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 2, 1999
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. [ ]
The aggregate market value of the Common Stock, $.75 par value, held by
non-affiliates as of March 3, 1999, was $1,423,557,092. 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, 1999, there were 42,272,475 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, 1999.
Exhibit Index on Page: 58
<PAGE>
FORM 10-K HANNAFORD BROS. CO. 1-7603
JANUARY 2, 1999
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 1998 consisted of 52 weeks of operations as compared to 53 weeks in
1997 and 52 weeks in 1996. The Company closes its fiscal year on the Saturday
closest to December 31.
Consolidated sales and other revenues for 1998 were $3.324 billion, an increase
of 3.0% over 1997 sales and other revenues of $3.226 billion. Identical store
sales were up 2.2% for fiscal year 1998 compared to an increase of 0.4% in 1997.
Comparable store sales were up 2.4% for fiscal year 1998. Both identical and
comparable store sales have been adjusted to exclude the 53rd week in 1997.
The Registrant ships food and food-related products from its distribution
centers to an additional 19 independent retail food stores. Sales to these
wholesale accounts amounted to 2.1% of total sales in 1998. 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 150 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 Save7 and Hannaford7. 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 108 pharmacies within the Registrant's
supermarkets and combination stores.
Of the Registrant's 104 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 46 supermarkets located in Virginia, North Carolina and
South Carolina. Eleven of these stores were acquired by the Registrant in July
1994, six were acquired in September 1995 and twenty-nine were newly constructed
since 1995.
The Registrant operates 124 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.
<PAGE>
The following tables set forth certain statistical information regarding the
Registrant's operations at the dates indicated:
FISCAL YEAR
NUMBER OF STORES 1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Beginning 93 118 134 139 148
Opened 10 13 13 15 11
Closed (5) (3) (7) (6) (9)
Sold 0 0 (1) 0 0
Acquired 20 6 0 0 0
--- --- --- --- ---
Ending 118 134 139 148 150
=== === === === ====
AVERAGE SQUARE FEET
OF SELLING AREA
PER STORE 30,100 31,100 32,300 33,400 34,500
TOTAL SQUARE FEET
OF SELLING AREA 3,547,000 4,166,000 4,490,000 4,947,000 5,171,000
<PAGE>
As illustrated by the foregoing tables, the Registrant has continued to expand
its food store operations.
During 1998, net selling square footage increased 4.5%. The Registrant opened
eight new food stores with selling areas ranging from 34,100 square feet to
42,300 square feet, relocated two existing stores to larger, new facilities and
closed seven non-core southeast stores that had limited potential for profitable
growth.
During 1999, the Registrant expects to open four new food stores, one of which
will be located in a northeastern market and three in southeastern markets. The
new stores will have 42,300 square feet of selling area. The Registrant will
undertake a number of major remodeling projects in 1999 that improve its
presentation to consumers, but that do not add square footage. It is expected
that net retail selling area will increase approximately 3.7% in 1999.
As part of its ongoing expansion program, the Registrant will also consider the
acquisition of additional supermarkets, if attractive opportunities become
available.
The Registrant owns four distribution facilities which support its retail
operations, as follows:
1. 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. 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. 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.
4. A 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.
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 continuing to test a home
shopping service called Hannaford's HomeRuns7. 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.
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 Save7" to "Hannaford7".
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.
No material expenditures were made during fiscal 1996, 1997 or 1998 on research
activities relating to new or improved products, services or techniques.
The Registrant does not foresee that material capital outlays will be needed or
that material increases in operating expenses will be incurred for the purpose
of compliance with any statutory requirement respecting environmental quality.
As of January 2, 1999, the Registrant had approximately 7,900 full-time and
15,700 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 58 of its 150 food stores and leases the remaining 92
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 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 2, 1999, consisted of:
(In thousands)
Square Square Footage
Footage Selling
Units Gross Area Area
Stores 150 7,224 5,171
Distribution and
administrative facilities 5 1,860 --
--- ----- -----
Total 155 9,084 5,171
The following table sets forth expiration dates of leased facilities, assuming
exercise of all renewal options:
Lease Administrative
Expiration Food stores Facilities
1999-2008 2
2009-2018 4
2019-thereafter 86 1
---- ---
92 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 1998.
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 54 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 41 Executive Vice President - 08/10/94
Southeast Operations
Mr. Anicetti was elected Executive Vice President - Southeast Operations in May
1998. He had been Senior Vice President and General Manager, Southeast
Operations since December 1995, Senior Vice President, Retail Operations for the
southeast from 1994 to 1995, 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 45 Executive Vice President, 01/02/92
Strategic Development
Mr. Fritzson was elected Executive Vice President - Strategic Development in May
1998. He had been Senior Vice President, Marketing, Merchandising and
Distribution since December 1995, Senior Vice President, Marketing from 1994 to
1995, 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.
ANDREW P. GEOGHEGAN, ESQ. 48 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 51 Executive Vice President - 08/10/94
Sales & Northeast Operations
Mr. Hodge was elected Executive Vice President - Sales & Northeast Operations in
May 1998. He had been Senior Vice President, Northeast Operations since December
1995, Senior Vice President, Retail Operations from 1994 to 1995 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.
BLYTHE J. MCGARVIE 42 Executive Vice President, 11/14/94
Chief Financial Officer
Ms. McGarvie was elected Executive Vice President and Chief Financial Officer in
May 1998. She had been Senior Vice President and Chief Financial Officer from
1995 to 1998. 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.
<PAGE>
SERVED AS AN EXECU-
NAME AGE POSITION TIVE OFFICER SINCE:
MICHAEL J. STROUT 44 Executive Vice President, 12/19/94
Human Resources
Mr. Strout was elected Executive Vice President - Human Resources in May 1998.
He had served as Senior Vice President - Human Resources since rejoining the
Registrant 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.
<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 1997 and 1998.
QUARTERLY
SALE PRICE DIVIDENDS
HIGH LOW PER SHARE
1st Quarter, 1998 $46.438 $38.750 .150
2nd Quarter, 1998 46.938 43.375 .150
3rd Quarter, 1998 47.000 41.250 .150
4th Quarter, 1998 53.000 40.063 .150
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 1998
was the fiftieth consecutive year that dividends were paid on the Common Stock
and the thirty-sixth consecutive year that the aggregate dividend paid per share
(after adjusting for stock splits) has increased. On February 12, 1999, the
Board of Directors voted to increase the quarterly dividend to $.165 per share
for the dividend due to be paid on March 25, 1999. Future dividends will depend
on the Registrant's earnings and financial condition.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
Fiscal Year
--------------------------------------------------------------
1998 1997 1996 1995 1994
(In thousands except per share amounts)
EARNINGS STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Sales and other revenues................................. $3,323,588 $3,226,433 $2,957,559 $2,568,061 $2,291,755
Cost of sales............................................ 2,480,346 2,427,287 2,242,784 1,951,248 1,728,499
--------- --------- --------- --------- ---------
Gross margin............................................. 843,242 799,146 714,775 616,813 563,256
Selling, general and administrative expense.............. 664,357 635,355 568,033 481,017 437,548
Impairment loss.......................................... - 39,950 - - -
--------- --------- --------- --------- ---------
Operating profit......................................... 178,885 123,841 146,742 135,796 125,708
Interest expense, net.................................... 26,577 26,425 22,204 19,368 21,360
--------- --------- --------- --------- ---------
Earnings before income taxes............................. 152,308 97,416 124,538 116,428 104,348
Income taxes............................................. 57,661 37,769 49,333 46,227 42,060
--------- --------- --------- --------- ---------
Net earnings............................................. $ 94,647 $ 59,647 $ 75,205 $ 70,201 $ 62,288
========= ========= ========= ========= =========
Per common share:
Basic earnings per share.............................. $ 2.24 $ 1.41 $ 1.78 $ 1.67 $ 1.50
========= ========= ========= ========= =========
Diluted earnings per share............................ $ 2.21 $ 1.40 $ 1.76 $ 1.66 $ 1.49
========= ========= ========= ========= =========
Cash dividends........................................ $ .60 $ .54 $ .48 $ .42 $ .38
========= ========= ========= ========= =========
January January December December December
2, 1999 3, 1998 28, 1996 30, 1995 31, 1994
BALANCE SHEET DATA: (Dollar amounts in thousands except per share data)
Working capital.......................................... $ 36,279 $ 20,873 $ 21,796 $ 23,512 $ 42,707
Total assets............................................. 1,284,538 1,227,190 1,183,727 961,830 877,605
Current maturities:
Long-term debt........................................ 19,296 18,155 14,213 11,246 14,409
Obligations under capital leases...................... 2,108 1,873 1,775 1,467 1,382
Long-term debt, excluding current maturities............. 220,130 235,850 227,525 150,648 153,687
Obligations under capital leases, excluding current
maturities............................................. 73,866 75,687 75,198 69,747 69,552
Shareholders' equity..................................... 663,350 601,029 569,156 518,677 454,475
Book value per share..................................... $ 15.70 $ 14.22 $ 13.46 $ 12.26 $ 10.88
</TABLE>
<PAGE>
FORM 10-K HANNAFORD BROS. CO. 1-7603 JANUARY 2, 1999
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
Sales and other revenues for 1998 amounted to $3.324 billion, an increase of
3.0% over last year's sales and other revenues of $3.226 billion. Fourth quarter
sales and other revenues in 1998 were $850 million, as compared to $871 million,
a decrease of 2.4%. Identical store sales, adjusted to exclude the 53rd week in
1997, were up 2.2% in the fourth quarter and up 1.3% for the year. Comparable
store sales, also adjusted for the 53rd week in 1997, were up 2.4% in the fourth
quarter and 1.9% for the year 1998.
Consolidated net earnings in 1998 were up 12.1% and fourth quarter earnings were
up 7.0% over 1997, before consideration of a 1997 pre-tax, non-cash accounting
charge of $40 million. On a reported basis, consolidated net earnings for fiscal
year 1998 were $95 million, which represents an increase of 58.7% over the $60
million reported last year. Diluted net earnings per common share were $2.21, as
compared to $1.40 last year. For the fourth quarter, consolidated net earnings
were $28 million, as compared to the $1 million reported last year. Diluted net
earnings per common share in the quarter were $.65 this year compared to $.03
for the same period in 1997.
<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:
YEAR-TO-YEAR PERCENTAGE
PERCENTAGE OF SALES CHANGE IN DOLLAR VALUES
AND OTHER REVENUES 1998 1997
EXCEPT PER SHARE AMOUNTS Compared to Compared to
1998 1997 1996 1997 1996
100.0% 100.0% 100.0% Sales and other revenues 3.0% 9.1%
===== ===== =====
25.4 24.8 24.2 Gross margin 5.5 11.8
Selling, general and
20.0 19.7 19.2 administrative expenses 4.6 11.9
- 1.3 - Impairment loss (100.0) -
----- ----- -----
5.4 3.8 5.0 Operating profit 44.5 (15.6)
0.8 0.8 0.8 Interest expense, net 0.6 19.0
----- ----- -----
4.6 3.0 4.2 Earnings before income taxes 56.3 (21.8)
1.7 1.2 1.7 Income taxes 52.7 (23.4)
----- ----- -----
2.9% 1.8% 2.5% Net earnings 58.7 (20.7)
===== ===== =====
Earnings per share:
$2.24 $1.41 $1.78 Basic 58.9 (20.8)
==== ==== ====
$2.21 $1.40 $1.76 Diluted 57.9 (20.5)
==== ==== ====
$ .60 $ .54 $ .48 Cash dividends per share 11.1 12.5
==== ==== ====
<PAGE>
Sales
Sales and other revenues rose 3.0% in 1998, to $3.324 billion, an increase of
$97 million over 1997 results. Fiscal year 1998 contained 52 weeks of operations
as compared to 53 weeks in 1997. This additional week accounted for
approximately $58 million of additional sales in 1997. The Company's real sales
growth in 1998 exceeded 6.7% after adjusting for the 53rd week of sales in 1997
and the 1997 sales attributable to seven non-core southeastern supermarkets
closed in January 1998. Sales from supermarkets that were open in both periods
presented, adjusted to exclude the 53rd week of sales in 1997 ("identical store
sales"), increased $39 million or 1.3%. Additional supermarket sales of $53
million resulted from the net impact of new, expanded, relocated and closed
stores offset by the 53rd week of sales in 1997. Other sales and revenues, which
include wholesale, trucking, home delivery, real estate and miscellaneous retail
operations, increased $5 million. Comparable store sales, which include results
from expanded and relocated stores on a 52-week basis in both years presented,
increased 1.9% in 1998.
Identical store sales were up 2.2% in the fourth quarter of 1998 while
comparable store sales were up 2.4% in the quarter. The Company attributes these
increases to a strong holiday sales season.
In 1997, sales and other revenues were $3.226 billion, an increase of $269
million or 9.1% over 1996 results. Retail sales increased $259 million or 9.0%.
Identical store sales reflected an increase of 0.4% while comparable store sales
increased 2.3%. Other sales and revenues, which include wholesale, trucking,
home delivery, real estate and miscellaneous retail operations, increased $10
million.
Gross Margin
Gross margins increased in 1998 to 25.4% of sales and other revenues in
comparison to 24.8% in 1997. The 1998 increase is the result of improved selling
margins in most of the Company's marketing territories. A portion of this
increase was the result of an inventory shrinkage reduction initiative which
combined store level associates and vendor partners using integrated information
technology. The Company continues to focus on maintaining a competitive pricing
strategy.
Gross margins increased in 1997 to 24.8% of sales and other revenues in
comparison to 24.2% in 1996. This 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.
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to 20.0% of sales and
other revenues in 1998 as compared to 19.7% in 1997. 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 increased direct labor costs, the Company incurred increased costs related to
its employee benefit plans (Note 6).
Selling, general and administrative expenses increased to 19.7% of sales and
other revenues in 1997 as compared to 19.2% in 1996. 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.
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 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 1998 was $27 million, an increase of 0.6% from 1997
interest expense of $26 million. This slight increase is primarily the result of
a decrease in capitalized interest from reduced construction activity offset by
a decrease in average debt levels.
<PAGE>
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 in average debt levels coupled with a decrease in invested cash which
is reflected as a decrease in interest income.
Income Taxes
The provision for income taxes includes both federal and state income taxes. The
effective tax rate decreased in 1998 to 37.9% from 38.8% in 1997 and 39.6% in
1996. These lower effective tax rates are the result of reductions in the
Company's overall state income tax rate. In addition, the 1998 reduced rate was
positively impacted by a tax benefit related to the Company's donation of food
products. Assuming there are no federal or state income tax rate changes, the
Company expects the effective tax rate for 1999 and thereafter to be in the
37.8% to 38.2% range.
Net Earnings and Earnings Per Common Share
Net earnings increased 58.7% in 1998 to $95 million or 2.9% of sales and other
revenues, an increase of $35 million from 1997 net earnings of $60 million or
1.8% of sales and other revenues. Before the 1997 fourth quarter impairment
loss, net earnings for 1998 increased by 12.1% over 1997 results. This increase
is the result of increased sales and gross margin coupled with a reduced income
tax provision, partially offset by an increase in selling, general and
administrative expenses.
Net earnings for the fourth quarter of 1998 were $28 million versus 1997 fourth
quarter net earnings of $1 million. Basic and diluted earnings exhibited a
similar increase to $.66 per common share for the fourth quarter of 1998 versus
$.03 per common share for the fourth quarter of 1997. This increase is primarily
the result of the impairment loss. Before the impairment loss, net earnings for
the fourth quarter of 1998 were up 7.0% over 1997 results.
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 were $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.
Basic earnings per common share in 1998 were $2.24 as compared to $1.41 in 1997,
an increase of 58.9%. Diluted earnings per common share (Note 1J) were $2.21 in
1998, an increase of 57.9% from $1.40 reported for 1997. Before the impairment
charge, diluted earnings per common share were $2.24 in 1998 as compared to
$1.99 in 1997, an increase of 12.6%. Management estimates that the extra week of
operations in the fourth quarter of 1997 increased net earnings by approximately
$0.04 per share.
<PAGE>
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 the $1.76 reported for 1996. Before the
impairment charge, basic earnings per common share were $2.00 as compared to
$1.78 in 1996, an increase of 12.4%.
The Company is continuing to test a home shopping service in the Boston,
Massachusetts market called Hannaford's HomeRuns(R). The majority of its
customer orders are generated from an internet-based, virtual shopping
experience. This service generated a net loss of approximately $0.16 per share
in 1998, $0.11 in 1997 and $.05 per share in 1996. Management will continue to
test this business venture in 1999.
Year 2000 Issues
Year 2000 (Y2K) issues arise from the inability of some computer-based systems
to properly recognize and process dates after December 31, 1999. The Company is
dependent on computer hardware, software, systems and processes ("IT Systems")
and non-information technology systems, such as telephones, clocks, scales,
refrigeration controllers and other equipment containing embedded microprocessor
technology ("Facilities Systems"). Most of the Company's key business processes,
such as product procurement, warehousing, product delivery, inventory and labor
management, retail sales and financial information reporting, depend on these
systems.
In 1996, the Company initiated a readiness plan to address Y2K issues. The
readiness plan addresses two major segments: (1) IT Systems including mainframe,
PC-desktop and in-store systems; and (2) Facilities Systems including all retail
stores, distribution centers, corporate offices and other owned real estate.
Phases of the readiness plan common to each segment include data collection,
assessment and prioritization, resolution, testing and implementation, and
monitoring ongoing compliance. The Company currently expects to complete all
phases of its readiness plan as follows:
IT Systems
Mainframe Completed
Network March 1999
PC-Desktop August 1999
In-store August 1999
Facilities Systems June 1999
More than 40% of the Company's IT Systems utilize a standard calendar routine.
This routine has been reprogrammed to be Y2K compliant. In addition, the Company
is extending this calendar routine to nearly all IT
<PAGE>
Systems where it was not previously used. This standardization has simplified
the Company's remediation efforts and has reduced the cost of the readiness
plan. As a final step, the Company will test systems deemed critical by running
them in a fully integrated Y2K environment. Critical systems include, but are
not limited to, product procurement systems for supermarkets and warehouses,
in-store retail sales systems and centralized financial systems including
payroll and banking activities. The Company has used outside consultants to help
with various phases of the readiness plan. However, the Company is relying on
its own associates to verify all test results prior to implementation.
The readiness plan for all IT Systems is progressing on schedule. The Company's
mainframe applications have been remediated and tested in a Y2K environment. In
addition, all mainframe systems software has been tested with an actual calendar
rollover from 1999 to 2000. The Company has completed all mainframe Y2K work and
will continue to monitor ongoing compliance.
Facilities Systems work has been completed at all retail stores and corporate
offices. The Y2K readiness plan for Distribution Centers and other owned real
estate is currently scheduled to be completed by June 1999.
In addition to the readiness plan addressing IT and Facilities Systems, the
Company contacted critical business partners (product suppliers, service
providers, and those with which the Company exchanges information) in January
1999, requesting information regarding the status of their individual Y2K
compliance plans. This effort will also consist of analyzing specific partners'
responses and personally contacting those deemed most critical, for verification
of their status. The Company currently expects that all critical business
partners will have been contacted and Y2K readiness verified by June 1999.
Based on current information, management expects that the Company will not
experience significant disruption in operations as a result of Y2K issues.
Management believes it has identified the principal hardware and software
modifications that must be made in order to address the most significant Y2K
issues. The Company is currently in the process of establishing a contingency
plan to address mission critical processes in the event of a Y2K caused failure.
Management will establish the plan based on actual testing experience and
assessment of outside risks. The Company currently anticipates that it will have
a fully developed contingency plan by June 1999. This plan will be reviewed and
updated throughout the balance of 1999.
<PAGE>
Because the Company's Y2K compliance is partially dependent upon key business
partners also being Y2K compliant on a timely basis, there can be no guarantee
that the Company's overall efforts will prevent a material adverse impact on its
results of operations, financial condition and cash flows. The possible
consequences to the Company of not being fully Y2K compliant include temporary
supermarket closings, delays in the delivery of merchandise, errors in purchase
orders and other financial transactions and the inability to efficiently process
customer purchases. In addition, business disruptions could result from the loss
of power or the loss of communication links between supermarkets, warehouses and
headquarters locations. However, management believes that the Company's store
base is broad enough to minimize the impact of isolated disruptions.
The total cost associated with anticipated Y2K modifications is not material to
the Company's results of operations, financial condition or cash flows. The
total estimated cost of the readiness plan, including the cost of internal
resources, is approximately $4 to $5 million, of which approximately $3.5
million has been incurred through the end of 1998. Most of the Company's
additional budgeted Y2K expenditures are earmarked for completion of Facilities
Systems testing, PC-desktop remediation, and for continuing interaction with
business partners. These costs do not include amounts capitalized in the normal
course of business to replace or upgrade older, outdated systems whose
replacement was not accelerated due to Y2K issues. All costs are being funded by
operating cash flows, and the costs of the readiness plan are being expensed as
incurred. Management does not anticipate deferring any technology-related
projects due to these costs or the implementation of its readiness plan. The
cost of the conversions and the projected completion dates are based on
management's current best estimates and are subject to revision as additional
information becomes available.
<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.
CAPITAL RESOURCES AND LIQUIDITY
Overview
Measures of liquidity at the end of the last three fiscal years were as follows:
(Dollars in millions)
1998 1997 1996
---------- ------------ ------------
Cash and cash equivalents $60 $58 $43
Working capital (FIFO inventory) $56 $39 $39
Unused lines of revolving credit $58 $54 $48
Unused lines of short-term credit $ 1 $30 $35
Current ratio (FIFO inventory) 1.22 1.15 1.16
<PAGE>
The Company continued to maintain a strong capital position at the end of fiscal
1998. Cash and cash equivalents increased $2 million to $60 million at the end
of the year. This increase was the result of cash provided by operating
activities offset by cash used in financing and investing activities. Lines of
credit represent a continuing source of capital and are available for purposes
of short-term financing. At January 2, 1999, the Company had $34 million
outstanding on its revolving lines of credit. The Company is in a solid
financial position to carry out its current internal expansion and potential
external growth plans in 1999.
In February 1999, the Company renewed a stock repurchase program authorizing the
repurchase of up to $100 million in shares of Hannaford common stock over the
next 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.
During 1998, the Company reacquired 360,000 shares at a cost of $15 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 $184 million in 1998, a slight
decrease from the $190 million provided in 1997. This decrease is primarily
attributable to an increase in inventories, receivables and prepayments,
partially offset by an increase in deferred taxes. The fluctuations within these
accounts are part of the Company's normal business operations.
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 had no net impact on cash provided by
operating activities.
Cash Flows from Investing Activities
Cash used in investing activities decreased $24 million during 1998 to $133
million from $157 million in 1997. This decrease is the result of the Company's
reduced capital investment coupled with the increased net book value of assets
sold during the year. During 1998, the Company completed the sale of certain
assets relating to supermarkets that were closed in January 1998 and written
down to their estimated fair values in 1997.
<PAGE>
Capital investments totaled $143 million in 1998 and were composed of $136
million in additions to property, plant and equipment, $6 million in computer
software costs and deferred charges and $1 million in non-cash capital lease
additions. These 1998 capital investments consist primarily of costs incurred in
building and equipping new, expanded and remodeled stores and for improvements
necessary in maintaining current facilities and systems.
Net retail selling space for supermarkets increased 4.5% in 1998 to 5,171,000
square feet at year-end, an increase of 224,000 square feet over 1997 year-end
sales area. During 1998, the Company opened fourteen supermarkets including
eight new stores, two relocations and four expansions. In January 1998, the
Company closed seven southeastern stores in non-core markets with limited
opportunity for profitable growth.
The number of supermarkets and square footage of selling area at year-ends 1998,
1997 and 1996 are summarized below:
SUPERMARKETS
Number of Square Footage
Units Selling Area
1998 150 5,171,000
1997 148 4,947,000
1996 139 4,490,000
<PAGE>
New, relocated and expanded supermarkets in 1998, together with their square
footage of selling area, are listed below:
Square Footage
Location Selling Area
Northeast
Machias, ME (expansion) 18,000
Lincoln, ME (expansion) 19,000
Rindge, NH 39,000
Herkimer, NY 41,000
Hampstead, NH 34,000
St. Albans, VT (expansion) 40,000
Southeast
Rocky Mount, NC 41,000
Gastonia, NC 42,000
Richmond, VA (expansion) 34,000
York County, VA 41,000
Virginia Beach, VA 40,000
Portsmouth, VA 41,000
Southport, NC (relocation) 30,000
Wilmington, NC (relocation) 34,000
During 1998, the Company also opened a number of remodeled supermarkets. The
growth in the Company's square footage of selling area does not reflect this
investment to remodel twelve existing stores, significantly modernizing the
store formats. By the end of 1999, approximately two-thirds of the Company's
supermarkets will have been newly constructed, expanded or remodeled within the
last five years.
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 following 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.
<PAGE>
Cash Flows from Financing Activities
Cash used in financing activities was $49 million in 1998, as compared to $17
million in 1997. This reduction in cash flows of $32 million is primarily the
result of increased payments of long-term debt coupled with reduced proceeds
from the issuance of long-term debt. During 1998, the Company received $20
million of proceeds from a senior uncollateralized debt financing. 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 line of
credit. In 1998, the Company made $35 million in payments on its long-term debt
as compared to $14 million in 1997. This increase of $21 million is the result
of the Company, during 1998, making $12 million in prepayments on its long-term
debt obligations coupled with the repayment of $4 million on its revolving lines
of credit (Note 2). In 1998, the Company purchased 418,000 shares of common
stock at a cost of $18 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. This amount was offset by proceeds of $11 million received during 1998
from the issuance of 392,000 shares of treasury stock.
The Company paid $25 million in dividends to common shareholders in 1998.
Quarterly cash dividends declared during 1998 totaled $.60 per common share, an
increase of 11.1% over the $.54 per share declared during 1997. This was the
thirty-sixth 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 1998 represented 26.8% of net earnings available to
common shareholders. In February 1999, the Company declared an increased
quarterly dividend on its common stock of $.165 per share, payable March 25,
1999. The new quarterly dividend of $.165 per share represents an increase of
10.0% over the $.15 per share paid in each quarter of 1998.
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.
<PAGE>
1999 Capital Program
Total capital expenditure commitments are projected to be in excess of $160
million in 1999, primarily for new store constructions, store relocations,
expansions and remodels, equipment, vehicles and other asset expenditures.
During 1999, 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 3.7% during 1999. A number of projects scheduled to
start in 1999 will not be completed until 2000. The 1999 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 information, as defined in the Private
Securities Litigation Reform Act of 1995. Examples of such statements in this
report include those concerning the Year 2000 issue, the Company's expected
future tax rates, 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, interest rates or the Company's cost of borrowing, by increases
in labor rates due to low unemployment or other factors, by unanticipated costs
related to the opening and closing of stores or by the inability to control
various expense categories.
(2) Hannaford's future growth is dependent on its ability to expand its retail
square footage, either de-novo or through acquisitions. 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 projected future expansion.
<PAGE>
(3) Adverse determinations with respect to pending or future litigation or other
material claims against Hannaford could affect actual results.
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.:
In our opinion, the consolidated financial statements listed in Item 8 of this
Form 10-K present fairly, in all material respects, the financial position of
Hannaford Bros. Co. and Subsidiaries at January 2, 1999 and January 3, 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended January 2, 1999, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
s/PricewaterhouseCoopers, LLP
Portland, Maine
January 21, 1999
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
January 2, January 3,
1999 1998
------------ ------------
Current assets:
Cash and cash equivalents $ 59,722 $ 57,663
Accounts receivable, net 22,869 14,918
Inventories (note 1C) 201,219 188,767
Prepaid expenses 6,116 7,801
Deferred income taxes (note 8) 5,952 6,912
--------- ---------
Total current assets 295,878 276,061
Property, plant and equipment, net
(notes 1D, 2 and 4) 823,368 777,909
Leased property under capital leases, net 54,911 58,516
(note 3)
Other assets:
Goodwill, net (notes 1F and 4) 63,517 67,552
Deferred charges, net (note 1G) 25,074 28,724
Computer software costs, net (note 1H) 19,318 16,551
Miscellaneous assets 2,472 1,877
--------- ---------
Total other assets 110,381 114,704
--------- ---------
$1,284,538 $1,227,190
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except per share amounts)
January 2, January 3,
1999 1998
------------ ------------
Current liabilities:
Current maturities of long-term debt (note 2) $ 19,296 $ 18,155
Obligations under capital leases (note 3) 2,108 1,873
Accounts payable 186,626 182,252
Accrued payroll 27,254 25,526
Other accrued expenses 23,873 24,553
Income taxes 442 2,829
--------- ---------
Total current liabilities 259,599 255,188
Deferred income tax liabilities (note 8) 28,859 18,265
Other liabilities 38,734 41,171
Long-term debt (note 2) 220,130 235,850
Obligations under capital leases (note 3) 73,866 75,687
Shareholders' equity (notes 5 and 7):
Class A Serial Preferred stock, no par,
authorized 2,000 shares - -
Class B Serial Preferred stock, par value
$.01 per share, authorized 28,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000 shares;
42,338 and 42,338 shares
issued. 31,754 31,754
Additional paid-in capital 109,664 115,130
Preferred stock purchase rights 423 423
Retained earnings 525,344 456,063
--------- ---------
667,185 603,370
Less common stock in treasury
85 and 59 shares 3,835 2,341
--------- ---------
Total shareholders' equity 663,350 601,029
--------- ---------
$1,284,538 $1,227,190
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
1998 1997 1996
----------- ---------- ----------
Sales and other revenues $3,323,588 $3,226,433 $2,957,559
Cost of sales 2,480,346 2,427,287 2,242,784
--------- --------- ---------
Gross margin 843,242 799,146 714,775
Selling, general and administrative
expenses 664,357 635,355 568,033
Impairment loss (note 4) - 39,950 -
--------- --------- ---------
Operating profit 178,885 123,841 146,742
Interest expense, net (notes 1I and 2) 26,577 26,425 22,204
--------- --------- ---------
Earnings before income taxes 152,308 97,416 124,538
Income taxes (note 8) 57,661 37,769 49,333
--------- --------- ---------
Net earnings $ 94,647 $ 59,647 $ 75,205
========= ========= =========
Earnings per share (note 1J):
Basic $ 2.24 $ 1.41 $ 1.78
========= ========= =========
Diluted $ 2.21 $ 1.40 $ 1.76
========= ========= =========
Cash dividends per share $ .60 $ .54 $ .48
========= ========= =========
Weighted average number of common shares
outstanding Basic 42,277 42,287 42,298
========= ========= =========
Diluted 42,884 42,732 42,621
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
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 30, 1995 42,298 $31,724 $121,974 $423 $364,556
Net earnings 75,205
Cash dividends on 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 on 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)
Net earnings 94,647
Cash dividends on common stock (25,366)
Shares issued under employee
benefit plans (5,466) 392 16,514
Treasury stock purchases (418) (18,008)
------ ------- -------- ---- -------- ---- -------
Balance, January 2, 1999 42,338 $31,754 $109,664 $423 $525,344 ( 85) $(3,835)
====== ======= ======== ==== ======== ==== =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-K HANNAFORD BROS. CO. 1-7603 JANUARY 2, 1999
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
1998 1997 1996
Cash flows from operating activities:
Net income $ 94,647 $ 59,647 $ 75,205
Adjustments to reconcile net
income to net cash provided
by operating activities:
Impairment loss - 39,950 -
Depreciation and amortization 96,739 93,953 77,420
(Increase) decrease in inventories (12,452) 2,891 (33,689)
(Increase) decrease in receivables and
prepayments (6,202) 599 (805)
Increase in accounts payable and
accrued expenses 2,986 440 77,889
Increase (decrease) in income
taxes payable (2,387) 297 2,532
Increase (decrease) in deferred taxes 11,554 (7,815) 2,523
Other operating activities (1,081) (446) 96
-------- -------- --------
Net cash provided by
operating activities 183,804 189,516 201,171
Cash flows from investing activities:
Acquisition of property, plant
and equipment (135,904) (152,862) (215,067)
Sale of property, plant and equipment, net 9,156 6,143 5,958
Increase in computer software costs (7,262) (6,205) (5,933)
(Increase) decrease in deferred charges 911 (4,054) (1,930)
Net cash used in investing
activities (133,099) (156,978) (216,972)
Cash flows from financing activities:
Principal payments under capital
lease obligations (1,740) (1,788) (1,493)
Proceeds from issuance of long-term debt 20,000 26,600 106,500
Payments of long-term debt (34,580) (14,418) (28,994)
Issuance of common stock 11,048 9,648 9,707
Purchase of treasury stock (18,008) (14,379) (14,129)
Dividends paid (25,366) (23,043) (20,302)
-------- -------- --------
Net cash (used in) provided by
financing activities (48,646) (17,380) 51,289
-------- -------- --------
Net increase in cash and cash equivalents 2,059 15,158 35,488
Cash and cash equivalents at beginning
of year 57,663 42,505 7,017
-------- -------- --------
Cash and cash equivalents at end of year $ 59,722 $ 57,663 $ 42,505
======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information
(In thousands)
1998 1997 1996
---- ---- ----
Cash paid during the year for:
Interest (net of amount capitalized,
$1,935 in 1998, $3,463 in 1997 and
$3,357 in 1996) $27,397 $26,396 $22,765
Income taxes 47,658 41,202 42,577
Supplemental disclosure of noncash investing and financing activities
Capital lease obligations totalling $1,166,000, $4,550,000 and $7,652,000
were incurred during 1998, 1997 and 1996, respectively, when the Company
entered into real estate leases.
