareholders' equity 601,029 569,156
$1,227,190 $1,183,727
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
FISCAL YEAR
1997 1996 1995
Sales and other revenues $3,226,433 $2,957,559 $2,568,061
Cost of sales 2,427,287 2,242,784 1,951,248
Gross margin 799,146 714,775 616,813
Selling, general and administrative
expenses 635,355 568,033 481,017
Impairment loss (note 4) 39,950 - -
Operating profit 123,841 146,742 135,796
Interest expense, net (notes 1I and 2) 26,425 22,204 19,368
Earnings before income taxes 97,416 124,538 116,428
Income taxes (note 8) 37,769 49,333 46,227
Net earnings $ 59,647 $ 75,205 $ 70,201
Per share of common stock (note 1J):
Basic earnings per share $ 1.41 $ 1.78 $ 1.67
Diluted earnings per share $ 1.40 $ 1.76 $ 1.66
Cash dividends $ .54 $ .48 $ .42
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION> HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
ADDITIONAL
COMMON STOCK PAID-IN PREFERRED STOCK RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL PURCHASE RIGHTS EARNINGS SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 41,779 $31,335 $110,669 $418 $312,053
Net earnings 70,201
Cash dividends:
Common stock (17,693)
Preferred stock purchase rights 5 (5)
Shares issued to certain shareholders
per agreement 132 99 3,376
Shares issued under employee
benefit plans 387 290 7,929
Balance, December 30, 1995 42,298 31,724 121,974 423 364,556
Net earnings 75,205
Cash dividends:
Common stock (20,302)
Shares issued to certain shareholders
per agreement 20 15 484
Shares issued under employee
benefit plans 20 15 (3,059) 410 $12,250
Treasury stock purchases (468) (14,129)
Balance, December 28, 1996 42,338 31,754 119,399 423 419,459 ( 58) (1,879)
Net earnings 59,647
Cash dividends:
Common stock (23,043)
Shares issued under employee
benefit plans (4,269) 399 13,917
Treasury stock purchases (400) (14,379)
Balance, January 3, 1998 42,338 $31,754 $115,130 $423 $456,063 (59) ($2,341)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
1997 1996 1995
Cash flows from operating activities:
Net income $ 59,647 $ 75,205 $ 70,201
Adjustments to reconcile net
income to net cash provided
by operating activities:
Impairment loss 39,950 - -
Depreciation and amortization 93,953 77,420 69,016
Decrease (increase) in inventories 2,891 (33,689) (25,545)
Decrease (increase) in receivables and
prepayments 599 (805) (1,196)
Increase in accounts payable,
accrued expenses and other liabilities 440 77,889 27,821
Increase (decrease) in income
taxes payable 297 2,532 (5,409)
Increase (decrease) in deferred taxes (7,815) 2,523 2,279
Other operating activities (446) 96 1,059
Net cash provided by
operating activities 189,516 201,171 138,226
Cash flows from investing activities:
Acquisition of property, plant
and equipment (152,862) (215,067) (133,587)
Sale of property, plant and equipment, net 6,143 5,958 2,607
Increase in goodwill and deferred charges (4,054) (1,930) (22,599)
Increase in computer software costs (6,205) (5,933) (4,130)
Net cash used in investing
activities (156,978) (216,972) (157,709)
Cash flows from financing activities:
Principal payments under capital
lease obligations (1,788) (1,493) (1,404)
Proceeds from issuance of long-term debt 26,600 106,500 11,400
Payments of long-term debt (14,418) (28,994) (18,452)
Issuance of common stock 9,648 9,707 11,694
Purchase of treasury stock (14,379) (14,129) -
Dividends paid (23,043) (20,302) (17,693)
Net cash provided by (used in)
financing activities (17,380) 51,289 (14,455)
Net increase (decrease) in cash and
cash items 15,158 35,488 (33,938)
Cash and cash items at beginning of year 42,505 7,017 40,955
Cash and cash items at end of year $ 57,663 $ 42,505 $ 7,017
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information
Cash paid during the year for:
(In thousands)
1997 1996 1995
Interest (net of amount capitalized,
$3,463 in 1997, $3,357 in 1996 and
$2,529 in 1995) $26,396 $22,765 $21,986
Income taxes 41,202 42,577 49,254
Supplemental disclosure of noncash investing and financing activities
Capital lease obligations totalling $4,550,000, $7,652,000 and
$1,997,000 were incurred during 1997, 1996 and 1995, respectively,
when the Company entered into real estate leases.
Disclosure of accounting policy
For the purposes of the Consolidated Statements of Cash Flows, the
Company considers all highly liquid debt instruments with maturities of
three months or less when purchased, to be cash items.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
The Company and its subsidiaries are principally involved in the
distribution and retail sale of food, prescription drugs and related
products through supermarkets and combination stores. The Company's stores
are located in Maine, New Hampshire, Vermont, Massachusetts, upstate New
York, Virginia, North Carolina and South Carolina.
B. PRINCIPLES OF CONSOLIDATION
The Company's fiscal year ends on the Saturday closest to December 31. The
consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries as of January 3, 1998, for fiscal year 1997
(53 weeks), December 28, 1996, for fiscal year 1996 (52 weeks) and December
30, 1995, for fiscal year 1995 (52 weeks). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ from
those estimates.
C. INVENTORIES
Inventories consist primarily of groceries, meat, produce, general
merchandise and pharmaceuticals. The majority of grocery, pharmaceutical
and general merchandise inventories are valued at the lower of cost,
determined on the last-in, first-out (LIFO) method, or market.
Approximately 84% of inventories were valued using the LIFO method in 1997
as compared to 71% in 1996. The LIFO method was elected in 1997 for the
majority of inventories in the Company's southeastern operations. Other
inventories are stated at the lower of cost (first-in, first-out) or market.
The current cost of groceries, general merchandise and pharmaceuticals
exceeded the LIFO valuation by $18,037,000 at January 3, 1998 and
$17,076,000 at December 28, 1996.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets.
Leasehold interests and improvements are amortized on the straight-line
method over the shorter of estimated useful life or lease term. The costs
of repairs and maintenance are expensed as incurred; renewals and
betterments are capitalized. Upon sale or retirement, the cost and related
accumulated depreciation are eliminated from the respective accounts and any
resulting gain or loss is included in the results of operations. Property,
plant and equipment consists of the following:
AVERAGE
DEPRECIATION (In thousands)
RATE 1997 1996
3% Land and improvements $ 129,752 $ 117,218
3% Buildings 279,310 252,228
13% Furniture, fixtures and equipment 454,564 404,725
4% Leasehold interests and improvements 277,560 245,490
Construction in progress 29,124 31,850
1,170,310 1,051,511
Less accumulated depreciation
and amortization 392,401 328,335
$ 777,909 $ 723,176
E. STORE OPENING COSTS
The noncapital expenditures incurred in opening new stores or remodelling
existing stores are expensed in the year in which they are incurred.
F. GOODWILL
Goodwill, which represents the excess of costs of assets acquired over the
fair value of their net assets at dates of acquisition, is being amortized
on the straight-line method over various periods not exceeding 20 years.
The Company evaluates, on an ongoing basis, the carrying value of goodwill
and will make a specific provision when impairment is identified (Note 4).
Goodwill amortization expense charged to operations was $5,534,000 in 1997,
$5,140,000 in 1996 and $4,448,000 in 1995.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
G. DEFERRED CHARGES
Deferred charges consist primarily of costs of obtaining new store sites,
covenants-not-to-compete, tradenames and initial direct lease costs. Costs
of obtaining new store sites, if ultimately developed, are capitalized and
depreciated over the estimated useful lives of the related assets. Other
intangible assets acquired in connection with acquisitions are amortized on
the straight-line method over periods ranging from five to ten years. Lease
costs are amortized on the straight-line method over the base lease term.
Amortization expense related to these deferred charges was $3,599,000 in
1997, $3,246,000 in 1996 and $5,609,000 in 1995.
H. CAPITALIZED COMPUTER SOFTWARE COSTS
Capitalized computer software costs consist of costs to purchase and develop
software. The Company capitalizes internally developed software costs based
on a project-by-project analysis of each project's significance to the
Company and its estimated useful life. All capitalized software costs are
amortized on a straight-line method over a period of five years.
Amortization expense charged to operations was $3,312,000 in 1997,
$2,338,000 in 1996 and $2,448,000 in 1995.
I. CAPITALIZED INTEREST
The Company capitalizes interest as a part of the cost of acquiring and
constructing certain assets. Capitalized interest was $3,463,000 in 1997,
$3,357,000 in 1996 and $2,529,000 in 1995.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
J. EARNINGS PER COMMON SHARE
Effective for the 1997 fiscal year, the Company adopted STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128 - EARNINGS PER SHARE. The
Statement requires dual presentation of basic and diluted earnings per share
of common stock on the consolidated statements of earnings. Basic earnings
per share of common stock have been determined by dividing net earnings by
the weighted average number of shares of common stock outstanding during the
year. Diluted earnings per share reflect the potential dilution that would
occur if existing stock options were exercised. Following is a
reconciliation of the dual presentations of earnings per share for the
fiscal years presented.
(Amounts in 000's)
NET COMMON EARNINGS
INCOME SHARES PER
(NUMERATOR) (DENOMINATOR) SHARE
FISCAL 1997
Basic earnings per share $59,647 42,287 $1.41
Dilutive potential shares 445
Diluted earnings per share $59,647 42,732 $1.40
FISCAL 1996
Basic earnings per share $75,205 42,298 $1.78
Dilutive potential shares 323
Diluted earnings per share $75,205 42,621 $1.76
FISCAL 1995
Basic earnings per share $70,201 42,092 $1.67
Dilutive potential shares 260
Diluted earnings per share $70,201 42,352 $1.66
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
K. FAIR VALUE DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash items, accounts receivable and notes receivable: The
carrying amounts reported in the balance sheet for these items
approximate their fair value.
Long-term debt: The fair values of the Company's long-term debt are
estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing
arrangements. The carrying amount of the Company's long-term debt,
including current maturities, was approximately $254,005,000 at
January 3, 1998. The fair value of the long-term debt is estimated
to be $259,519,000 at January 3, 1998.
L. ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 130 - REPORTING
COMPREHENSIVE INCOME, which requires the separate reporting of all
changes to shareholders' equity, and SFAS NO. 131 - DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which revises
existing guidelines about the level of financial disclosure of a
Company's operations. Both Statements are effective for financial
statements issued for fiscal years beginning after December 15, 1997.
The Company has determined that the new standards will not have a
material impact to existing financial reporting.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. EXTERNAL FINANCING
At January 3, 1998, the Company had revolving credit lines with several
banks totalling $92,000,000 with interest rates determined by different
borrowing options including prime, quoted money market or LIBOR plus a
premium. At January 3, 1998, there were $38,100,000 of outstanding
borrowings under these credit lines with a weighted-average interest rate of
7.0%. The agreements provide for conversion of revolving credit loans to
term loans with principal payments due in quarterly installments over a
period of four years. The loan agreements contain certain restrictive
covenants, which among other provisions, require maintenance of certain
levels of working capital, debt and tangible net worth.
The lines require a commitment fee of 0.21% on the unused portion of the
line. There are no compensating balances required during the commitment
period.
In addition, the Company had unused, uncommitted short-term lines of credit
with three banks totalling $36,000,000 at January 3, 1998. Of this amount,
approximately $6,100,000 is reserved to support outstanding standby letters
of credit which guarantee payment of certain insurance claims and premiums.
In February 1997, the Company received the proceeds of a $20,000,000 senior
uncollateralized debt financing. The term of the debt is 12 years, with an
average life of 10 years and an interest rate of 7.41%.
At January 3, 1998, real estate and equipment with a net book value of
approximately $84,082,000 served as collateral for debt of approximately
$73,648,000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Net interest expense was as follows:
(In thousands)
1997 1996 1995
Interest on debt $20,108 $17,460 $15,302
Capital lease interest 9,902 9,351 9,105
Capitalized interest (3,463) (3,357) (2,529)
Interest income (122) (1,250) (2,510)
$26,425 $22,204 $19,368
Long-term debt consists of the following:
(In thousands)
1997 1996
Uncollateralized senior notes due in varying
annual installments through 2016 with interest
from 6.16% to 8.97%. $136,250 $123,500
Collateralized by real estate, due in
varying installments through 2011 with
interest from 7.55% to 10.35% 70,665 75,255
Uncollateralized revolving credit loans with
interest from 6.34% to 7.44% 38,100 31,500
Collateralized by equipment, due in varying
installments through 1999 with interest
from 6.30% to 7.72%. 2,983 4,417
Other 6,007 7,066
254,005 241,738
Less current portion 18,155 14,213
$235,850 $227,525
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The uncollateralized senior note agreements contain certain restrictive
covenants, which among other provisions, limit total debt and require
minimum levels of tangible net worth.
Maturities of long-term debt at January 3, 1998, are as follows:
(In thousands)
1998 $ 18,155
1999 20,918
2000 30,215
2001 33,404
2002 25,733
2003 and thereafter 125,580
$254,005
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3. LEASED ASSETS AND LEASE COMMITMENTS
The Company's financial structure includes leases of certain stores, office
facilities, transportation vehicles and equipment. Initial lease terms
range from 3 to 45 years with the majority of lease terms between 20 and 25
years. Substantially all leases contain renewal options. Certain leases
contain a provision for the payment of contingent rentals based on a
percentage of sales in excess of stipulated amounts. Most of the real
estate leases provide that the Company pay taxes, insurance and maintenance
applicable to the leased premises.
The Company's investment in real property under capital leases was as
follows:
(In thousands)
1997 1996
Real property $84,494 $83,047
Less accumulated amortization 25,978 23,129
Net real property under capital leases $58,516 $59,918
Amortization of property under capital leases was $4,322,000 in 1997,
$4,004,000 in 1996 and $3,866,000 in 1995.
Future minimum rental payments under capital lease obligations and operating
leases at January 3, 1998, are as follows:
(In thousands)
CAPITAL OPERATING
LEASES LEASES
1998 $ 11,730 $ 20,881
1999 11,934 20,148
2000 12,050 18,442
2001 11,919 17,176
2002 12,147 16,668
2003 and thereafter 118,996 176,593
Total minimum lease payments 178,776 $269,908
Less:
Imputed interest (at rates
from 6.50% to 21.13%) 101,216
Present value of net mini-
mum lease payments 77,560
Less current obligations 1,873
Long-term obligations $ 75,687
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Minimum payments for capital and operating leases have not been reduced by
minimum sublease rentals of $2,406,000 and $7,506,000, respectively, due in
the future under noncancellable subleases. They also do not include
contingent rentals that may be payable under certain leases.
Total rent expense, net of executory costs, was as follows:
(In thousands)
1997 1996 1995
Capital leases:
Contingent rentals $ 194 $ 169 $ 166
Operating leases:
Minimum rentals 20,584 19,019 13,847
Contingent rentals 714 491 517
Rentals from subleases (1,492) (690) (222)
19,806 18,820 14,142
$20,000 $18,989 $14,308
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. IMPAIRMENT LOSS
In December 1997, the Company determined that certain of its supermarket
assets and identifiable intangibles, including goodwill, were impaired based
upon STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 121 - ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF. Based on a review of certain Company locations, in considering the
expected operating cash flows along with the estimated market value of the
assets as if they were to be sold or disposed of, an impairment loss of
$39,950,000 was recognized. Approximately $24,000,000 of the asset
impairment loss relates to supermarket assets and related costs for stores
that were closed in January 1998 and are being held for sale or disposal,
and $15,950,000 relates to supermarket assets which will continue to be used
in the operations of the Company. Management expects to complete the sale
or disposal of the assets relative to the closed supermarkets, whose
estimated fair values are approximately $8,987,000, within one year from the
dates of closure. In 1997 the operating losses of these closed supermarkets
were not material.
Management's estimated future discounted cash flows from these supermarket
locations indicated that such cash flows were insufficient to recover the
asset carrying values. Therefore, such carrying values were written down to
estimated fair value less costs to sell. Under SFAS NO. 121, the potential
impairment evaluation is made on an individual supermarket basis and
involves considerable management judgment as to the expected future sales
and profitability of each individual supermarket. Actual results of these
supermarkets may differ from management's estimates.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. CAPITAL STOCK
In December 1997, the Company adopted a Shareholder Rights Plan which will
become effective upon the expiration of the Company's existing rights plan
on February 4, 1998. The replacement plan is substantially identical to the
existing plan, except for modification to the exercise and redemption prices
of the new rights, and the term of the rights plan. The terms of the plan
provide for a dividend distribution of one right for each share of Hannaford
common stock to holders of record at the close of business on February 4,
1998. The rights will become exercisable only in the event an acquiring
party (excluding the Sobey Parties under certain circumstances and certain
other persons) accumulates 20% or more of Hannaford voting stock, or if a
party announces an offer which would result in it owning 30% or more of
Hannaford voting stock. The rights will expire on February 4, 2001. Each
right will entitle the holder to buy one one-hundredth of a share of a
series of junior participating preferred stock of Hannaford at a price of
$60. In addition, upon the occurrence of a merger or other business
combination, certain self-dealing transactions with an owner of 20% or more
of Hannaford voting stock or the acquisition by a person or group of 30% or
more of Hannaford voting stock, holders of the rights will be entitled to
purchase either participating preferred stock of Hannaford or shares in an
"acquiring entity" at half of market value. Hannaford will be entitled to
redeem the rights at 1 cent per right any time until the tenth day following
the acquisition by an acquiring person or group of a 20% position in its
voting stock.
In May 1997, the shareholders of the Company approved an amendment to the
Hannaford Bros. Co. Employee Stock Purchase Plan. This amendment increased
the total authorized shares for this Plan by an additional 750,000 shares
thereby permitting continued use of the Plan during 1997 and future years.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In May 1996, the Company amended and extended its existing standstill
agreement with certain shareholders ("the Sobey Parties"). The
amendment extends the term of the standstill agreement to December
31, 1998, subject to automatic renewal 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
standstill agreement. The amendment also made technical changes to the
agreement which will allow the Company greater flexibility in the use of
common stock to compensate employees and directors and permitted adoption of
a new Shareholder Rights Plan through February 4, 2001, on substantially the
same terms as the prior Rights Plan. The amendment maintains the Sobey
Parties' ownership limit at approximately 25.6% of the Company's voting
stock, except in certain circumstances specified by the agreement. Under
the agreement, whenever the Company issues shares of voting stock to third
parties, the Sobey Parties generally have the right to purchase sufficient
shares from the Company to maintain a 25.6% level of ownership. Since 1995
the Company has issued to the Sobey Parties the following shares of common
stock pursuant to their purchase rights under the agreement: 1996, 19,600
shares and 1995, 132,000 shares. All sales to the Sobey Parties pursuant to
the standstill agreement have been made at market prices. Due to the
Company's share repurchase program to fund stock-based benefit plans and the
resulting slowdown in the growth of Company shares outstanding, the Sobey
Parties purchased no additional shares in 1997.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. EMPLOYEE BENEFIT PLANS
The Company has a non-contributory, defined benefit pension plan covering
approximately 50% of its employees. The plan provides for payment of
retirement benefits on the basis of employees' length of service and
earnings. The Company's policy is to fund the plan based upon legal
requirements and tax regulations. Plan assets consist of common stocks,
cash and cash equivalents and fixed income investments. At September 30,
1997 and 1996, the plan's measurement dates, the discount rates used in
determining the actuarial present values of the projected benefit
obligations were 7.50% and 8.25%, respectively; the long-term rate of
increase in compensation levels was assumed to be 4.5% in both years. The
expected long-term rate of return on plan assets used in determining net
pension expense was 10.5% for 1997, 9.5% for 1996, and 9.0% for 1995.