<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 2, 1999, for fiscal year 1998 (52
weeks), January 3, 1998, for fiscal year 1997 (53 weeks), and December 28, 1996,
for fiscal year 1996 (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 87% of inventories
were valued using the LIFO method in 1998 as compared to 84% in 1997. 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 $19,583,000 at January 2, 1999, $18,037,000 at January 3, 1998
and $17,076,000 at December 28, 1996. LIFO expense charged to cost of goods sold
was $1,546,000 in 1998, $961,000 in 1997 and $1,468,000 in 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 1998 1997
- ------------ -------- --------
3% Land and improvements $ 141,706 $ 129,752
3% Buildings 300,708 279,310
13% Furniture, fixtures and equipment 506,512 454,564
4% Leasehold interests and improvements 324,106 277,560
Construction in progress 8,790 29,124
--------- ---------
1,281,822 1,170,310
Less accumulated depreciation
and amortization 458,454 392,401
--------- ---------
$ 823,368 $ 777,909
========= =========
E. STORE OPENING COSTS
The noncapital expenditures incurred in opening new stores or remodeling
existing stores are expensed as 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 $4,035,000 in 1998, $5,534,000 in 1997 and
$5,140,000 in 1996.
<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 $3,715,000 in 1998,
$3,599,000 in 1997 and $3,246,000 in 1996.
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. The majority of capitalized software costs are
amortized on a straight-line method over a period of five years. Amortization
expense charged to operations was $4,495,000 in 1998, $3,312,000 in 1997 and
$2,338,000 in 1996.
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position (SOP) 98-1, Accounting For the Costs of Computer Software Developed For
or Obtained For Internal-Use. The SOP will be effective for the Company
beginning January 3, 1999 (fiscal 1999). SOP 98-1 will require the
capitalization of certain costs incurred in connection with developing or
obtaining software for internal use. Amounts capitalized in fiscal 1999 must be
adjusted to conform to SOP 98-1. The Company does not anticipate that there will
be a material impact on its results of operations or financial position after
SOP 98-1 is adopted.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
I. CAPITALIZED INTEREST
The Company capitalizes interest as part of the cost of acquiring and
constructing certain assets. Capitalized interest was $1,935,000 in 1998,
$3,463,000 in 1997 and $3,357,000 in 1996.
J. EARNINGS PER COMMON SHARE
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 and have been determined by
dividing net earnings by the weighted average number of diluted shares of common
stock outstanding during the year.
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 equivalents, accounts receivable and notes receivable: The
carrying amounts reported in the balance sheet for these items approximate
their fair values.
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 $239,426,000 at January 2,
1999. The fair value of the long-term debt is estimated to be $249,549,000
at January 2, 1999.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
L. ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) 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
were effective for financial statements issued for fiscal years beginning
after December 15, 1997. The Company has determined that these new standards
do not necessitate any changes to existing financial reporting.
In June 1998, the FASB issued SFAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities, which requires entities to report all
derivatives at fair value as assets or liabilities in their statements of
financial position. This statement is effective for financial statements
issued for fiscal periods beginning after June 15, 1999. The Company does
not currently have any derivative instruments or hedging activities to
report under this standard.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. EXTERNAL FINANCING
At January 2, 1999, 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
2, 1999, there were $34,100,000 of outstanding borrowings under these credit
lines with a weighted-average interest rate of 5.8%. 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 an unused, uncommitted short-term bank line of
credit of $11,000,000 at January 2, 1999. Of this amount, approximately
$10,295,000 is reserved to support outstanding standby letters of credit which
guarantee payment of certain insurance claims and premiums.
In April 1998, the Company received the proceeds of a $20,000,000 senior
uncollateralized debt financing. The term of the debt is 10 years with an
average life of 7 years and an interest rate of 6.3%.
At January 2, 1999, real estate and equipment with a net book value of
approximately $79,490,000 served as collateral for debt of approximately
$60,897,000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Net interest expense was as follows:
(In thousands)
1998 1997 1996
---- ---- ----
Interest on debt $19,012 $20,108 $17,460
Capital lease interest 9,630 9,902 9,351
Capitalized interest (1,935) (3,463) (3,357)
Interest income (130) (122) (1,250)
------ ------ ------
$26,577 $26,425 $22,204
====== ====== ======
Long-term debt consists of the following:
(In thousands)
1998 1997
Uncollateralized senior notes due in varying
annual installments through 2016 with interest
from 6.2% to 9.0%. $139,600 $136,250
Collateralized by real estate, due in
varying installments through 2011 with
interest from 7.5% to 10.3% 59,619 70,665
Uncollateralized revolving credit loans with
interest from 5.6% to 6.5% 34,100 38,100
Collateralized by equipment, due in 1999 with
interest from 6.3% to 7.4%. 1,278 2,983
Other 4,829 6,007
------- -------
239,426 254,005
Less current portion 19,296 18,155
------- -------
$220,130 $235,850
======= =======
<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 2, 1999, are as follows:
(In thousands)
1999 $ 19,296
2000 24,791
2001 25,581
2002 26,229
2003 25,650
2004 and thereafter 117,879
-------
$239,426
<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, 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)
1998 1997
---- ----
Real property $82,500 $84,494
Less accumulated amortization 27,589 25,978
------ ------
Net real property under capital leases $54,911 $58,516
====== ======
Amortization of property under capital leases was $4,217,000 in 1998, $4,381,000
in 1997 and $4,004,000 in 1996.
Future minimum rental payments under capital lease obligations and operating
leases at January 2, 1999, are as follows:
(In thousands)
Capital Operating
Leases Leases
1999 $ 11,784 $ 21,541
2000 11,900 19,979
2001 11,769 18,668
2002 11,997 18,132
2003 12,139 16,975
2004 and thereafter 110,541 171,055
------- -------
Total minimum lease payments 170,130 $266,350
Less:
Imputed interest (at rates
from 6.50% to 21.13%) 94,156
Present value of net mini-
mum lease payments 75,974
Less current portion 2,108
Long-term portion of obligations $ 73,866
<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 $2,507,000 and $8,797,000, 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)
1998 1997 1996
---------- ---------- ----------
Capital leases:
Contingent rentals $ 123 $ 194 $ 169
------ ------ ------
Operating leases:
Minimum rentals 21,439 20,584 19,019
Contingent rentals 2 714 491
Rentals from subleases (1,843) (1,492) (690)
------ ------ ------
19,598 19,806 18,820
------ ------ ------
$19,721 $20,000 $18,989
====== ====== ======
<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 on a
review of Company locations and 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 related to supermarket assets and
associated costs for stores that were closed in January 1998 and being held for
sale or disposal, and $15,950,000 related to supermarket assets which the
Company continued to use in its operations. In 1997 the operating losses of
these closed supermarkets were not material.
<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 became
effective upon the expiration of the Company's existing rights plan on February
4, 1998. The replacement plan is substantially identical to the previous 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 in 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. In 1996, the Company issued 19,600 common
shares to the Sobey Parties pursuant to their purchase rights under the
agreement. 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 no new shares were issued by the Company, and
so the Sobey Parties purchased no additional shares in 1997 or 1998.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. EMPLOYEE BENEFIT PLANS
The Company maintains 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. The Board of Directors approved an amendment to the
plan which converted it to a cash balance plan effective January 1, 1998. This
resulted in the remeasurement of the plan's projected benefit obligation. The
accrued pension costs as of January 2, 1999 and January 3, 1998, together with
the 1998 and 1997 net pension expense, reflect the plan's remeasurement.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 132 - Employers' Disclosures about
Pensions and Other Postretirement Benefits which changes the disclosures
previously required by SFAS No. 87 and SFAS No. 106. The Company has adopted
SFAS No. 132 and has restated its disclosures of pension and other
postretirement benefits for the years ended January 2, 1999 and January 3, 1998.
The Company also maintains an unfunded supplemental executive retirement plan
that provides benefits in excess of those limited in the cash balance plan by
maximum compensation and benefit limitations.
The Company also provides a defined contribution 401(k) plan to substantially
all employees. Amounts charged to expense for this plan were $6,561,000 in 1998,
$2,916,000 in 1997 and $3,076,000 in 1996. Effective for 1998, the Company
increased the percentage of its matching contribution to this 401(k) plan.
In addition, the Company provides certain health care and life insurance
benefits for retired employees ("postretirement benefits"). Substantially all
employees may become eligible for these benefits if they reach early or normal
retirement age and accrue 10 years of service while working for the Company. The
postretirement health care plan is contributory for most participants with
retiree contributions adjusted annually. Life insurance benefits are not
available for employees who retired after January 1, 1996.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following tables set forth the change in plans' benefit obligations and
assets as well as the plans' funded status reconciled with the amounts shown in
the Company's financial statements at January 2, 1999 (1998 plan year) and
January 3, 1998 (1997 plan year):
<TABLE>
(In thousands)
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $84,201 $ 71,057 $3,118 $ 5,380
Service cost 4,690 3,128 36 35
Interest expense 6,247 5,793 228 248
Amendments - - (369) (12)
Actuarial loss (gain) 8,462 7,182 571 (1,882)
Benefits paid (5,608) (2,959) (439) (651)
------ ------- ----- ------
Benefit obligation at end of year $97,992 $ 84,201 $3,145 $ 3,118
====== ======= ===== ======
Change in plan assets:
Fair value of plan assets at beginning
of year $88,385 $ 70,391 $ 0 $ 0
Actual return on plan assets 3,123 20,074 0 0
Employer contribution 4,818 879 439 651
Benefits paid (5,608) (2,959) (439) (651)
------ ------- ----- ------
Fair value of plan assets at end of year $90,718 $ 88,385 $ 0 $ 0
====== ======= ===== ======
Funded status $(7,274) $ 4,184 $(3,145) $(3,118)
Unrecognized transition obligation (ass (227) (258) 7,381 8,283
Unrecognized prior service cost 2,549 2,873 0 0
Unrecognized net actuarial loss (gain) 3,192 (12,662) (5,149) (6,273)
Accrued benefit cost $(1,760) $ (5,863) $ (913) $(1,108)
</TABLE>
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For measurement purposes, a 5.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999. The rate was assumed to
decrease gradually to 5.0% for 2000 and remain at that level thereafter.
<TABLE>
(In thousands)
Pension Benefits Postretirement Benefits
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 4,690 $3,128 $4,709 $ 36 $ 35 $ 70
Interest expense 6,247 5,793 5,155 228 248 438
Expected return on plan assets (10,162) (7,062) (7,194) 0 0 0
Amortization of transition
obligation (asset) (31) (31) (31) 533 552 553
Amortization of prior service cost 322 322 322 0 0 0
Recognized net actuarial loss (gain) (318) 28 1,371 (553) (612) (386)
------- ----- ------ ---- ---- ----
$ 748 $2,178 $ 4,332 $ 244 $ 223 $ 675
======= ===== ====== ==== ==== ====
Weighted-average assumptions as of
September 30 (the plans measurement
date):
Discount rate 6.50% 7.50% 8.25% 6.50% 7.50% 8.25%
Expected return on plan assets 10.50% 10.50% 9.50% - - -
Rate of compensation increase 4.50% 4.50% 4.50% - - -
</TABLE>
The projected benefit obligation and accumulated benefit obligation for the
unfunded supplemental executive retirement plan were $2,192,000 and $2,176,000
respectively as of January 2, 1999 and $2,259,000 and $2,257,000 respectively as
of January 3, 1998. The projected benefit obligation for the defined benefit
plan was $95,800,000 with a fair value of plan assets of $90,718,000 at January
2, 1999.
A 1% change in the assumed health care cost trend rates would not have a
material effect on the benefit obligation or expense of postretirement benefits.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. EMPLOYEE STOCK PLANS
The 1988 and 1998 Stock Plans 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. Under the 1988 Stock Plan 2,800,000 shares were authorized for
grant and under the 1998 Stock Plan 6,000,000 shares were authorized for grant.
The 1988 and 1998 Stock Plans allow the granting of both incentive stock options
and non-qualified stock options. Under the 1988 and 1998 Stock Plans, 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 and 1998 Plans, 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. Incentive stock option activity for the last three fiscal years was as
follows:
<TABLE>
(Share Amounts in Thousands)
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,512 $27.57 1,422 $24.91 1,362 $22.37
Granted 520 44.70 367 34.63 359 30.39
Exercised (224) 24.76 (261) 22.85 (287) 19.63
Cancelled (48) 37.47 (16) 30.89 (12) 26.74
----- ----- -----
Outstanding at end
of year 1,760 32.72 1,512 27.57 1,422 24.91
Exercisable at end
of year 921 26.01 912 24.02 902 22.42
</TABLE>
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<TABLE>
Non-qualified stock option activity was as follows:
(Share Amounts in Thousands)
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 470 $30.29 366 $28.18 218 $24.60
Granted 92 44.82 117 35.57 189 31.30
Exercised (52) 30.82 (13) 27.89 (35) 19.96
Cancelled (4) 41.07 - - (6) 29.01
--- ---- ---
Outstanding at end
of year 506 32.55 470 30.02 366 28.18
Exercisable at end
of year 290 28.67 252 26.68 151 24.60
Available for future
grants (all plans) 5,444 - 92 - 569 -
</TABLE>
Exercise prices for options outstanding as of January 2, 1999 ranged from $18.81
to $50.63. 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 117,000 shares, for which $2,596,000 was paid to the
Company. During 1998, employees purchased 112,000 shares, for which $2,941,000
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 2,
1999, grants had been exercised by employees for the purchase of 98,000 shares
and 723,000 shares remained available for issuance under the Plan. As of
February 1999, $3,089,000 had been received by the Company upon issuance of
these shares and the balance of shares available for future issuance was reduced
to 625,000.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Statement of Financial Accounting Standards (SFAS) No. 123 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). 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)
1998 1997 1996
Net earnings As reported $94,647 $59,647 $75,205
Proforma 90,585 56,436 72,567
Basic earnings per share As reported $2.24 $1.41 $1.78
Proforma 2.14 1.33 1.71
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:
1998 1997 1996
---- ---- ----
Risk-free interest rate 5.65% 6.85% 7.03%
Dividend yield 1.40% 1.55% 1.54%
Expected volatility 20.17% 19.42% 19.44%
Expected life 4.4 yrs. 4.5 yrs. 4.9 yrs.
The weighted-average grant date fair values of options granted during 1998, 1997
and 1996 were $10.33, $8.84 and $8.28, 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)
1998 1997 1996
-------- -------- --------
Current
Federal $39,944 $37,028 $38,842
State 6,135 4,790 7,969
------ ------ ------
46,079 41,818 46,811
------ ------ ------
Deferred
Federal 10,514 (2,801) 2,276
State 1,068 (1,248) 246
------ ------ ------
11,582 (4,049) 2,522
------ ------ ------
Total income tax expense $57,661 $37,769 $49,333
====== ====== ======
The reconciliation of income tax computed at the United States Federal
statutory tax rates to income tax expense was as follows:
(In thousands)
1998 1997 1996
-------- -------- ---------
Tax at U.S.
statutory rate $53,307 35.00% $34,096 35.00% $43,588 35.00%
State income taxes,
net of federal tax
benefit 4,630 3.04 3,487 3.58 5,280 4.24
Other - net (276) (.18) 186 .19 465 .37
------ ----- ------ ----- ------ -----
$57,661 37.86% $37,769 38.77% $49,333 39.61%
====== ===== ====== ===== ====== =====
<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 at the end of
the last two fiscal years were as follows:
(In thousands)
1998 1997
---- ----
Deferred Tax Liabilities:
Depreciation and amortization $43,824 $33,238
Other 2,880 3,427
------- -------
46,704 36,665
Deferred Tax Assets:
Capital leases (8,027) (7,588)
Insurance reserves (10,314) (10,380)
Associate benefit plans (4,681) (4,736)
Other (775) (2,608)
------- -------
(23,797) (25,312)
22,907 11,353
Net current deferred tax assets 5,952 6,912
------- -------
Net non-current deferred tax liabilities $28,859 $18,265
======= =======
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
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 1998, 1997 and 1996.
(In thousands except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1998
<S> <C> <C> <C> <C>
Sales and other revenues.......... $788,296 $830,371 $854,675 $850,246
Gross margin...................... 198,317 207,614 217,649 219,662
Net earnings...................... 17,815 23,019 25,832 27,981
Earnings per share:
Basic........................ $ .42 $ .54 $ .61 $ .66
Diluted...................... $ .42 $ .54 $ .60 $ .65
1997
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
Earnings per share:
Basic........................ $ .37 $ .47 $ .54 $ .03
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
Earnings per share:
Basic........................ $ .35 $ .46 $ .47 $ .50
Diluted...................... $ .35 $ .46 $ .46 $ .49
</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, 1999.
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, 1999.
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, 1999.
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, 1999.
<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............................. 29
Consolidated Balance Sheets - January 2, 1999 and
January 3, 1998............................................ 30-31
Consolidated Statements of Earnings - Fiscal Years Ended,
Janaury 2, 1999, January 3, 1998 and December 28, 1996..... 32
Consolidated Statements of Changes in Shareholders'
Equity - Fiscal Years Ended, January 2, 1999,
January 3, 1998 and December 28, 1996...................... 33
Consolidated Statements of Cash Flows
- Fiscal Years Ended, January 2, 1999,
January 3, 1998 and December 28, 1996...................... 34-35
Notes to Consolidated Financial Statements.................... 36-57
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 68-83
3.2 - By-Laws of the Registrant
Incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for
the fiscal year ended January 1, 1994
(SEC File No. 1-7603).
<PAGE>
PAGES
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 10.27 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 - The Hannaford Cash Balance Plan (formerly known as the Amended
and Restated Hannaford Bros. Co. Employees' Retirement Plan),
effective January 1, 1998. 84-163
10.4 - There is incorporated herein by reference the First
Amendment to The Cash Balance 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 4, 1998.
10.5 - 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).
10.6 - The Amended and Restated Hannaford Bros. Co. Supplemental
Executive Retirement Plan, effective January 1, 1998. 164-174
<PAGE>
PAGES
10.7 - 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).
10.8 - 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); (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) and (iv) the Third 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 January 3, 1998.
10.9 - There is incorporated herein by reference the Amended
and Restated Hannaford Bros. Co. 1993 Long Term Incentive
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 3, 1998.
<PAGE>
PAGES
10.10 - 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).
10.11 - There is incorporated herein by reference an Amended
and Restated Employment Continuity Agreement between the
Registrant and Hugh G. Farrington, 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 3, 1998.
10.12 - There is incorporated herein by reference an Amended
and Restated 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 January 3, 1998.
10.13 - 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).
10.14 - 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 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
<PAGE>
PAGES
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).
10.15 - 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).
10.16 - The Hannaford Savings and Investment Plan (merging and 175-264
amending the Hannaford Northeast Savings and Investment
Plan and the Hannaford Southeast Savings and Investment
Plan), effective January 1, 1998.
10.17 - 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).
10.18 - 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
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).
<PAGE>
PAGES
10.19 - 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).
10.20 - 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).
10.21 - 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).
10.22 - There is incorporated herein by reference the Hannaford
Bros. Co. 1998 Stock Option Plan, a copy of which was
filed as Exhibit 10.25 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 3, 1998.
10.23 - There is incorporated herein by reference the Hannaford
Bros. Co. 1998 Restricted Stock Plan, 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 January 3, 1998.
10.24 - 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 (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).
<PAGE>
PAGES
10.25 - 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).
10.26 - 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).
10.27 - There is incorporated herein by reference a Consulting
and Non-Competition Agreement between the Registrant
and Larry A. Plotkin, dated June 11, 1998, 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
July 4, 1998 (SEC File No. 1-7603).
21 - Subsidiaries of the Registrant............................ 265
23 - Consents of Accountants................................... 266
27 - Financial Data Schedule 267-268
(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
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
March 11, 1999
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/Robert D. Bolinder s/William T. End
Walter J. Salmon Robert D. Bolinder William T. End
Chairman of the Board Director Director
Director March 11, 1999 March 11, 1999
March 11, 1999
s/Richard K. Lochridge s/Renee M. Love
s/Blythe J. McGarvie Richard K. Lochridge Renee M. Love
Blythe J. McGarvie Director Director
Exec. Vice President, March 11, 1999 March 11, 1999
Chief Financial Officer
(Principal Accounting Officer)
March 11, 1999
s/Claudine B. Malone s/Robert J. Murray
Claudine B. Malone Robert J. Murray
s/Hugh G. Farrington Director Director
Hugh G. Farrington March 11, 1999 March 11, 1999
President
Chief Executive Officer
Director s/David F. Sobey s/John R. Sobey
March 11, 1999 David F. Sobey John R. Sobey
Director Director
March 11, 1999 March 11, 1999
s/Robert L. Strickland s/Robert J. Tarr, Jr.
Bruce G. Allbright Robert L. Strickland Robert J. Tarr, Jr.
Director Director Director
March 11, 1999 March 11, 1999
<PAGE>
EXHIBIT 3.1
HANNAFORD BROS. CO.
CONFORMED ARTICLES OF INCORPORATION
Note: These conformed Articles of Incorporation have been prepared based on
the Certificate of Organization of Hannaford Bros. Co. and all
amendments thereto filed with the Maine Secretary of State, to
which reference is made for the complete text of Hannaford Bros. Co.'s
Articles of Incorporation as currently in effect.
/////////////////////////////////////////////////////////////////////////////
STATE OF MAINE
------
CERTIFICATE OF ORGANIZATION OF A CORPORATION,
UNDER THE GENERAL LAW
------
The undersigned, officers of a corporation organized at Portland, in the County
of Cumberland and State of Maine, at a meeting of the signers of the articles of
agreement therefor, duly called and held at No. 166 Commercial Street, in the
City of Portland aforesaid on Thursday the Eleventh day of December A. D. 1902,
hereby certify as follows:
The name of said corporation is Hannaford Bros. Co.
The purposes of said corporation are to carry on the business of buying, selling
and dealing in fruit, produce, and goods, wares and merchandise of every name
and nature with full power to own, buy, sell and acquire all kinds of property
necessary or convenient for carrying out any of the purposes aforesaid,
including stocks and bonds of other parties or corporations, and to do any and
all things which may be necessary or convenient for carrying out said purposes.
The amount of capital stock is $50,000.
The amount of capital stock already paid in is Nothing.
The par value of the shares is one hundred dollars.
The names and residences of the owners of said shares are as follows:
Names. Residence. No. of Shares.
Howard C. Hannaford Portland, Maine One
Edward W. Hannaford Portland, Maine One
Phillip E. Hannaford Portland, Maine One
Charles Collins Portland, Maine One
Wallace J. Shaw Portland, Maine One
William L. Keith South Portland, Maine One
Balance of stock, to wit 494 shares in Treasury unissued and unsubscribed for.
Said corporation is located at Portland in the County of Cumberland. The number
of directors is five and their names are Howard C. Hannaford, Edward W.
Hannaford, Phillip E. Hannaford, Wallace J. Shaw and William L. Keith. The
<PAGE>
name of the clerk is Charles Collins and his residence is Portland, Maine. The
undersigned, Howard C. Hannaford is president; the undersigned, Charles Collins
is treasurer; and the undersigned, Howard C. Hannaford, Edward W. Hannaford,
Phillip E. Hannaford, Wallace J. Shaw and William L. Keith are a majority of and
all of the directors of said corporation.
Witness our hands this eleventh day of December A. D. 1902.
/s/ Howard C. Hannaford
President
/s/ Charles Collins Treasurer
/s/ Howard C. Hannaford }
/s/ Edward W. Hannaford }
/s/ William L. Keith } Directors.
/s/ Phillip E. Hannaford }
/s/ Wallace J. Shaw }
Cumberland, ss. Dec. 11 A. D. 1902.
Then personally appeared Howard C. Hannaford, Edward W. Hannaford, Phillip E.
Hannaford, Wallace J. Shaw and William L. Keith and Charles Collins and
severally made oath to the foregoing certificate, that the same is true.
Before me,
/s/ Albert S. Woodman Justice of the Peace.
------
State of Maine
------
Attorney General's office, Dec. 12th A. D. 1902.
I hereby certify that I have examined the foregoing certificate, and the same is
properly drawn and signed, and is conformable to the constitution and laws of
the State.
/s/ Geo. M. Seiders Attorney General.
------
COPY.
(Name of Corporation.)
Hannaford Bros. Co.
------
Cumberland, ss.
Registry of Deeds
Received December 12, 1902
at 2 h. 10 m. P. M.
Recorded in Vol. 25 Page 214
<PAGE>
Attest:
/s/ Norman True ....... Register
A true copy of record.
Attest:
/s/ Norman True ....... Register
------
STATE OF MAINE
------
Office of Secretary of State
Augusta, Dec. 13, 1902
Received and filed this day.
Attest:
/s/ Byron Boyd Secretary of State
Recorded in Vol. 41 Page 229
/////////////////////////////////////////////////////////////////////////////
OTHER PROVISIONS OF THE ARTICLES OF
INCORPORATION [established by Articles of Amendment
filed on the dates noted]
PURPOSES
The purposes of said corporation are to carry on the business of buying,
selling and dealing in fruit, produce, and goods, wares and merchandise of every
name and nature with full power to own, buy, sell and acquire all kinds of
property necessary or convenient for carrying out any of the purposes aforesaid,
including stocks and bonds of other parties or corporations and to do any and
all things which may be necessary or convenient for carrying out said purposes.
To purchase, acquire, hold, improve, demolish, abandon, assign, sell, lease,
rent and/or license the use of real estate, fixtures, personal property and/or
rights of every nature and description; to mortgage, pledge and/or encumber the
same; to erect, manage, maintain, alter and/or demolish buildings and/or other
structures and improvements thereon.
To do or transact at any time any other lawful business anywhere.
To permit the subscribers for and/or the purchasers of the capital stock of
this Corporation, whether same be original or subsequent issue and/or treasury
stock, to purchase the same and to be credited for the full payment for the same
by tender of cash and/or property, whether the same be real, personal, tangible,
intangible or mixed.
To nominate, permit the qualification of and elect persons to its Board of
Directors without requiring such persons to own any of the capital stock of this
Corporation in order to qualify as and be elected as a Director of this
Corporation.
To permit this Corporation to purchase and/or otherwise acquire the
outstanding shares of its capital stock, and upon acquisition of same, to hold
the same as treasury stock and/or to retire the same.
To permit this Corporation to provide in its By-Laws for the indemnification
by this Corporation of its Directors and Officers against liabilities and
expenses incurred by them or any of them by reason of being or having been a
Director or Officer of this Corporation.
To permit this Corporation to guarantee to others the payment of and/or the
performance of the debts, obligations or covenants of any of the subsidiary
corporations and/or affiliate corporations of this Corporation, or its
stockholders; and/or any other corporation, partnership and/or sole
proprietorship in which this Corporation shall have an interest, or of which
this Corporation shall be a supplier, customer, debtor, creditor, lessor,
lessee, landlord, tenant, agent, principal, and/or party to covenant or
<PAGE>
indenture; excepting however, that this power to so guarantee shall not be
construed to permit or authorize this Corporation to engage in the business of a
commercial surety or a commercial bonding company.
Provided however, that nothing herein contained shall be construed to
authorize the corporation to transact business in any other state, territory or
country, contrary to the provisions of the laws thereof, and that nothing in
these purposes and powers shall be construed to give the Corporation any rights,
powers or privileges not permitted by the Laws of the State of Maine to
corporations organized under Section 71 of Title 13 of the Maine Revised
Statutes, and acts amendatory thereto.
DIRECTORS AND CLASSIFIED BOARD
The business of the Corporation shall be managed and conducted by a Board of
not less than seven (7) nor more than eighteen (18) Directors, as from time to
time may be determined by resolution of the Shareholders or by resolution of the
Directors. In addition to their other powers to fill vacancies, the Directors
may fill any newly created directorships which they may have created.
The Board of Directors shall be divided into three classes as nearly equal in
number as may be, with the term of office of one class expiring each year, and
at the Annual Meeting of Shareholders in 1978, Directors of the first class
shall be elected to hold office for a term expiring at the next succeeding
annual meeting; Directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting; and Directors of
the third class shall be elected for a term expiring at the third succeeding
annual meeting. At each Annual Meeting of Shareholders after 1978, the
successors to the class of Directors whose terms shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting, except that no Director shall stand for reelection after reaching the
age of 70, and the term of a Director who attains the age of 70 years shall
terminate at the Annual Meeting of Shareholders following his 70th birthday.
In addition to any vote required by law or by any other provision of these
Articles of Incorporation, the affirmative vote of the holders of 66-2/3% of all
votes entitled to be cast by all outstanding shares of all classes of stock of
the Corporation entitled to vote in elections of Directors, considered for the
purposes of this provision as one class, shall be required to amend this
provision or to remove Directors.
[per Articles of Amendment filed May 11, 1978]
CAPITAL STOCK.
1. AUTHORIZED STOCK.
The authorized capital stock of the Corporation shall be as follows:
(A) There shall be a class of Common Stock consisting of one hundred ten
million (110,000,000) shares having a par value of seventy-five cents ($0.75)
per share.
(B) There shall be a class of Preferred Stock consisting of two million
(2,000,000) shares without par value, which class shall be designated Class A
Serial Preferred Stock.
(C) There shall be a class of Preferred Stock consisting of twenty-eight
million (28,000,000) shares having a par value of one cent ($0.01) per share,
which class shall be designated Class B Serial Preferred Stock.
The aggregate par value of all authorized shares of all classes having a par
value is eighty-two million seven hundred eighty thousand dollars ($82,780,000).
[per Articles of Amendment filed June 22, 1992]
2. AUTHORITY OF BOARD OF DIRECTORS TO FIX AND DETERMINE SERIES OF PREFERRED
STOCK.
<PAGE>
The Board of Directors shall have the authority, to the extent that the
Articles have not established series and fixed and determined the variation in
the relative rights and preferences as between series, to divide any or all of
the Serial Preferred Stock into one or more series, to fix and determine the
relative rights and preferences of the shares of any series so established, and
to authorize from time to time the issuance of all or any part of the stock
included in any such series for such consideration as the Directors shall
determine.
If the shares of Serial Preferred Stock are to be issued in series, then each
series shall be so designated as to distinguish the shares thereof from the
shares of all other series. All shares of the same series shall be identical.
Any or all of the series of Serial Preferred Stock and the variations in the
relative rights and preferences as between different series shall be fixed and
determined by the Board of Directors at the time the issuance of any series
thereof is authorized. Shares of any series of Serial Preferred Stock which have
been redeemed shall have the status of authorized but unissued Serial Preferred
Stock of that series and may be reissued by the Board of Directors as shares of
the same series, if authorized by the resolution authorizing such series, or any
other series.
All shares of Serial Preferred Stock shall be identical except as to the
following relative rights and preferences, as to which there may be variations
between different series:
(A) The number of shares to constitute such series and the distinctive serial
designation thereof. (B) The rate or rates of dividend, whether dividends are
to be cumulative, and the terms and conditions thereof. (C) Whether shares may
be redeemed, and, if so, the redemption price and the terms and conditions of
redemption. (D) The amount payable upon shares in event of voluntary or
involuntary liquidation. (E) Sinking fund provisions, if any, for the
redemption or purchase of shares.
(F) The terms and conditions, if any, on which shares may be converted. (G)
The voting rights, if any.
[per Articles of Amendment filed June 6, 1985]
NO PREEMPTIVE RIGHTS There are no preemptive rights.
[per Articles of Amendment filed June 6, 1985 and Section 2.4 of the
Corporation's former bylaws]
AUTHORITY TO ISSUE CONVERTIBLE BONDS, DEBENTURES,
NOTES AND OTHER EVIDENCES OF INDEBTEDNESS
The Corporation may issue bonds, debentures, notes or other evidences of
indebtedness bearing such terms as the Board of Directors shall fix and
determine. Any such bonds, debentures, notes or other evidences of indebtedness
may, without limitation, be convertible into other bonds, debentures, notes or
evidences of indebtedness or into shares of any class of stock of the
Corporation, within such periods and upon such conditions as the Board of
Directors shall fix and determine.