In October 1996, the Board of Directors approved an amendment to the plan
which converts it to a cash balance plan. This amendment was effective
January 1, 1998, and has resulted in the remeasurement of the plan's
projected benefit obligation. The accrued pensions costs as of January 3,
1998 and the net pension expense for the year then ended, reflect the plan's
remeasurement.
The components of net pension expense were as follows:
(In thousands)
1997 1996 1995
Service cost $ 3,117 $ 4,709 $ 4,248
Interest expense 5,613 5,155 4,916
Actual return on plan assets (20,074) (7,194) (8,566)
Net amortization and deferral 13,252 1,662 3,769
Net pension expense $ 1,908 $ 4,332 $ 4,367
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following summarizes the funded status of the plan at January 3, 1998
and December 28, 1996:
(In thousands)
1997 1996
Actuarial present value of
benefit obligations:
Vested benefit obligation $71,707 $59,828
Accumulated benefit obligation $76,474 $63,849
Projected benefit obligation $81,942 $68,864
Plan assets at fair value 88,385 70,391
Plan assets greater than
projected benefit obligation (6,443) (1,527)
Unrecognized net asset
at transition 308 352
Unrecognized net gain 13,141 7,359
Unrecognized prior service cost (2,611) (2,895)
Accrued pension cost $ 4,395 $ 3,289
The Company also provides certain health care and life insurance benefits
for retired employees. The discount rates used to determine the accumulated
benefit obligation at September 30, 1997 and 1996, the plan's measurement
date, were 7.50% and 8.25%, respectively. A 6.0% annual rate of increase in
the per capita costs of covered health care was assumed for 1998, gradually
decreasing to 5% by the year 2000. A 1% increase in the assumed rate of
increase would not have a material effect on the benefit obligation or
expense. The Company does not separately fund this plan.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The components of postretirement benefit expense were as follows:
(In thousands)
1997 1996 1995
Service cost $ 35 $ 70 $ 65
Interest expense 248 438 530
Net amortization and deferral (60) 167 231
Net periodic postretirement
benefit expense $ 223 $ 675 $ 826
The following summarizes the status of the plan at January 3, 1998 and
December 28, 1996:
(In thousands)
1997 1996
Accumulated benefit obligation:
Retirees $ 2,138 $ 3,836
Actives - eligible to retire 361 559
Actives - not eligible to retire 619 985
Total obligation 3,118 5,380
Unrecognized transition obligation (8,283) (8,847)
Unrecognized net gain 6,273 5,003
Accrued postretirement benefit liability $ 1,108 $ 1,536
The Company also provides a defined contribution 401(k) plan to
substantially all employees. Amounts charged to expense for this plan were
$2,916,000 in 1997, $3,076,000 in 1996 and $2,744,000 in 1995. The Company
also administers a supplemental executive retirement plan for which the cost
was not significant.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. EMPLOYEE STOCK PLANS
The 1985 Incentive Stock Option Plan (the final grants under which expired
on May 4, 1996) and the 1988 Stock Plan provide for the granting to
officers and other key employees options to purchase common stock at 100% of
the market price on the date of grant. The 1988 Stock Plan allows the
granting of both incentive stock options and non-qualified stock options.
Under the 1988 Stock Plan, both incentive stock options and non-qualified
stock options may have various vesting schedules, but generally none are
exercisable until at least one year following the grant. All options may be
exercised for cash or by exchanging currently owned shares, or both. Under
the 1988 Plan, exchanged shares may trigger the granting of non-qualified
"reload" options for the balance of the original option term. Original
option grants expire ten years from the date of grant (seven years in the
case of the 1985 Incentive Stock Option Plan). Incentive stock option
activity for the fiscal years ended January 3, 1998, December 28, 1996 and
December 30, 1995, was as follows:
(Share Amounts in Thousands)
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning of year 1,422 $24.91 1,362 $22.37 1,185 $20.43
Granted 367 34.63 359 30.39 336 26.75
Exercised (261) 22.85 (287) 19.63 (137) 16.08
Cancelled (16) 30.89 (12) 26.74 (22) 23.66
Outstanding at end
of year 1,512 27.57 1,422 24.91 1,362 22.37
Exercisable at end
of year 912 24.02 902 22.42 860 20.85
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Non-qualified stock option activity for the fiscal years ended January 3,
1998, December 28, 1996 and December 30, 1995, was as follows:
(Share Amounts in Thousands)
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning of year 366 $28.18 218 $24.60 103 $22.09
Granted 127 36.15 189 31.30 116 26.85
Exercised (13) 27.89 (35) 19.96 - -
Cancelled - - (6) 29.01 (1) 25.04
Outstanding at end
of year 480 30.29 366 28.18 218 24.60
Exercisable at end
of year 252 26.68 151 24.60 80 22.19
Available for future
grants (all plans) 92 - 569 - 1,089 -
Exercise prices for options outstanding as of January 3, 1998 ranged from
$18.81 to $43.44. The weighted-average remaining contractual life of these
options is approximately 7.6 years.
The Employee Stock Purchase Plan enables participating employees to purchase
common stock through payroll deduction of up to 5% of eligible compensation.
The Company pays interest on the accumulated withholdings. These amounts
may be used to purchase shares of company stock at the option price (lesser
of: (a) 85% of the fair market value at the date of grant or (b) the greater
of the market price at the close of business on the exercise date or $10.00
per share). During 1997, employees purchased 116,849 shares, for which
$2,595,828 was paid to the Company. On May 12, 1997, shareholders approved
an additional 750,000 shares of common stock to be allocated to this plan.
As of January 3, 1998, grants had been exercised by employees for the
purchase of 111,509 shares and 834,915 shares remained available for
issuance under the Plan. As of February 1998, $2,926,442 had been received
by the Company upon issuance of these shares and the balance of shares
available for future issuance was reduced to 723,711.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In 1995, the Financial Accounting Standards Board issued "Statement of
Financial Accounting Standards (SFAS) No. 123 - Accounting for Stock Based
Compensation". This statement requires a fair value based method of
accounting for employee stock options and would result in expense
recognition for the Company's employee stock plans. It also permits a
Company to continue to measure compensation expense for such plans using the
intrinsic value based method as prescribed by Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees". The
Company has elected to follow APB 25 in accounting for its employee stock
plans, and accordingly, no compensation cost has been recognized.
Had compensation cost for the Company's stock plans been determined based on
the fair value requirements of SFAS No. 123, the Company's net income and
basic earnings per share would have been reduced to the proforma amounts
indicated below:
(In thousands except earnings per share)
1997 1996 1995
Net earnings As reported $59,647 $75,205 $70,201
Proforma 56,436 72,567 68,814
Basic earnings per share As reported $1.41 $1.78 $1.67
Proforma 1.33 1.71 1.63
During the phase-in period of SFAS No. 123, the fair value of stock options
included in the proforma accounts for fiscal 1997, 1996 and 1995 is not
necessarily indicative of the future effects on net income and earnings per
share.
The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
1997 1996 1995
Risk-free interest rate 6.85% 7.03% 6.61%
Dividend yield 1.55% 1.54% 1.60%
Expected volatility 19.42% 19.44% 18.77%
Expected life 4.5 yrs. 4.9 yrs. 4.6 yrs.
The weighted-average grant date fair values of options granted during 1997,
1996 and 1995 were $8.84, $8.28 and $6.76, respectively.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. INCOME TAXES
The components of the provision for income taxes were as follows:
(In thousands)
1997 1996 1995
Current
Federal $37,028 $38,842 $35,689
State 4,790 7,969 8,259
41,818 46,811 43,948
Deferred
Federal (2,801) 2,276 2,024
State (1,248) 246 255
(4,049) 2,522 2,279
Total income tax expense $37,769 $49,333 $46,227
The reconciliation of income tax computed at the United States Federal
statutory tax rates to income tax expense is:
(In thousands)
1997 1996 1995
Amount Percent Amount Percent Amount Percent
Tax at U.S.
statutory rate $34,096 35.00% $43,588 35.00% $40,750 35.00%
State income taxes,
net of federal tax
benefit 3,487 3.58 5,280 4.24 5,530 4.75
Other - net 186 .19 465 .37 (53) (.05)
$37,769 38.77% $49,333 39.61% $46,227 39.70%
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
for the fiscal years ended January 3, 1998 and December 28, 1996 were as
follows:
(In thousands)
1997 1996
Deferred Tax Liabilities:
Depreciation and amortization $33,238 $38,729
Other 3,427 4,398
36,665 43,127
Deferred Tax Assets:
Capital leases (7,588) (6,870)
Insurance reserves (10,380) (9,412)
Associate benefit plans (4,736) (5,400)
Other (2,608) (2,277)
(25,312) (23,959)
11,353 19,168
Net current deferred tax assets 6,912 4,589
Net non-current deferred tax liabilities $18,265 $23,757
The Company expects to realize the deferred tax assets in the ordinary
course of business operations in subsequent years, and, accordingly, has not
established a valuation reserve relative to these amounts.
<PAGE>
<TABLE> HANNAFORD BROS. CO. AND SUBSIDIARIES
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a presentation of selected financial data for each of
the four quarters of fiscal years 1997, 1996 and 1995.