[per Articles of Amendment filed May 20, 1987]
AMENDED AND RESTATED RESOLUTION ESTABLISHING
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Company in accordance with the provisions of its Articles of Incorporation,
a series of Preferred Stock of the Company be, and hereby is,
<PAGE>
created and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
2,000,000.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 100 times the aggregate per share amount of all cash
dividends declared or paid on the Common Stock, $0.75 par value per share, of
the Company (the "Common Stock") and (ii) a preferential cash dividend (the
"preferential Dividends"), if any, on the first day of February, May, August and
November of each year (each a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount equal to $13.50
per share of Series A Preferred Stock less the per share amount of all cash
dividends declared on the Series A Preferred Stock pursuant to clause (i) of
this sentence since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. In the
event the Company shall, at any time after the issuance of any share or fraction
of a share of Series A Preferred Stock, make any distribution on the shares of
Common Stock of the Company, whether by way of a dividend or a reclassification
of stock, a recapitalization, reorganization or partial liquidation of the
Company or otherwise, which is payable in cash or any debt security, debt
instrument, real or personal property or any other property (other than cash
dividends subject to the immediately preceding sentence, a distribution of
shares of Common Stock or other capital stock of the Company or a distribution
of rights or warrants to acquire any such share, including any debt security
convertible into or exchangeable for any such share, at a price less than the
Fair Market Value of such share), then and in each such event the Company shall
simultaneously pay on each then outstanding share of Series A Preferred Stock of
the Company a distribution, in like kind, of 100 times such distribution paid on
a share of Common Stock (subject to the provisions for adjustment hereinafter
set forth). The dividends and distributions on the Series A Preferred Stock to
which holders thereof are entitled pursuant to clause (i) of the first sentence
of this paragraph and pursuant to the second sentence of this paragraph are
hereinafter referred to as "Participating Dividends" and the multiple of such
cash and non-cash dividends on the Common Stock applicable to the determination
of the Participating Dividends, which shall be 100 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple". In the event the Company shall at any time after
February 4, 1998 declare or pay any dividend or make any distribution on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the determination of
the amount of Participating Dividends which holders of shares of Series A
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Company shall declare each Participating Dividend at the same
<PAGE>
time it declares any cash or non-cash dividend or distribution on the Common
Stock in respect of which a Participating Dividend is required to be paid. No
cash or non-cash dividend or distribution on the Common Stock in respect of
which a Participating Dividend is required to be paid shall be paid or set aside
for payment on the Common Stock unless a Participating Dividend in respect of
such dividend or distribution on the Common Stock shall be simultaneously paid,
or set aside for payment, on the Series A Preferred Stock.
(C) Preferential Dividends shall begin to accrue on outstanding shares of
Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issuance of any shares of Series A Preferred Stock. Accrued but
unpaid Preferential Dividends shall cumulate but shall not bear interest.
Preferential Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
SECTION 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights: (A) Subject to the provisions for
adjustment hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted to a vote of
the
stockholders of the Company. The number of votes which a holder of Series A
Preferred Stock is entitled to cast, as the same may be adjusted from time to
time as hereinafter provided, is hereinafter referred to as the "Vote Multiple".
In the event the Company shall at any time after February 4, 1998 declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Vote Multiple thereafter applicable to
the determination of the number of votes per share to which holders of shares of
Series A Preferred Stock shall be entitled after such event shall be the Vote
Multiple immediately prior to such event multiplied by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Articles of Incorporation
or By-laws, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the Series A
Preferred Stock for four or more quarterly dividend periods, whether consecutive
or not, shall not have been declared and paid or set apart for payment, the
holders of record of Preferred Stock of the Company of all series (including the
Series A Preferred Stock), other than any series in respect of which such right
is expressly withheld by the Articles of Incorporation or the authorizing
resolutions included in the Certificate of Designations therefor, shall have the
right, at the next meeting of stockholders called for the election of directors,
to elect two members to the Board of Directors, which directors shall be in
addition to the number required by the Bylaws prior to such event, to serve
until the next Annual Meeting and until their successors are elected and
qualified or their earlier resignation, removal or incapacity or until such
earlier time as all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series A Preferred Stock shall have been paid (or set
aside for payment) in full. The holders of shares of Series A Preferred Stock
shall continue to have the right to elect directors as provided by the
immediately preceding sentence until all accrued and unpaid Preferential
Dividends upon the outstanding shares of Series A Preferred Stock shall have
been paid (or set aside for payment) in full. Such directors may be removed and
replaced by such stockholders, and vacancies in such directorships may be filled
only by such stockholders (or by the remaining director elected by such
stockholders, if there be one) in the manner
<PAGE>
permitted by law; provided, however, that any such action by stockholders shall
be taken at a meeting of stockholders and shall not be taken by written consent
thereto.
(D) Except as otherwise required by the Articles of Incorporation,
By-laws, or applicable law or as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for the taking of any corporate action.
SECTION 4. CERTAIN RESTRICTIONS. (A) Whenever Preferential Dividends or
Participating Dividends are in arrears or the Company shall be in default of
payment thereof, thereafter and until all accrued and unpaid Preferential
Dividends and Participating Dividends, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid or set aside for
payment in full, and in addition to any and all other rights which any holder of
shares of Series A Preferred Stock may have in such circumstances, the Company
shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled if the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph 4(A),
redeem or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except in accordance with a purchase offer made to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any Subsidiary (as hereinafter defined) of
the Company to purchase or otherwise acquire for consideration any shares of
stock of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner. A "Subsidiary" of the Company shall mean any corporation or other entity
of which securities or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly, by
the Company or by any corporation or other entity that is otherwise controlled
by the Company.
(C) The Company shall not issue any shares of Series A Preferred Stock
except upon exercise of Rights issued pursuant to that certain Rights Agreement
dated as of December 16, 1997 between the Company and Continental Stock Transfer
& Trust Company, a copy of which is on file with the Secretary of the Company at
its principal executive office and shall be made available to stockholders of
record without charge upon written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing contained in the provisions
hereof shall prohibit or restrict the Company from
<PAGE>
issuing for any purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series A Preferred
Stock.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Company in any manner whatsoever shall be retired
promptly after the acquisition thereof. All such shares upon their retirement
shall be restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and such shares may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless the holders of shares of Series A Preferred
Stock shall have received, with respect to each share of Series A Preferred
Stock, subject to adjustment as hereinafter provided, (A) $6,000 plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, or (B) if greater than the amount
specified in clause (i)(A) of this sentence, an amount equal to 100 times the
aggregate amount to be distributed per share to holders of Common Stock, as the
same may be adjusted as hereinafter provided, and (ii) to the holders of stock
ranking on a parity upon liquidation, dissolution or winding up with the Series
A Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of shares of
Series A Preferred Stock are entitled under clause (i)(A) of this sentence and
to which the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Series A
Preferred Stock may be entitled upon liquidation, dissolution or winding up of
the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter
referred to as the "Participating Liquidation Amount" and the multiple of the
amount to be distributed to holders of shares of Common Stock upon the
liquidation, dissolution or winding up of the Company applicable pursuant to
said clause to the determination of the Participating Liquidation Amount, as
said multiple may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Liquidation Multiple". In the event the company
shall at any time after February 4, 1998 declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Liquidation Multiple thereafter applicable to the determination of
the Participating Liquidation Amount to which holders of Series A Preferred
Stock shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 7. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS.
(A) In the event that holders of shares of Common Stock of the Company
receive after February 4, 1998 in respect of their shares of Common Stock any
share of capital stock of the Company (other than any share of Common Stock of
the Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise (a "Transaction"),
then and in each such event the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of
Series A Preferred Stock shall be adjusted so that after such event the holders
of Series A Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such
<PAGE>
adjustment, to (i) such additional dividends as equal the Dividend Multiple in
effect immediately prior to such Transaction multiplied by the additional
dividends which the holder of a share of Common Stock shall be entitled to
receive by virtue of the receipt in the Transaction of such capital stock, (ii)
such additional voting rights as equal the Vote Multiple in effect immediately
prior to such Transaction multiplied by the additional voting rights which the
holder of a share of Common Stock shall be entitled to receive by virtue of the
receipt in the Transaction of such capital stock and (iii) such additional
distributions upon liquidation, dissolution or winding up of the Company as
equal the Liquidation Multiple in effect immediately prior to such Transaction
multiplied by the additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or winding up of the
Company by virtue of the receipt in the Transaction of such capital stock, as
the case may be, all as provided by the terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the Company
receive after February 4, 1998 in respect of their shares of Common Stock any
right or warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share less than the Fair Market Value (as
hereinafter defined) of a share of Common Stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon the liquidation, dissolution or winding up of the Company of the
shares of Series A Preferred Stock shall each be adjusted so that after such
event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares
of Common Stock which could be purchased, at the Fair Market Value of the Common
Stock at the time of such issuance, by the maximum aggregate consideration
payable upon exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the Company
receive after February 4, 1998 in respect of their shares of Common Stock any
right or warrant to purchase capital stock of the Company (other than shares of
Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the Company
(other than Common Stock), at a purchase price per share less than the Fair
Market Value of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon liquidation, dissolution or winding up of the Company of the
shares of Series A Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined) and (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such event multiplied,
first, by the additional voting rights to which the holder of a share of Common
Stock shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise and multiplied again by
the Discount Fraction and (iii)
<PAGE>
such additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to such
event multiplied, first, by the additional amount which the holder of a share of
Common Stock shall be entitled to receive upon liquidation, dissolution or
winding up of the Company upon exercise of such right or warrant by virtue of
the capital stock which could be acquired upon such exercise and multiplied
again by the Discount Fraction. For purposes of this paragraph, the "Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a right
or warrant distributed to holders of shares of Common Stock of the Company as
contemplated by this paragraph immediately after the distribution thereof and
the purchase price per share for such share of capital stock pursuant to such
right or warrant and the denominator of which shall be the Fair Market Value of
a share of such capital stock immediately after the distribution of such right
or warrant.
(D) For purposes of this Section 7, the "Fair Market Value" of a share of
capital stock of the Company (including a share of Common Stock) on any date
shall be deemed to be the average of the daily closing price per share thereof
over the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that, in the event that such
Fair Market Value of any such share of capital stock is determined during a
period which includes any date that is within 30 Trading Days after (i) the
ex-dividend date for a dividend or distribution on stock payable in shares of
such stock or securities convertible into shares of such stock, or (ii) the
effective date of any subdivision, split, combination, consolidation, reverse
stock split or reclassification of such stock, then, and in each such case, the
Fair Market Value shall be appropriately adjusted by the Board of Directors of
the Company to take into account ex-dividend or post-effective date trading. The
closing price for any day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked
prices, regular way (in either case, as reported in the applicable transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange), or, if the shares are not listed or admitted to
trading on the New York Stock Exchange, as reported in the applicable
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares are listed or admitted to
trading or, if the shares are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use or, if on any such date the shares
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
shares selected by the Board of Directors of the Company. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares are listed or admitted to trading is open for the transaction of
business or, if the shares are not listed or admitted to trading on any national
securities exchange, on which the New York Stock Exchange or such other national
securities exchange as may be selected by the Board of Directors of the Company
is open. If the shares are not publicly held or not so listed or traded on any
day within the period of 30 Trading Days applicable to the determination of Fair
Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair
market value thereof per share as determined in good faith by the Board of
Directors of the Company. In either case referred to in the foregoing sentence,
the determination of Fair Market Value shall be described in a statement filed
with the Secretary of the Company.
SECTION 8. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each
<PAGE>
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Vote Multiple, the Dividend Multiple or the
Liquidation Multiple in effect immediately prior to such event.
SECTION 9. EFFECTIVE TIME OF ADJUSTMENTS.
(A) Adjustments to the Series A Preferred Stock required by the provisions
hereof shall be effective as of the time at which the event requiring such
adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a share
of Series A Preferred Stock of the effect of any adjustment to the voting
rights, dividend rights or rights upon liquidation, dissolution or winding up of
the Company of such shares required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
SECTION 10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable at the option of the Company or any holder thereof. Notwithstanding
the foregoing sentence of this Section, the Company may acquire shares of Series
A Preferred Stock in any other manner permitted by law, the provisions hereof
and the Articles of Incorporation of the Company.
SECTION 11. RANKING. Unless otherwise provided in the Articles of
Incorporation of the Company or a Certificate of Designations relating to a
subsequent series of preferred stock of the Company, the Series A Preferred
Stock shall rank junior to all other series of the Company's Preferred Stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up and senior to the Common Stock.
SECTION 12. AMENDMENT. The provisions hereof and the Articles of Incorporation
of the Company shall not be amended in any manner which would adversely affect
the rights, privileges or powers of the Series A Preferred Stock without, in
addition to any other vote of stockholders required by law, the affirmative vote
of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
[per Statements of Resolution filed February 26, 1988 and February 4, 1998]
USE OF CAPITAL SURPLUS
The Corporation may, from time to time, make distributions to its shareholders
out of capital surplus and may purchase shares of its capital stock to the
extent of unreserved and unrestricted capital surplus. The distributions and
purchases from capital surplus allowed by this provision are in addition to
those otherwise permitted by Maine law.
[per Articles of Amendment filed May 31, 1988]
TRANSACTIONS WITH CONTROLLING PERSONS
1. From the date that any Person becomes a Controlling Person of the
Corporation through the date that such Controlling Person completes a Fair Value
Offer for all shares of Voting Stock of the Corporation, the Corporation shall
not enter into any Material Transaction involving such Controlling Person
unless, at least 20 days prior to the consummation thereof, the Corporation has
mailed to all record holders of Voting Stock a proxy or information statement
describing the Material Transaction and complying with the requirements of the
Securities Exchange Act of 1934, as amended (whether or not such proxy or
information statement is required to be mailed pursuant to such Act). Such proxy
or information statement shall contain at the front thereof, in a prominent
place, any determinations or recommendations as to the advisability or
inadvisability of the Material Transaction which the Independent Directors, or
any of them, may have furnished to the Corporation in writing and a summary of
any opinion of an investment banking firm obtained
<PAGE>
pursuant to Section 3 hereof. Notwithstanding the foregoing, the requirements of
this Section 1 shall be inapplicable to (i) any Material Transaction approved by
a Majority of Independent Directors if such Majority of Independent Directors
has determined that the mailing of such a proxy or information statement is not
necessary to protect the interests of the shareholders of the Corporation or
(ii) any Material Transaction entered into prior to May 25, 1988, made pursuant
to any agreement entered into by the Corporation prior to May 25, 1988, or made
pursuant to any amendment or extension to any such agreement.
2. For a period of five years after any Person becomes a Controlling Person,
the Corporation shall not, without prior approval by a Majority of Independent
Directors or an Independent Majority of Shareholders, reduce the annual rate of
dividends payable on the Common Stock of the Corporation (except as necessary to
reflect any subdivision of the Common Stock and except to the extent that the
payment of such dividends is prohibited by law); fail to increase the annual
rate of dividends paid on the Common Stock of the Corporation as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of Common Stock of the Corporation
(but not including repurchases by the Corporation of its Common Stock); or fail
to declare and pay at the regular rate therefor any dividend (whether or not
cumulative) on any outstanding Preferred Stock of the Corporation.
3. Promptly upon the request of a Majority of Independent Directors, the
Corporation shall retain a reputable investment banking firm to render an
opinion to or otherwise advise the Independent Directors on the fairness or lack
of fairness of the terms of any proposed Material Transaction from the financial
point of view of the holders of each class of Voting Stock other than any
Controlling Person involved in the Material Transaction (such investment banking
firm to be selected by a Majority of Independent Directors, to be furnished
promptly with all information it reasonably requests from the Corporation and to
be paid a reasonable fee consistent with fees charged by investment bankers for
similar services to similarly sized companies for such services upon receipt by
the Independent Directors of such opinion or advice).
4. For purposes of this Article, the following terms shall have the meanings
set forth below:
(a) An "Affiliate" of any Person shall mean any Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with such Person.
(b) An "Associate" of any Person shall mean (i) any corporation or
organization (other than the Corporation or any Subsidiary) of which such Person
is an officer or partner or is, directly or indirectly, the Beneficial Owner of
10% or more of any class of equity securities, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to which such
Person serves as a trustee or in a similar fiduciary capacity or (iii) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.
(c) The terms "Beneficial Ownership" or "Beneficially Own" shall have the
meanings conferred thereon by Rules 13d-3 and 13d-5 promulgated under Section
13(d) of the Securities Exchange Act of 1934, as amended, and any calculation of
the percentage of a Person=s Beneficial Ownership of a security shall be
determined in accordance with said Rules.
(d) A "Controlling Person" means (i) a Person who has Voting Power over
shares of Voting Stock of the Corporation that would entitle the holders of
those shares to cast at least 25% of the votes that all shareholders would be
entitled to cast in an election of the directors of the Corporation or (ii) a
Person who has Voting Power over at least 25% of the shares in any class of
shares entitled to elect all the directors of the Corporation, or any specified
number of them. Notwithstanding clauses (i) and (ii), a Person which would
otherwise be a Controlling Person within the meaning hereof shall not be deemed
a Controlling Person unless, subsequent to September 19, 1985,
<PAGE>
that Person increases the percentage of outstanding shares of Voting Stock over
which it has Voting Power to a percentage in excess of the percentage of
outstanding shares of Voting Stock over which that Person had Voting Power on
September 19, 1985, and to at least the amount specified in clauses (i) or (ii)
above.
Any Person that inadvertently becomes a Controlling Person shall no
longer be deemed a Controlling Person if such Person divests itself of a
sufficient amount of its shares of Voting Stock so that it is no longer a
Controlling Person, as soon as practicable, but in no event more than 30 days
after that Person receives notice from the Corporation that it has become a
Controlling Person.
No Person shall be deemed a Controlling Person solely as a result of
the Corporation=s purchase or redemption of its own shares of Voting Stock.
(e) A Person shall be deemed to have completed a "Fair Value Offer" for
all shares of Voting Stock of the Corporation once such Person (i) fulfills all
notice and purchase obligations arising under Section 910 of the Maine Business
Corporation Act in respect of such Person=s "control transaction" within the
meaning of such Section or (ii) extends an offer to all record holders of Voting
Stock to purchase any and all shares of Voting Stock tendered by such holders
and conducts and consummates such transaction at a price and in a manner that a
Majority of Independent Directors determines to be substantially equivalent to,
or more favorable to, the shareholders of the Corporation than compliance with
the procedures specified under Section 910 of the Maine Business Corporation
Act.
(f) The term "Independent Director" shall mean a member of the Board of
Directors of the Corporation who is not an officer, employee, designee or
representative of any Related Person or of any Affiliate of a Related Person
(other than the Corporation or any Subsidiary) and either (i) was a member of
the Board of Directors at any time prior to May 25, 1988, or (ii) was designated
(before or at the time of his initial election as a Director of the Corporation)
as an Independent Director by a Majority of Independent Directors. An approval,
request, determination or designation by a Majority of Independent Directors
shall mean an approval, request, determination or designation contained in
either (x) a unanimous written consent of all Independent Directors of the
Corporation or (y) an affirmative vote of a majority of all Independent
Directors present at a duly convened meeting of the Board of Directors of the
Corporation or any appropriate committee thereof.
(g) The term "Independent Majority of Shareholders" shall mean the holders
of a majority of the outstanding shares of Voting Stock that are not
Beneficially Owned by any Controlling Person. Approval by an Independent
Majority of Shareholders shall mean approval by the affirmative vote (whether in
person or by proxy) of an Independent Majority of Shareholders, voting as a
single class, at a duly convened meeting of the holders of all classes of Voting
Stock of the Corporation.
(h) A "Material Transaction" shall mean any of the following transactions:
(i) The issuance or transfer by the Corporation or any Subsidiary to
any Controlling Person or Affiliate or Associate of any Controlling Person of
equity securities of the Corporation or any Subsidiary which has the effect,
directly or indirectly, of increasing by more than 1% the percentage Beneficial
Ownership of a Controlling Person or any Affiliate or Associate of any
Controlling Person as to any class of equity securities of the Corporation or
any Subsidiary;
(ii) The sale, lease, license, exchange, transfer or other
disposition (excluding any mortgage or pledge not made to avoid the requirements
of this Article) to or with a Controlling Person or any Affiliate or Associate
of any Controlling Person of any assets (including cash) of the Corporation or
any Subsidiary having an aggregate fair market value in excess of 5% of the
Corporation=s total consolidated assets at the end of its last full fiscal year;
<PAGE>
(iii) Any merger or consolidation of the Corporation or any
Subsidiary with a Controlling Person or another Person which is (or as a result
of or in connection with such merger or consolidation would become) an Affiliate
or Associate of such Controlling Person, in each case without regard to which
entity is the surviving entity;
(iv) Any reclassification of securities (including any reverse stock
split), recapitalization or other transaction (other than a redemption in
accordance with the terms of the securities redeemed) which has the effect,
directly or indirectly, of increasing by more than 1% the percentage Beneficial
Ownership of a Controlling Person or any Affiliate or Associate of any
Controlling Person as to any class of equity securities of the Corporation or
any Subsidiary; or
(v) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Controlling
Person or any Affiliate or Associate of any Controlling Person.
For purposes of this section, a "transaction" shall include a series
of related transactions.
(i) The term "Person" shall mean any individual, firm, corporation or
other entity, and any group of Persons (other than a group of Independent
Directors) acting in concert with respect to the voting, acquisition, holding or
disposition of Voting Stock; provided, however, that two Persons shall not be
deemed to be so acting in concert merely because of the delivery or holding of a
proxy to vote shares of Voting Stock if such proxy is delivered or held in good
faith and not for the purpose of circumventing the provisions of this Article.
(j) The term "Related Person" shall mean any Person (other than the
Corporation or any Subsidiary) which (i) Beneficially Owns more than 5% of the
outstanding shares of any class of Voting Stock, (ii) is an Affiliate of the
Corporation and at any time within the one-year period immediately prior to the
date in question Beneficially Owned more than 5% of the outstanding shares of
any class of Voting Stock or (iii) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any time within the one-year period
immediately prior to the date in question Beneficially Owned by any Related
Person, if such assignment or succession occurred in the course of a transaction
or series of transactions not involving a public offering within the meaning of
the Securities Act of 1933, as amended.
(k) The term "Subsidiary" shall mean any corporation of which a majority
of each class of equity securities is owned, directly or indirectly, by the
Corporation.
(l) A Person has "Voting Power" over shares of Voting Stock if that Person
has or shares, directly or indirectly, through any option, contract,
arrangement, understanding, voting trust, conversion right or relationship, or
by acting jointly or in concert or otherwise, the power to vote, or direct the
voting of, such shares; provided, however, that no Person shall be deemed to
have Voting Power over any shares held subject to a voting trust agreement with
the Corporation and an independent trustee which provides that such Person has
no right, directly or indirectly, to vote or direct the voting of such shares.
(m) The term "Voting Stock" shall mean any class of equity securities
having the right to elect the Directors of the Corporation or any specified
number or proportion of such Directors (except that Preferred Stock of the
Corporation having a right to elect Directors only in the event of a default in
the payments of dividends shall not constitute Voting Stock for purposes of this
Article). Each reference to a given proportion of shares of Voting Stock shall
refer to such proportion of the total number of votes to which such shares would
be entitled in an election of Directors of the Corporation.
5. In addition to any other vote required by law or the Corporation=s Articles
of Incorporation or By-Laws, any amendment, modification or repeal of this
Article shall require the prior approval of an Independent Majority of
Shareholders.
[per Articles of Amendment filed May 31, 1988]
<PAGE>
CLERK / REGISTERED OFFICE
The name and registered office of [the Corporation's] clerk who must be a Maine
resident: Peter B. Webster, One Portland Square, P.
O. Box 586, Portland, Maine 04112.
[per Change of Clerk filed December 14, 1992]
Exhibit 10.3
HANNAFORD CASH BALANCE PLAN
(as amended and restated effective January 1, 1998)
<PAGE>
Table of Contents
ARTICLE I
Definitions
ARTICLE II
Participation
2.1 Date of Participation
2.2 Participation Requirements
2.3 Transfers Among Affiliated Employers
2.4 Re-employed Former Participant
ARTICLE III
Retirement Dates
3.1 Normal Retirement Date
3.2 Early Retirement Date
3.3 Deferred Retirement Date
ARTICLE IV
Benefit Formulas
4.1 Benefits For Participants Other Than Warehouse Participants
(a) Cash Balance Account
(b) Contribution Credit
(c) Interest Credit
(d) Normal Retirement Benefit
(e) Early Retirement Benefit
(f) Deferred Retirement Benefit
(g) Vested Benefit
4.2 Benefits For Certain Warehouse Participants
4.3 Employment Transfers
ARTICLE V
Retirement at Normal Retirement Date
5.1 Normal Retirement Benefit
5.2 Form of Normal Retirement Benefit
5.3 Qualified Joint and Survivor Annuity
5.4 Disability Benefit
<PAGE>
ARTICLE VI
Retirement at Early Retirement Date
6.1 Early Retirement Benefit
6.2 Form of Early Retirement Benefit
6.3 Qualified Joint and Survivor Annuity
ARTICLE VII
Retirement at Deferred Retirement Date
7.1 Deferred Retirement Benefit
7.2 Form of Deferred Retirement Benefit
7.3 Qualified Joint and Survivor Annuity
ARTICLE VIII
Termination of Employment
8.1 Termination of Employment
8.2 Vested Benefit
8.3 Form of Benefit
8.4 Qualified Joint and Survivor Annuity
8.5 Forfeitures
ARTICLE IX
Death Benefits
9.1 Death Before Annuity Starting Date
9.2 Death After Annuity Starting Date
9.3 Designation of Beneficiary
9.4 Qualified Domestic Relations Orders
ARTICLE X
Qualified Joint and Survivor Annuity Election
10.1 Election Period
10.2 Written Explanation
10.3 Additional Information Furnished Upon Request
10.4 Election Not to Receive Qualified Joint and Survivor Annuity
10.5 Qualified Joint and Survivor Annuity
10.6 Spousal Consent
ARTICLE XI
Optional Forms of Benefits
11.1 Early Retirement Benefit - Optional Lump Sum
11.2 Vested Benefit - Optional Lump Sum
11.3 Contingent Annuitant Option
11.4 Five Year Certain and Life Annuity Option
11.5 Life Annuity Option
11.6 Lump Sum Option
<PAGE>
ARTICLE XII
Actuarial Assumptions and Lump Sum Distributions
12.1 Actuarial Equivalency Assumptions
12.2 Lump Sum Distributions
ARTICLE XIII
Limitation on Benefits
13.1 Limitation For Defined Benefit Plans
13.2 Adjustments
13.3 Reduction For Less Than Ten (10) Years of Participation or Service
13.4 Adjustment to Dollar Limitation
13.5 Limitation For Defined Benefit Plan and Defined Contribution Plan
13.6 Combining and Aggregating Plans
13.7 Certain Contributions Treated as Annual Additions
13.8 Definitions
ARTICLE XIV
Restriction on Benefits Payable to Certain Participants
14.1 Nondiscriminatory Benefit
14.2 Limits on Annual Payments
ARTICLE XV
Credit For Years of Benefit Service Upon Re-employment Following Receipt
of an Optional Lump Sum Distribution
15.1 Re-employment With Credit For Prior Years of Benefit Service
15.2 Re-employment Without Credit For Prior Years of Benefit Service
15.3 Re-employment With Partial Credit For Prior Years of Benefit
Service
ARTICLE XVI
Top Heavy Provisions
16.1 Top Heavy Requirements
16.2 Minimum Vesting Requirement
16.3 Minimum Benefit Requirement
16.4 Modified Limitation on Annual Additions
16.5 Present Value Factors
16.6 Definitions
<PAGE>
ARTICLE XVII
Contributions
17.1 Employer Contributions
17.2 Erroneous Employer Contributions
17.3 Application For Forfeitures
17.4 Trust
ARTICLE XVIII
Retirement Committee
18.1 Appointment of Retirement Committee
18.2 Appointment, Resignation and Removal
18.3 Duties
18.4 Notice to Trustee
18.5 Fiduciary Duties
18.6 Reporting and Disclosure
18.7 Delegation of Ministerial Duties
18.8 Compensation and Reimbursement of Expenses
18.9 Uniformity of Rules and Regulations
18.10 Reliance on Reports
18.11 Multiple Signatures
18.12 Payment of Plan Expenses
ARTICLE XIX
Finance Committee
19.1 Duties
19.2 Fiduciary Duties
19.3 Compensation and Reimbursement of Expenses
19.4 Reliance on Reports
19.5 Multiple Signatures
ARTICLE XX
Claims Procedure
20.1 Filing a Claim For Benefits
20.2 Denial of Claim
20.3 Appeal of Denied Claim
20.4 Decision on Appeal
ARTICLE XXI
Amendment and Termination
21.1 Amendment
21.2 Termination
<PAGE>
ARTICLE XXII
Retiree Medical Benefits
22.1 401(h) Account
22.2 Retiree Medical Benefits
22.3 Contributions
22.4 Forfeitures
22.5 Investments
22.6 Reversion to Employer
22.7 Key Employees
ARTICLE XXIII
Inalienability of Benefits; Qualified Domestic Relations Orders
23.1 Inalienability of Benefits
23.2 Qualified Domestic Relations Orders
23.3 Notice
23.4 Representative
23.5 Separate Account
23.6 Determination by Retirement Committee
23.7 Definitions
ARTICLE XXIV
Direct Rollovers
24.1 Eligibility
24.2 Notice
24.3 Election
ARTICLE XXV
Miscellaneous
25.1 Merger or Consolidation of Plan
25.2 Distributions to Minors and Incompetent Persons
25.3 Commencement of Distributions
25.4 No Duplication of Benefits
25.5 Exclusive Benefit
25.6 Employment
25.7 Predecessor Employer Plan
25.8 Governing Law
25.9 Article and Section Headings and Table of Contents
25.10 Delegation of Authority by Subsidiaries
25.11 Directed Payments
25.12 USERRA Requirements
25.13 EPCRS Adjustments
APPENDIX A
APPENDIX B
<PAGE>
HANNAFORD CASH BALANCE PLAN
Hannaford Bros. Co. hereby amends and restates the Hannaford Bros. Co.
Employees' Retirement Plan (renamed the Hannaford Cash Balance Plan) effective
generally January 1, 1998. It is intended that the Plan, as amended and
restated, meet all applicable requirements of the Internal Revenue Code of 1986
and the Employee Retirement Income Security Act of 1974 ("ERISA"), as the same
may from time to time be amended. The Plan shall, therefore, be interpreted to
comply with the applicable terms of the Code and ERISA and all applicable
regulations and rulings issued thereunder.
ARTICLE I
Definitions
The following terms, when used herein, shall have the meanings as
hereinafter set forth, unless the context indicates otherwise:
1.1 "Accrued Benefit" shall mean, as of any date of reference (and except
as otherwise provided in Section 1.11), a Participant's monthly retirement
benefit commencing on the first day of the month coinciding with or next
following his or her Normal Retirement Date (or, if later, the date of
reference) payable in the normal form and in an amount determined in accordance
with the Normal Retirement Benefit formula set forth in Article IV. The Accrued
Benefit of a Participant whose benefit under the Plan is expressed as a Cash
Balance Account shall be determined as of any date of reference prior to his or
her Normal Retirement Date by (i) projecting the future value of the Account
balance to the Participant=s Normal Retirement Date at the rate interest is
credited under Section 4.1(c), and then (ii) converting the projected Account
balance to a monthly retirement benefit payable in the form of a life annuity,
based on the factors set forth in Section 12.2(a).
1.2 "Actuarial Equivalence," "Actuarial Equivalent," or "Actuarially
Equivalent" shall mean equality in value of the aggregate amounts expected to be
received under different forms of payment, based on the assumptions set forth in
Section 12.1.
1.3 "Affiliated Employer" shall mean any Employer which has adopted the
Plan in accordance with Section 1.19 and any other corporation or other business
organization if any such Employer and such other corporation or business
organization are members of a controlled group of corporations (as defined in
Section 414(b) of the Code), trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c) of the Code) or an
affiliated service group (as defined in Section 414(m) of the Code).
1.4 "Annuity Starting Date" shall mean the first day of the first month for
which an amount is payable as an annuity or, in the case of an optional lump sum
benefit, the first day on which such lump sum is payable.
<PAGE>
1.5 "Average Annual Compensation" shall mean a Participant's annual
Compensation averaged over the sixty (60) consecutive calendar months of his or
her employment for which such average is the highest during the one hundred and
twenty (120) consecutive calendar month period immediately prior to the date as
of which such Participant's Average Annual Compensation is to be determined. If
a Participant has fewer than sixty (60) calendar months of employment during
such period, such average shall be taken over all of his or her calendar months
of employment. Any calendar month during such sixty (60) consecutive month
averaging period (or during all calendar months of employment, if shorter) in
which a Participant receives no Compensation shall be disregarded in determining
his or her Average Annual Compensation.