(In thousands except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1997
<S> <C> <C> <C> <C>
Sales and other revenues.......... $759,923 $775,687 $820,115 $870,708
Gross margin...................... 185,650 194,615 203,060 215,821
Net earnings...................... 15,590 19,878 22,797 1,382
Per common share, Basic...... $ .37 $ .47 $ .54 $ .03
Per common share, Diluted.... $ .37 $ .47 $ .53 $ .03
1996
Sales and other revenues.......... $690,525 $729,081 $773,271 $764,682
Gross margin...................... 167,836 176,345 184,093 186,501
Net earnings...................... 14,674 19,509 19,898 21,124
Per common share, Basic...... $ .35 $ .46 $ .47 $ .50
Per common share, Diluted.... $ .35 $ .46 $ .46 $ .49
1995
Sales and other revenues.......... $598,796 $634,798 $653,879 $680,588
Gross margin...................... 145,954 153,055 155,410 162,394
Net earnings...................... 14,564 19,025 19,714 16,898
Per common share, Basic...... $ .35 $ .45 $ .47 $ .40
Per common share, Diluted.... $ .35 $ .45 $ .46 $ .40
</TABLE>
<PAGE>
ITEM 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This item, except for certain information relating to Executive
Officers included in Part I, is incorporated by reference to the
Registrant's definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 19, 1998.
ITEM 11. EXECUTIVE COMPENSATION
This item is incorporated by reference to the Registrant's
definitive proxy statement for the Annual Meeting of Shareholders
to be held on May 19, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This item is incorporated by reference to the Registrant's
definitive proxy statement for the Annual Meeting of Shareholders
to be held on May 19, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This item is incorporated by reference to the Registrant's
definitive proxy statement for the Annual Meeting of Shareholders
to be held on May 19, 1998.
<PAGE>
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) 1., 2. Consolidated Financial Statements and Related
Schedules PAGES
Report of Independent Accountants............................. 26
Consolidated Balance Sheets - January 3, 1998 and
December 28, 1996.......................................... 27-28
Consolidated Statements of Earnings - Fiscal Years Ended,
Janaury 3, 1998, December 28, 1996 and December 30, 1995... 29
Consolidated Statements of Changes in Shareholders'
Equity - Fiscal Years Ended, January 3, 1998,
December 28, 1996 and December 30, 1995.................... 30
Consolidated Statements of Cash Flows
- Fiscal Years Ended, January 3, 1998,
December 28, 1996 and December 30, 1995.................... 31-32
Notes to Consolidated Financial Statements.................... 33-54
Schedules I, II, III and IV are not included as they are not applicable.
3. Exhibits Required by Item 601 of Regulation S-K
SEQUENTIAL
PAGE NUMBER
IN ORIGINAL 10-K
3.1 - Articles of Incorporation
Incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 (SEC File
No. 1-7603).
3.2 - By-Laws of the Registrant
Incorporated by reference to Exhibit 3.2 to the
<PAGE>
PAGES
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994 (SEC File
No. 1-7603).
4.1 - Instruments Defining the Rights of Included in
Security Holders Exhibit 3
4.2 - There are incorporated herein by reference (i) a Rights
Agreement dated as of February 4, 1988 between the
Registrant and The First National Bank of Boston, as Rights
Agent, a copy of which was filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K, dated February 16,
1988 (SEC File No. 1-7603) and (ii) an Appointment and
Amendment Agreement dated September 22, 1992 to said Rights
Agreement, substituting Continental Stock Transfer & Trust
Company as Rights Agent, a copy of which was filed as
Exhibit 4.3 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 1993 (SEC File No.
1-7603).
4.3 - There are incorporated herein by reference a (i) Rights
Agreement dated as of February 4, 1998 between the
Registrant and Continental Stock Transfer & Trust Company,
as Rights Agent, a copy of which was filed as Exhibit 4.1
to the Registrant's Registration Statement on Form 8-A,
dated January 23, 1998 (SEC File No. 1-7603).
10.1 - There are incorporated herein by reference (i) an Amended
and Restated Agreement, dated as of February 4, 1988, among
the Registrant and various Sobey Parties, a copy of which
was filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K, dated February 16, 1988 (SEC File No. 1-7603);
(ii) an Amendment Agreement dated as of January 1, 1992 to
said Agreement with the Sobey Parties, substituting certain
Sobeys Inc. employee benefit plans as parties thereto, a
copy of which was filed as Exhibit 10.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603) and (iii) a Second Amendment
Agreement dated as of May 14, 1996, which extends the term of
the agreement and makes other technical changes, a copy of
which was filed as Exhibit 1 to the Registrant's current report
on Form 8-K, dated May 14, 1996 (SEC File No. 1-7603).
NOTE: Compensatory plans and arrangements and management contracts are
filed as Exhibits 10.2 through 10.25 below.
<PAGE>
PAGES
10.2 - There are incorporated herein by reference (i) the amended
and restated Hannaford Bros. Co. Employees' Retirement Plan,
a copy of which was filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603); (ii) the First Amendment
to said Plan, a copy of which was filed as Exhibit 10.4 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994 (SEC File No. 1-7603); (iii) the
Second Amendment to said Plan, a copy of which was filed as
Exhibit 10.3 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (SEC File No.
1-7603); (iv) the Third Amendment to said Plan, a
copy of which was filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995 (SEC File No. 1-7603) and (v) the Fourth
Amendment to said Plan, a copy of which was filed as Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 28, 1997 (SEC File No. 1-7603).
10.3 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Employees' Retirement Plan,
effective January 1, 1998, a copy of which was filed as
Exhibit 10.3 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 28, 1996
(SEC File No. 1-7603).
10.4 - There are incorporated herein by reference (i) the amended and
restated Supplemental Executive Retirement Plan, a copy of
which was filed as Exhibit 10.5 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 2,
1993 (SEC File No. 1-7603); (ii) the First Amendment to said
Plan, a copy of which was filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (SEC File No. 1-7603) and (iii)
the Second Amendment to said Plan, which was filed as
Exhibit 10.4 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1995 (SEC
File No. 1-7603).
10.5 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Supplemental Executive Retirement
Plan, effective January 1, 1998, a copy of which was filed
<PAGE>
PAGES
as Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 28, 1997 (SEC File
No. 1-7603).
10.6 - There are incorporated herein by reference (i) the Amended
and Restated Hannaford Bros. Co. Employee Stock Purchase
Plan, a copy of which was filed as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (SEC File No. 1-7603); (ii)
the First Amendment to said Plan, a copy of which was
filed as Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended July 1, 1995
(SEC File No. 1-7603); (iii) the Second Amendment to
said Plan, a copy of which was filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1995 (SEC File
No. 1-7603); (iv) the Third Amendment to said Plan,
a copy of which was filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 1996 (SEC File No. 1-7603)
and (v) the Fourth Amendment to said Plan, a copy of
which was filed as Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 (SEC File No. 1-7603).
10.7 - There are incorporated herein by reference (i) the
Registrant's 1993 Long Term Incentive Plan, a copy of
which was filed as Exhibit 10.8 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 (SEC File No. 1-7603); (ii) the
First Amendment to said Plan, a copy of which was
filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
1, 1994 (SEC File No. 1-7603) and (iii) the Second
Amendment to said Plan, a copy of which was filed as
Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996
(SEC File No. 1-7603).
10.8 - The Third Amendment to the Registrant's 1993 Long Term 66
Incentive Plan, effective December 15, 1997.
10.9 - The Amended and Restated Hannaford Bros. Co. 1993 Long 67-71
Term Incentive Plan, effective January 4, 1998, subject
to approval by the Shareholders of the Registrant.
<PAGE>
PAGES
10.10 - There are incorporated herein by reference (i) the
Registrant's 1980 Long Term Incentive Plan, a copy of
which was filed as Exhibit 10B to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 3,
1981 (SEC File No. 1-7603); (ii) an Amendment to said Plan,
a copy of which was filed as Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended January 3, 1987 (SEC File No. 1-7603); (iii)
the Second Amendment to said Plan, a copy of which was
filed as Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
2, 1988 (SEC File No. 1-7603); (iv) the Third Amendment
to said Plan, a copy of which was filed as Exhibit
10.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 2, 1988 (SEC File No.
1-7603); (v) the Fourth Amendment to said Plan, a copy
of which was filed as Exhibit 10.10 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 (SEC File No. 1-7603) and (vi)
the Fifth Amendment to said Plan, a copy of which was
filed as Exhibit 10.7 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 28, 1991
(SEC File No. 1-7603).
10.11 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Annual Incentive Plan,
effective December 7, 1995, a copy of which was filed as
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K
For the fiscal year ended December 30, 1995 (SEC File
No. 1-7603).
10.12 - There are incorporated herein by reference (i) an Employment
Continuity Agreement between the Registrant and Hugh G.
Farrington, a copy of which was filed as Exhibit 10.14 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 (SEC File No. 1-7603); (ii)
the First Amendment to said Agreement, a copy of which
was filed as Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603) and (iii) the Second Amendment
to said Agreement, a copy of which was filed as Exhibit
10.14 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (SEC File No.
1-7603).
<PAGE>
PAGES
10.13 - Amended and Restated Employment Continuity Agreement 72-79
between the Registrant and Hugh G. Farrington, effective
January 1, 1998.
10.14 - There are incorporated herein by reference (i) a standard
form of Employment Continuity Agreement between the
Registrant and various of its executive officers, a copy
of which was filed as Exhibit 10.15 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 (SEC File No. 1-7603); (ii) the First
Amendment to Form of said Agreement, a copy of which
was filed as Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603) and (iii) the Second
Amendment to form of said Agreement, a copy of which was
filed as Exhibit 10.16 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994
(SEC File No. 1-7603).
10.15 - Amended and Restated Standard Form of Employment 80-87
Continuity Agreement between the Registrant and
various of its executive offices, effective January
1, 1998.
10.16 - There is incorporated herein by reference a standard form
Deferred Compensation Agreement available to outside
directors of the Registrant, a copy of which was filed as
Exhibit 10.2 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 29, 1984 (SEC File
No. 1-7603).
10.17 - There are incorporated herein by reference (i) the Amended
and Restated Hannaford Bros. Co. Savings and Investment Plan,
a copy of which was filed as Exhibit 10.17 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603); (ii) the First Amendment to
said Plan, which was filed as Exhibit 10.19 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (SEC File No. 1-7603);
(iii) the Second Amendment to said Plan, a copy of
which was filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
<PAGE>
PAGES
ended July 1, 1995 (SEC File No. 1-7603); (iv) the Third
Amendment to said Plan, a copy of which was filed as
Exhibit 10.3 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 1, 1995
(SEC File No. 1-7603) and (v) the Fourth Amendment to
said Plan (renamed the Hannaford Northeast Savings
and Investment Plan), a copy of which was filed as
Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September
30, 1995 (SEC File No. 1-7603).
10.18 - There is incorporated herein by reference (i) the Hannaford
Southeast Savings and Investment Plan, a copy of which was
filed as Exhibit 4.5 to the Registrant's Registration
Statement on Form S-8, dated June 8, 1995 (SEC Registration
No. 33-60119), (ii) the First Amendment to said Plan, a copy
of which was filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 29, 1997 (SEC File No. 1-7603); and (iii) the Second
Amendment to said Plan, a copy of which was filed as Exhibit
10.4 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 28, 1997 (SEC File No. 1-7603).
10.19 - There is incorporated herein by reference the Hannaford
Savings and Investment Plan (Merging and Amending the
Hannaford Northeast Savings and Investment Plan and the
Hannaford Southeast Savings and Investment Plan),
effective January 1, 1998, a copy of which was filed as
Exhibit 10.6 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 28, 1997 (SEC File
No. 1-7603).
10.20 - There is incorporated herein by reference the Hannaford Bros.
Co. Nonqualified Savings and Investment Plan, effective
January 1, 1998, a copy of which was filed as Exhibit 10.5
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 28, 1997 (SEC File No. 1-7603).
10.21 - There are incorporated herein by reference (i) the
Registrant's Amended and Restated Deferred Compensation
Plan available to certain management employees of the
Registrant, a copy of which was filed as Exhibit 10.24
<PAGE>
PAGES
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1988 (SEC File No. 1-7603)
and (ii) the First Amendment said Plan, a copy of which
was filed as Exhibit 10.18 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994 (SEC File No. 1-7603).
10.22 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. Deferred Compensation Plan for
Officers, effective January 1, 1998, a copy of which was
filed as Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended September 27, 1997
(SEC File No. 1-7603).
10.23 - There is incorporated herein by reference a standard form
of Deferred Compensation Agreement available to certain
management employees pursuant to the Registrant's Amended
and Restated Deferred Compensation Plan, a copy of which
was filed as Exhibit 10.19 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 2, 1993 (SEC
File No. 1-7603).
10.24 - There is incorporated herein by reference the Amended and
Restated Hannaford Bros. Co. 1988 Stock Plan, a copy of
which was filed as Exhibit 4.5 to the Registrant's
Registration Statement on Form S-8, dated June 27, 1995 (SEC
Registration No. 33-60655).
10.25 - Hannaford Bros. Co. 1998 Stock Option Plan, effective upon 88-99
approval by the Shareholders of the Registrant.
10.26 - Hannaford Bros. Co. 1998 Restricted Stock Plan, effective 100-107
February 13, 1998.
10.27 - There is incorporated herein by reference (i) the Hannaford
Bros. Co. Stock Ownership Plan for Outside Directors,
approved by shareholders May 24, 1995 and effective
January 1, 1996, a copy of which was filed as Exhibit 4.5
to the Registrant's Registration Statement on Form S-8,
dated June 27, 1995 (SEC Registration No. 33-60691) and
<PAGE>
PAGES
(ii) the First Amendment to said Plan, a copy of which was
filed as Exhibit 10.21 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996
(SEC File No. 1-7603).
10.28 - There are incorporated herein by reference (i) an Agreement,
dated February 11, 1991, between the Registrant and James L.
Moody, Jr., a copy of which was filed as Exhibit 10.26 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 (SEC File No. 1-7603) and (ii)
an Amendment to said Agreement, dated May 14, 1992, a copy
of which was filed as Exhibit 10.24 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January
2, 1993 (SEC File No. 1-7603).
10.29 - There are incorporated herein by reference (i) a Letter
Agreement between the Registrant and Norman E. Brackett,
dated June 30, 1995, a copy of which was filed as Exhibit
10.7 to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended July 1, 1995 (SEC File No. 1-7603)
and (ii) a Consulting Agreement between the Registrant
and Norman E. Brackett, dated June 30, 1995, a copy of
which was filed as Exhibit 10.8 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended July 1, 1995 (SEC File No. 1-7603).
10.30 - There is incorporated herein by reference a Letter
Agreement between the Registrant and James J. Jermann, dated
July 8, 1996, a copy of which was filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 29, 1996 (SEC File No. 1-7603).
21 - Subsidiaries of the Registrant............................ 108
23 - Consents of Accountants................................... 109
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HANNAFORD BROS. CO.
s/Blythe J. McGarvie
Blythe J. McGarvie
Sr. Vice President, Chief
Financial Officer
(Principal Financial Officer)
March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
s/Walter J. Salmon s/Bruce G. Allbright s/Robert D. Bolinder
Walter J. Salmon Bruce G. Allbright Robert D. Bolinder
Chairman of the Board Director Director
Director March 9, 1998 March 9, 1998
March 9, 1998
s/William T. End s/James W. Gogan
s/Blythe J. McGarvie William T. End James W. Gogan
Blythe J. McGarvie Director Director
Sr. Vice President, March 9, 1998 March 9, 1998
Chief Financial Officer
(Principal Accounting Officer)
March 9, 1998
s/Richard K. Lochridge s/Renee M. Love
Richard K. Lochridge Renee M. Love
s/Hugh G. Farrington Director Director
Hugh G. Farrington March 9, 1998 March 9, 1998
President
Chief Executive Officer
Director s/Claudine B. Malone s/Robert J. Murray
March 9, 1998 Claudine B. Malone Robert J. Murray
Director Director
March 9, 1998 March 9, 1998
s/David F. Sobey s/Robert L. Strickland
David F. Sobey Robert L. Strickland
Director Director
March 9, 1998 March 9, 1998
Exhibit 10.8
THIRD AMENDMENT
TO THE
HANNAFORD BROS. CO. 1993 LONG TERM INCENTIVE PLAN
The Hannaford Bros. Co. 1993 Long Term Incentive Plan (the "Plan") was
adopted by the Board of Directors, subject to shareholder approval, February
9, 1993, and approved by shareholders on May 19, 1993. The Plan was
thereafter amended on two occasions and is hereby further amended in the
following respects.
1. The terms used in this Amendment shall have the meanings set forth in
the Plan unless the context indicates otherwise.
2. Section 5 is hereby amended to read:
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
Compensation Committee at the beginning of the Award Period; and
(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 Compensation
Committee at the beginning of the Award Period.
The Compensation 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 Compensation Committee, by the
Chief Executive Officer of the Corporation."
3. This Amendment shall be effective December 15, 1997.
Exhibit 10.9
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.
Exhibit 10.13
EMPLOYMENT CONTINUITY AGREEMENT
This Agreement made as of this day of ,
199 , but effective January 1,1998, by and between HANNAFORD BROS. CO., a
Maine corporation with its principal place of business in Scarborough,
Maine (the "Company") and HUGH G. FARRINGTON ("Farrington"), of Cape
Elizabeth, Maine.
WHEREAS, Farrington has been employed by the Company since August of
1968, serving since 1981 as a director, since 1984 as its President and
since 1992 as its Chief Executive Officer; and
WHEREAS, Farrington's creativity, ability to work with people,
experience, knowledge and business skills are extremely valuable to the
Company and its stockholders; and
WHEREAS, in the current business climate an attempted acquisition of
the Company is always a possibility; and
WHEREAS, the Company desires to assure itself of the continued
employment of Farrington and the benefit of his independent judgment in the
operation of the Company in the event that any such attempted acquisition
were made, in light of the disruption resulting from any such attempt; and
WHEREAS, the Company and Farrington entered into an Employment
Continuity Agreement, dated March 15, 1991 ("Agreement"); and
WHEREAS, Section 11 of the Agreement provides that the Agreement may
be amended in writing by the parties, and the Agreement was amended on two
occasions thereafter; and
WHEREAS, the parties desire to amend and restate the Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged by each of
the parties, Farrington and the Company agree as follows:
1. TERM OF THE AGREEMENT AND RENEWAL. The term of this Agreement
shall be for a period beginning January 1, 1998, and ending December 31,
2000. On January 1, 2001, and on January 1 of each period of three (3)
years thereafter (in each case such date to be a "Renewal Date") this
Agreement automatically shall be renewed for an additional three (3) year
term, unless at least one (1) year prior to any such Renewal Date, either
party shall have given written notice to the other that such renewal shall
not take place. Such notice may be given by the Company only upon the
affirmative vote of the Human Resources Committee of the Board of
Directors.
<PAGE>
2. "Change in Control Event." Each of the following events shall
constitute a "Change in Control Event" for purposes of this Agreement:
(a) Any person acquires beneficial ownership of Company securities 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 this Agreement, "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, corporation, partnership, trust
or association, or any group or combination thereof whose ownership of
Company securities 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 of directors of the Company.
For purposes of this Agreement an "Outside Director" as of a given
date shall mean a member of the Company's board of directors 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 stockholders approve:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Company 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 Company's 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
(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.
<PAGE>
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 the Company's common stock
immediately prior to the transaction have substantially the same
proportionate ownership and voting control of the holding company.
3. Rights Upon Involuntary Termination of Employment. If, within
twelve (12) months after the occurrence of a Change in Control Event, the
Company terminates Farrington's employment for any reason other than Good
Cause as defined in Paragraph 5, or if Farrington voluntarily terminates
employment for Good Reason as defined in Paragraph 4, the Company shall
provide Farrington with the following:
(a) Within thirty (30) days of such termination, a lump sum cash
payment in an amount equal to the sum of:
(i) three hundred percent (300%) of Farrington's annual base
salary in effect upon the date of the Change in Control Event, and
(ii) three Hundred Percent (300%) of the award Farrington would
have received for the year in which such termination occurs, pursuant to
the Hannaford Bros. Co. Annual Incentive Plan, assuming that his employment
had not terminated and that for such year "actual profit" will equal
"budgeted profit" (as those terms are defined in the plan).