The Average Annual Compensation of a Disabled Participant shall be
determined based on the assumption that such Participant's rate of Compensation
during the Plan Year immediately preceding commencement of his or her disability
continued during the period of such disability.
1.6 "Beneficiary" shall mean the person or persons designated by a
Participant as provided in Section 9.3 to receive any death benefits payable
under the Plan following the death of a Participant.
1.7 "Board of Directors" shall mean the Board of Directors of Hannaford
Bros. Co. or any corporation into which Hannaford Bros. Co. may be
merged or consolidated.
1.8 "Break in Service" shall have the meaning set forth in subsection (a),
(b) or (c) below, whichever is applicable:
(a) In the case of an hourly Employee other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver, the term "Break in Service" with regard to Plan Years commencing
prior to January 1, 1980, shall have the meaning under the terms of the Plan as
in effect on December 31, 1979, and with regard to Plan Years commencing on or
after January 1, 1980, shall mean a Plan Year in which such Employee is not
credited with more than four hundred and thirty-five (435) Hours of Service on
account of any one or more of the following:
(i) discharge from employment;
(ii) voluntary termination of employment;
(iii) effective December 12, 1994, failure to return to the
employ of an Affiliated Employer prior to the expiration of the period entitling
such Employee to re-employment rights under the Uniformed Services Employment
and Reemployment Rights Act of 1994 after a period of "service in the uniformed
services" as defined in such Act;
<PAGE>
(iv) failure to return to the employ of an Affiliated Employer
upon the expiration of any period of absence due to sickness, accident or
disability for which such an Employee is entitled to receive benefits under any
welfare plan sponsored by an Affiliated Employer; or
(v) failure to return to the employ of an Affiliated Employer
when recalled following a temporary period of layoff for a period not to exceed
twelve (12) months.
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver, the term
"Break in Service" with regard to Plan Years commencing prior to January 1,
1983, shall have the meaning applicable to other hourly Employees in accordance
with subsection (a) of this Section and with regard to Plan Years commencing on
or after January 1, 1983, shall have the meaning applicable to salaried and
salaried nonexempt Employees in accordance with subsection (c) of this Section.
(c) In the case of a salaried or salaried nonexempt Employee, the term
"Break in Service" shall mean a Plan Year in which such Employee is not credited
with more than five hundred (500) Hours of Service on account of any one or more
of the reasons set forth in paragraphs (i) through (v) of subsection (a) of this
Section.
1.9 "Cash Balance Account" or "Account" shall mean the account established
pursuant to Section 4.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Compensation" shall mean the basic compensation paid, before any
reduction pursuant to a deferral election under a Code Section 401(k) plan or a
benefit election under a Code Section 125 plan sponsored by an Employer, to a
Participant by an Employer, including compensation for incentive hours and
excluding reimbursements or other expense allowances, fringe benefits (cash and
noncash), moving expenses, deferred compensation, welfare benefits, unguaranteed
overtime pay, bonuses and other irregular payments.
Notwithstanding the preceding sentence to the contrary, for benefits
accruing in Plan Years beginning on or after January 1, 1989, the annual
Compensation of any Participant in excess of Two Hundred Thousand Dollars
($200,000), or such higher amount as the Secretary of the Treasury may
prescribe, shall not be taken into account under the Plan; and for benefits
accruing in Plan Years beginning on or after January 1, 1994, the annual
Compensation of any Participant in excess of One Hundred Fifty Thousand Dollars
($150,000), or such higher amount as the Secretary of the Treasury may
prescribe, shall not be taken into account under the Plan. In the event
Compensation is determined for a period which contains fewer than twelve (12)
calendar months, the annual Compensation limit shall be an amount equal
<PAGE>
to the annual Compensation limit for the calendar year in which the period
begins multiplied by a fraction, the numerator of which is the number of
calendar months in the period and the denominator of which is twelve (12).
The rules of this paragraph are effective January 1, 1994. If the Secretary
of the Treasury increases the annual Compensation limit for a calendar year, the
increased limit shall apply to any period beginning in such calendar year over
which Compensation is determined ("determination period"). If Compensation for a
prior determination period is taken into account for a determination period
beginning on or after January 1, 1994, such Compensation shall be subject to the
annual Compensation limit (determined under this Section) in effect for such
prior determination period. For purposes of this paragraph, the annual
Compensation limit is $150,000 for determination periods beginning before
January 1, 1994.
The average percentage of total compensation (as defined in Treasury
Regulation Section 1.414(s)-1(d)(3)(ii)) included in the Compensation of
Participants who are highly compensated employees (within the meaning of section
414(q) of the Code) as a group shall not exceed by more than a de minimis amount
the average percentage of total compensation included in the Compensation of all
other Participants as a group. For purposes of this Section "de minimis amount"
shall mean (5%).
Effective January 1, 1994, the Accrued Benefit of a Section 401(a)(17)
Participant shall be equal to the greater of:
(a) the Participant's Accrued Benefit as of the date such benefit is
determined; or
(b) the sum of:
(i) the Participant's Accrued Benefit based on his or her average
annual compensation, covered compensation and years of benefit service as of
December 31, 1993, determined under the terms of the Plan in effect on that
date; and
(ii) the Participant's Accrued Benefit (disregarding Years of
Benefit Service prior to January 1, 1994) as of the date such benefit is
determined.
"Section 401(a)(17) Participant" means a Participant whose Accrued Benefit
determined on or after January 1, 1994, is based on annual Compensation for a
period beginning before that date in excess of One Hundred Fifty Thousand
Dollars ($150,000). In the event the Plan is amended after January 1, 1994, to
add an optional form of benefit (within the meaning of Treasury Regulation
Section 1.401(a)(4)-4(e)), such benefit, if subsidized, shall not be available
to a Section 401(a)(17) Participant.
<PAGE>
1.12 "Disabled Employee" shall mean an Employee whose service with an
Employer is terminated on account of a nonwork-related disability for which he
or she receives Social Security disability income benefits.
1.13 "Disabled Participant" shall mean a Participant who is a Disabled
Employee.
1.14 "Driver Employee" shall mean an Employee who is employed as a truck
driver by Hannaford Bros. Co. or any subsidiary thereof and whose employment was
governed prior to January 1, 1995, by a collective bargaining agreement.
1.15 "Driver Participant" shall mean a Participant who, as of the date of
his or her retirement or separation from service, is a Driver Employee.
1.16 "Effective Date" of this Amendment and Restatement shall mean January
1, 1998, except as otherwise specifically provided.
1.17 "Eligibility Computation Period" shall mean the initial twelve (12)
consecutive month period beginning with the date on which an Employee first
performs an Hour of Service and thereafter each Plan Year commencing with the
Plan Year which includes the first anniversary of the Employee's Employment
Commencement Date.
In the case of an hourly Employee other than a Driver Employee or any
full-time Employee of Progressive Distributors, Inc. who is employed as a truck
driver, if such an Employee is credited with the number of Hours of Service
determined in accordance with (a) or (b) below, whichever is applicable, in his
or her initial Eligibility Computation Period and in the Plan Year which
includes the first anniversary of his or her Employment Commencement Date, he or
she shall be credited with two (2) Years of Participation Service:
(a) with regard to initial Eligibility Computation Periods and Plan
Years commencing on or after January 1, 1980, eight hundred and seventy (870)
Hours of Service; and
(b) with regard to initial Eligibility Computation Periods and Plan
Years commencing before January 1, 1980, one thousand (1,000) Hours of Service.
In the case of a Driver Employee or any full-time Employee of Progressive
Distributors, Inc. who is employed as a truck driver, if such an Employee is
credited with the number of Hours of Service determined in accordance with (a),
(b), or (c) below, whichever is applicable, in his or her initial Eligibility
Computation Period and in the Plan Year which includes the first anniversary of
his or her Employment Commencement Date, he or she shall be credited with two
(2) Years of Participation Service:
<PAGE>
(a) with regard to initial Eligibility Computation Periods and Plan
Years commencing on or after January 1, 1983, one thousand (1,000) Hours of
Service;
(b) with regard to initial Eligibility Computation Periods and Plan
Years commencing on or after January 1, 1980, but prior to January 1, 1983,
eight hundred and seventy (870) Hours of Service; and
(c) with regard to initial Eligibility Computation Periods and Plan
Years commencing before January 1, 1980, one thousand (1,000) Hours of Service.
In the case of a salaried or salaried nonexempt Employee, if such an
Employee is credited with one thousand (1,000) Hours of Service in both his or
her initial Eligibility Computation Period and the Plan Year which includes the
first anniversary of his or her Employment Commencement Date, he or she shall be
credited with two (2) Years of Participation Service.
In measuring completion of a Year of Participation Service upon an
Employee's return after a Break in Service, the term "Eligibility Computation
Period" shall mean the twelve (12) consecutive month period beginning on the
Employee's Re-employment Commencement Date and, where necessary, Plan Years
beginning with the Plan Year which includes the first anniversary of the
Employee's Re-employment Commencement Date.
1.18 "Employee" shall mean any individual employed by an Employer,
excluding -
(a) Leased Employees;
(b) any person who is classified by the Employer (without regard to
the classification of such person by a third party) as an independent
contractor; and
(c) prior to January 1, 1998, any individual employed in the Southeast
Division, unless such individual commenced participation prior to being
transferred to such division.
1.19 "Employer" shall mean Hannaford Bros. Co. or any other corporation
identified on Schedule A which has adopted the Plan, and "Employers" shall mean
Hannaford Bros. Co. and each such other corporation. If an Employer is a member
of a group of employers which constitutes a controlled group of corporations (as
defined in Section 414(b) of the Code), trades or businesses (whether or not
incorporated) under common control (as defined in Section 414(c) of the Code) or
an affiliated service group (as defined in Section 414(m) of the Code), all such
employers shall be considered a single employer to the extent required by
Sections 414(b), 414(c), 414(m) and 414(o) of the Code. For purposes of applying
the limitations of Article XIII, Section 414(b) and 414(c) of the Code shall be
applied with the modification provided by Section 415(h).
<PAGE>
1.20 "Employment Commencement Date" shall mean the first day for which an
Employee is entitled to be credited with an Hour of Service.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.22 "Finance Committee" shall mean the Finance Committee of the Board of
Directors.
1.23 "Hour of Service" shall have the meaning set forth in subsection (a),
(b) or (c) below, whichever is applicable:
(a) In the case of an hourly Employee, other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver, the term "Hour of Service":
(i) with regard to Plan Years commencing prior to January 1,
1980, shall mean an Hour of Service under the terms of the Plan as in effect on
December 31, 1979;
(ii) with regard to Plan Years commencing on or after January 1,
1981, shall mean, for purposes of computing Years of Participation Service and
Years of Vesting Service (aa) each hour for which such an Employee is paid, or
entitled to payment, by an Affiliated Employer for the performance of duties
during the applicable computation period and (bb) each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by an
Affiliated Employer, provided the same Hours of Service shall not be credited
both under this clause (bb) and the preceding clause (aa); and shall mean, for
purposes of computing Years of Benefit Service, (aa) each hour for which such an
Employee is paid, or entitled to payment, by an Employer for the performance of
duties during the applicable computation period and (bb) each hour for which
back pay, irrespective of mitigation of damages, is either awarded or agreed to
by an Employer, provided the same Hours of Service shall not be credited both
under this clause (bb) and the immediately preceding clause (aa).
(iii) with regard to the Plan Year commencing January 1, 1980,
shall have the meaning set forth in (i) or (ii) above, whichever results in such
an Employee being credited with the greater number of Hours of Service during
such Plan Year;
(iv) with regard to any Plan Year in which such an Employee
sustains one or more injuries as a result of which he or she is incapacitated
for work and entitled to compensation under applicable workers compensation
laws, such Employee shall be credited with four hundred and thirty-six (436)
additional Hours of Service if such Plan Year commenced on or after January 1,
1980, or five hundred and one (501) additional Hours of Service if such Plan
Year commenced before January 1, 1980, unless such
<PAGE>
Employee is otherwise credited with at least eight hundred and seventy (870)
Hours of Service in such Plan Year if such Plan Year commenced on or after
January 1, 1980, or at least one thousand (1,000) Hours of Service in such Plan
Year if such Plan Year commenced before January 1, 1980. If an Employee is not
credited with additional Hours of Service in the Plan Year in which he or she
sustains one or more such injuries by reason of the number of Hours of Service
otherwise credited to him or her during such year and if such Employee's
incapacity to work continues into the next succeeding Plan Year, he or she
shall, with respect to such succeeding Plan Year, be credited with four hundred
and thirty-six (436) additional Hours of Service if such Plan Year commenced on
or after January 1, 1980, or five hundred and one (501) additional Hours of
Service if such Plan Year commenced before January 1, 1980; provided, in no
event shall more than four hundred and thirty-six (436) additional Hours of
Service be credited pursuant to this paragraph in any Plan Year commencing on or
after January 1, 1980, or five hundred and one (501) additional Hours of Service
in any Plan Year commencing before January 1, 1980; or
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver, the term "Hour
of Service":
(i) with regard to the Plan Years commencing prior to January 1,
1983, shall have the meaning applicable to other hourly Employees in accordance
with subsection (a) of this Section; and
(ii) with regard to Plan Years commencing on or after January 1,
1983, shall have the meaning applicable to salaried and salaried nonexempt
Employees in accordance with subsection (c) of this Section.
(c) In the case of a salaried or salaried nonexempt Employee, the term
"Hour of Service":
(i) for purposes of computing Years of Participation Service and
Years of Vesting Service shall mean each hour for which such an Employee is
paid, or entitled to payment, by an Affiliated Employer for the performance of
duties during the applicable computation period and, for purposes of computing
Years of Benefit Service, shall mean each hour for which such an Employee is
paid or entitled to payment by an Employer for the performance of duties during
the applicable computation period;
(ii) for purposes of computing Years of Participation Service and
Years of Vesting Service shall mean each hour for which such an Employee is
paid, or entitled to payment, directly or indirectly, by an Affiliated Employer
on account of time during which no duties are performed (irrespective of whether
the employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or leave of
absence, and for purposes of computing Years
<PAGE>
of Benefit Service, shall mean each hour for which such an Employee is paid, or
entitled to payment, by an Employer on account of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence.
Notwithstanding anything contained in this subsection (c) to the contrary (1) no
more than five hundred and one (501) Hours of Service shall be credited under
this subsection (c) to such an Employee on account of any single continuous
period during which such an Employee performs no duties (whether or not such
period occurs in a single computation period), (2) no Hours of Service shall be
credited if payment is made or due under a plan maintained solely for the
purpose of complying with unemployment compensation or disability insurance
laws, and (3) no Hours of Service shall be credited if payment is made solely to
reimburse such an Employee for medical or medically related expenses incurred by
such an Employee;
(iii) for purposes of computing Years of Participation Service
and Years of Vesting Service shall mean each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by an
Affiliated Employer, and for purposes of computing Years of Benefit Service,
shall mean each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by an Employer;
(iv) with regard to any period during which an Employee sustains
one or more injuries as a result of which he or she is incapacitated for work
and entitled to compensation under applicable workers' compensation laws, such
Employee shall be credited with five hundred and one (501) additional Hours of
Service unless such Employee is otherwise credited with at least one thousand
(1,000) Hours of Service in such Plan Year. If such an Employee is not credited
with additional Hours of Service in the Plan Year in which he or she sustains
one or more injuries by reason of the number of Hours of Service otherwise
credited to him or her during such year and such Employee's incapacity to work
continues into the next succeeding Plan Year, he or she shall, with respect to
such succeeding Plan Year, be credited with five hundred and one (501)
additional Hours of Service; provided, in no event shall more than five hundred
and one (501) additional Hours of Service be credited pursuant to this paragraph
in any Plan Year.
Hours of Service shall, except for computing Years of Benefit Service, be
credited with respect to a Leased Employee or other individual who is treated as
an Employee under Section 414(o) of the Code, but only to the extent required by
Section 414(n) or (o) of the Code.
In determining the number of Hours of Service to be credited to any
Employee, the provisions of 29 CFR Sections 2530.200b-2(b) and 2(c) are
incorporated herein by reference.
<PAGE>
Each Employee who is absent from work for any period (i) by reason of the
pregnancy of the Employee, (ii) by reason of the birth of a child of the
Employee, (iii) by reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee or (iv) for purposes
of caring for such child for a period beginning immediately following such birth
or placement shall, solely for purposes of determining whether such Employee has
incurred a Break in Service, be credited with the Hours of Service which would
normally have been credited to such Employee but for such absence or, if such
Hours of Service cannot be determined, eight (8) Hours of Service for each day
of such absence; provided the total number of Hours of Service credited in
accordance with this paragraph on account of such absence shall not exceed five
hundred and one (501). The Hours of Service described in this paragraph shall be
credited in the computation period in which the absence begins, if the Employee
would be prevented from incurring a Break in Service in such year solely because
the Employee is credited with such Hours of Service or, in all other cases, in
the immediately following computation period. The same hours shall not be
credited under both subsection (a), (b) or (c) and this paragraph.
In the case of any full-time salaried or salaried nonexempt Employee or,
with respect to service after December 31, 1982, any Driver Employee or any
full-time Employee of Progressive Distributors, Inc. who is employed as a truck
driver, such an Employee shall be credited with forty-five (45) Hours of Service
for each week for which such Employee is required to be credited with at least
one (1) Hour of Service in accordance with paragraphs (i), (ii), or (iii) of
subsection (c) of this Section or in accordance with paragraph (ii) of
subsection (b) of this Section.
A Disabled Employee shall be credited with the number of Hours of Service
which he or she regularly would have been scheduled to work, based upon his or
her work schedule immediately prior to becoming disabled, for the period he or
she is so disabled; provided such disability continues until the first to occur
of his or her retirement date, Termination of Employment Date, the date the
Disabled Employee is re-employed by an Affiliated Employer immediately following
such disability, or dies. If a Disabled Employee is not re-employed by an
Affiliated Employer immediately following such disability, and such disability
does not continue until his or her retirement date, Termination of Employment
Date or death, then no Hours of Service shall be credited pursuant to this
paragraph. If a Disabled Employee elects to receive an Early Retirement Benefit
pursuant to Article VI or a Vested Benefit pursuant to Article VIII, no Hours of
Service shall be credited under this paragraph thereafter, unless such Employee
is subsequently re-employed and again becomes a Disabled Employee.
Effective December 12, 1994, to the extent required by the Uniformed
Services Employment and Reemployment Rights Act of 1994, if an Employee leaves
the employ of an Employer to enter one of the uniformed services of the United
States and subsequently returns to employment with the Employer
<PAGE>
within the statutory period during which his or her right to re-employment is
guaranteed by law, then for such period of uniformed service the Employee shall
be credited with the number of Hours of Service which he or she regularly would
have been scheduled to work, based upon his or her work schedule immediately
prior to such period of service; if an Employee leaves the employ of an
Affiliated Employer to enter one of the uniformed services of the United States
and subsequently returns to employment with the Affiliated Employer within the
statutory period during which his or her right to re-employment is guaranteed by
law, then, for purposes of computing Years of Participation Service and Years of
Vesting Service, for such period of uniformed service the Employee shall be
credited with the number of Hours of Service which he or she regularly would
have been scheduled to work, based upon his or her work schedule immediately
prior to such period of service.
1.24 "Investment Manager" shall mean any fiduciary (other than the Trustee
or a named fiduciary as defined in Section 402(a)(2) of ERISA):
(a) who is appointed by the Finance Committee to manage, acquire, or
dispose of all or any portion of the Trust Fund;
(b) who (i) is registered as an investment adviser under the
Investment Advisers Act of 1940; (ii) is a bank, as defined in said Act; or
(iii) is an insurance company qualified to manage, acquire, or dispose of all or
any portion of the Trust Fund under the laws of more than one State; and
(c) who has acknowledged, in writing, that he or she is a fiduciary
with respect to the Plan.
1.25 "Leased Employee" shall mean any person who is not an Employee and
who provides services to the Employer if:
(a) such services are provided pursuant to an agreement between the
Employer and any leasing organization;
(b) such person has performed such services for the Employer (or for
the Employer and any related person within the meaning of Section 144(a)(3) of
the Code) on a substantially full-time basis for a period of at least one (1)
year; and
(c) such services are performed under the primary direction and
control of the Employer.
1.26 "Participant" shall mean an Employee who participates in the Plan.
1.27 "Plan" shall mean the Hannaford Cash Balance Plan.
1.28 "Plan Year" shall mean the twelve (12) consecutive month period
ending December 31.
<PAGE>
1.29 "Re-employment Commencement Date" shall mean the first day for which
an Employee is entitled to be credited with an Hour of Service after the first
Eligibility Computation Period in which the Employee incurs a Break in Service
following an Eligibility Computation Period in which the Employee is credited
with more than the number of Hours of Service determined in accordance with
subsection (a), (b), or (c) below, whichever is applicable:
(a) In the case of an hourly Employee other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver:
(i) with regard to Eligibility Computation Periods commencing on
or after January 1, 1980, four hundred and thirty-five (435) Hours of Service;
and
(ii) with regard to Eligibility Computation Periods commencing
before January 1, 1980, five hundred (500) Hours of Service.
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver:
(i) with regard to Eligibility Computation Periods commencing on
or after January 1, 1983, five hundred (500) Hours of Service;
(ii) with regard to Eligibility Computation Periods commencing on
or after January 1, 1980, but before January 1, 1983, four hundred and
thirty-five (435) Hours of Service; and
(iii) with regard to Eligibility Computation Periods commencing
before January 1, 1980, five hundred (500) Hours of Service.
(c) In the case of a salaried or salaried nonexempt Employee, five
hundred (500) Hours of Service.
In the case of an Employee who is credited with no Hours of Service in an
Eligibility Computation Period beginning after the Employee's Re-employment
Commencement Date, the Employee shall be treated as having a new Re-employment
Commencement Date as of the first day for which the Employee is entitled to be
credited with an Hour of Service after such Eligibility Computation Period.
1.30 "Retirement Committee" shall mean the committee appointed by the Board
of Directors in accordance with Section 18.1.
1.31 "Social Security Retirement Age" shall mean --
(a) with respect to a Participant born prior to 1938,
age sixty-five (65);
<PAGE>
(b) with respect to a Participant born after 1937 and prior to 1955,
age sixty-six (66); and
(c) with respect to a Participant born after 1954, age sixty-seven
(67).
1.32 "Terminated Driver Participant" shall mean a Driver Participant who
ceases to be employed by an Affiliated Employer and is no longer employed by any
Affiliated Employer prior to his or her Normal Retirement Date for any reason
other than early retirement in accordance with Section 6.1 or death.
1.33 "Termination of Employment Date" shall mean the day on which an
Employee ceases to be employed by an Affiliated Employer and is no longer
employed by any Affiliated Employer for any reason other than retirement or
death.
1.34 "Terminated Participant" shall mean a Participant who ceases to be
employed by an Affiliated Employer and is no longer employed by any Affiliated
Employer prior to his or her Normal Retirement Date for any reason other than
early retirement in accordance with Section 6.1 or death.
1.35 "Terminated Warehouse Participant" shall mean a Warehouse Participant
who ceases to be employed by an Affiliated Employer and is no longer employed by
any Affiliated Employer prior to his or her Normal Retirement Date for any
reason other than early retirement in accordance with Section 6.1 or death.
1.36 "Trust" shall mean the Hannaford Bros. Co. Employees' Retirement
Trust, maintained in accordance with the Plan.
1.37 "Trustee" shall mean the bank, trust company or individuals appointed
by the Finance Committee to serve as the trustee of the Trust.
1.38 "Trust Fund" shall mean the property held in trust for the benefit of
Participants and their Beneficiaries.
1.39 "Warehouse Employee" shall mean an Employee who is employed by
Hannaford Bros. Co. or any subsidiary thereof at its Distribution Center in
South Portland, Maine, and whose employment is governed by a collective
bargaining agreement.
1.40 "Warehouse Participant" shall mean a Participant who, as of the date
of his or her retirement or separation from service, is a Warehouse Employee.
1.41 "Year of Benefit Service" shall, except as hereinafter provided, have
the meaning set forth in subsection (a), (b) or (c) below, whichever is
applicable:
(a) In the case of an hourly Employee other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver, the term "Year of Benefit Service" with regard to Plan Years
commencing prior to January 1, 1980, shall mean a "Year of Benefit Service"
under the terms of the Plan as in effect on December 31, 1979, and with regard
to Plan Years commencing on or after January 1, 1980, shall mean a Plan Year in
which such an Employee is credited with eight hundred and seventy (870) or more
Hours of Service, excluding:
(i) in the case of such an Employee who does not have any
nonforfeitable right to an Accrued Benefit, his or her Years of Benefit Service
before any Break in Service if the Employee's Years of Vesting Service are
excluded under Section 1.43(d); or
(ii) in the case of such an Employee who receives an optional
lump sum benefit in accordance with Section 11.1 or 11.2, all or such lesser
portion of his or her Years of Benefit Service in accordance with the provisions
of Article XV.
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver, the term "Year
of Benefit Service" shall:
(i) (with respect to Plan Years commencing prior to January 1,
1983, have the meaning applicable to other hourly Employees in accordance with
subsection (a) of this Section; and
(ii) with respect to Plan Years commencing on or after January 1,
1983, have the meaning applicable to salaried and salaried nonexempt Employees
in accordance with subsection (c) of this Section; or
(c) In the case of a salaried or salaried nonexempt Employee, the term
"Year of Benefit Service" shall mean a Plan Year in which such an Employee is
credited with one thousand (1,000) or more Hours of Service, excluding:
(i) in the case of such an Employee who does not have any
nonforfeitable right to an Accrued Benefit, his or her Years of Benefit Service
before any Break in Service if the Employee's Years of Vesting Service are
excluded under Section 1.43(d); or
(ii) in the case of such an Employee who receives an optional
lump sum benefit in accordance with Section 11. 1 or 11.2 all or such lesser
portion of his or her Years of Benefit Service in accordance with the provisions
of Article XV.
(d) Notwithstanding the foregoing provisions of this Section to the
contrary, a Participant shall accrue no Years of Benefit Service while employed
in the Southeast Division prior to the Effective Date.
In the case of an Employee whose employment by Hannaford Bros. Co.
terminated by reason of the sale of the Milbridge store, the term "Year of
Benefit Service" shall mean for the 1991 Plan Year that such Employee is
credited with four hundred (400) or more Hours of Service, if an hourly
Employee, or four hundred sixty (460) or more Hours of Service, if a salaried or
salaried nonexempt Employee. In the case of an Employee whose employment with
Wellby Super Drug Stores, Inc. terminated by reason of the sale of assets to
Rite Aid Corporation, the term "Year of Benefit Service" shall mean for the 1992
Plan Year that such Employee is credited with three hundred sixty-eight (368) or
more Hours of Service, if an hourly Employee, or four hundred twenty-three (423)
or more Hours of Service, if a salaried or salaried nonexempt Employee. In the
case of an hourly Employee whose employment by Hannaford Bros. Co. terminated by
reason of the sale of the Kennebunk store, the term "Year of Vesting Service"
shall mean for the 1996 Plan Year that such Employee is credited with four
hundred eighteen (418) or more Hours of Service.
1.42 "Year of Participation Service" shall have the meaning set forth in
subsection (a), (b), or (c) below, whichever is applicable:
(a) In the case of an hourly Employee other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver, the term "Year of Participation Service" with regard to
Eligibility Computation Periods commencing before January 1, 1980, shall mean a
"Year of Participation Service" under the terms of the Plan as in effect on
December 31, 1979, and with regard to Eligibility Computation Periods commencing
on or after January 1, 1980, shall mean an Eligibility Computation Period in
which such an Employee is credited with eight hundred and seventy (870) or more
Hours of Service; or
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver, the term "Year
of Participation Service" shall:
(i) with respect Eligibility Computation Periods commencing prior
to January 1, 1983, have the same meaning applicable to other hourly Employees
in accordance with subsection (a) of this Section; and
(ii) with respect to Eligibility Computation Periods commencing
on or after January 1, 1983, have the meaning applicable to salaried and
salaried nonexempt Employees in accordance with subsection (c) of this Section;
or
(c) In the case of a salaried or salaried nonexempt Employee, the term
"Year of Participation Service" shall mean an Eligibility Computation Period in
which such an Employee is credited with one thousand (1,000) or more Hours of
Service.
<PAGE>
1.43 "Year of Vesting Service" shall, except as hereinafter provided, have
the meaning set forth in subsection (a), (b) or (c) below, whichever is
applicable:
(a) In the case of an hourly Employee other than a Driver Employee or
any full-time Employee of Progressive Distributors, Inc. who is employed as a
truck driver, the term "Year of Vesting Service" with regard to Plan Years
commencing prior to January 1, 1980, shall mean a "Year of Vesting Service"
under the terms of the Plan as in effect on December 31, 1979, and with regard
to Plan Years commencing on or after January 1, 1980, shall mean a Plan Year in
which such an Employee is credited with eight hundred and seventy (870) or more
Hours of Service, excluding, in the case of such an Employee who does not have
any nonforfeitable right to an Accrued Benefit, his or her Years of Vesting
Service before any Break in Service, in accordance with subsection (d) of this
Section.
(b) In the case of a Driver Employee or any full-time Employee of
Progressive Distributors, Inc. who is employed as a truck driver, the term "Year
of Vesting Service" shall:
(i) with respect to Plan Years commencing prior to January 1,
1983, have the meaning applicable to other hourly Employees in accordance with
subsection (a) of this Section; and
(ii) with respect to Plan Years commencing on or after January 1,
1983, have the meaning applicable to salaried and salaried nonexempt Employees
in accordance with subsection (c) of this Section.
(c) In the case of a salaried or salaried nonexempt Employee, the term
"Year of Vesting Service" shall mean a Plan Year in which such an Employee is
credited with one thousand (1,000) or more Hours of Service, excluding, in the
case of such an Employee who does not have any nonforfeitable right to an
Accrued Benefit, his or her Years of Benefit Service before any Break in
Service, in accordance with subsection (d) of this Section.
(d) In the case of an Employee who does not have any nonforfeitable
right to an Accrued Benefit, his or her Years of Vesting Service before a Break
in Service shall be excluded if:
(i) the number of his or her consecutive Breaks in Service as of
the earlier of his or her Re-employment Commencement Date or December 31, 1984,
equals or exceeds the aggregate number of his or her Years of Vesting Service
before such break, or
(ii) the number of his or her consecutive Breaks in Service as of
his or her Re-employment Commencement Date equals or exceeds the greater of five
(5) or the aggregate number of his or her Years of Vesting Service before such
break.
<PAGE>
(e) Notwithstanding the foregoing provisions of this Section to the
contrary, for purposes of computing Years of Vesting Service, Hours of Service
shall be credited with respect to a Participant who is first employed by an
Affiliated Employer as an employee of Boney Wilson & Sons, Inc., commencing on
March 1, 1993.
In the case of an Employee whose employment by Hannaford Bros. Co.
terminated by reason of the sale of the Milbridge store, the term "Year of
Vesting Service" shall mean for the 1991 Plan Year that such Employee is
credited with four hundred (400) or more Hours of Service, if an hourly
Employee, or four hundred sixty (460) or more Hours of Service, if a salaried or
salaried nonexempt Employee. In the case of an Employee whose employment with
Wellby Super Drug Stores, Inc. terminated by reason of the sale of assets to
Rite Aid Corporation, the term "Year of Vesting Service" shall mean for the 1992
Plan Year that such Employee is credited with three hundred sixty-eight (368) or
more Hours of Service, if an hourly Employee, or four hundred twenty-three (423)
or more Hours of Service, if a salaried or salaried nonexempt Employee. In the
case of an Employee whose employment by Hannaford Bros. Co. terminated by reason
of the sale of the Kennebunk store, the term "Year of Vesting Service" shall
mean for the 1996 Plan Year that such Employee is credited with four hundred
eighteen (418) or more Hours of Service.
ARTICLE II
Participation
2.1 Date of Participation. Each Employee who is a Participant on the
Effective Date shall continue to participate in the Plan in accordance with its
terms. Each Employee who is in the employ of an Employer on the Effective Date
and who meets the requirements of Section 2.2 on or before December 31, 1997,
shall commence participation as of the Effective Date. Each other Employee who
thereafter satisfies the minimum age and service requirements specified in
Section 2.2 shall commence participation in the Plan as of the first day of the
second month following the month in which such Employee satisfies such
requirements, provided such Employee is still in the employ of an Employer on
such date. In no event shall an Employee who is employed in the Southeast
Division commence participation prior to the Effective Date, unless such
Employee commenced participation prior to being transferred to such division.