(b) The continuation of Farrington's participation and the
participation of his dependents (to the extent they were participating
prior to his termination of employment) in the Company's health, life,
disability and other employee benefit plans, programs and arrangements
(excluding the Hannaford Bros. Co. Employees' Retirement Plan and Hannaford
Bros. Co. Savings and Investment Plan) for a period of thirty-six (36)
months after such termination as if he were still employed during such
period; provided, however, if such participation in any such plan, program
or arrangement is specifically prohibited by the terms thereof, the Company
shall provide Farrington (and his dependents) with benefits substantially
similar to those which he was entitled to receive under such plan, program
or arrangement immediately prior to his termination of employment.
Additionally, at the end of any period of such coverage, Farrington shall
have the right to have assigned to him, for the cash surrender value
thereof, any assignable insurance owned by the Company on the life of
Farrington.
For purposes of this Paragraph 3(b), any employee benefit determined
with reference to Farrington's compensation or earnings shall be based on
his annual base salary unless otherwise provided under the terms of the
applicable employee benefit plan, program or arrangement.
<PAGE>
Notwithstanding the foregoing provisions of this Paragraph 3(b) to the
contrary, to the extent continuation of Farrington's participation and the
participation of his dependents (to the extent they were participating
prior to his termination of employment) in an employee benefit plan,
program, or arrangement described in this Paragraph 3(b) is specifically
provided for under the terms of such plan, program or arrangement relating
to retirement from the Company, this Paragraph 3(b) shall not apply.
(c) Immediately upon such termination Farrington shall be entitled to
acceleration of any payments to be made to him under the Hannaford Bros.
Co. Deferred Compensation Plan for Officers, the Hannaford Bros. Co.
Nonqualified Savings and Investment Plan or any other deferred compensation
arrangement for his benefit. Payment under any such plan or arrangement
pursuant to this Paragraph 3(c) shall be made in a lump sum within ninety
(90) days after Farrington's employment terminates.
(d) The Company shall pay Farrington an amount equal to the award he
would have been entitled to receive under the Company's Annual Incentive
Plan, if his employment had not terminated, based on the base salary he had
earned as of his termination date, and assuming that "actual profit" will
equal "budgeted profit" (as those terms are defined in the plan). Such
payment shall be made within ninety (90) days after his employment
terminates.
(e) Farrington shall also be entitled to such benefits and rights as
are provided upon the occurrence of a Change in Control Event under the
terms of the Company's 1988 Stock Plan, 1993 Long Term Incentive Plan, 1998
Stock Option Plan and Supplemental Executive Retirement Plan ("SERP"). FOR
PURPOSES OF CALCULATING ANY BENEFIT PAYABLE WITH RESPECT TO FARRINGTON
UNDER THE SERP, HIS CASH BALANCE ACCOUNT SHALL BE INCREASED BY THE PRODUCT
OF (I) THE CONTRIBUTION CREDIT FOR HIS LAST FULL MONTH OF EMPLOYMENT OR, IF
GREATER, HIS LAST FULL MONTH OF EMPLOYMENT PRIOR TO THE CHANGE IN CONTROL
EVENT, AND (II) THIRTY-SIX (36).
4. Termination for Good Reason. For purposes of this Agreement,
termination by Farrington of his employment for "Good Reason," except upon
Farrington's express written consent otherwise, shall mean:
(a) the assignment of duties to Farrington which:
(i) are materially different from his duties immediately prior to
the Change in Control Event, or
(ii) result in his having significantly less authority or
responsibility than he had prior to the Change in Control Event; or
<PAGE>
(b) Farrington's removal from, or any failure to re-elect him to, any
position he held immediately prior to the Change in Control Event with
either the Company or any majority-owned subsidiary; or
(c) a reduction of Farrington's annual base salary in effect on the
date of the Change in Control Event or as the same may be increased from
time to time thereafter; or
(d) the relocation of the Company's principal executive offices to a
place outside of the greater Portland, Maine, area, or the Company's
transferring or assigning Farrington to a place of employment other than
its principal executive offices, except for required business travel to an
extent substantially consistent with his business travel obligations
immediately prior to the Change in Control Event; or
(e) the Company's failure to provide Farrington with substantially the
same health, life and other employee benefit plans, programs and
arrangements (specifically including the Company's stock plans and
compensation and incentive plans, as the same may be amended in the
future), and substantially the same perquisites of employment, as provided
to him immediately prior to the Change in Control Event or as the same may
be increased thereafter; or
(f) the Company's failure to provide Farrington with substantially the
same support staff as provided to him immediately prior to the Change in
Control Event; or
(g) the Company's failure to increase Farrington's salary, employee
benefits or perquisites of employment in a manner or an amount commensurate
with the increases provided to the Company's Senior Vice Presidents; or
(h) the Company's failure to obtain from any successor a satisfactory
agreement to assume and perform the terms of this Agreement.
5. TERMINATION FOR GOOD CAUSE. The Company retains the right to
terminate Farrington for "Good Cause," in which event he shall not be
entitled to receive any payment or benefits pursuant to this Agreement.
"Good Cause" shall mean:
(a) Farrington's conviction, by a court of competent jurisdiction, of
a crime adversely reflecting on his honesty, trustworthiness or fitness to
carry out the responsibilities of his position with the Company in other
respects; or
(b) a willful breach by him of any material duty or obligation imposed
upon him under the terms of his employment, as those terms existed
immediately prior to any Change in Control Event, and his failure to cure
such breach within thirty (30) days after receiving notice thereof from the
Company.
<PAGE>
6. NOTICES. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
deposited in the United States mails, certified or registered mail postage
prepaid and addressed as follows:
To Farrington: Hugh G. Farrington
Lighthouse Point Road
Cape Elizabeth, Maine 04107
To the Company: Hannaford Bros. Co.
P. 0. Box 1000
Portland, Maine 04104
Attention: Senior Vice President-Human Resources
Either party may change by notice to the other the address to which
notices to it are to be addressed.
7. APPLICABLE LAW, TAXES, BINDING AGREEMENT, SEVERABILITY,
CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maine, except as to any matter
which is preempted by federal law.
Notwithstanding anything to the contrary herein contained, the Company
may withhold from any amounts payable under this Agreement all federal,
state or other taxes or assessments which may be required by applicable
statute or regulation to be withheld.
This Agreement shall be binding upon and inure to the benefit of
Farrington, his heirs, assigns, executors and legal representatives; and
the Company, its successors and assigns.
If any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected thereby.
The Outside Directors shall have the authority to construe and
interpret this Agreement on behalf of the Company, and any such
determination by the Outside Directors shall be conclusive on the Company.
8. EXECUTION OF FURTHER DOCUMENTS. In the event Farrington receives
payments or benefits pursuant to the terms hereof and the Company's
independent counsel deems it necessary for the Company to receive a release
or other acknowledgment, Farrington agrees to execute any such document, as
may be reasonably required as a condition of his receipt of such payment or
benefits.
<PAGE>
9. AMENDMENT AND WAIVER. The Agreement may be amended only in
writing, by the Parties hereto, and no condition or provision of the
Agreement may be waived except in writing. Waiver by either party at any
time of the other party's breach of, or failure to comply with, any
condition or provision of this Agreement to be performed by such other
party shall not be deemed a waiver of any other provision or condition at
the same time or of any provision or condition at any prior or subsequent
time, unless specifically stated therein.
10. FUNDING. This Agreement shall not be construed to create or
require the Company to create a trust or to otherwise act to fund the
amounts payable hereunder.
11. ASSIGNMENT. Except as required by law, the right to receive
payments hereunder shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such payments to be so subject shall not be recognized by the
Company.
12. ARBITRATION. In recognition of the mutual benefits of
arbitration, the parties hereby agree that arbitration as provided for
herein shall be the exclusive remedy for resolving any claim or dispute
arising under this Agreement, and hereby mutually waive any and all other
remedies at law or in equity for determining any such claim or dispute.
(a) Any arbitration under this Agreement, and any related judicial
proceeding, shall be initiated and shall proceed pursuant to the
provision's 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 hereunder 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 this Agreement 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 this
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 parties shall share equally all costs and fees charged by the
Association or the arbitrator.
<PAGE>
13. LIMITATION ON AMOUNT TO BE PAID. If payment of any amount under
this Agreement would cause Farrington to be subject to an excise tax
pursuant to Section 4999 of the Internal Revenue Code (as amended from time
to time) or the regulations thereunder, then such amount shall not be paid
to the extent necessary to avoid the imposition of such tax. The preceding
sentence shall apply only if the aggregate amount payable to Farrington or
for his benefit under the Agreement, after payment of such excise tax,
would be less than the aggregate amount payable in accordance with the
preceding sentence.
14. NO ADDITIONAL EFFECT. Except as expressly provided herein,
nothing contained herein shall confer upon Farrington any specific period
of employment, right to be retained in the service of the Company or other
rights, nor shall this Agreement be construed to otherwise limit the rights
of the Company to discharge or take other action with respect to
Farrington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Witness: HANNAFORD BROS. CO.
By
Its
Hugh G. Farrington
Exhibit 10.15
EMPLOYMENT CONTINUITY AGREEMENT
This Agreement made as of this day of , 199 , but
effective January 1, 1998, by and between HANNAFORD BROS. CO., a Maine
corporation with its principal place of business in Scarborough, Maine (the
"Company") and ______________________ of ________________________ ,
("Officer").