Each Employee who commenced employment with an Employer on or before
December 31, 1987, after attaining age sixty (60) and who satisfied the minimum
service requirements set forth in Section 2.2 as of December 31, 1987, shall
commence participation on January 1, 1988, provided he or she is credited with
at least one (1) Hour of Service after December 31, 1987. Each other Employee
who satisfied the minimum age and service requirements specified in Section 2.2
on or before June 30, 1993, shall commence
<PAGE>
participation in the Plan on the first day of the calendar month following the
date on which such Employee first satisfies such requirements provided such
Employee is still in the employ of an Employer on such date.
An Employee who separates from service after satisfying the requirements of
Section 2.2, but before he or she commences participation in the Plan shall
commence participation in the Plan immediately upon the later of his or her
re-employment date, or his or her participation commencement date before
separating from service, unless the number of his or her consecutive Breaks in
Service as of his or her Re-employment Commencement Date equals or exceeds five
(5), in which event he or she shall be considered a new Employee.
2.2 Participation Requirements. Each Employee who has attained age
twenty-one (21) and completed one (1) Year of Participation Service shall be
eligible to participate in the Plan.
2.3 Transfers Among Affiliated Employers. In the event an employee of an
Affiliated Employer that has not adopted the Plan is transferred to an
Affiliated Employer that has adopted the Plan, he or she shall become a
Participant and thereby commence to accrue benefits under the Plan effective as
of the later of the following dates:
(a) the first day of the second month following the date on which he
or she meets the requirements of Section 2.2, taking into account his or her
prior service with Affiliated Employers; or
(b) the date he or she is transferred to an Affiliated Employer that
has adopted the Plan.
A Participant who is transferred to an Affiliated Employer that has not
adopted the Plan shall cease to accrue any further benefits under the Plan
effective as of the date his or her employment is transferred; service with such
Affiliated Employer shall, however, be taken into account in determining the
Participant's Years of Vesting Service.
2.4 Re-employed Former Participant. If a former Participant who has a
nonforfeitable right to his or her Accrued Benefit returns to the employ of the
Employer, such former Participant shall resume participation as of his or her
re-employment date. A former Participant who does not have a nonforfeitable
right to his or her Accrued Benefit shall resume participation as of his or her
re-employment date unless the number of his or her consecutive Breaks in Service
as of his or her Re-employment Commencement Date equals or exceeds five (5), in
which event he or she shall be considered a new Employee.
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ARTICLE III
Retirement Dates
3.1 Normal Retirement Date. Except as hereinafter provided, the Normal
Retirement Date of each Participant shall be the later of the date he or she
attains age 65 or the fifth anniversary of his or her Employment Commencement
Date. The Normal Retirement Date of each of the following Participants shall be
the date he or she attains age 62:
(a) a Driver Participant hired before January 1, 1995, with respect to
his or her Accrued Benefit as of December 31, 1997;
(b) a Driver Participant who attains age fifty-five (55) and completes
ten Years of Benefit Service on or before December 31, 1997; and
(c) a Warehouse Participant.
3.2 Early Retirement Date. A Participant who has attained age fifty-five
(55) and completed five (5) Years of Vesting Service may retire at any time
prior to his or her Normal Retirement Date. The date of such Participant's
actual early retirement shall be referred to as his or her "Early Retirement
Date."
3.3 Deferred Retirement Date. A Participant who does not retire on his or
her Normal Retirement Date may retire at any time thereafter. The date on which
he or she retires or is deemed to have retired shall be referred to as his or
her "Deferred Retirement Date."
ARTICLE IV
Benefit Formulas
4.1 Benefits For Participants Other Than Warehouse Participants. Effective
January 1, 1998, the benefits payable to or in respect of Participants, other
than Warehouse Participants, shall be determined as follows:
(a) Cash Balance Account. Solely for purposes of determining the
amount of retirement or death benefits payable under the Plan, each
Participant=s benefit shall be expressed as an account. Each Cash Balance
Account shall be adjusted in accordance with subsection (b) to reflect
Contribution Credits and in accordance with subsection (c) to reflect Interest
Credits. No separate account shall be established or maintained under this Plan,
and no Participant shall have a claim to any specific Trust Fund assets.
The opening Account balance of a Participant who is an Employee on
January 1, 1998, shall equal the product of (i) the Participant's Accrued
Benefit (multiplied by 12) as of December 31, 1997, and (ii) the applicable
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conversion factor in Schedule B. The applicable conversion factor for a
Participant whose employment extends beyond his or her Normal Retirement Date,
or whose Normal Retirement Date is determined with reference to his or her
Employment Commencement Date, shall be the same as the conversion factor for a
Participant who has reached his or her Normal Retirement Date. For purposes of
this paragraph, a Disabled Participant who is receiving Hours of Service credit
on January 1, 1998, shall be treated as an Employee on such date.
The opening Account balance of a Participant who is not an Employee on
January 1, 1998, and who is re-employed by an Employer after such date shall be
established as of January 1, 1998, unless such Participant does not have a
nonforfeitable right to his or her Accrued Benefit at his or her Termination of
Employment Date and the number of his or her consecutive Breaks in Service as of
his or her Re-employment Commencement Date equals or exceeds five (5). Such
balance shall equal the present value of the Participant's Accrued Benefit as of
December 31, 1997, based on an interest rate of seven percent (7%) and the
mortality table set forth in Section 12.2(a). Such Account shall be credited
with Interest Credits from January 1, 1998.
The Account balance of a Participant who does not have a
nonforfeitable right to his or her Accrued Benefit and who terminates employment
after December 31, 1997, shall be restored upon his or her re-employment by an
Employer, with Interest Credits from his or her Termination of Employment Date,
unless the number of his or her consecutive Breaks in Service as of his or her
Re-employment Commencement Date equals or exceeds five (5).
The opening Account balance of a Warehouse Participant who transfers
employment, after January 1, 1998, to a position that is not governed by a
collective bargaining agreement shall equal the present value of his or her
Accrued Benefit as of the date of transfer, based on the interest rate and
mortality table set forth in Section 12.2(a).
(b) Contribution Credit. At the end of each month beginning with the
month in which participation commences, the Cash Balance Account of each
Participant shall be credited with an amount ("Contribution Credit") equal to
three percent (3%) of the Participant=s Compensation for such month. For each
month the annual Compensation limit of Section 1.11 shall be one-twelfth (1/12)
of the annual Compensation limit for the Plan Year. The Cash Balance Account of
a Disabled Participant shall be credited with Contribution Credits, based upon
his or her monthly rate of Compensation immediately preceding commencement of
his or her disability, for the period during which such disability income
benefits continue prior to the commencement of distributions from the Plan.
(c) Interest Credit. At the end of each month interest shall be
credited on the beginning Account balance of each Participant ("Interest
<PAGE>
Credit") for such month, reduced for distributions made in such month, at
one-twelfth (1/12) of the following rate: the yield on one-year Treasury
Constant Maturities as reported in the Federal Reserve Bulletin on the last
business day of October of the preceding Plan Year plus one-half of one percent
(0.50%).
(d) Normal Retirement Benefit. A Participant who retires or is deemed
to retire on his or her Normal Retirement Date shall be entitled to receive a
monthly retirement benefit ("Normal Retirement Benefit") equal to one-twelfth
(1/12) of the amount determined by converting his or her Account balance as of
the end of the month preceding the Annuity Starting Date to a life annuity,
based on the factors set forth in Section 12.2(a).
The Normal Retirement Benefit of a Participant who retires or is
deemed to retire after December 31, 1997, shall not be less than the
Participant's Accrued Benefit, payable in the normal form, determined in
accordance with the terms of the Plan as in effect on such date.
(e) Early Retirement Benefit. A Participant, other than a Driver
Participant described in Section 3.1(a) or Section 3.1(b), who retires on an
Early Retirement Date shall be entitled to receive a monthly retirement benefit
("Early Retirement Benefit") equal to his or her Accrued Benefit as of such
date, reduced using the interest rate and mortality table set forth in Section
12.2(a), for commencement prior to Normal Retirement Date. A Driver Participant
described in Section 3.1(a) or Section 3.1(b) who retires on an Early Retirement
Date shall be entitled to receive an Early Retirement Benefit equal to his or
her Accrued Benefit as of such date, reduced by 0.5952 of 1% for each month by
which the commencement of such Driver Participant's Early Retirement Benefit
precedes the first day of the month coinciding with or next following his or her
Normal Retirement Date.
The Early Retirement Benefit of a Participant who retires after
December 31, 1997, shall not be less than the Participant's Accrued Benefit,
payable in the normal form and reduced for early commencement of payment,
determined in accordance with the terms of the Plan as in effect on such date.
(f) Deferred Retirement Benefit. A Participant who retires or is
deemed to retire on a Deferred Retirement Date shall be entitled to receive a
monthly retirement benefit ("Deferred Retirement Benefit") equal to his or her
Accrued Benefit as of such date.
The Deferred Retirement Benefit of a Participant who retires after
December 31, 1997, shall not be less than the Participant's Accrued Benefit,
payable in the normal form, determined in accordance with the term of the Plan
as in effect on such date.
(g) Vested Benefit. A Terminated Participant, other than a Terminated
Driver Participant described in Section 3.1(a) or Section 3.1(b), who is
credited with at least five (5) Years of Vesting Service on his or
<PAGE>
her Termination of Employment Date shall be entitled to receive a monthly
retirement benefit ("Vested Benefit") equal to his or her Accrued Benefit as of
such date, reduced using the interest rate and mortality table set forth in
Section 12.2(a), for commencement prior to Normal Retirement Date. A Terminated
Driver Participant described in Section 3.1(a) or Section 3.1(b) who is credited
with at least five (5) Years of Vesting Service on his or her Termination of
Employment Date shall be entitled to receive a Vested Benefit equal to his or
her Accrued Benefit as of such date, reduced by 0.5952 of 1% for each month by
which the commencement of such Driver Participant's Vested Benefit precedes the
first day of the month coinciding with or next following his or her Normal
Retirement Date.
The Vested Benefit of a Participant who terminates employment after
December 31, 1997, shall not be less than the Participant's Vested Benefit,
payable in the normal form and reduced for early commencement of payment,
determined in accordance with the terms of the Plan as in effect on such date.
4.2 Benefits For Certain Warehouse Participants. The benefits payable to
or in respect of Warehouse Participants who retire or separate from service
before February 17, 1996, shall be determined in accordance with the terms of
the Plan as in effect on the date of each such Participant's retirement or
separation from service.
(a) The benefits payable to or in respect of Warehouse Participants
who retire or separate from service on or after February 17, 1996, shall be
determined as follows:
(i) Normal Retirement Benefit. A Warehouse Participant who
retires or is deemed to retire on his or her Normal Retirement Date shall be
entitled to receive a monthly retirement benefit ("Normal Retirement Benefit")
equal to the amount determined by multiplying the number of such Warehouse
Participant's Years of Benefit Service determined as of his or her Normal
Retirement Date by Thirty Dollars ($30.00).
(ii) Early Retirement Benefit. A Warehouse Participant who
retires on an Early Retirement Date shall be entitled to receive a monthly
retirement benefit ("Early Retirement Benefit") equal to the amount determined
by multiplying the number of such Warehouse Participant's Years of Benefit
Service determined as of his or her Early Retirement Date by Thirty Dollars
($30.00).
The amount determined in accordance with this subsection (ii)
shall be reduced by 0.5952 of 1% for each month by which the commencement of
such Warehouse Participant's Early Retirement Benefit precedes the first day of
the month coinciding with or next following his or her Normal Retirement Date.
(iii) Deferred Retirement Benefit. A Warehouse Participant who
retires or is deemed to retire on a Deferred Retirement Date shall be entitled
to receive a monthly retirement benefit ("Deferred Retirement
<PAGE>
Benefit") equal to the amount determined by multiplying the number of such
Warehouse Participant's Years of Benefit Service determined as of his or her
Deferred Retirement Date by Thirty Dollars ($30.00).
(iv) Vested Benefit. A Terminated Warehouse Participant who is
credited with at least five (5) Years of Vesting Service shall be entitled to a
monthly retirement benefit ("Vested Benefit") equal to the amount determined by
multiplying the number of such Warehouse Participant's Years of Benefit Service
determined as of his or her Termination of Employment Date by Thirty Dollars
($30.00).
The amount determined in accordance with this subsection (iv)
shall be reduced by 0.5952 of 1% for each month by which the commencement of
such Warehouse Participant's Vested Benefit precedes the first day of the month
coinciding with or next following his or her Normal Retirement Date.
(b) Notwithstanding the preceding to the contrary, the benefits
payable to or in respect of a Warehouse Participant who retires or separates
from service shall not be less than his or her Accrued Benefit determined in
accordance with the terms of the Plan as in effect on April 10, 1982, based upon
his or her Years of Benefit Service and Average Annual Compensation as of such
date.
4.3 Employment Transfers. If a benefit is payable to or in respect of a
Participant whose employment status has changed to or from that of a Warehouse
Employee, such benefit shall not be less than the benefit which would have been
payable to such Participant if he or she had retired or terminated employment on
the date of such change and deferred payment of his or her Accrued Benefit as of
such date until the date payment of his or her benefit commences.
ARTICLE V
Retirement at Normal Retirement Date
5.1 Normal Retirement Benefit. A Participant who retires or is deemed to
retire on his or her Normal Retirement Date shall be entitled to receive a
Normal Retirement Benefit determined as of such date in accordance with Section
4.1 or 4.2. A Participant who continues in the employ of the Employer after his
or her Normal Retirement Date may elect to receive a monthly retirement benefit
in accordance with this Article and, as a result of such election, shall be
deemed to have retired on his or her Normal Retirement Date. Such Participant
shall continue to accrue a benefit in accordance with Section 7.1 with respect
to employment after his or her Normal Retirement Date.
5.2 Form of Normal Retirement Benefit. Except as provided in Section 5.3, a
Participant's Normal Retirement Benefit shall be an annuity, payable monthly for
life, commencing with the first day of the month coinciding with or next
following his or her Normal Retirement Date and ending with the
<PAGE>
monthly payment preceding the Participant's death. If a Driver Participant hired
before January 1, 1995, (but only with respect to his or her Accrued Benefit as
of December 31, 1994) or a Warehouse Participant dies after his or her Normal
Retirement Benefit commences in accordance with this Section 5.2 and prior to
receiving retirement benefit payments equal to sixty (60) times his or her
monthly Normal Retirement Benefit, his or her Beneficiary shall receive a death
benefit equal to sixty (60) times the last monthly benefit paid to such
Participant reduced by the total amount of benefits paid to such Participant.
Such death benefit shall be paid in a lump sum unless the Beneficiary requests
payment in the form of an annuity.
5.3 Qualified Joint and Survivor Annuity. If a Participant is legally
married on the date on which his or her Normal Retirement Benefit commences,
such benefit shall be paid in the form of a qualified joint and survivor annuity
described in Section 10.5 unless the Participant elects in writing during the
election period described in Section 10.1 not to receive his or her Normal
Retirement Benefit in the form of a qualified joint and survivor annuity and the
Participant's spouse consents to such election within the time and in the manner
set forth in Section 10.6.
5.4 Disability Benefit. A Disabled Participant, other than a Warehouse
Participant or, prior to January 1,1995, a Driver Participant, shall be entitled
to receive a Normal Retirement Benefit, provided such disability and such
disability income benefits continue at least until the Participant=s Normal
Retirement Date, and such Participant does not elect to receive an Early
Retirement Benefit or a Vested Benefit.
ARTICLE VI
Retirement at Early Retirement Date
6.1 Early Retirement Benefit. A Participant who retires on an Early
Retirement Date shall be entitled to receive an Early Retirement Benefit
determined as of such date in accordance with Section 4.1 or 4.2.
6.2 Form of Early Retirement Benefit. Except as provided in Section 6.3, a
Participant's Early Retirement Benefit shall be an annuity, payable monthly for
life, commencing at the election of the Participant, with the first day of the
month coinciding with or next following his or her Early Retirement Date or the
first day of any month thereafter prior to his or her Normal Retirement Date and
ending with the monthly payment preceding the Participant's death. If a Driver
Participant hired before January 1, 1995, (but only with respect to his or her
Accrued Benefit as of December 31, 1994) or a Warehouse Participant dies after
his or her Early Retirement Benefit commences in accordance with this Section
6.2 and prior to receiving retirement benefit payments equal to sixty (60) times
his or her monthly Early Retirement Benefit, his or her Beneficiary shall
receive a death benefit equal to sixty (60) times the last monthly benefit paid
to such Participant reduced by the total amount of benefits paid to such
Participant. Such death benefit shall be paid in a lump sum unless the
<PAGE>
Beneficiary requests payment in the form of an annuity.
6.3 Qualified Joint and Survivor Annuity. If a Participant is legally
married on the date on which his or her Early Retirement Benefit commences, such
benefit shall be paid in the form of a qualified joint and survivor annuity
described in Section 10.5 unless the Participant elects in writing during the
election period described in Section 10.1 not to receive his or her Early
Retirement Benefit in the form of a qualified joint and survivor annuity and the
Participant's spouse consents to such election within the time and in the manner
set forth in Section 10.6.
ARTICLE VII
Retirement at Deferred Retirement Date
7.1 Deferred Retirement Benefit. A Participant who retires or is deemed to
retire on a Deferred Retirement Date shall be entitled to receive a Deferred
Retirement Benefit determined in accordance with Section 4.1 or 4.2. A
Participant who continues in the employ of the Employer after his or her Normal
Retirement Date may elect to receive a monthly retirement benefit in accordance
with this Article and, as a result of such election, shall be deemed to have
retired on a Deferred Retirement Date. Such Participant shall continue to accrue
a benefit in accordance with the Normal Retirement Benefit formula with respect
to each Plan Year after his or her Normal Retirement Date; provided, however,
that such accrual shall be reduced by the Actuarial Equivalent of the payments
received by the Participant by the close of the Plan Year. Further, if such
payments are not made in the normal form described in Section 7.2 and the total
amount of such payments received by the Participant after his or her Normal
Retirement Date exceeds the total amount of such payments the Participant would
have received if payments had been made in the normal form, only the amount that
would have been paid in the normal form shall be taken into account for purposes
of the reduction required by this Section. In no event, however, shall the
Participant's Accrued Benefit as of any Plan Year be less than his or her
Accrued Benefit for the prior Plan Year.
Any additional retirement benefit payable with respect to a Participant as
a result of accrual of a benefit after the Participant's deemed retirement date
shall commence, in the form such Participant's retirement benefit is being paid,
on the first day of the month coinciding with or next following the
Participant's actual retirement date. In the event a Participant dies before
payment of such additional benefit commences, any death benefit payable with
respect to the Participant shall be adjusted, as may be required under the
applicable provisions of the Plan, to take into account such additional
benefits.
The Accrued Benefit of a Participant who continues in the employ of the
Employer after attaining age seventy and one-half (70-1/2) shall be actuarially
increased, if required in accordance with Code Section 401(a)(9)(C).
<PAGE>
7.2 Form of Deferred Retirement Benefit. Except as provided in Section 7.3,
a Participant's Deferred Retirement Benefit shall be an annuity, payable monthly
for life, commencing with the first day of the month coinciding with or next
following the earlier of:
(a) his or her Deferred Retirement Date; or
(b) April 1 following the calendar year in which the Participant
attains age seventy and one-half (70-1/2), if required under Section 25.3;
and ending with the monthly payment preceding the Participant's death. If a
Driver Participant hired before January 1, 1995, (but only with respect to his
or her Accrued Benefit as of December 31, 1994) or a Warehouse Participant dies
after his or her Deferred Retirement Benefit commences in accordance with this
Section 7.2 and prior to receiving retirement benefit payments equal to sixty
(60) times his or her monthly Deferred Retirement Benefit, his or her
Beneficiary shall receive a death benefit equal to sixty (60) times the last
monthly benefit paid to such Participant reduced by the total amount of benefits
paid to such Participant. Such death benefit shall be paid in a lump sum unless
the Beneficiary requests payment in the form of an annuity.
7.3 Qualified Joint and Survivor Annuity. If a Participant is legally
married on the date on which his or her Deferred Retirement Benefit commences,
such benefit shall be paid in the form of a qualified joint and survivor annuity
described in Section 10.5 unless the Participant elects in writing during the
election period described in Section 10.1 not to receive his or her Deferred
Retirement Benefit in the form of a qualified joint and survivor annuity and the
Participant's spouse consents to such election within the time and in the manner
set forth in Section 10.6.
ARTICLE VIII
Termination of Employment
8.1 Termination of Employment. There are no benefits payable under the Plan
if a Participant's employment ceases prior to his or her Normal Retirement Date
unless (a) the Participant is eligible to elect early retirement in accordance
with Section 6.2, (b) a death benefit is payable with respect to such
Participant in accordance with Article IX, or (c) the Participant meets the
requirements of Section 8.2.
8.2 Vested Benefit. If a Terminated Participant, a Terminated Warehouse
Participant, or a Terminated Driver Participant is credited with at least five
(5) Years of Vesting Service at his or her Termination of Employment Date, he or
she shall be entitled to receive a Vested Benefit determined as of his or her
Termination of Employment Date in accordance with Section 4.1 or 4.2.
<PAGE>
8.3 Form of Benefit. Except as provided in Section 8.4, a Terminated
Participant's Vested Benefit, a Terminated Warehouse Participant's Vested
Benefit and a Terminated Driver Participant's Vested Benefit shall be an
annuity, payable monthly for life, commencing at the election of such
Participant with the first day of any month coinciding with or next following
his or her Termination of Employment Date, but prior to his or her Normal
Retirement Date, and ending with the monthly payment preceding the death of such
Participant. If a Terminated Warehouse Participant or a Terminated Driver
Participant hired before January l, 1995, (but only with respect to his or her
Accrued Benefit as of December 31, 1994) dies after his or her Vested Benefit
commences in accordance with this Section 8.3 and prior to receiving benefit
payments equal to sixty (60) times his or her monthly Vested Benefit, his or her
Beneficiary shall receive a death benefit equal to sixty (60) times the last
monthly benefit paid to such Participant reduced by the total amount of benefits
paid to such Participant. Such death benefit shall be paid in a lump sum unless
the Beneficiary requests payment in the form of an annuity.
8.4 Qualified Joint and Survivor Annuity. If a Terminated Participant, a
Terminated Warehouse Participant or a Terminated Driver Participant is legally
married on the date on which his or her Vested Benefit commences, such benefit
shall be paid in the form of a qualified joint and survivor annuity described in
Section 10.5 unless such Participant elects in writing during the election
period described in Section 10.1 not to receive his or her Vested Benefit in the
form of a qualified joint and survivor annuity and the Participant's spouse
consents to such election within the time and in the manner set forth in Section
10.6.
8.5 Forfeitures. A Terminated Participant who is not credited with five (5)
Years of Vesting Service as of his or her Termination of Employment Date shall,
solely for purposes of determining the date as of which he or she shall forfeit
his or her Accrued Benefit, be deemed to have received a lump sum payment of
such Accrued Benefit as of his or her Termination of Employment Date. Such
Terminated Participant shall forfeit his or her Accrued Benefit as of such date;
provided, however, that such forfeiture shall be restored if the Participant is
re-employed by the Employer prior to incurring five (5) consecutive Breaks in
Service.
ARTICLE IX
Death Benefits
9.1 Death Before Annuity Starting Date. In the event of the death of a
Participant, other than a Warehouse Participant, before his or her Annuity
Starting Date, the Participant=s Cash Balance Account as of the end of the month
before distribution is to commence shall be paid in the form of a lump sum to
his or her surviving spouse or, in the case of an unmarried Participant,
Beneficiary. Notwithstanding the preceding sentence to the contrary, if the Cash
Balance Account exceeds $5,000 as of the date distribution is to commence (or
the date of any prior distribution) the
<PAGE>
surviving spouse or Beneficiary may elect payment in the form of a life annuity.
Payment of the death benefit shall, with the consent of the surviving spouse or
Beneficiary, be made or commence as soon as practicable following the date of
death.
A death benefit with respect to any Warehouse Participant who is entitled
to a nonforfeitable benefit under the Plan and who dies before his or her
Annuity Starting Date shall be payable as follows:
(a) If a Warehouse Participant dies while in the employ of an
Employer, or while on an authorized leave of absence from service with an
Employer, then:
(i) If such Participant has not attained age fifty-five (55) and
is survived by a spouse to whom he or she has been legally married for a period
of at least one (1) year, his or her surviving spouse shall be entitled to
receive a death benefit in an amount equal to the greater of the following:
(1) two percent (2%) of such Participant's Average Annual
Compensation determined as of the date of his or her death, multiplied by the
number of his or her Years of Benefit Service determined as of such date, up to
a maximum of twenty-five (25) years; or
(2) the Actuarial Equivalent value as of the date of
distribution of the benefit such spouse would have received if the Participant
had terminated employment on the date of death, had survived to age fifty-five
(55), had commenced receiving benefits under a qualified joint and survivor
annuity described in Section 10.5, and had died the next day;
Such death benefit shall be in the form of an annuity, computed on an
Actuarially Equivalent basis and payable monthly for the life of the surviving
spouse and, with the consent of such spouse, shall commence with the first day
of the month following the month in which the Participant dies; unless such
surviving spouse elects in writing to be paid in a lump sum, in which case such
death benefit shall be paid in a lump sum as soon as practicable following
receipt by the Retirement Committee of such written election.
(ii) If such Participant has attained age fifty-five (55) and is
survived by a spouse to whom he or she has been legally married for a period of
at least one (1) year, his or her surviving spouse shall be entitled to receive
a death benefit in an amount equal to the greater of the following:
(1) the benefit such spouse would have received if the
Participant had retired on the day before his or her death, had elected a
Contingent Annuitant Option under Section 11.3 with one hundred percent (100%)
continued to the Contingent Annuitant, had named his or her spouse as the
Contingent Annuitant and had commenced receiving benefits; or
<PAGE>
(2) Ten Dollars ($10) a month.
Such death benefit shall be in the form of an annuity, payable monthly
for the life of the surviving spouse and, with the consent of such spouse, shall
commence on the first day of the month following the month in which the
Participant dies; unless such surviving spouse elects in writing to be paid in a
lump sum, in which case such death benefit shall be paid in a lump sum as soon
as practicable following receipt by the Retirement Committee of such written
election.
(iii) If such Participant is not survived by a spouse to whom he
or she has been legally married for a period of at least one (1) year, his or
her Beneficiary or surviving spouse, as the case may be, shall be entitled to
receive a death benefit in an amount equal to two percent (2%) of such
Participant's Average Annual Compensation determined as of the date of his or
her death, multiplied by the number of his or her Years of Benefit Service
determined as of such date, up to a maximum of twenty-five (25) years. Such
death benefit shall be in the form of an annuity, payable monthly for the life
of the Beneficiary or surviving spouse and, with the consent of such person,
shall commence on the first day of the month following the month in which the
Participant dies; unless such person elects in writing to be paid in a lump sum,
in which case such death benefit shall be paid in a lump sum as soon as
practicable following receipt by the Retirement Committee of such written
election.
(b) If a Warehouse Participant dies after retiring, the following
death benefit shall be payable:
(i) If such Participant is survived by a spouse to whom he or she
has been legally married for a period of at least one (1) year, his or her
surviving spouse shall be entitled to receive the greater of (1) the death
benefit such spouse would have received if the Participant had commenced
receiving benefits on the day before his or her death in the form elected by the
Participant under Article XI, or (2) the death benefit such spouse would have
received if the Participant had commenced receiving benefits on the day before
his or her death under a qualified joint and survivor annuity described in
Section 10.5; or
(ii) If such Participant is not survived by a spouse to whom he
or she has been legally married for a period of at least one (1) year, his or
her Beneficiary shall be entitled to receive a death benefit equal to sixty (60)
times the monthly Early, Normal or Deferred Retirement Benefit which would have
been paid to such Participant.
Such death benefit shall be paid in a lump sum unless the Beneficiary
requests payment in the form of an annuity.
<PAGE>
(c) If a Warehouse Participant dies after terminating employment, then
(i) If such Participant has not attained age 55 and is survived
by a spouse to whom he or she has been legally married for a period of at least
one year, his or her surviving spouse shall be entitled to receive a death
benefit in an amount determined in accordance with Section 9.1(a)(i). Such death
benefit shall be in the form of an annuity, computed on an Actuarially
Equivalent basis and payable monthly for the life of the surviving spouse,
commencing with the first day of the month following the month in which the
Participant dies; unless such surviving spouse elects in writing to be paid in a
lump sum, in which case such death benefit shall be paid in a lump sum as soon
as practicable following receipt by the Retirement Committee of such written
election.
(ii) If such Participant has attained age fifty-five (55) and is
survived by a spouse to whom he or she has been legally married for a period of
at least one (1) year, his or her surviving spouse shall be entitled to receive
the death benefit such spouse would have received if the Participant had died
while in the employ of an Employer, or while on an authorized leave of absence
from service with an Employer, as provided in Section 9.1(a)(ii).
(iii) If such Participant is not survived by a spouse to whom he
or she has been legally married for a period of at least one (1) year, his or
her Beneficiary or surviving spouse shall receive a death benefit in accordance
with Section 9.1(a)(iii).
9.2 Death After Annuity Starting Date. Upon the death of a Participant
after his or her Annuity Starting Date, the form in which his or her benefit is
paid shall determine the amount, if any, and the form of death benefit payable
with respect to such Participant.
9.3 Designation of Beneficiary. Each unmarried Participant from time to
time, by completing and signing a form furnished by the Retirement Committee,
may designate any person or persons (who may be designated concurrently or
contingently) to receive benefits which are payable under this Plan to his or
her Beneficiary upon his or her death. Each Beneficiary designation shall revoke
all prior designations by the Participant and will be effective only when filed
in writing with the Retirement Committee during the Participant's lifetime. If
an unmarried Participant fails to designate a Beneficiary before his or her
death as aforesaid, or if the Beneficiary dies before the date of the
Participant's death, then the benefits which are payable as aforesaid shall be
paid in such manner as the Retirement Committee may determine to the
Participant's estate. An unmarried Participant may change any Beneficiary
designation without the consent of any Beneficiary.
<PAGE>
9.4 Qualified Domestic Relations Orders. The provisions of this Article
shall be subject to the terms of any qualified domestic relations order (as
defined in Section 414(p) of the Code) which may be in effect with respect to a
Participant at the time distribution of the Participant's vested Accrued Benefit
is to commence; and, the former spouse of a Participant shall be treated, under
this Article, as such Participant's spouse or surviving spouse to the extent
required by any qualified domestic relations order.
ARTICLE X
Qualified Joint and Survivor Annuity Election
10.1 Election Period. The election period during which a Participant may
elect not to receive his or her benefit in the form of a qualified joint and
survivor annuity as described in Sections 5.3, 6.3, 7.3 and 8.4 is the ninety
(90) day period ending on the Annuity Starting Date; provided, however, that if
the Participant requests the additional information described in Section 10.3,
the election period shall be extended, if necessary, to include the sixty (60)
day period following the day on which such additional information is personally
delivered or mailed to the Participant. In the event the election period is
extended, the commencement of the Participant's benefit shall be delayed, if
necessary, until the end of the extended election period, at which time the
deferred benefits, plus such interest as the Retirement Committee shall
determine, shall be paid.
An election under this Section 10.1 must specify the form of benefit, and
if the Participant=s spouse is not the Beneficiary, the nonspouse Beneficiary.
If the Participant designates a trust as Beneficiary, the beneficiaries of the
trust need not be identified and may be changed without the consent of the
Participant=s spouse. An election may be revoked by a Participant in writing
during the election period, and after any such revocation, another election may
be made during the election period.
After the explanation described in Section 10.2 has been furnished, a
Participant shall have at least thirty (30) days to make an election; provided,
however, that a Participant=s Annuity Starting Date may be less than thirty (30)
days after such explanation has been furnished if the following conditions are
met:
(a) the Retirement Committee has informed such Participant, in
writing, of his or her right to a period of at least thirty (30) days to make
such election,
(b) the Participant affirmatively elects to have distribution of his
benefit commence,
(c) the Participant is permitted to revoke such affirmative election
at least until the Annuity Starting Date, or, if later, at any time prior to the
expiration of the seven (7) day period that begins the day after such written
explanation is furnished to the Participant,
(d) the Annuity Starting Date is after the date such written
explanation is provided to the Participant, and
<PAGE>
(e) distribution in accordance with such affirmative election does not
commence before the expiration of the seven (7) day period that begins the day
after the date such written explanation is provided to the Participant.