WHEREAS, the Officer has been employed by the Company since
________________ and is presently serving in the capacity of
_____________________; and
WHEREAS, in the current business climate an attempted acquisition of
the Company is always a possibility; and
WHEREAS, the Company desires to assure itself of the continued
employment and sound judgment of the Officer in the event that any such
attempted acquisition were made, in light of the disruption resulting from
any such attempt;
WHEREAS, the Company and the Officer entered into an Employment
Continuity Agreement, dated ______________________; and
WHEREAS, Section 11 of the Agreement provides that the Agreement may
be amended in writing by the parties; and
WHEREAS, the parties desire to amend and restate the Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged by each of
the parties, the Officer and the Company agree as follows:
1. TERM OF THE AGREEMENT AND RENEWAL. The term of this Agreement
shall be for a period beginning January 1, 1998, and ending December 31,
2000. On January 1, 2001, and on January 1 of each period of three (3)
years thereafter (in each case such date to be a "Renewal Date") this
Agreement automatically shall be renewed for an additional three (3) year
term, unless at least one (1) year prior to any such Renewal Date, either
party shall have given written notice to the other that such renewal shall
not take place. Such notice may be given by the Company only upon the
affirmative vote of the Human Resources Committee of the Board of
Directors.
<PAGE>
2. "CHANGE IN CONTROL EVENT." Each of the following events shall
constitute a "Change in Control Event" for purposes of this Agreement:
(a) Any person acquires beneficial ownership of Company securities 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 this Agreement, "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, corporation, partnership, trust
or association, or any group or combination thereof, whose ownership of
Company securities 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 of directors of the Company.
For purposes of this Agreement, an "Outside Director" as of a given
date shall mean a member of the Company's board of directors 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 stockholders approve:
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Company 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 Company's 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
(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.
<PAGE>
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 the Company's common stock
immediately prior to the transaction have substantially the same
proportionate ownership and voting control of the holding company.
3. RIGHTS UPON INVOLUNTARY TERMINATION OF EMPLOYMENT. If, within
twelve (12) months after the occurrence of a Change in Control Event, the
Company terminates the Officer's employment for any reason other than Good
Cause as defined in Paragraph 5, or if the Officer voluntarily terminates
employment for Good Reason as defined in Paragraph 4, the Company shall
provide the Officer with the following:
(a) Within thirty (30) days of such termination, a lump sum cash
payment in an amount equal to the sum of:
(i) two hundred percent (200%) of the Officer's annual base
salary in effect upon the date of the Change in Control Event, and
(ii) two hundred percent (200%) of the award the Officer would
have received for the year in which such termination occurs pursuant to the
Hannaford Bros. Co. Annual Incentive Plan, assuming that his employment had
not terminated and that for such year "actual profit" will equal "budgeted
profit" (as those terms are defined in the plan).
(b) The continuation of the Officer's participation and the
participation of his dependents (to the extent they were participating
prior to his termination of employment) in the Company's health, life,
disability and other employee benefit plans, programs and arrangements
(excluding the Hannaford Cash Balance Plan and the Hannaford Bros. Co.
Savings and Investment Plan) for a period of twenty-four (24) months after
such termination as if he were still employed during such period; provided,
however, if such participation in any such plan, program or arrangement is
specifically prohibited by the terms thereof, the Company shall provide the
Officer (and his dependents) with benefits substantially similar to those
which he was entitled to receive under such plan, program or arrangement
immediately prior to his termination of employment. Additionally, at the
end of any period of such coverage, the Officer shall have the right to
have assigned to him, for the cash surrender value thereof, any assignable
insurance owned by the Company on the life of the Officer.
For purposes of this Paragraph 3(b), any employee benefit determined
with reference to the Officer's compensation or earnings shall be based on
his annual base salary unless otherwise provided under the terms of the
applicable employee benefit plan, program or arrangement.
<PAGE>
Notwithstanding the foregoing provisions of this Paragraph 3(b) to the
contrary, to the extent continuation of the Officer's participation and the
participation of his dependents (to the extent they were participating
prior to his termination of employment) in an employee benefit plan,
program, or arrangement described in this Paragraph 3(b) is specifically
provided for under the terms of such plan, program or arrangement relating
to retirement from the Company, this Paragraph 3(b) shall not apply.
(c) Immediately upon such termination, the Officer shall be entitled
to acceleration of any payments to be made to him under the Hannaford
Bros. Co. Deferred Compensation Plan for Officers, the Hannaford Bros. Co.
Nonqualified Savings and Investment Plan or any other deferred compensation
arrangement for his benefit. Payment under any such plan or arrangement
pursuant to this Paragraph 3(c) shall be made in a lump sum within ninety
(90) days after the Officer's employment terminates.
(d) The Company shall pay the Officer an amount equal to the award he
would have been entitled to receive under the Company's Annual Incentive
Plan, if his employment had not terminated, based on the base salary he had
earned as of his termination date, and assuming that "actual profit" will
equal "budgeted profit" (as those terms are defined in the plan). Such
payment shall be made within ninety (90) days after his employment
terminates.
(e) The Officer shall also be entitled to such benefits and rights as
are provided upon the occurrence of a Change in Control Event under the
terms of the Company's 1988 Stock Plan, 1993 Long Term Incentive Plan, 1998
Stock Option Plan and Supplemental Executive Retirement Plan ("SERP"). For
purposes of calculating any benefit payable with respect to the Officer
under the SERP, his cash balance account shall be increased by the product
of (i) THE COMBINED CONTRIBUTION CREDIT UNDER THE SERP AND THE HANNAFORD
CASH BALANCE PLAN for his last full month of employment or, if greater, his
last full month of employment prior to the change in Control Event, and
(ii) twenty-four (24).
4. TERMINATION FOR GOOD REASON. For purposes of this Agreement,
termination by the Officer of his employment for "Good Reason," except upon
the Officer's express written consent otherwise, shall mean:
(a) the assignment of duties to the Officer which:
(i) are materially different from his duties immediately prior to
the Change in Control Event, or
(ii) result in his having significantly less authority or
responsibility than he had prior to the Change in Control Event; or
<PAGE>
(b) the Officer's removal from, or any failure to re-elect him to, any
position he held immediately prior to the Change in Control Event with
either the Company or any majority-owned subsidiary; or
(c) a reduction of the Officer's annual base salary in effect on the
date of the Change in Control Event or as the same may be increased from
time to time thereafter; or
(d) the relocation of the Company's principal executive offices to a
place outside of the greater Portland, Maine, area, or the Company's
transferring or assigning the Officer to a place of employment other than
its principal executive offices, except for required business travel to an
extent substantially consistent with his business travel obligations
immediately prior to the Change in Control Event; or
(e) the Company's failure to provide the Officer with substantially
the same health, life and other employee benefit plans, programs and
arrangements (specifically including the Company's stock plans and
compensation and incentive plans, as the same may be amended in the
future), and substantially the same perquisites of employment, as provided
to him immediately prior to the Change in Control Event or as the same may
be increased thereafter; or
(f) the Company's failure to provide the Officer with substantially
the same support staff as provided to him immediately prior to the Change
in Control Event; or
(g) the Company's failure to increase the Officer's salary, employee
benefits or perquisites of employment in a manner or amount commensurate
with increases provided to the Company's other executive officers; or
(h) the Company's failure to obtain from any successor a satisfactory
agreement to assume and perform the terms of this Agreement.
5. TERMINATION FOR GOOD CAUSE. The Company retains the right to
terminate the Officer for "Good Cause," in which event he shall not be
entitled to receive any payment or benefits pursuant to this Agreement.
"Good Cause" shall mean:
(a) the Officer's conviction, by a court of competent jurisdiction, of
a crime adversely reflecting on his honesty, trustworthiness or fitness to
carry out the responsibilities of his position with the Company in other
respects; or
(b) a willful breach by him of any material duty or obligation imposed
upon him under the terms of his employment, as those terms existed
immediately prior to any Change in Control Event, and his failure to cure
such breach within thirty (30) days after receiving notice thereof from the
Company.
<PAGE>
6. NOTICES. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
deposited in the United States mails, certified or registered mail, postage
prepaid and addressed as follows:
To the Officer:
To the Company: Hannaford Bros. Co.
P. 0. Box 1000
Portland, Maine 04104
Attention: Senior Vice President-Human Resources
Either party may change by notice to the other the address to which
notices to it are to be addressed.
7. APPLICABLE LAW, TAXES, BINDING AGREEMENT, SEVERABILITY,
CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maine, except as to any matter
which is preempted by federal law.
Notwithstanding anything to the contrary herein contained, the Company
may withhold from any amounts payable under this Agreement all federal,
state or other taxes or assessments which may be required by applicable
statute or regulation to be withheld.
This Agreement shall be binding upon and inure to the benefit of the
Officer, his heirs, assigns, executors and legal representatives; and the
Company, its successors and assigns.
If any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected thereby.
The Outside Directors shall have the authority to construe and
interpret this Agreement on behalf of the Company, and any such
determination by the Outside Directors shall be conclusive on the Company.
8. EXECUTION OF FURTHER DOCUMENTS. In the event the Officer receives
payments or benefits pursuant to the terms hereof and the Company's
independent counsel deems it necessary for the Company to receive a release
or other acknowledgment, the Officer agrees to execute any such document,
as may be reasonably required as a condition of his receipt of such payment
or benefits.
<PAGE>
9. AMENDMENT AND WAIVER. The Agreement may be amended only in
writing, by the parties hereto, and no condition or provision of the
Agreement may be waived except in writing. Waiver by either party at any
time of the other party's breach of, or failure to comply with, any
condition or provision of this Agreement to be performed by such other
party shall not be deemed a waiver of any other provision or condition at
the same time or of any provision or condition at any prior or subsequent
time, unless specifically stated therein.
10. FUNDING. This Agreement shall not be construed to create or
require the Company to create a trust or to otherwise act to fund the
amounts payable hereunder.
11. ASSIGNMENT. Except as required by law, the right to receive
payments hereunder shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind, and any attempt to
cause such payments to be so subject shall not be recognized by the
Company.
12. ARBITRATION. In recognition of the mutual benefits of
arbitration, the parties hereby agree that arbitration as provided for
herein shall be the exclusive remedy for resolving any claim or dispute
arising under this Agreement, and hereby mutually waive any and all other
remedies at law or in equity for determining any such claim or dispute.