10.2 Written Explanation. The Retirement Committee shall furnish each
Participant a written explanation of:
(a) the terms and conditions of the qualified joint and survivor
annuity,
(b) the circumstances in which it will be provided unless the
Participant has elected not to receive his or her retirement benefit in the form
of a qualified joint and survivor annuity,
(c) the Participant's right to make the election described in
Section 10.1,
(d) the right of the Participant's spouse to consent to the election
described in Section 10.1,
(e) the right to make, and the effect of, a revocation of an
election under Section 10.1,
(f) the relative financial effect on the Participant's benefit of
such an election,
(g) the eligibility requirements, material features and relative
values of the optional forms of benefit described in Article XI, and
(h) the availability of the additional information described in
Section 10.3.
The written explanation shall be delivered or mailed (first class mail, postage
prepaid) not less than thirty (30) days nor more than ninety (90) days before
the Annuity Starting Date.
10.3 Additional Information Furnished Upon Request. The Retirement
Committee shall furnish to a Participant upon receipt of a written request
within the sixty (60) day period following the date on which the written
explanation described in Section 10.2 is mailed or personally delivered to the
Participant, a further written explanation in nontechnical language of the terms
and conditions of the qualified joint and survivor annuity and the financial
effect, in terms of dollars per annuity payment, upon the particular
Participant's benefit of making the election described in Section 10.1. The
Retirement Committee need not comply with more than one such request made by a
particular Participant. The explanation described herein shall be personally
delivered or mailed (first class mail, postage prepaid) to the Participant
within thirty (30) days from the date of the Participant's written request.
<PAGE>
10.4 Election Not to Receive Qualified Joint and Survivor Annuity. In the
event a Participant elects not to receive his or her retirement benefit in the
form of a qualified joint and survivor annuity, his or her benefit shall be paid
in accordance with Section 5.2, 6.2, 7.2 or 8.3, whichever is applicable, unless
the Participant has elected an optional form of benefit in accordance with
Article XI.
10.5 Qualified Joint and Survivor Annuity. The qualified joint and survivor
annuity described in Sections 5.3, 6.3, 7.3 and 8.4 shall be an annuity for the
life of the Participant with a survivor annuity for the life of his or her
spouse which is equal to fifty percent (50%) of the amount of the annuity
payable during the joint lives of the Participant and his or her spouse. Such
qualified joint and survivor annuity shall be the Actuarial Equivalent of the
normal form of life annuity.
10.6 Spousal Consent. An election by a Participant under Section 10.1 shall
not be effective unless the spouse of the Participant consents in writing to
such election within the applicable election period, and the spouse's consent
acknowledges the effect of such election and is witnessed by a notary public. A
consent by a spouse under this Section shall be effective (only with respect to
such spouse) upon delivery thereof to the Retirement Committee. A revocation of
an election by a Participant under Section 10.1 does not require spousal
consent. Notwithstanding any provision of the Plan to the contrary, spousal
consent shall not be required if a Participant elects a Contingent Annuitant
Option described in Section 11.3, provided that such option is Actuarially
Equivalent to the qualified and joint survivor annuity.
ARTICLE XI
Optional Forms of Benefits
11.1 Early Retirement Benefit - Optional Lump Sum. In lieu of receiving an
Early Retirement Benefit in the manner described in Section 6.2 or 6.3, a
Participant entitled to an Early Retirement Benefit may, with the consent of his
or her spouse, if married, elect to receive an optional lump sum benefit if he
or she commenced employment with an Employer prior to January 1, 1981 or at the
time of making such election he or she is a Driver Participant who was hired
before January 1, 1995, or a Warehouse Participant. For purposes of the
preceding sentence, in determining the time when an Employee commenced
employment with an Employer, any service which is disregarded under Section 1.43
shall not be taken into account. Such election and, if required, spousal
consent, shall be effective upon delivery of a written instrument to the
Retirement Committee within the applicable election period described in Section
10.1. If an electing Participant dies prior to his or her Annuity Starting Date,
such election shall be void, and any death benefit payable with respect to such
Participant shall be determined in accordance with the applicable provisions of
Article IX. A Participant who receives a benefit pursuant to this Section and is
thereafter re-employed by an Employer shall not be eligible to receive a further
benefit under this Section.
<PAGE>
The amount of the optional lump sum benefit for a Driver Participant shall
be equal to 2% of his or her Average Annual Compensation determined as of the
earlier of December 31, 1994, or his or her Early Retirement Date, multiplied by
the number of his or her Years of Benefit Service as of such date, not exceeding
25. The amount of the optional lump sum benefit for a Warehouse Participant
shall be equal to 2% of his or her Average Annual Compensation determined as of
his or her Early Retirement Date, multiplied by the number of his or her Years
of Benefit Service as of such date, not exceeding 25. The amount of the optional
lump sum benefit for any other eligible Participant shall be equal to 2% of his
or her Average Annual Compensation determined as of the earlier of December 31,
1988, or his or her Early Retirement Date, multiplied by the number of his or
her Years of Benefit Service as of such date not exceeding 25.
In the event a Participant elects an optional lump sum benefit as provided
in this Section 11.1 and the present value of his or her Early Retirement
Benefit exceeds the amount of his or her optional lump sum benefit, he or she
shall, in addition to his or her optional lump sum benefit, be entitled to
receive an actuarially reduced Early Retirement Benefit. Such actuarially
reduced Early Retirement Benefit shall be paid at the time and in the manner
which the retired Participant's Early Retirement Benefit would have been paid if
he or she had not elected an optional lump sum benefit under this Section 11.1
and shall be calculated in such a manner that the present value of his or her
actuarially reduced Early Retirement Benefit when added to the amount of his or
her optional lump sum benefit equals the present value of his or her Early
Retirement Benefit.
The present value of a Participant's Early Retirement Benefit shall be
calculated using the interest rate and mortality table set forth in Section
12.2(a). In the event the present value of such Participant's actuarially
reduced Early Retirement Benefit is $10,000 or less, the Retirement Committee
shall, with the written consent of such Participant and, if married, his or her
spouse, distribute the present value of such actuarially reduced Early
Retirement Benefit in a single sum payment at the time such Participant's
optional lump sum benefit is distributed. In the event that a Participant dies
after receiving an optional lump sum benefit and before the Annuity Starting
Date of his or her actuarially reduced Early Retirement Benefit, any death
benefit payable with respect to such Participant shall be determined in
accordance with the applicable provisions of Article IX and shall reflect only
such Participant's actuarially reduced Early Retirement Benefit.
11.2 Vested Benefit - Optional Lump Sum. In lieu of receiving a Vested
Benefit in the manner described in Section 8.3 or 8.4, a Participant entitled to
a Vested Benefit may, with the consent of his or her spouse, if married, elect
to receive an immediate optional lump sum benefit if he or she commenced
employment with an Employer prior to January 1, 1981, or at the time of making
such election, he or she is a Driver Participant who was hired before January 1,
1995, or a Warehouse Participant. For purposes of the preceding sentence, in
determining the time when an Employee commenced employment with an Employer, any
service which is disregarded under Section 1.43 shall not be taken into account.
Such election and, if required, spousal consent, shall be effective upon
delivery of a written instrument to the Retirement Committee within the
applicable election period described in Section 10.1. If an electing Participant
dies prior to his or her Annuity Starting Date, such election shall be void and
any death benefit payable
<PAGE>
with respect to such Participant shall be determined in accordance with the
applicable provisions of Article IX. A Participant who receives a benefit
pursuant to this Section and is thereafter re-employed by an Employer shall not
be eligible to receive a further benefit under this Section.
The amount of the optional lump sum benefit for a Driver Participant shall
be equal to 2% of his or her Average Annual Compensation determined as of the
earlier of December 31, 1994, or his or her Termination of Employment Date,
multiplied by the number of his or her Years of Benefit Service as of such date,
not exceeding 25. The amount of the optional lump sum benefit for a Warehouse
Participant shall be equal to 2% of his or her Average Annual Compensation
determined as of his or her Termination of Employment Date, multiplied by the
number of his or her Years of Benefit Service as of such date, not exceeding 25.
The amount of the optional lump sum benefit for any other eligible Participant
shall be equal to 2% of his or her Average Annual Compensation determined as of
the earlier of December 31, 1988, or his or her Termination of Employment Date,
multiplied by the number of his or her Years of Benefit Service as of such date,
not exceeding 25.
In the event a Participant elects an optional lump sum benefit as provided
in this Section 11.2 and the present value of his or her Vested Benefit exceeds
the amount of his or her optional lump sum benefit, he or she shall, in addition
to his or her optional lump sum benefit, be entitled to receive an actuarially
reduced Vested Benefit. Such actuarially reduced Vested Benefit shall be paid at
the time and in the manner which such Participant's Vested Benefit would have
been paid if he or she had not elected an optional lump sum benefit under this
Section 11.2 and shall be calculated in such a manner that the present value of
his or her actuarially reduced Vested Benefit when added to the amount of his or
her optional lump sum benefit equals the Actuarial Equivalent value of his or
her Vested Benefit.
The present value of a Participant's Vested Benefit shall be calculated
using the interest rate and mortality table set forth in Section 12.2(a). In the
event the present value of such Participant's actuarially reduced Vested Benefit
is $10,000 or less, the Retirement Committee shall, with the written consent of
such Participant and, if married, his or her spouse, distribute the present
value of such actuarially reduced Vested Benefit in a single sum payment at the
time such optional lump sum benefit is distributed. In the event that a
Participant dies after receiving an optional lump sum benefit and before the
Annuity Starting Date of his or her actuarially reduced Vested Benefit, any
death benefit payable with respect to such Participant shall be determined in
accordance with the applicable provisions of Article IX and shall reflect only
such Participant's actuarially reduced Vested Benefit.
<PAGE>
Notwithstanding any provision of the Plan to the contrary, a Participant
who is entitled to elect an immediate lump sum payment may elect within the
applicable election period to receive payment in the normal form prescribed in
Section 8.3 or 8.4, commencing on the date such lump sum payment would be made.
11.3 Contingent Annuitant Option. In lieu of receiving the normal form of
benefit described in Section 5.2, 6.2, 7.2 or 8.3, or the qualified joint and
survivor annuity described in Section 10.5, a Participant may, with the consent
of his or her spouse, if married, elect to have his or her benefit paid in the
form of an Actuarially Equivalent contingent annuity.
A Participant who has elected a Contingent Annuitant Option shall receive
an actuarially reduced benefit during his or her lifetime so that following the
Participant's death, payment of a benefit in an amount equal to one hundred
percent (100%), sixty-six and two-thirds percent (66-2/3%) or fifty percent
(50%) of the Participant's actuarially reduced benefit, as elected by the
Participant, shall continue to the person designated by the Participant
("Contingent Annuitant") at the time of making the election for the life of the
Contingent Annuitant. An election and, if required, spousal consent under this
Section 11.3, shall be effective upon delivery of a written instrument to the
Retirement Committee within the applicable election period described in Section
10.1. If an electing Participant dies prior to his or her Annuity Starting Date,
such election shall be void and any death benefit payable with respect to such
Participant shall be determined in accordance with the applicable provisions of
Article IX. If the Contingent Annuitant dies prior to the commencement of
benefits to the Participant, the Participant's election under this Section 11.3
shall be void and the Participant shall be entitled to his or her normal form of
benefit under the Plan. If the Contingent Annuitant dies after the commencement
of the Participant's benefits under this Plan, the Participant shall receive
only the reduced amount of benefit provided under this option.
If distribution to a Participant commences in the form of a contingent
annuity option for the joint lives of the Participant and a contingent annuitant
other than his or her spouse, the periodic annuity payment payable to the
contingent annuitant must not at any time on and after the date payments are
required to commence to the Participant exceed the applicable percentage for
such period payable to the Participant using the table set forth in regulation
Section 1.401(a)(9)-2 Q&A-6. For purposes of the preceding sentence, a former
spouse to whom all or a portion of a Participant's Accrued Benefit is payable
pursuant to a qualified domestic relations order (as defined in Section 414(p)
of the Code) shall be treated as a spouse of the Participant. If a Participant's
Accrued Benefit is divided and a portion is allocated to an alternate payee
pursuant to a qualified domestic relations order (as defined in Section 414(p)
of the Code), this paragraph shall not apply to the portion so allocated.
<PAGE>
11.4 Five Year Certain and Life Annuity Option. In lieu of receiving the
normal form of benefit described in Section 5.2, 6.2, 7.2 or 8.3, or the
qualified joint and survivor annuity described in Section 10.5, a Participant
may elect an Actuarially Equivalent Five Year Certain and Life Annuity Option
which will provide for an actuarially reduced benefit payable to the Participant
during his or her lifetime with the guarantee that 60 monthly benefit payments
will be made.
If this option is elected and the Participant dies prior to the receipt of
the guaranteed monthly payments, the balance of the guaranteed monthly payments
shall be paid to the Participant's Beneficiary and shall continue until the
total guaranteed monthly payments have been made to the Participant and his or
her Beneficiary. The first such payment to the Beneficiary shall be due and
payable as of the first day of the month following the Participant's death.
In the event there is no Beneficiary living at the death of the
Participant, the balance of the guaranteed monthly payments which would
otherwise have been payable to the Participant's Beneficiary shall be paid to
the Participant's estate. If the Beneficiary of a deceased Participant should
die prior to receiving the balance of the guaranteed monthly payments, the
balance of the guaranteed payments shall be paid to the Beneficiary's estate.
11.5 Life Annuity Option. In lieu of receiving the normal form of benefit
described in Sections 5.2, 6.2, 7.2 or 8.3, or the qualified joint and survivor
annuity described in Section 10.5, a Participant, other than a Warehouse
Participant, may elect an actuarially equivalent Life Annuity Option, payable
monthly for life and ending with the monthly payment preceding the Participant=s
death.
11.6 Lump Sum Option. In lieu of receiving the normal form of benefit
described in Section 5.2, 6.2, 7.2, or 8.3, or the qualified joint and survivor
annuity described in Section 10.5, a Participant, other than a Warehouse
Participant, may elect payment in the form of a lump sum equal to the greater of
(a) his or her Cash Balance Account at the beginning of the month payment is
made, or (b) the present value of his or her Accrued Benefit determined as of
such date based on the interest rate and mortality table set forth in Section
12.2(a).
ARTICLE XII
Actuarial Assumptions and Lump Sum Distributions
12.1 Actuarial Equivalency Assumptions. The following assumptions shall be
used to determine Actuarial Equivalency of benefits payable under the Plan with
respect to Participants, other than Warehouse Participants, who are credited
with at least one Hour of Service on or after January 1, 1998:
<PAGE>
Interest: The rate specified in Section 12.2(a)(i).
Mortality: 1983 Group Annuity Mortality Table, as blended in
accordance with Revenue Ruling 95-6.
The following assumptions shall be used to determine Actuarial Equivalency of
benefits payable under the Plan with respect to Participants who are not
credited with at least one Hour of Service after December 31, 1997, and
Warehouse Participants:
Interest: Six and one-half percent (6-1/2%).
Mortality: 1971 Group Annuity Mortality Table using male rates
for all Participants regardless of sex and male rates set back six (6) years
for all Contingent Annuitants regardless of sex.
In the event the above assumptions are amended, the Actuarial Equivalent of a
Participant's Accrued Benefit on or after the date of such amendment shall be
the greater of (i) the Actuarial Equivalent of such benefit under the Plan, as
amended, or (ii) the Actuarial Equivalent of the Participant's Accrued Benefit,
as of the date of such amendment, under the Plan prior to the amendment.
12.2 Lump Sum Distributions.
(a) Notwithstanding any provision of the Plan to the contrary, if the
present value of the entire nonforfeitable benefit payable with respect to a
Participant, other than a Disabled Participant, or to an alternate payee
pursuant to a qualified domestic relations order, does not exceed $5,000 as of
the date distribution of such benefit is to commence (or the date of any prior
distribution), the Retirement Committee shall direct the Trustee to pay such
benefit in a lump sum as soon as practicable following the Participant's
retirement date, Termination of Employment Date or death, as the case may be, or
in the case of an alternate payee, the date the Retirement Committee determines
that a qualified domestic relations order is qualified. The present value of
such benefit shall be calculated:
(i) using the annual rate of interest on 30-year Treasury
securities for the second full calendar month preceding the first day of the
Plan Year that contains the Annuity Starting Date, with such rate remaining
constant for the Plan Year; and
(ii) using the 1983 Group Annuity Mortality Table, as blended in
accordance with Revenue Ruling 95-6.
In no event, however, shall the present value of such benefit be less than
the present value of the Participant's Accrued Benefit as of December 31, 1995,
calculated under the terms of the Plan in effect on such date, as
<PAGE>
required by the Retirement Protection Act of 1994 (and the regulations
thereunder). A lump sum payment may be made after the Annuity Starting Date only
with the written consent of the Participant (if living) and the Participant's
spouse (if married) within the 90 day period ending on the distribution date.
(b) If the present value of the entire nonforfeitable benefit payable
with respect to a Warehouse Participant exceeds $5,000, but does not exceed
$10,000, as of the date distribution is to commence, such Participant may, at
any time prior to the Annuity Starting Date, elect to receive payment in the
form of an immediate lump sum (in lieu of the form prescribed in Sections 5.2,
6.2, 7.2, 8.3 or 10.5); provided, if the Participant is married, his or her
spouse must consent in writing to such election within the 90 day period ending
on the date of distribution. The present value of such benefit shall be
calculated in the manner set forth in subsection (a) of this Section.
Notwithstanding any provision of the Plan to the contrary, a Participant who is
entitled to elect an immediate lump sum payment may elect within such ninety 90
day period, payment in the normal form prescribed in Articles V, VI, VII or
VIII, as the case may be, commencing on the date such lump sum payment would be
made.
(c) In the event a benefit is payable to an alternate payee (other
than the surviving spouse of a Participant) pursuant to a qualified domestic
relations order, following the death of the Participant and after his or her
Annuity Starting Date, such benefit shall be paid in a lump sum as soon as
practicable following the Participant's death. If such alternate payee is the
Participant's surviving spouse, such payment shall be made only with his or her
written consent within the 90 day period ending on the date of distribution. In
no event shall the aggregate amount of such death benefit payable to all
alternate payees exceed the present value of the benefits payable following the
Participant's death under the form in which the Participant's retirement benefit
was being paid. Present value shall be determined in the manner set forth in
subsection (a) of this Section.
(d) Any election pursuant to this Section shall be in writing and
shall be effective upon receipt by the Retirement Committee. A spouse's consent
under this Section must meet the applicable requirements of Section 10.6.
ARTICLE XIII
Limitation on Benefits
13.1 Limitation For Defined Benefit Plans. The benefits with respect to a
Participant, when expressed as an Annual Benefit, shall not exceed the lesser of
- --
(a) Ninety Thousand Dollars ($90,000.00);
(b) one hundred percent (100%) of the Participant's Highest Average
Compensation.
<PAGE>
The limitation of this Section shall be deemed satisfied if the benefits
payable with respect to a Participant, when expressed as an Annual Benefit, do
not exceed the product of (i) One Thousand Dollars ($1000.00), and (ii) the
Participant's Years of Benefit Service (not exceeding ten (10)), and if an
Employer has not at any time maintained a qualified defined contribution plan, a
Welfare Benefit Fund or an Individual Medical Account in which such Participant
participated.
13.2 Adjustments. The limitation in Section 13.1 shall be subject to the
following adjustments:
(a) If payment of benefits commences before age 62, the limitation
under Section 13.1(a), as reduced pursuant to Section 13.3, if applicable, shall
be the Actuarial Equivalent of such limitation (as adjusted pursuant to Section
13.2(b)) beginning at age 62, actuarially reduced for each month by which
benefits commence before the month in which the Participant attains age 62. For
purposes of making the adjustments required under this subsection, Actuarial
Equivalence shall be determined by using the mortality table specified in
Section 12.2(a)(ii) and an interest rate assumption of 5% or the rate specified
in Section 12.1 of the Plan, whichever is greater; provided, however, effective
for Limitation Years beginning in 1995, the applicable interest rate (as defined
in Section 417(e)(3) of the Code and as determined under Section 12.2(a)(i))
shall be substituted for 5% with respect to any benefits payable in a form
subject to Section 417(e)(3) of the Code. Any decrease in the limitation under
Section 13.1(a) determined in accordance with this subsection shall not reflect
the mortality decrement to the extent that benefits will not be forfeited upon
the death of the Participant.
(b) If payment of benefits commences before Social Security Retirement
Age and on or after age 62, the limitation under Section 13.1(a), as reduced
pursuant to Section 13.3, if applicable, shall be determined as follows:
(i) if the Participant's Social Security Retirement Age is 65, by
reducing such limitation by 5/9 of 1% for each month by which benefits commence
before the month in which the Participant attains age 65; or
(ii) if the Participant's Social Security Retirement Age is
greater than 65, by reducing such limitation by 5/9 of 1% for each of the first
36 months and 5/12 of 1% for each additional month, up to 24 months, by which
benefits commence before the month in which the Participant attains Social
Security Retirement Age.
(c) If payment of benefits commences after Social Security Retirement
Age, the limitation under Section 13.1(a), as reduced pursuant to Section 13.3,
if applicable, shall be adjusted so that such limitation is the Actuarial
Equivalent of a $90,000 Annual Benefit beginning at Social
<PAGE>
Security Retirement Age. For purposes of making the adjustment required under
this subsection, Actuarial Equivalence shall be determined by using the
mortality table specified in Section 12.2(a)(ii) and an interest rate assumption
of 5% or the rate specified in Section 12.1 of the Plan, whichever is less.
Notwithstanding the foregoing to the contrary, a Participant's Accrued
Benefit shall not be reduced below his or her Accrued Benefit as of December 31,
1994.
If the benefit which a Participant would otherwise accrue in a Limitation
Year would produce an Annual Benefit in excess of the limitation prescribed by
this Section, the rate of accrual shall be reduced to the extent necessary to
comply with said limitation.
If a Participant is or has ever been covered under more than one qualified
defined benefit plan maintained by an Employer, the sum of the Participant's
benefits from all such plans, when expressed as an Annual Benefit, shall not
exceed the limitation prescribed by this Section. If the sum of the benefits
which a Participant would otherwise accrue would exceed the limitation
prescribed by this Section, the rate of accrual under this Plan shall be reduced
to the extent that if the rate of accrual under each such other plan was reduced
proportionately the limitation prescribed by this Section would be satisfied.
In the case of an individual who was a Participant in the Plan or in one or
more other qualified defined benefit plans of an Employer as of the first day of
the first limitation year beginning after December 31, 1986, the limitation
prescribed by this Section shall not be less than the individual's accrued
benefit, when expressed as an Annual Benefit, under this Plan and all such other
qualified defined benefit plans as of the end of the last limitation year
beginning before January 1, 1987, disregarding any changes in the terms and
conditions of the plans after May 5, 1986, and any cost of living adjustments
occurring after May 5, 1986. The preceding sentence shall apply only if the Plan
and all such other qualified defined benefit plans met the requirements of
Section 415 of the Code, as in effect for all limitation years beginning before
January 1, 1987.
13.3 Reduction For Less Than Ten (10) Years of Participation or Service.
(a) In the case of a Participant with less than ten (10) years of
participation in the Plan, the limitation described in Section 13.1(a) shall be
reduced by one-tenth (1/10) for each year of participation in the Plan less than
ten (10).
(b) In the case of a Participant who has less than ten (10) Years of
Benefit Service, the limitation described in Section 13.1(b) shall be reduced by
one-tenth (1/10) for each Year of Benefit Service less than ten (10).
(c) The reductions required by this Section shall be applied in the
denominator of the fraction under Section 13.5(a), based upon Years of Benefit
Service, and such years shall include future Years of Benefit Service occurring
before the Participant's Normal Retirement Date. Such future years shall include
the year which contains the Participant's Normal Retirement Date only if it can
reasonably be anticipated that the Participant shall receive credit for a Year
of Benefit Service for such Year.
For purposes of this Section, the term "year of participation" shall mean a Plan
Year in which the Participant is credited with a Year of Benefit Service and is
included as a Participant in the Plan in accordance with Article II for at least
one day in such Plan Year.
13.4 Adjustment to Dollar Limitation. Each January 1 the dollar limitation
in effect under Section 13.1 shall be automatically adjusted for increases in
the cost of living in accordance with regulations promulgated under Section
415(d) of the Code. Such adjustment shall apply to the Limitation Year ending
within the calendar year of the effective date of such adjustment.
13.5 Limitation For Defined Benefit Plan and Defined Contribution Plan. For
Limitation Years beginning before January 1, 2000, if a Participant also
participates or has participated in one or more qualified defined contribution
plans, Welfare Benefit Funds or Individual Medical Accounts maintained by an
Employer, then in addition to the limitation set forth in Section 13.1, the sum
of the fractions determined under subsections (a) and (b) of this Section with
respect to said Participant for any Limitation Year shall not exceed 1.0.
(a) A fraction, the numerator of which is the sum of the Participant's
Projected Annual Benefits under all qualified defined benefit plans (whether or
not terminated) maintained by an Employer and the denominator of which is the
lesser of --
(i) the dollar limitation in effect under Sections 415(b)(1)(A)
and 415(d) of the Code for such year multiplied by 1.24, or
(ii) the amount which may be taken into account under Section
415(b)(1) (B) of the Code with respect to the Participant for such year
multiplied by 1.4.
If the Participant participated as of the first day of the first
limitation year beginning after December 31, 1986, in one or more qualified
defined benefit plans maintained by an Employer which were in existence on May
6, 1986, the denominator of this fraction shall not be less than one hundred and
twenty-five percent (125%) of the sum of the Annual Benefits which the
Participant accrued under such plans as of the end of the last limitation year
beginning before January 1, 1987, disregarding any changes
<PAGE>
in the terms and conditions of the plans after May 5, 1986. The preceding
sentence applies only if the qualified defined benefit plans individually and in
the aggregate satisfied the requirements of Section 415 of the Code as in effect
for all limitation years beginning before January 1, 1987.
(b) A fraction, the numerator of which is the sum of the annual
additions to the Participant's accounts under all qualified defined contribution
plans (whether or not terminated) maintained by an Employer for the current and
all prior limitation years (including the annual additions attributable to the
Participant's nondeductible voluntary contributions under all qualified defined
benefit plans, whether or not terminated, and attributable to all Welfare
Benefit Funds or Individual Medical Accounts and the denominator of which is the
sum of the lesser of the following amounts determined for the current and all
prior limitation years (without regard to whether a qualified defined
contribution plan was maintained by an Employer) in which the Participant
performed service for an Employer:
(i) the dollar limitation in effect under Section 415(c)(1)(A)
of the Code for such year multiplied by 1.24, or
(ii) thirty-five percent (35%) of the Participant's
compensation (as defined in Section 13.8) for such year.
If an Employee was a participant as of the first day of the first
limitation year beginning after December 31, 1986, in one or more qualified
defined contribution plans maintained by an Employer which were in existence on
May 6, 1986, the numerator of this fraction shall be adjusted if the sum of the
fractions under this Section would otherwise exceed 1.0. Under the adjustment,
an amount equal to the product of (i) the excess of the sum of said fractions
over 1.0 multiplied by (ii) the denominator of this fraction, shall be
permanently subtracted from the numerator of this fraction. The adjustment shall
be calculated using the fractions as they would be computed as of the end of the
last limitation year beginning before January 1, 1987, and disregarding any
changes in the terms and conditions of the plans after May 6, 1986, but using
the limitation under Section 415 of the Code applicable to the first limitation
year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before January
1, 1987, shall not be recomputed to treat all nondeductible voluntary
contributions as annual additions.
If the sum of said fractions for any Limitation Year exceeds 1.0, the
Annual Benefits under this Plan and any other qualified defined benefit plan
maintained by an Employer shall be proportionately reduced to the extent
necessary to comply with the limitation of this Section.
13.6 Combining and Aggregating Plans. For purposes of applying the benefit
limitations described in this Article: (a) all qualified defined
benefit plans (whether or not terminated) ever maintained by an
Employer shall be treated as one
defined benefit plan; and
(b) all qualified defined contribution plans (whether or not
terminated) ever maintained by an Employer shall be treated as one defined
contribution plan.
13.7 Certain Contributions Treated as Annual Additions. For purposes of
this Article:
(a) Employer contributions (including "excess contributions" as
defined in Section 401(k) of the Code and "excess aggregate contributions" as
defined in Section 401(m) of the Code), employee contributions and forfeitures
allocated to an individual's account under a qualified defined contribution plan
maintained by an Employer shall constitute annual additions.
(b) Contributions by Employees to a qualified defined benefit plan
maintained by an Employer shall be treated as annual additions to a qualified
defined contribution plan.
(c) Amounts derived from contributions paid or accrued in taxable
years ending after December 31, 1985, and which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee (as required in Section 419A(d) of the Code) under a Welfare Benefit
Fund maintained by an Employer, shall be treated as annual additions to a
qualified defined contribution plan. ("Key employee" shall have the meaning
given such term in Section 16.6(c).)
(d) Contributions allocated after March 31, 1984, to an Individual
Medical Account which is part of a pension or annuity plan maintained by an
Employer shall be treated as annual additions to a qualified defined
contribution plan.
13.8 Definitions
(a) "Annual Benefit" shall mean a benefit which is payable annually in
the form of a straight-life annuity, excluding any benefits attributable to
contributions by Employees, rollover contributions and assets transferred from a
qualified plan not maintained by the Employer. For purposes of applying the
limitations of this Article XIII, a benefit payable in any form other than a
straight-life annuity shall, except as hereinafter provided, be adjusted to a
straight-life annuity using the mortality table specified in Section 12.2(a)(ii)
and an interest assumption of 5% or the rate specified in Section 12.1 for
determining Actuarial Equivalence, whichever is greater; provided, however,
effective for Limitation Years beginning in 1995, the interest rate specified in
Section 12.2(a)(i) shall be substituted for 5% for purposes of adjusting any
form of
<PAGE>
benefit subject to Section 417(e)(3) of the Code. No actuarial adjustment shall
be made, however, for (i) the value of a qualified joint and survivor annuity
(as defined in Section 10.5), (ii) the value of benefits that are not directly
related to retirement benefits (such as qualified disability benefits,
pre-retirement death benefits and post-retirement medical benefits) and (iii)
the value of post-retirement cost of living increases, if any, made in
accordance with Section 415(d) of the Code and Section 1.415-3(c)(2)(iii) of the
Treasury Regulations.
(b) "Compensation," for purposes of applying the limitations of this
Article, shall mean, with respect to a Limitation Year, the total compensation
paid by an Employer to an Employee for services rendered while an Employee that
constitutes wages as defined in Section 3401(a) of the Code, and all other
payments by an Employer to an Employee for services rendered while an Employee
for which an Employer is required to furnish the Employee a written statement
under Sections 6041(d) and 6051(a)(3) of the Code, without regard to any rules
that limit the remuneration included in wages based on the nature or location of
the employment or services performed. Notwithstanding the foregoing to the
contrary, effective January 1, 1998, "compensation" shall include any elective
deferrals within the meaning of Section 402(g)(3) of the Code and any amount
which is contributed or deferred by the Employer at the election of an Employee
and which is not includable in the gross income of the Employee by reason of
Section 125 or 457 of the Code.
(c) "Highest Average Compensation" shall mean the average of a
Participant's compensation (as defined in this Section 13.8) for the period of
three (3) consecutive calendar years (or, the actual number of the Participant's
consecutive years of employment if the Participant has been employed for less
than three (3) consecutive calendar years) during which the Participant was both
an active Participant in the Plan and had the greatest aggregate compensation
(as defined in this Section 13.8) from the Employer.
(d) "Individual Medical Account" shall mean an "individual medical
benefit account" as defined in Section 415(l) of the
Code.
(e) "Limitation Year" shall mean the calendar year or any other twelve
(12) consecutive month period designated by the Board of Directors pursuant to a
written resolution. In the event the Limitation Year is changed, the new
limitation year shall begin within the Limitation Year in which such change is
effective.
(f) "Projected Annual Benefit" shall mean the Annual Benefit to which
a Participant would be entitled under the Plan assuming:
(i) the Participant continues employment with an Employer until
the Normal Retirement Date; and
<PAGE>
(ii) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under the Plan
remain constant for all future Limitation Years.
(g) "Welfare Benefit Fund" shall mean a "welfare benefit fund" as
defined in Section 419(e) of the Code.
ARTICLE XIV
Restriction on Benefits Payable to Certain Participants
14.1 Nondiscriminatory Benefit. Notwithstanding any provision of the Plan
to the contrary, in the event the Plan is terminated, the benefit payable with
respect to a Participant who is an active or former highly compensated employee
(within the meaning of Section 414(q) of the Code) shall be limited to a benefit
that is nondiscriminatory under Section 401(a)(4) of the Code.
14.2 Limits on Annual Payments. Except as hereinafter provided, the annual
payments with respect to a Participant who is one of the twenty-five (25) most
highly compensated active or former highly compensated employees (within the
meaning of Section 414(q) of the Code) shall not exceed an amount equal to the
annual payments that would be made with respect to such Participant under a
straight life annuity that is the Actuarial Equivalent of the Participant's
Accrued Benefit and any other benefits to which he or she is entitled under the
Plan.