(a) Any arbitration under this Agreement, 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 hereunder, 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 this Agreement 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 this
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 parties shall share equally all costs and fees charged by the
Association or the arbitrator.
<PAGE>
13. LIMITATION ON AMOUNT TO BE PAID. If payment of any amount under
this Agreement would cause the Officer to be subject to an excise tax
pursuant to Section 4999 of the Internal Revenue Code (as amended from time
to time) or the regulations thereunder, then such amount shall not be paid
to the extent necessary to avoid the imposition of such tax. The preceding
sentence shall apply only if the aggregate amount payable to the Officer or
for his benefit under the Agreement, after payment of such excise tax,
would be less than the aggregate amount payable in accordance with the
preceding sentence.
14. NO ADDITIONAL EFFECT. Except as expressly provided herein,
nothing contained herein shall be construed to provide the Officer with any
specific period of employment, right to be retained in the service of the
Company or other rights, nor shall this Agreement be construed to otherwise
limit the rights of the Company to discharge or take other action with
respect to the Officer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Witness:
HANNAFORD BROS. CO.
By____________________________
Its
______________________________
Officer
Exhibit 10.25
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 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.
Exhibit 10.26
HANNAFORD BROS. CO.
1998 RESTRICTED STOCK PLAN
1. PURPOSE. The purpose of this Plan is to provide certain key
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 key 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 grant of Restricted Stock or Stock Units
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) "Employee" shall mean any person who is employed by the Company or
any Subsidiary and who is (i) an officer of the Company or of any
Subsidiary, (ii) responsible for the general management of a division or
department of the Company, a Subsidiary, or a major portion of the
consolidated operations of the Company, or (iii) any other key employee of
the Company or any Subsidiary.
(i) "Fair Market Value" shall mean, with respect to Shares, the
closing price of Shares as reported on the New York Stock Exchange, or such
other price as the Committee in good faith determines to be the fair market
value of the Shares.
(j) "Plan" shall mean the Hannaford Bros. Co. 1998 Restricted Stock
Plan.
<PAGE>
(k) "Restricted Stock" shall mean any Share granted pursuant to
Section 7.
(l) "Share" shall mean a share of Common Stock of the Company, as
adjusted in accordance with subsection 4(b).
(m) "Stock Unit" shall mean a right granted under Section 8 to receive
a Share or a cash amount equal to the Fair Market Value of a Share.
(n) "Subsidiary" shall mean 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.
(o) "Treasury Shares" shall mean Shares that have been issued and
subsequently acquired by the Company, but have not been canceled or
retired.
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. 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;
<PAGE>
(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.
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) SOURCE. Any Shares issued hereunder shall consist only of
Treasury Shares.
(b) ADJUSTMENTS. If the number of Shares outstanding changes as a
result of a stock split or stock dividend, or 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 the number and class of Shares subject
to Awards.
5. ELIGIBILITY.
The Committee may, from time to time, designate Employees to whom
Shares of Restricted Stock or Stock Units 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, and 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 expiration of the restriction period with respect to such
prior Award.
<PAGE>
7. RESTRICTED STOCK.
(a) RESTRICTED STOCK AGREEMENT. The grant of any Shares of Restricted
Stock by the Committee shall be evidenced by an Award Agreement
("Restricted Stock Agreement"), specifying restrictions on the transfer and
vesting of such Shares and such other terms, conditions and restrictions as
the Committee shall determine.
(b) RESTRICTIONS. Shares of Restricted Stock may not be sold,
transferred or otherwise disposed of and may not be pledged, hypothecated
or otherwise encumbered, other than by will or by the laws of descent and
distribution, during the applicable restriction period set forth in the
Restricted Stock Agreement. In the event that an Employee ceases to be
employed by the Company or any Subsidiary and is no longer employed by any
of them prior to the last day of a restriction period, the Shares of
Restricted Stock granted to such Employee that are subject to such
restriction period shall be forfeited to the Company, unless otherwise
provided in accordance with the provisions of subsection (c).
(c) RESTRICTION PERIOD. The restriction period applicable to any
Shares of Restricted Stock shall commence on the date such Shares are
granted by the Committee and shall end on such date as the Committee shall
determine; provided that the minimum restriction period shall be one year
and the Committee may, at any time, reduce or terminate the restriction
period in effect with respect to any outstanding Shares of Restricted
Stock.
(d) LAPSE OF RESTRICTIONS. At the expiration of the restriction period
applicable to any Shares of Restricted Stock, such Shares shall be
transferred free of restrictions on transfer and vesting to the Employee
or, in the event of the Employee's death, to his or her estate or other
successor in interest.
(e) DIVIDENDS. Cash dividends payable with respect to Shares of
Restricted Stock shall be paid to an Employee currently, except as the
Committee may otherwise provide in the Restricted Stock Agreement. Noncash
dividends payable with respect to Shares of Restricted Stock shall be
limited to Treasury Shares and shall be subject to the same restrictions
applicable to such Shares of Restricted Stock.
(f) CERTIFICATES DEPOSITED WITH COMPANY. Each certificate issued in
respect of Shares of Restricted Stock granted to an Employee shall be
registered in the name of the Employee and deposited with the Company,
together with a stock power endorsed in blank by the Employee. Each such
certificate shall bear the following (or a similar) legend:
<PAGE>
The transferability of this certificate and the shares of stock
represented hereby are subject to the applicable terms and conditions
(including forfeitures) contained in the Hannaford Bros. Co. 1998
Restricted Stock Plan and an Agreement between the registered owner and
Hannaford Bros. Co. Copies of the Plan and the Agreement are on file in
the office of the Assistant Secretary of Hannaford Bros. Co., 145 Pleasant
Hill Road, Scarborough, Maine 04074.
(g) SHAREHOLDER RIGHTS. Subject to the restrictions set forth in the
Restricted Stock Agreement, an Employee shall have all of the rights of a
shareholder with respect to Shares of Restricted Stock, including the right
to vote such Shares.
8. STOCK UNITS.
(a) STOCK UNIT AGREEMENT. The grant of any Stock Units by the
Committee shall be evidenced by an Award Agreement ("Stock Unit
Agreement"), specifying the number of Stock Units, the payment date, and
such other terms, conditions and restrictions as the Committee shall
determine.
(b) STOCK UNIT AWARD. An Employee to whom a Stock Unit has been
granted shall be entitled to receive on the payment date set forth in the
Stock Unit Agreement a Share or a cash amount equal to the Fair Market
Value of a Share on such date.
(c) STOCK UNIT ACCOUNT. The Company shall establish and maintain a
separate account ("Stock Unit Account") for each Employee who has received
a grant of Stock Units, and such account shall reflect the number of Stock
Units granted to such Employee. At such times as the Company pays a cash
dividend on its Shares, there shall be credited to an Employee's Stock Unit
Account an amount equal to the cash dividend paid on one (1) Share for each
Stock Unit credited to such account, unless the applicable Stock Unit
Agreement provides otherwise.
(d) NONTRANSFERABILITY. Stock Units may not be sold, transferred or
otherwise disposed of and may not be pledged, hypothecated or otherwise
encumbered, except by will or the laws of descent and distribution.
(e) RELATED RESTRICTED STOCK. A grant of Stock Units may, but need
not, relate to a grant of Restricted Stock under Section 7. Stock Units
related to a grant of Restricted Stock shall be subject to the same
restrictions on transferability and vesting as apply to the Shares of
Restricted Stock.
(f) FORM OF PAYMENT. Payment with respect to a Stock Unit may be made
in cash, Shares or a combination thereof, as the Committee shall determine.
<PAGE>
9. 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.
10. CHANGE IN CONTROL. Upon the occurrence of a Change in Control
Event, all then outstanding Shares of Restricted Stock and Stock Units
shall be transferred free of restrictions on transfer and vesting to the
Employee. 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.
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
<PAGE>
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.
11. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Committee 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 if such
amendment modifies the class of employees eligible to participate in the
Plan.
(b)TERMINATION. The Board 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.
12. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its
adoption by the Board.
13. 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
<PAGE>
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.
14. 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 Subsidiary, nor shall the existence of the Plan impair the right of the
Company or a 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.
Exhibit 21
Hannaford Bros. Co. Parents and Subsidiaries
Percentage
of Voting
State Securities
of Owned by the
Registrant Incorporation Registrant
Hannaford Bros. Co. Maine
Subsidiaries (1)
Athenian Real Estate Development, Inc. Virginia 100.00%
Boney Wilson & Sons, Inc. North Carolina 100.00%
Hannaford Licensing Corp. Maine 100.00%
Hannaford Procurement Corp. Maine 100.00%
Hannaford Trucking Company Maine 100.00%
HHR, Inc. Massachusetts 100.00%
Martin's Foods of South Burlington, Inc. Vermont 100.00%
Plain Street Properties, Inc. Maine 100.00%
Progressive Distributors, Inc. Maine 100.00%
Shop 'n Save-Mass., Inc. Massachusetts 100.00%
(1) Each of the subsidiaries is included in the consolidated financial
statements of the Registrant.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Hannaford Bros. Co. and Subsidiaries on Form S-8 (File Nos.
2-77902, 2-98387, 33-1281, 33-22666, 33-31624, 33-41273, 33-60119,
33-60655, 33-60691 and 333-41381) of our report dated January 21, 1998, on
our audits of the consolidated financial statements of Hannaford Bros. Co.
and Subsidiaries as of January 3, 1998 and December 28, 1996, and for each
of the three years in the period ended January 3, 1998, which report is
included in this Annual Report on Form 10-K.
s/Coopers & Lybrand
Portland, Maine
March 3, 1998
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> JAN-03-1998
<CASH> 57,663
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<RECEIVABLES> 16,128
<ALLOWANCES> 1,210
<INVENTORY> 188,767
<CURRENT-ASSETS> 276,061
<PP&E> 1,170,310
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0
0
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<OTHER-EXPENSES> 675,305
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