The foregoing provisions of this Section shall not apply if--
(a) the value of the Plan's assets equals or exceeds one hundred ten
percent (110%) of the value of the Plan's current liabilities (as defined in
Section 412(l)(7) of the Code), determined as of the same date, after payment
has been made to a Participant described above of all benefits to which he or
she is entitled under the Plan;
(b) the value of the benefits to which a Participant described above
is entitled under the Plan is less than one percent (1%) of the value of current
liabilities (as defined in Section 412(l)(7) of the Code) before such benefits
are distributed; or
(c) the value of the benefits to which a Participant described above
is entitled under the Plan does not exceed Five Thousand Dollars ($5,000.00).
ARTICLE XV
Credit For Years of Benefit Service Upon Re-employment
Following Receipt of an Optional Lump Sum Distribution
15.1 Re-employment With Credit For Prior Years of Benefit Service. If a
Participant who elected to receive an optional lump sum benefit under
<PAGE>
Section 11.1 or Section 11.2 is subsequently re-employed by an Employer, his or
her Years of Benefit Service shall include his or her Years of Benefit Service
prior to the date his or her service terminated only if:
(a) the amount he or she received was less than the Actuarial
Equivalent value of his or her Accrued Benefit, as of the date his or her
service terminated; and
(b) within two (2) years of the date the Participant resumes
employment with an Employer, he or she repays to the Trust the entire amount he
or she received, together with interest computed on such amount from the date of
distribution to the date of repayment, compounded annually from the date of
distribution, at the rate as determined in Section 411(c)(2)(C) of the Code.
Notwithstanding the preceding sentence, a Participant shall not be required to
repay the amount he or she received before the end of a period of five (5)
consecutive one-year Breaks in Service.
15.2 Re-employment Without Credit For Prior Years of Benefit Service. If a
Participant who elected to receive an optional lump sum benefit under Section
11.1 or Section 11.2 is subsequently re-employed by an Employer, his or her
Years of Benefit Service shall not include his or her Years of Benefit Service
prior to the date his or her service terminated if the amount he or she received
was equal to or greater than the Actuarial Equivalent value of his or her
Accrued Benefit as of the date his or her service terminated.
15.3 Re-employment With Partial Credit For Prior Years of Benefit Service.
If a Participant who elected to receive an optional lump sum benefit under
Section 11.1 or Section 11.2 and received less than the Actuarial Equivalent
value of his or her Accrued Benefit is subsequently re-employed, but he or she
does not repay to the Trust the amount he or she received with interest thereon
as provided in Section 15.1, his or her Years of Benefit Service shall include
his or her Years of Benefit Service prior to the date his or her service
terminated, provided, however, any subsequent benefit payable to or in respect
of such Participant shall be reduced by a benefit having an Actuarial Equivalent
value equal to the amount he or she received.
ARTICLE XVI
Top Heavy Provisions
16.1 Top Heavy Requirements. Notwithstanding any provision of this Plan to
the contrary, if the Plan is or becomes Top Heavy with respect to any Employer,
then the provisions of this Article shall become applicable and supersede any
conflicting provisions of this Plan which are applicable with respect to
participation of such Employer in this Plan, but not with respect to the
participation of any other Employer.
16.2 Minimum Vesting Requirement. Except as hereinafter provided, the
nonforfeitable interest of each Participant in his or her Accrued Benefit shall
be determined in accordance with the following schedule:
<PAGE>
Years of Vesting Service Vested Percentage
0 but less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
The nonforfeitable interest of any Participant who is not credited with an
Hour of Service after the Plan becomes Top Heavy shall, however, be determined
in accordance with the provisions of the Plan without regard to this Section.
In the event the Plan ceases to be Top Heavy, the Employer may amend the
vesting schedule, provided the Employer complies with the provisions of Section
21.1.
16.3 Minimum Benefit Requirement. The benefit of each Participant who is a
Non-Key Employee, when expressed as an annual retirement benefit payable in the
form of a single life annuity beginning at his or her Normal Retirement Date,
shall not be less than the Participant's average compensation multiplied by the
lesser of (i) two percent (2%) multiplied by the number of the Participant's
Years of Benefit Service, or (ii) twenty percent (20%). For purposes of this
Section:
(a) the following Years of Benefit Service shall be excluded in
determining the minimum benefit of any Participant:
(i) any Year of Benefit Service if the Plan was not Top Heavy for
the Plan Year ending during such year; and
(ii) any Year of Benefit Service completed in a Plan Year
beginning before January 1, 1984.
(b) The average compensation of a Participant shall mean the average
of the Participant's compensation (as defined in Section 13.8) for the period of
the Participant's Years of Benefit Service (not exceeding five (5)) during which
he or she had the greatest compensation, excluding:
(i) any Year of Benefit Service (and compensation received by the
Participant during such year) which ends in a Plan Year beginning before January
1, 1984; and
(ii) any Year of Benefit Service (and compensation received by
the Participant during such year) which begins after the close of the last year
in which the Plan was Top Heavy.
<PAGE>
16.4 Modified Limitation on Annual Additions. The combined defined
contribution and defined benefit plan limitation set forth in Section 13.5 shall
be applied by substituting 1.0 for 1.25 whenever 1.25 appears therein for each
Plan Year in which the Plan is Top Heavy.
16.5 Present Value Factors. For purposes of determining the Top Heavy
Ratio, the present value of Accrued Benefits of the Plan shall be based on the
following factors:
Interest: Six and one-half percent (6-1/2%) per annum.
Mortality Table: 1971 Group Annuity Mortality Table using
male rates for all individuals regardless of sex.
16.6 Definitions.
(a) "Determination Date" shall mean, with respect to any Plan Year,
the last day of the preceding Plan Year or, in the case of the first Plan Year,
the last day of such Plan Year.
(b) Five Percent Owner" shall mean:
(i) if the Employer is a corporation, any person who owns (or is
considered as owning within the meaning of Section 318 of the Code) more than
five percent (5%) of the outstanding stock of the corporation or stock
possessing more than five percent (5%) of the total combined voting power of all
stock of the corporation; or
(ii) if the Employer is not a corporation, any person who owns
more than five percent (5%) of the capital or profits interest in the Employer.
(c) "Key Employee" shall mean any Employee or former Employee (and the
Beneficiary of such Employee) who at any time during the Plan Year or the four
(4) preceding Plan Years is:
(i) an officer of an Employer having annual compensation (within
the meaning of Section 13.8) greater than fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the Code for any such Plan Year, but in no
event shall more than fifty (50) Employees (or, if less, the greater of three
(3) or ten percent (10%) of all Employees) be treated as Key Employees by reason
of being officers;
(ii) a person owning (or considered as owning within the meaning
of Section 318 of the Code) more than a one-half percent (0.5%) interest, as
well as one of the ten (10) largest interests in the Employer and having annual
compensation (within the meaning of Section 13.8) from an Employer of more than
the limitation in effect under Section 415(c)(1)(A) of the Code for any such
Plan Year;
<PAGE>
(iii) a Five Percent Owner;
(iv) a person who has annual compensation (as defined in Section
13.8) from an Employer of more than One Hundred and Fifty Thousand Dollars
($150,000) and who would be described in (c) above if one percent (1%) was
substituted for five percent (5%).
The determination of who is a Key Employee shall be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder, the
provisions of which are incorporated herein by reference.
(d) "Non-Key Employee" shall mean any Employee who is not a Key
Employee.
(e) "Permissive Aggregation Group" shall mean each qualified
retirement plan of an Employer which is included in a Required Aggregation Group
and any other qualified retirement plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, continues to satisfy
the requirements of Sections 401(a)(4) and 410 of the Code.
(f) "Required Aggregation Group" shall mean each qualified retirement
plan (whether or not terminated) of an Employer in which a Key Employee is a
participant and each other qualified retirement plan of the Employer which
enables any plan of the Employer in which a Key Employee is a participant to
meet the requirements of Sections 401(a)(4) or 410 of the Code.
(g) "Top Heavy" shall mean, with respect to any Plan Year beginning
after December 31, 1983, that, as of the Determination Date:
(i) the Top Heavy Ratio for the Plan exceeds sixty percent (60%),
if the Plan is not included in a Required Aggregation Group; or
(ii) the Top Heavy Ratio for the Required Aggregation Group which
includes the Plan exceeds sixty percent (60%), if the Plan is included in a
Required Aggregation Group, but is not included in a Permissive Aggregation
Group.
(h) "Top Heavy Ratio" shall mean:
(i) if the Plan is not included in a Required Aggregation Group,
a fraction, the numerator of which is the sum of the present values of Accrued
Benefits of Key Employees under the Plan and the denominator of which is the sum
of the present values of Accrued Benefits of all Participants under the Plan; or
(ii) if the Plan is included in a Required Aggregation Group or a
Permissive Aggregation Group, a fraction, the numerator of which is the
<PAGE>
sum of the account balances of Key Employees under all defined contribution
plans included in such group and the present values of the accrued benefits of
Key Employees under all defined benefit plans included in such group and the
denominator of which is the sum of the account balances of all Participants
under all defined contribution plans included in such group and the present
values of the accrued benefits of all Participants under all defined benefit
plans included in such group.
The present value of accrued benefits under the Plan and under each
other plan with which it is aggregated shall be determined, in accordance with
the provisions of Section 416(g) of the Code and the regulations thereunder
which are incorporated herein by reference, as of the plan's most recent
valuation date that falls within or ends with the twelve (12) month period
ending on the plan's Determination Date. When aggregating plans (i) the present
value of accrued benefits shall be determined separately for each plan as of
each plan's most recent valuation date that falls within or ends with said
period and (ii) the present value of accrued benefits shall be calculated with
reference to the Determination Dates that fall within the same calendar year.
The valuation date for the Plan is January 1 which is the same date used for
computing its costs for minimum funding purposes.
In determining the Top Heavy Ratio for any Plan Year, if an individual
is a Non-Key Employee with respect to the Plan or with respect to any other plan
which is included in the same Required Aggregation Group or Permissive
Aggregation Group as the Plan, but was a Key Employee with respect to the Plan
or such other plan for any prior plan year, any account balance or accrued
benefit for such individual shall not be taken into account.
In addition, effective for Plan Years beginning after December 31,
1984, any account balance or accrued benefit of any individual who has not
performed services for the Employer at any time during the five (5) year period
ending on the Determination Date shall not be taken into account; provided,
however, if such individual subsequently performs services for the Employer, his
or her account balance or accrued benefit shall be taken into account, as
required by Treasury regulations, in a subsequent Plan Year.
ARTICLE XVII
Contributions
17.1 Employer Contributions. Each Employer shall from time to time
contribute to the Trust such amounts as shall be required under accepted
actuarial principles to provide the benefits under the Plan and to meet the
funding requirements of ERISA.
17.2 Erroneous Employer Contributions. All contributions by an Employer are
conditioned upon the continued qualification of the Plan under the Code,
including any amendments to the Plan, and upon the deductibility under Section
404 of the Code. Upon the request of an Employer, any contribution made (a) by
reason of a mistake of fact, (b) conditioned upon initial qualification of the
Plan or conditioned upon qualification of the Plan, as amended, or (c) for which
a deduction is disallowed under Section 404 of the Code shall be returned to the
Employer within one (1) year of the mistaken payment of the contribution, the
date of denial of qualification,
<PAGE>
or disallowance of the deduction, as the case may be. The amount which may be
returned to an Employer is the excess of the amount contributed over the amount
that would have been contributed had there not occurred a mistake of fact or a
mistake in determining the deduction. Earnings attributable to any excess
contribution shall not be returned to the Employer, but losses attributable
thereto shall reduce the amount which may be returned.
17.3 Application For Forfeitures. All forfeitures arising from terminations
of employment shall be applied to reduce Employer contributions, and no such
amounts shall in any event be applied to increase the benefits any Participant
would otherwise receive under the Plan at any time prior to the termination of
the Plan.
17.4 Trust. In order to establish a funding medium to carry out the
provisions of the Plan, the Employers shall maintain a Trust with a bank or
trust company as Trustee, as the Finance Committee shall appoint. Such Trust
shall become a part of the Plan and shall provide that no part of the corpus or
income of the Trust Fund shall, except as otherwise provided in this Plan, be
used for, or diverted to, purposes other than the exclusive benefit of the
Participants and their Beneficiaries.
ARTICLE XVIII
Retirement Committee
18.1 Appointment of Retirement Committee. The Human Resources Committee of
the Board of Directors shall appoint a committee of not less than four (4)
individuals who shall have authority to control and manage the administration of
the Plan. A majority of the Retirement Committee shall constitute a quorum, and
an action of the majority present at any meeting shall be deemed the action of
the Committee. Any member of the Retirement Committee may participate in a
meeting of the Committee through conference telephone or similar communications
equipment by means of which all individuals participating in the meeting can
hear each other. Any action of the Retirement Committee may be taken without a
meeting if all 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.
18.2 Appointment, Resignation and Removal. Any person appointed to serve as
a member of the Retirement Committee shall serve at the pleasure of the Human
Resources Committee of the Board of Directors and may be removed by delivery of
written notice of removal which shall take effect at the date specified therein.
Any member of the Retirement Committee may resign at any time by delivering to
the Human Resources Committee a written notice of resignation which shall take
effect at a date specified therein. The Human Resources Committee, as soon as
practicable following delivery of a written notice of removal or receipt of a
written notice of resignation of any member of the Retirement Committee, shall
consider the appointment of a successor.
<PAGE>
18.3 Duties. The Retirement Committee shall be a named fiduciary within the
meaning of Section 402(a)(2) of ERISA with the following powers and complete
discretionary authority to control and manage the operation and administration
of the Plan:
(a) to determine all questions concerning the eligibility of Employees
to participate in and receive benefits under the Plan;
(b) to compute the amount of benefits payable to any Participant or
other person;
(c) to authorize and direct the Trustee with respect to payment of
benefits;
(d) to interpret the provisions of the Plan and to make rules and
regulations for the administration of the Plan;
(e) to maintain all the necessary records for the administration
of the Plan;
(f) to monitor the performance of the Trustee and any Investment
Managers and to report its findings to the Finance Committee not less often than
semiannually;
(g) to act as agent for service of legal process; and
(h) to employ or retain counsel, accountants, actuaries or such other
consultants as may be required to assist in administering the Plan.
The interpretation of the Plan and the construction of Plan provisions that
are made by the Retirement Committee shall be final, conclusive and binding on
all affected parties.
Except as provided in subsection (f) of this Section, the Retirement
Committee shall have no power or authority over the investment of the assets of
the Trust Fund. The Finance Committee, Trustee and/or any duly appointed
Investment Manager or Managers shall have exclusive authority and discretion to
manage and control the Trust Fund in accordance with the terms of the Trust.
18.4 Notice to Trustee. The Retirement Committee shall give the Trustee
written notice whenever a Participant or other person is entitled to receive a
distribution of Plan benefits. Such notice shall indicate the name of the
Participant or other person entitled to receive a distribution and the manner in
which the distribution is to be made.
Unless a Participant otherwise elects, in no event shall the distribution
of benefits to such Participant commence later than the
<PAGE>
sixtieth (60th) day after the latest of (i) the close of the Plan Year in which
occurs the earlier of the date on which the Participant attains age sixty-five
(65) or his or her Normal Retirement Date, (ii) the close of the Plan Year in
which occurs the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan, or (iii) the close of the Plan Year in
which the Participant terminates employment with an Employer and is no longer
employed by any Employer. The aforesaid election may be made by submitting to
the Retirement Committee a written statement, signed by the Participant, which
specifies the date, subject to the restrictions of Section 25.3, on which the
distribution of benefits shall commence.
18.5 Fiduciary Duties. The Retirement Committee shall discharge its duties
under the Plan solely in the interest of the Participants and their
Beneficiaries and:
(a) for the exclusive purpose of (i) providing benefits to
Participants and their Beneficiaries, and (ii) defraying reasonable expenses of
administering the Plan; and
(b) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
18.6 Reporting and Disclosure. The Retirement Committee shall furnish to
each Participant and to each other person who is receiving benefits under the
Plan, and shall file with the Secretary of Labor, the Secretary of Treasury and
the Pension Benefit Guaranty Corporation all reports, disclosures and
notifications as are required under the Code.
18.7 Delegation of Ministerial Duties. The Retirement Committee may
delegate to any member or members of the Committee or to any Employee or
Employees, severally or jointly, the authority to perform any ministerial act in
connection with the administration of the Plan.
18.8 Compensation and Reimbursement of Expenses. The members of the
Retirement Committee shall be entitled to reasonable compensation for services
rendered, and to reimbursement of expenses properly and actually incurred, in
the performance of their duties on behalf of the Plan, but no person so serving
who already receives pay from an Affiliated Employer shall receive compensation
for such services, except for reimbursement of expenses properly and actually
incurred and not otherwise reimbursed.
18.9 Uniformity of Rules and Regulations. In the administration of the Plan
and the interpretation and application of its provisions, the Retirement
Committee shall exercise its powers and authority in a nondiscriminatory manner,
and shall apply uniform administrative rules and
<PAGE>
regulations in order to assure substantially the same treatment to Participants
in similar circumstances.
18.10 Reliance on Reports. The Retirement Committee shall be entitled to
rely upon all certificates and reports made by any counsel, accountant, actuary
or other consultant employed or retained to assist in administering the Plan.
18.11 Multiple Signatures. A majority of the members of the Retirement
Committee or any one member authorized by such Committee shall have authority to
execute all documents, reports or other memoranda necessary or appropriate to
carry out the actions and decisions of the Retirement Committee. The Trustee,
Any Investment Manager or any other interested party may rely upon any document,
report or other memorandum so executed as evidence of the Retirement Committee
action or decision indicated thereby.
18.12 Payment of Plan Expenses. Notwithstanding any provision of the Plan
or the Trust to the contrary, payment of any reasonable expenses of
administering the Plan, as determined by the Retirement Committee, shall be made
from the Trust Fund, unless paid by the Employer. If such expenses are incurred
as a result of services provided to the Plan or Trust by a party in interest (as
defined in Section 3(14) of ERISA), no payment shall be made from the Trust Fund
unless such payment - (a) satisfies the applicable requirements of Section 408
of ERISA and the regulations thereunder; or (b) is otherwise exempt from the
applicable prohibited transaction rules of the Code and ERISA.
ARTICLE XIX
Finance Committee
19.1 Duties. The Finance Committee shall be a named fiduciary within the
meaning of Section 402(a)(2) of ERISA and shall have the following duties and
responsibilities:
(a) to appoint and remove the Trustee and establish the terms of the
Trust Agreement;
(b) to establish investment policies and objectives with regard to
management of the Trust Fund; and
(c) to appoint one or more Investment Managers to direct the
investment of the Trust Fund or such portion thereof as may be designated by the
Finance Committee, to remove any Investment Manager, and to establish investment
guidelines which shall be binding on such Investment Managers.
A majority of the Finance Committee shall constitute a quorum, and an
action of the majority present at any meeting shall be deemed the action of the
Committee. Any member of the Finance Committee may participate in a meeting of
the Committee through conference telephone or similar
<PAGE>
communications equipment by means of which all individuals participating in the
meeting can hear each other. Any action of the Finance Committee may be taken
without a meeting if all 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. In carrying out its duties, the Finance Committee
may employ or retain counsel, accountants, actuaries and such other consultants
as it deems to be in the best interests of the Plan. The Finance Committee may
delegate to any member or members of the Committee or to any Employee or
Employees, severally or jointly, the authority to perform any ministerial act in
connection with the administration of the Plan.
The Finance Committee shall have no power or authority to control the
operation and administration of the Plan, apart from its duties as enumerated in
this Section.
19.2 Fiduciary Duties. The Finance Committee shall discharge its duties
under the Plan and Trust solely in the interest of the Participants and their
Beneficiaries and:
(a) for the exclusive purposes of (i) providing benefits to the
Participants and Beneficiaries; and (ii) defraying reasonable expenses of
administering the Plan and Trust;
(b) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims; and
(c) by diversifying the investments of the Trust so as to minimize the
risk of large losses, unless under the circumstances it is clearly prudent not
to do so.
19.3 Compensation and Reimbursement of Expenses. The members of the Finance
Committee shall be entitled to reasonable compensation for services rendered,
and to reimbursement of expenses properly and actually incurred, in the
performance of their duties on behalf of the Plan, but no person so serving who
already receives compensation from an Affiliated Employer for services rendered
as an Employee shall receive compensation for such services, except for
reimbursement of expenses properly and actually incurred and not otherwise
reimbursed.
19.4 Reliance on Reports. The Finance Committee shall be entitled to rely
upon all certificates and reports made by any counsel, accountant, Actuary,
Investment Manager or other consultant employed or retained to assist in
administering the Plan and Trust.
19.5 Multiple Signatures. A majority of the members of the Finance
Committee or any one member authorized by such Committee shall have authority to
execute all documents, reports or other memoranda necessary or appropriate to
carry out the actions and decisions of the Finance Committee. The Trustee, Any
Investment Manager or any other interested party may rely upon any document,
report or other memorandum so executed as evidence of the Finance Committee
action or decision indicated thereby.
<PAGE>
ARTICLE XX
Claims Procedure
20.1 Filing a Claim For Benefits. A Plan Participant or other person
entitled to benefits under the Plan may make a claim for Plan benefits by filing
a written request with the Retirement Committee upon a form to be furnished to
it for such purpose.
20.2 Denial of Claim. If a claim is wholly or partially denied, the
Retirement Committee shall furnish the claimant with written notice setting
forth in a manner calculated to be understood by the claimant:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the
denial is based;
(c) a description of any additional material or information necessary
for the claimant to perfect his or her claim and an explanation why such
material or information is necessary; and
(d) appropriate information as to the steps to be taken if the
claimant wishes to submit his or her claim for review.
Such notice shall be furnished to the claimant within ninety (90) days
after receipt of his or her claim, unless special circumstances require an
extension of time for processing his or her claim. If an extension of time for
processing is required, the Retirement Committee shall, prior to the termination
of the initial ninety (90) day period, furnish the claimant with written notice
indicating the special circumstances requiring an extension and the date by
which the Committee expects to render its decision. In no event shall an
extension exceed a period of ninety (90) days from the end of the initial ninety
(90) day period.
20.3 Appeal of Denied Claim. A claimant may request the Retirement
Committee to review a denied claim. Such request shall be in writing and must be
delivered to the Retirement Committee within sixty (60) days after receipt by
the claimant of written notification of denial of claim. A claimant or his or
her duly authorized representative may:
(a) review pertinent documents, and
(b) submit issues and comments in writing.
20.4 Decision on Appeal. The Retirement Committee shall notify the claimant
of its decision on review not later than sixty (60) days after receipt of a
request for review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered
<PAGE>
as soon as possible, but not later than one hundred twenty (120) days after
receipt of a request for review. If an extension of time for review is required
because of special circumstances, written notice of the extension must be
furnished to the claimant prior to the commencement of the extension. The
Retirement Committee's decision on review shall be in writing and shall include
specific reasons for the decision, as well as specific references to the
pertinent Plan provisions on which the decision is based.
ARTICLE XXI
Amendment and Termination
21.2 Amendment. The Board of Directors may from time to time amend any or
all provisions of the Plan, provided that no amendments shall, except as
otherwise provided in this Plan, permit any part of the Trust Fund to revert to
any Employer or to be used or diverted to purposes other than the exclusive
benefit of the Participants, their surviving spouses and Beneficiaries. Each
such amendment shall be effective in respect of each adopting Employer without
further action by any such Employer.
If the vesting provisions in effect under the Plan are amended, each
Participant who has completed at least three (3) Years of Vesting Service, may
elect to have his or her nonforfeitable interest determined without regard to
such amendment. The Retirement Committee shall promptly furnish each such
Participant with written notice of the adoption of such amendment and the
availability of the election to have his or her nonforfeitable interest
determined without regard to such amendment. An election by a Participant shall
be in writing and shall be effective if filed with the Retirement Committee at
any time during the period beginning with the date such amendment is adopted and
ending on the later of (i) the date which is sixty (60) days after the day such
amendment is adopted, (ii) the day which is sixty (60) days after the day such
amendment becomes effective, or (iii) the day which is sixty (60) days after the
Participant receives written notice of such amendment. An election once made
shall be irrevocable.
No amendment shall, except to the extent permitted under Section 412(c)(8)
of the Code, decrease a Participant's Accrued Benefit or, except to the extent
permitted by Section 411(d)(6) of the Code, eliminate an early retirement
benefit, a retirement type subsidy or an optional form of benefit. In addition,
no amendment shall have the effect of decreasing a Participant's nonforfeitable
interest determined without regard to such amendment as of the later of the date
such amendment is adopted or the date it becomes effective.
21.2 Termination. An Employer may terminate the Plan with respect to its
Employees at any time. Upon complete or partial termination of the Plan by an
Employer, the rights of its affected Participants to their respective Accrued
Benefits, based on Years of Benefit Service prior to the date of termination,
shall become fully vested and nonforfeitable. The assets of
<PAGE>
the Trust, other than the assets held pursuant to Article XXII, attributable to
such Employer, after payment of all proper expenses, shall be liquidated by the
payment or provision for the payment of benefits in the following order of
preference:
(a) First, in the case of benefits payable as an annuity:
(i) In the case of a benefit of a Participant or Beneficiary
which was in pay status as of the beginning of the three (3) year period ending
on the termination date of the Plan, to each such benefit, based on the
provisions of the Plan (as in effect during the five (5) year period ending on
such date) under which such benefit would be the least; and
(ii) In the case of a Participant's or Beneficiary's benefit
(other than a benefit described in (1) above) which would have been in pay
status as of the beginning of such three (3) year period if the Participant had
retired prior to the beginning of the three (3) year period and if his or her
benefits had commenced (in the normal form of pension payment) as of the
beginning of such period, to each such benefit based on the provisions of the
Plan (as in effect during the five (5) year period ending on such date) under
which such benefit would be the least.
For purposes of (i) above, the lowest benefit in pay status during a three
(3) year period shall be considered the benefit in pay status for such period.
(b) Second, (i) to all other benefits (if any) of individuals under
the Plan guaranteed under Title IV of ERISA (determined without regard to
Section 4022B(b) of ERISA, and (ii) to the additional benefits (if any) which
would be determined under (i) if Section 4022(b)(5) of ERISA did not apply.
(c) Third, to all other nonforfeitable benefits under the Plan.
(d) Fourth, to all other benefits under the Plan.
(e) Fifth, any balance attributable to such Employer remaining in the
Trust Fund after payment or providing for payment of the benefits described in
the foregoing categories (a) through (d) shall be returned to the Employer.
If the assets of the Trust attributable to such Employer available for
allocation under any category (other than category (c) or (d)) are insufficient
to satisfy in full the benefits of all individuals which are described in that
category, the assets shall be allocated pro rata among such individuals on the
basis of the present value (as of the termination date) of their respective
benefits described in that category. If the assets of the Trust available for
allocation under category (c) are not sufficient to satisfy in full the benefits
of individuals described in that
<PAGE>
category, then (i) except as provided in subsection (ii), the assets shall be
allocated to the benefits of individuals described in category (c) on the basis
of the benefits of individuals which would have been described in category (c)
under the Plan as in effect at the beginning of the five (5) year period ending
on the date of Plan termination; and (ii) if the assets available for allocation
under subsection (i) are sufficient to satisfy in full the benefits described in
category (c), then for purposes of subsection (i) benefits of such individuals
described therein shall be determined on the basis of the Plan as amended by the
most recent Plan amendment effective during such five (5) year period under
which the assets available for allocation are sufficient to satisfy in full the
benefits of individuals described in subsection (i) and any assets remaining to
be allocated under such subsection shall be allocated under subsection (i) on
the basis of the Plan as amended by the next succeeding plan amendment effective
during such period.
ARTICLE XXII
Retiree Medical Benefits
22.1 401(h) Account. The Trustee shall establish and maintain a separate
account ("401(h) account") for the payment, in accordance with this Article, of
benefits for sickness, accident, hospitalization and medical expenses of retired
Employees, their spouses and their dependents. The provision of such benefits is
intended to comply with the applicable requirements of Section 401(h) of the
Code and the regulations thereunder.
22.2 Retiree Medical Benefits. The benefits payable under this Article
("Retiree Medical Benefits") and the amount to be paid shall be determined under
the terms and provisions of the Hannaford Bros. Co. Retiree Medical Plan
("Retiree Medical Plan"), as the same may from time to time be amended. In no
event shall payment of any benefit be made under this Article with respect to
any Employee unless --
(a) the Employee, or his or her spouse or dependent, is entitled to
such benefit under the Retiree Medical Plan; and
(b) the Employee is eligible to receive retirement benefits under the
Plan or has terminated employment due to permanent disability. For purposes of
the preceding sentence an Employee shall not be considered eligible to receive
retirement benefits if termination of employment is a condition to receiving
such benefits.
22.3 Contributions. Each Employer whose Employees are eligible to
participate in the Retiree Medical Plan may from time to time contribute to the
Trust amounts to be allocated to the 401(h) account. At the time of each such
contribution, the Employer shall designate in writing that the contribution is
to be used to fund Retiree Medical Benefits. An Employer's contributions to the
401(h) account shall be reasonable and ascertainable and shall not exceed the
total cost of providing Retiree Medical Benefits to
<PAGE>
its Employees. The total cost of providing Retiree Medical Benefits shall be
determined in accordance with any generally accepted actuarial method which is
reasonable in view of the provisions of the Retiree Medical Plan, the funding
medium, and other applicable considerations. In no event shall the aggregate
Employer contribution to fund Retiree Medical Benefits for any taxable year
exceed the greater of --
(a) an amount determined by distributing the remaining unfunded costs
of past and current service credits as a level amount or a level percentage of
Compensation over the remaining future service of each Employee; or
(b) ten percent (10%) of the total cost required to fund such
benefits.
To determine the appropriate limit under the preceding sentence, either
subsection (a) shall apply to all Employees or subsection (b) shall apply to all
Employees.
In addition, the aggregate contributions for Retiree Medical Benefits when
added to the contributions, if any, under the Plan, for life insurance benefits,
shall not exceed twenty-five percent (25%) of the total actual contributions to
the Plan (other than contributions for past service credits) after January 1,
1990. For purposes of this Section, life insurance benefits include any benefit
paid under the Plan as a result of a Participant's death, to the extent such
payment exceeds the amount of the reserve required to provide the retirement
benefits accrued by the Participant as of the date of death.
22.4 Forfeitures. In the event that the interest of any individual in
Retiree Medical Benefits is forfeited prior to the termination of the Retiree
Medical Plan, an amount equal to the amount of such forfeiture shall be applied
as soon as possible to reduce future Employer contributions to fund Retiree
Medical Benefits. Notwithstanding the preceding sentence, at no time shall an
Employee or his or her spouse or dependents have a vested interest in Retiree
Medical Benefits or in the 401(h) account; neither shall retirement nor
entitlement to retirement benefits hereunder create any such vested interest in
any individual.
22.5 Investments. The 401(h) account shall be maintained for record keeping
purposes only, and contributions to the 401(h) account may be commingled for
investment purposes with contributions pursuant to Article XVII of the Plan,
provided that earnings and losses on investments are allocated to the 401(h)
account in the same proportion that the value of assets in the 401(h) account
bears to the total value of all Plan assets.
22.6 Reversion to Employer. Prior to the satisfaction of all liabilities
hereunder to pay Retiree Medical Benefits, no part of the corpus or income of
the 401(h) account may be used for, or diverted to, any purpose
<PAGE>
other than the satisfaction of such liabilities or the payment of any necessary
or appropriate expenses attributable to the administration of the 401(h)
account. After satisfaction of all liabilities hereunder to pay Retiree Medical
Benefits, any assets remaining in the 401(h) account shall be returned to the
Employers in the same proportion that each such Employer's aggregate
contributions to the 401(h) account bear to the total contributions of all such
Employers to the 401(h) account.
22.7 Key Employees. The Trustee shall establish and maintain a separate
sub-account within the 401(h) account with respect to the Retiree Medical
Benefits payable to a key employee (within the meaning or Section 16.6(c)) or
his or her spouse and dependents, and such benefits shall be payable only from
such sub-account.
ARTICLE XXIII
Inalienability of Benefits;
Qualified Domestic Relations Orders
23.1 Inalienability of Benefits. Except as expressly provided below, the
benefits provided under the Plan shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind (other than collection by
the United States on a judgment resulting from an unpaid tax assessment or a
federal tax levy made pursuant to Code Section 6331), and any attempt to cause
such benefits to be so subjected will not be recognized.
Effective August 5, 1997, Section 23.1 shall not apply to any offset of a
Participant's benefit hereunder against an amount that the Participant is
ordered or required to pay to the Plan, and the Plan shall not be treated as
failing to meet the requirements of Section 401(a)(13) of the Code solely by
reason of such an offset, provided:
(a) the order or requirement to pay arises (i) under a judgment of
conviction for a crime involving the Plan; (ii) under a civil judgment
(including a consent order or decree) entered by a court in an action brought in
connection with a violation (or alleged violation) of Part 4 of Subtitle B of
Title I of ERISA; or (iii) pursuant to a settlement agreement between the
Secretary of Labor and the Participant, or a settlement agreement between the
Pension Benefit Guaranty Corporation and the Participant, in connection with a
violation (or alleged violation) of Part 4 of Subtitle B of Title I of ERISA by
a fiduciary or any other person;
(b) the judgment, order, decree or settlement agreement expressly
provides for the offset of all or a part of the amount ordered or required to be
paid to the Plan against the Participant's benefit hereunder; and
(c) if the Participant has a spouse at the time at which the offset is
to be made, either (i) the spouse has consented in writing to such offset and
such consent is witnessed by a notary public (or it is established to the
satisfaction of the Retirement Committee that such consent may not be obtained
because there is no spouse or the spouse cannot be located), or the spouse has
consented in accordance with the requirements of Section 417(a) of the Code and
Section 10.6 of the Plan to the Participant=s waiver of the qualified joint and
survivor annuity described in Section 10.5; (ii) such spouse is ordered or
required in such judgment, order, decree or settlement to pay an amount to the
Plan in connection with a violation of Part 4 of Subtitle B of Title I of ERISA;
or (iii) in such judgment, order, decree or settlement, such spouse retains the
right to receive the survivor benefit under the qualified joint and survivor
annuity, determined as if (1) the Participant terminated employment on the date
of
<PAGE>
the offset; (2) there was no offset; (3) the Plan permitted commencement of
benefits only on or after the Participant=s Normal Retirement Date; (4) the Plan
provided only the minimum-required qualified joint and survivor annuity; and (5)
the amount of the qualified pre-retirement survivor annuity is equal to the
amount of the survivor annuity payable under the minimum-required qualified
joint and survivor annuity.
For purposes of this Section, the term "minimum-required qualified joint
and survivor annuity" means the qualified joint and survivor annuity that is the
actuarial equivalent of the Participant's accrued benefit (within the meaning of
Section 411(a)(7) of the Code) and under which the survivor annuity is fifty
percent (50%) of the amount of the annuity which is payable during the joint
lives of the Participant and his or her spouse.
23.2 Qualified Domestic Relations Orders. The provisions of the immediately
preceding section shall apply to the creation, assignment or recognition of a
right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless the order is determined to be a qualified
domestic relations order.
23.3 Notice. Upon the receipt of any domestic relations order by the Plan,
the Retirement Committee shall promptly notify, in writing, the Participant and
any alternate payee named in the domestic relations order (at the address
included in the domestic relations order) of the receipt of such order and the
Plan's procedures for determining the qualified status of such domestic
relations order.
23.4 Representative. Any alternate payee named in a domestic relations
order received by the Plan shall have the right to designate, by notice in
writing to the Retirement Committee, a representative for the receipt of copies
of notices that are sent to the alternate payee with respect to such domestic
relations order.
23.5 Separate Account. During any period in which the issue of whether a
domestic relations order is a qualified domestic relations order is being
determined (by the Retirement Committee, by a court of competent jurisdiction,
or otherwise), the Retirement Committee shall direct the Trustee to segregate in
a separate interest-bearing account in the Plan or in an interest-bearing escrow
account, the amounts which would have been payable to any alternate payee during
such period if the order had been determined to be a qualified domestic
relations order.
23.6 Determination by Retirement Committee.
(a) Within ninety (90) days after receipt of a domestic relations
order, the Retirement Committee shall determine whether such order is a
qualified domestic relations order and shall notify, in writing, the Participant
and each alternate payee named in such order of such determination.
<PAGE>
(b) If the Retirement Committee shall determine that the domestic
relations order is a qualified domestic relations order, the Retirement
Committee shall direct the Trustee to pay to each alternate payee named in such
order, the benefits required to be paid under such order, including any amounts
segregated in a separate account or escrow account in accordance with the
immediately preceding Section (including any interest thereon).
(c) If the Retirement Committee shall determine that the domestic
order is not a qualified domestic relations order, the notice required by
subsection (a) above shall include a statement of the specific reason or reasons
for the Retirement Committee's determination and the Retirement Committee shall
direct the Trustee to continue to segregate, in a separate account or escrow
account, during the eighteen (18) month period beginning on the date that the
first payment is required to be made under such domestic relations order, any
amounts which would have been payable to any alternate payee during such
eighteen (18) month period if the order had been determined to be a qualified
domestic relations order, unless such order shall sooner be determined, by the
Retirement Committee or a court of competent jurisdiction, to be a qualified
domestic relations order, in which event the Retirement Committee shall direct
the Trustee to make payment of any such segregated amount to each alternate
payee named in the order in accordance with subsection (b) above. If neither the
Retirement Committee nor a court of competent jurisdiction shall determine
within said period of eighteen (18) months that such domestic relations order is
a qualified domestic relations order; then, upon expiration of said period, the
Retirement Committee shall direct the Trustee to pay any such segregated amount
(including any interest thereon) to the person or persons who would have been
entitled to such amounts if there had been no order.
23.7 Definitions. As used in this Article, the following terms shall have
the meanings hereinafter set forth:
(a) "Alternate payee" shall mean any spouse, former spouse, child or
other dependent of a Participant who is recognized by a domestic relations order
as having a right to receive all, or a portion of, the benefits payable under
the Plan with respect to such Participant.
(b) "Domestic relations order" shall mean any judgment, decree or
order (including approval of property settlement agreement) which relates to the
provisions of child support, alimony payments or marital property rights to a
spouse, former spouse, child or other dependent of a Participant, and is made
pursuant to a state domestic relations law (including a community property law).
(c) "Earliest retirement age" shall mean the date on which, under the
Plan, a Participant could elect to receive retirement benefits.
(d) "Qualified domestic relations order" shall mean a domestic
relations order which:
<PAGE>
(i) creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to, receive all or a
portion of the benefits payable with respect to a Participant under the Plan;
and
(ii) clearly specifies:
(1) the name and the last known mailing address (if any) of
the Participant and the name and mailing address of each alternate payee covered
by the order;
(2) the amount or percentage of the Participant's benefits
to be paid by the Plan to each such alternate payee, or the manner in which such
amount or percentage is to be determined;
(3) the number of payments or period to which such order
applies; and
(4) each plan to which such order applies; and
(iii) does not require the Plan to:
(1) provide any type or form of benefits, or any option, not
otherwise provided under the Plan;
(2) provide increased benefits (determined on the basis of
actuarial value); or
(3) pay benefits to an alternate payee which are to be paid
to another alternate payee under an order previously determined to be a
qualified domestic relations order.
In the case of any payment to an alternate payee before a Participant has
separated from service, a domestic relations order shall not be treated as
failing to meet the requirements of clause (1) of subparagraph (iii) solely
because such order requires that payment of benefits be made to an alternate
payee:
(i) on or after the date on which the Participant attains (or
would have attained) the earliest retirement age;
(ii) as if the Participant has retired on the date on which such
payment is to begin under such order; and
(iii) in any form in which such benefits may be paid under the
Plan to the Participant (other than in the form of a qualified joint and
survivor annuity with respect to the alternate payee and his or her subsequent
spouse).
<PAGE>
ARTICLE XXIV
Direct Rollovers
24.1 Eligibility. A Participant who is entitled to receive a lump sum
payment from the Plan may elect to have such payment (or portion thereof not
less than $500) made directly to an individual retirement account described in
Section 408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code (other than an endowment contract), a trust described
in Section 401(a) of the Code which is exempt from tax under Section 501(a) of
the Code and which is part of a defined contribution plan described in Section
414(i) of the Code that permits rollover contributions, or an annuity plan
described in Section 403(a) of the Code.
An alternate payee who is entitled to receive a lump sum payment from the
Plan pursuant to a qualified domestic relations order under Article XXIII and
who is the spouse or a former spouse of a Participant may make an election
pursuant to the preceding paragraph as if such alternate payee were the
Participant.
A surviving spouse who is entitled to receive a lump sum payment from the
Plan by reason of the Participant's death may elect to have such payment (or a
portion thereof not less than $500.00) made directly to an individual retirement
account described in Section 408(a) of the Code or an individual retirement
annuity described in Section 408(b) of the Code. A surviving spouse who is the
Participant's beneficiary under a Five Year Certain and Life Annuity and who is
entitled to receive payments under such annuity by reason of the Participant's
death may elect as hereinafter provided to have such payments (or a portion
thereof not less than $500.00) made directly to an individual retirement account
described in Section 408(a) of the Code or an individual retirement annuity
described in Section 408(b) of the Code, provided the aggregate amount of such
payments for the calendar year will be at least $200.00.
The preceding provisions of this Section shall apply only to the extent
payment to the Participant, alternate payee, or surviving spouse, as the case
may be, is not required under Section 25.3.
24.2 Notice. No earlier than ninety (90) days and no later than thirty (30)
days before a lump sum payment is to be made under the Plan, or before payments
commence to a surviving spouse under a Five Year Certain and Life Annuity, the
Retirement Committee shall provide the Participant, alternate payee, or
surviving spouse, as the case may be, with a written explanation of -
(a) the rules under which he or she may elect a payment pursuant to
this Article ("direct rollover");
<PAGE>
(b) the legal requirement that federal income tax be withheld from the
payment if he or she does not elect a direct rollover;
(c) the rules under which the amount that he or she actually receives
will not be subject to federal income tax if such amount is transferred ("rolled
over") within sixty (60) days after being received pursuant to Section 402(c) of
the Code;
(d) the rules, if applicable, for receiving special income tax
averaging, or capital gain treatment, under Section 402(d) of the Code; and
(e) the Plan provisions under which a direct rollover election by a
surviving spouse with respect to one payment in a series of periodic payments
under a Five Year Certain and Life Annuity will apply to all subsequent payments
until such election is changed.
Such written explanation shall be provided annually to a surviving
spouse receiving benefits under a Five Year Certain and Life Annuity.
Notwithstanding the foregoing to the contrary, if an individual, after
receiving the written explanation required by this Section, affirmatively elects
to make a direct rollover, an eligible rollover distribution may be made less
than thirty (30) days after the date such written explanation was given,
provided the Retirement Committee has informed such individual, in writing, of
his or her right to a period of at least thirty (30) days to make such election.
24.3 Election. An election pursuant to this Article shall be made in such
manner and at such time as the Retirement Committee shall prescribe and shall
include:
(a) the name of the individual retirement account or plan receiving
the direct rollover;
(b) a statement that such account or plan is eligible to receive a
direct rollover; and
(c) any other information necessary to permit a direct rollover by the
means selected by the Retirement Committee.
If a Participant is married, a direct rollover of a payment exceeding
$5,000 may not be made unless such Participant has obtained the written consent
of his or her spouse as required by Section 10.6. An alternate payee who is a
former spouse of a Participant shall not be required to obtain the written
consent of his or her new spouse, if remarried, in order to make a direct
rollover.
An election by a surviving spouse to make a direct rollover with respect to
one payment in a series of periodic payments under a Five Year
<PAGE>
Certain and Life Annuity shall apply to all subsequent payments in the series
until such election is changed; such change with respect to subsequent payments
may be made at any time.
ARTICLE XXV
Miscellaneous
25.1 Merger or Consolidation of Plan. In case of any merger or
consolidation of the Plan with, or transfer of assets or liabilities of the Plan
to, any other plan, provision must be made so that each Participant would, if
the Plan then terminated, receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he or
she would have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated. In the case of a plan
spin-off from the Plan, the applicable percentage of "excess assets," as defined
in Section 414(l) of the Code, if any, shall be allocated to the spun off plan,
as required under such section.
25.2 Distributions to Minors and Incompetent Persons. If any person to whom
benefits shall be distributable under the Plan shall be a minor or if the
Retirement Committee, in its discretion, shall determine that such person is
incompetent by reason of mental or physical disability, the Retirement Committee
may direct the Trustee to distribute such benefits in one or more of the
following ways:
(a) directly to such minor or incompetent person;
(b) to the legal representative or spouse of such person; or
(c) to any other person for the use or benefit of such minor or
incompetent person.
In no event shall either the Retirement Committee or Trustee be required to
see to the application of any such distributions, and distributions made
pursuant to this Section shall operate as a complete discharge of the Trustee,
the Retirement Committee and the Trust Fund.
25.3 Commencement of Distributions. Effective January 1, 1997, the
following distribution rules apply:
(a) A Participant who is not a Five Percent Owner and who attains age
seventy and one-half (70-1/2) and becomes a Participant before January 1, 1999,
shall commence to receive benefits not later than April 1 of the calendar year
following the calendar year in which the Participant attains age seventy and
one-half (70-1/2).
(b) Any other Participant who is not a Five Percent Owner shall
commence to receive benefits not later than April 1 of the calendar year
following the later of --
<PAGE>
(i) the calendar year in which the Participant attains age
seventy and one-half (70-1/2) or
(ii) the calendar year in which the Participant retires.
(c) a Participant who is a Five Percent Owner shall commence to
receive benefits not later than April 1 of the calendar year following the
calendar year in which the Participant attains age seventy and one-half
(70-1/2).
Once distributions commence to a Participant who is a Five Percent Owner,
distributions shall continue even if the Participant is no longer a Five Percent
Owner. For purposes of this Section, "Five Percent Owner" means a Participant
who at anytime during the Plan Year ending within the calendar year in which
such Participant attains age seventy and one-half (70-1/2) owns (or is
considered as owning within the meaning of Section 318 of the Code) more than
five percent (5%) of the outstanding stock of an Employer or stock possessing
more than five percent (5%) of the total combined voting power of all stock of
the Employer.
Except as provided in Section 12.2, payment of benefits pursuant to this
Section shall be in the form of a qualified joint survivor annuity described in
Section 10.5 if the Participant is legally married on the date payment is to
commence, otherwise in the form of an annuity for the life of the Participant.
Notwithstanding any provision of this Plan to the contrary, distributions
shall be made in accordance with the regulations under Section 401(a)(9) of the
Code, including the minimum distribution incidental death benefit requirements
of Section 1.401(a)(9)-2, and shall be distributed over the life of such
Participant (or over the lives of such Participant and his or her Beneficiary)
or over a period not extending beyond the life expectancy of such Participant
(or the life expectancy of such Participant and his or her Beneficiary). The
provisions of Section 401(a)(9) of the Code and the regulations thereunder shall
override any distribution options inconsistent therewith.
25.4 No Duplication of Benefits. In the event a former Participant is
re-employed by an Employer after distribution of his or her benefits has been
made or commenced then at the time of his or her subsequent retirement or
separation from service, his or her benefit shall be recomputed in accordance
with the applicable Plan provisions without regard to the benefits previously
distributed to him and such Participant's benefit as recomputed shall be reduced
by a benefit which is the Actuarial Equivalent of the benefits previously
distributed to such Participant.
25.5 Exclusive Benefit. Except as provided in Sections 17.2, 21.2 and
22.6, no part of the corpus or income of the Trust Fund
shall be used for,
<PAGE>
or diverted to, purposes other than the exclusive benefit of the Employees and
their Beneficiaries.
25.6 Employment. Participation in the Plan shall not give any Participant
the right to be retained in the employ of the Employer, or any other right not
specified herein.
25.7 Predecessor Employer Plan. In the event an Employer maintained a plan
of a predecessor employer prior to adopting the Plan, service with such
predecessor employer shall be treated as service with such Employer.
25.8 Governing Law. This Plan shall be governed and construed by the laws
of the United States of America and, to the extent that such laws do not preempt
state law, by the laws of the State of Maine.
25.9 Article and Section Headings and Table of Contents. The Article and
Section headings and Table of Contents are inserted for convenience of reference
and shall not be considered in the construction of the Plan.
25.10 Delegation of Authority by Subsidiaries. Each subsidiary of Hannaford
Bros. Co. that adopts the Plan hereby irrevocably grants to Hannaford Bros. Co.,
the Board of Directors, the Retirement Committee and the Finance Committee
exclusive authority to exercise all of the powers conferred on them by the terms
of the Plan, including the power vested in the Board of Directors to amend or
terminate the Plan. Each subsidiary shall automatically become a party to the
Trust without further action on its part.
25.11 Directed Payments. A former Participant, surviving spouse or
Beneficiary who is entitled to receive monthly benefit payments from the Plan
and who is a participant in the Hannaford Bros. Co. Retiree Medical Plan
("Retiree Medical Plan") may direct the Trustee to deduct such portion of each
monthly benefit payment as is necessary to satisfy his or her required monthly
contribution under the Retiree Medical Plan and to remit such amount to the
Hannaford Bros. Co. Tax Exempt Employee Benefits Trust ("Tax Exempt Trust"), the
amount of each monthly benefit payment from the Plan is at least equal to the
amount of his or her required monthly contribution under the Retiree Medical
Plan. Such direction shall be made on such form and in such manner as the
Retirement Committee may prescribe and shall be effective as of the first
monthly benefit payment following receipt by the Retirement Committee, provided
it is received at least fifteen (15) days in advance of such payment.
Notwithstanding the foregoing to the contrary, any individual who is a
former highly compensated employee (within the meaning of Section 414(q) of the
Code) or who is a "party in interest" (as defined in Section 3(14) of ERISA)
shall not be permitted to direct payments pursuant to this Section.
<PAGE>
A direction pursuant to this Section may be revoked, in writing, by the
former Participant, surviving spouse or Beneficiary, as the case may be, at any
time, and shall be effective as soon as practicable following receipt by the
Retirement Committee.
The Retirement Committee may terminate the availability of this direct
payment provision upon thirty (30) days' prior written notice to the Trustee and
each affected former Participant, surviving spouse and Beneficiary.
The Retirement Committee shall maintain records sufficient to demonstrate
that no payments have been made to the Tax Exempt Trust pursuant to this Section
before the monthly benefit payment would have been otherwise made to the former
Participant, surviving spouse or Beneficiary, as the case may be, and that no
expense has been incurred by the Plan as a result of this Section.
25.12 USERRA Requirements. Notwithstanding any provision of this Plan to
the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Code Section
414(u) and the Uniformed Services Employment and Reemployment Rights Act of
1994.
25.13 EPCRS Adjustments. An Employer, the Finance Committee, the Trustee,
the Retirement Committee, any Investment Manager and any other person providing
services to the Plan, acting jointly or singly, as the situation may require,
shall take such action, pursuant to the Employee Plans Compliance Resolution
System or any successor system, policy or program established by the Internal
Revenue Service, as may be necessary or appropriate to correct any operational
defect occurring in the administration of the Plan.
IN WITNESS WHEREOF, Hannaford Bros. Co. has caused this document to be
executed by its duly authorized officer on this day of , 1998.
HANNAFORD BROS. CO.
By______________________________________________
Its Executive Vice President B Human Resources
<PAGE>
SCHEDULE A
ADOPTING EMPLOYERS
<PAGE>
SCHEDULE B
CONVERSION FACTORS
Years to Age 62 Age 65
Normal Retirement Date Normal Retirement Date Normal Retirement Date
45 0.46110 0.42090
44 0.49360 0.45050
43 0.52820 0.48220
42 0.56540 0.51610
41 0.60510 0.55240
40 0.64770 0.59130
39 0.69320 0.63290
38 0.74200 0.67740
37 0.79420 0.72520
36 0.85010 0.77620
35 0.90990 0.83090
34 0.97400 0.88950
33 1.04270 0.95230
32 1.11610 1.01950
31 1.19480 1.15699
30 1.27910 1.30883
29 1.36940 1.47642
28 1.55407 1.66135
27 1.75806 1.86498
26 1.98323 2.08937
25 2.23150 2.33633
24 2.50510 2.60791
23 2.80650 2.90660
22 3.13806 3.23504
21 3.50301 3.59589
20 3.90421 3.99229
19 4.34528 4.27867
18 4.82994 4.58638
17 5.36262 4.91731
16 5.74704 5.27335
15 6.16052 5.65674
14 6.60497 6.06954
13 7.08330 6.51433
12 7.59827 6.99386
11 8.15263 7.24889
10 8.75016 7.50592
9 9.39412 7.76376
8 9.73673 8.02145
7 10.08192 8.27732
6 10.42842 8.53006
5 10.77440 8.77812
<PAGE>
4 11.11817 9.01951
3 11.45773 9.25226
2 11.79087 9.47386
1 12.11505 9.68193
0 12.42764 9.87330
Exhibit 10.6
HANNAFORD SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated effective January 1, 1998)
<PAGE>
PREAMBLE
The primary objective of the Hannaford Supplemental Executive Retirement
Plan, as amended and restated herein, is to provide a competitive level of
retirement income in order to attract and retain selected executives. The plan
is designed to provide a benefit which, when added to other retirement income of
an executive, will meet this objective. Participation in the Plan shall be
limited to a select group of management or highly compensated employees within
the meaning of ERISA.
ARTICLE I
Definitions
1.1 "Basic Plan" shall mean the Hannaford Cash Balance Plan, as amended.
1.2 "Beneficiary" shall mean the person or persons designated by a
Participant to receive any benefits payable under the Basic Plan following the
death of the Participant.
1.3 "Board" or "Board of Directors" shall mean the Board of Directors of
Hannaford Bros. Co.
1.4 "Cash Balance Account" or "Account" shall mean the account established
pursuant to Section 3.1.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6 "Committee" shall mean the committee appointed by the Human Resources
Committee of the Board to administer the Basic Plan.
1.7 "Company" shall mean Hannaford Bros. Co. and any successor to all or
a major portion of its assets or business which
assumes the obligations of Hannaford Bros. Co. under the Plan.
1.8 "Compensation" shall mean a Participant's compensation as defined in
the Basic Plan, without regard to those provisions in the Basic Plan
incorporating the limit on the amount of compensation which may be taken into
account under Section 401(a)(17) of the Code and including any amounts of basic
compensation deferred under a nonqualified deferred compensation plan sponsored
by the Company.
1.9 "Disabled Participant" shall have the meaning given such term under the
Basic Plan.
<PAGE>
1.10 "Effective Date" of this amendment and restatement shall mean January
1, 1998.
1.11 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.12 "Participant" shall mean an employee of the Company or one of its
subsidiaries who is a member of a select group of management employees, who is a
"highly compensated employee" within the meaning of Code Section 414(q) and who
is a participant in the Basic Plan.
1.13 "Plan" shall mean the Hannaford Supplemental Executive Retirement Plan
as set forth herein and hereafter amended.
ARTICLE II
Eligibility for Benefits
2.1 Retirement Benefit. On his or her retirement or other termination of
employment a Participant who meets the requirement of Section 2.3 shall be
entitled to a benefit under this Plan equal to the value of the Participant=s
Cash Balance Account.
2.2 Death Benefit. If the Participant dies prior to the date payment of his
or her benefit commences under this Plan, the Participant=s Cash Balance Account
shall be paid to the surviving spouse or Beneficiary entitled to receive any
death benefit payable with respect to the Participant under the Basic Plan. In
the absence of such surviving spouse or designated beneficiary, the Account
shall be paid to the Participant=s estate.
2.3 Vesting Requirement. No benefits are payable under this Plan, other
than a death benefit, unless the Participant is vested under the Basic Plan.
ARTICLE III
Plan Benefits
3.1 Cash Balance Formula. Effective January 1, 1998, the benefits payable
to or in respect of Participants shall be determined as follows:
(a) Cash Balance Account. Solely for purposes of determining the
amount of retirement or death benefits payable under the Plan, each
Participant=s benefit shall be expressed as an account. Each Cash Balance
Account shall be adjusted in accordance with subsection (b) to reflect
Contribution Credits and in accordance with subsection (c) to reflect Interest
Credits. No separate account shall be established or maintained under this Plan,
and no Participant shall have a claim to any specific assets of the
<PAGE>
Company or any of its subsidiaries.
The opening Account balance of a Participant who is an employee on
January 1, 1998, shall equal the product of (i) the Participant's annual benefit
under this Plan as of December 31, 1997, and (ii) the applicable conversion
factor in Schedule A. The applicable conversion factor for a Participant whose
employment extends beyond his or her normal retirement date under the Basic
Plan, or whose normal retirement date under the Basic Plan is determined with
reference to his or her employment commencement date, shall be the same as the
conversion factor for a Participant who has reached his or her normal retirement
date under the Basic Plan. For purposes of this paragraph, a Disabled
Participant who is receiving hours of service credit on January 1, 1998, under
the Basic Plan shall be treated as an employee on such date.
A Participant=s annual benefit under this Plan as of December 31,
1997, shall be determined in the same manner as his or her accrued benefit as of
such date was determined under the Basic Plan.
The Account balance of a Participant who does not have a
nonforfeitable right to his or her accrued benefit under the Basic Plan and who
terminates employment after December 31, 1997, shall be restored upon his or her
re-employment by the Company or one of its subsidiaries, with Interest Credits
from his or her termination of employment date, unless the number of his or her
consecutive breaks in service as of his or her re-employment commencement date
equals or exceeds five (5), as determined in accordance with the Basic Plan.
(b) Contribution Credit. At the end of each month beginning with the
month in which participation commences, the Cash Balance Account of each
Participant shall be credited with an amount equal to three percent (3%) of the
excess of the Participant=s Compensation for such month over the Participant=s
compensation for such month under the Basic Plan ("Contribution Credit"). The
Cash Balance Account of a Disabled Participant shall be credited with
Contribution Credits for the period during which Social Security disability
income benefits continue prior to the commencement of distributions from the
Plan, based upon the excess of the Participant=s monthly rate of Compensation
over the his or her monthly rate of compensation under the Basic Plan
immediately preceding commencement of his or her disability.
(c) Interest Credit. At the end of each month interest shall be
credited on the beginning Account balance of each Participant ("Interest
Credit") for such month, reduced for distributions made in such month, at the
same rate that interest is credited for such period on the account balances of
participants under the Basic Plan.
<PAGE>
3.2 Payment of Benefits. A Participant's Cash Balance Account shall be
distributed in cash in the form of a lump sum or annual installments over a
period not exceeding ten (10) years. Payment shall be made or commence to the
Participant as soon as practicable following termination of employment and not
later than the last business day of the calendar month following the month in
which the Participant terminates employment or January 31 of the calendar year
following the calendar year for which the Participant terminates employment.
Each Participant shall elect the form and time of payment at least twenty-four
(24) months before payment shall be made. For purposes of this Plan, a
termination of employment occurs on the date a Participant ceases to be employed
by the Company or one of its subsidiaries and is no longer employed by any of
them.
Death benefits shall be paid in a cash lump sum as soon as practicable
following a Participant=s death and not later than the last business day of the
calendar month following the month in which the Participant dies.
Notwithstanding any provision of the Plan to the contrary, if the Cash
Balance Account payable with respect to a Participant, does not exceed $5,000 as
of the date distribution of such benefit is to commence, payment shall be made
in a lump sum as soon as practicable following the Participant's termination of
employment or death.
3.3 Change in Control Event.
(a) Upon the termination of a Participant's employment with the
Company following the occurrence of a Change in Control Event, the benefits
payable with respect to the Participant shall be determined in accordance with
the applicable provisions of this Article III and any employment continuity
agreement then in effect between the Participant and the Company.
(b) Each of the following events shall constitute a Change in Control
Event for purposes of this Section:
(i) 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.
"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
<PAGE>
required to be reported under such Regulation 13D, or any similar successor
regulation or rule.
(ii) 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.
"Outside Director" as of a given date shall mean a member of the
Company's 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.
(iii) 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.
(iv) The Company's stockholders approve:
(A) 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
(B) 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 (A) and (B) 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.
ARTICLE IV
Administration
<PAGE>
4.1 Administrative Committee. The Committee shall have complete
discretionary authority to control and manage the operation and administration
of the Plan and to construe Plan provisions. Subject to the provisions of the
Plan, the Committee from time to time may establish rules for the administration
and interpretation of the Plan. The final determination of the Committee as to
any disputed questions shall be conclusive. All actions, decisions and
interpretations of the Committee in administering the Plan shall be made in a
uniform and nondiscriminatory manner.
4.2 Action By Committee. A majority of the Committee shall constitute a
quorum, and an action of the majority present at any meeting shall be deemed the
action of the Committee. Any member of the Committee may participate in a
meeting of the Committee through conference telephone or similar communications
equipment by means of which all individuals participating in the meeting can
hear each other. Any action of the Committee may be taken without a meeting if
all 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.
4.3 Delegation. The Committee may authorize one or more of its members to
execute or deliver any instrument, make any payment or perform any other act
which the Plan authorizes or requires the Committee to do. The Committee may
employ counsel and other agents, may delegate ministerial duties to such agents
or to employees of the Company and may procure such clerical, accounting,
actuarial, consulting and other services as it may require in carrying out the
provisions of the Plan.
4.4 Claims Procedure. If an application for a benefit ("claim") is denied
by the Committee, the Committee shall give written notice of such denial to the
applicant, by certified or registered mail, within 90 days after the claim was
filed with the Committee; provided, however, that such 90-day period may be
extended to 180 days by the Committee if it determines that special
circumstances exist which require an extension of the time required for
processing the claim. Such denial shall set forth:
(a) the specific reason or reasons for the denial;
(b) the specific Plan provisions on which the denial is based;
(c) any additional material or information necessary for the applicant
to perfect the claim and an explanation of why such material or information is
necessary; and
(d) an explanation of the Plan's claim review procedure.
<PAGE>
Following receipt of such denial, the applicant or his or her duly authorized
representative may:
(a) request a review of the denial by filing a written application for
review with the Committee within 60 days after receipt by the applicant of such
denial;
(b) review documents pertinent to the claim at such reasonable time
and location as shall be mutually agreeable to the applicant and the Committee;
and
(c) submit issues and comments in writing to the Committee relating to
its review of the claim.
The Committee shall, after consideration of the application for review,
render a decision and shall give written notice thereof to the applicant, by
certified or registered mail, within 60 days after receipt by the Committee of
the application for review; provided, however, that such 60-day period may be
extended to 120 days by the Committee if it determines that special
circumstances exist which require an extension of the time required for
processing the application for review. Such notice shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
4.5 Indemnification. The Company shall indemnify and hold harmless each
member of the Committee against all expenses and liabilities arising out of his
or her acts or omissions with respect to the Plan, provided such member would be
entitled to indemnification pursuant to the bylaws of the Company.
ARTICLE V
Miscellaneous
5.1 Amendment and Termination of Plan. The Board may at any time, in its
sole discretion, terminate this Plan or amend the Plan in whole or in part. No
such termination or amendment shall have the effect of retroactively reducing
any benefit, based on a Participant's service with the Company and its
subsidiaries and Compensation as of the date of such termination or amendment,
or restricting any right of a Participant, retired Participant, surviving
spouse, or other person or estate entitled to benefits hereunder.
5.2 Employee Status. Nothing contained herein will confer upon any
Participant the right to be retained in the employ of the Company or any of its
subsidiaries or any other right not expressly provided for herein, nor will the
existence of this Plan impair the right of the Company or any of its
subsidiaries to discharge or otherwise deal with a Participant.
<PAGE>
5.3 Enforcement. Except as hereinafter provided, the Company shall
indemnify any Participant or other person having a right to receive payments
from the Company in accordance with the terms of the Plan for all court costs
and reasonable attorneys' fees, including counsel's out of pocket expenses for
actuarial or accounting services, incurred in connection with bringing a civil
action in state or federal court to recover benefits due or clarify rights to
future benefits under the terms of the Plan. The Company shall not be required
to indemnify any person for such costs and fees if a state or federal court
finds that the action is frivolous or if the plaintiff voluntarily dismisses the
action.
5.4 Funding. This Plan is unfunded for purposes of the Code and Title I of
ERISA and is not intended to meet the requirements of Section 401(a) of the
Code. The Plan constitutes the Company's mere promise to pay benefits in the
future, and a Participant hereunder shall have no greater rights than a general,
unsecured creditor of the Company.
5.5 Assignment. To the maximum extent permitted by law, no benefit under
this Plan shall be assignable or subject in any manner to alienation, sale,
transfer, assignment, claims of creditors, pledge, attachment or encumbrance of
any kind.
5.6 Taxes. Any and all taxes that may be due and owing with respect to any
payment under the Plan shall be the sole responsibility of the persons to whom
and for whose benefit such payment is made; provided, however, that the Company
shall withhold from any amount payable under the Plan all amounts that are
required by law to be withheld.
5.7 Plan Documents. Each Participant shall receive a copy of this Plan and
the Committee will make available for inspection by the Participant a copy of
any rules and regulations adopted by the Committee in administering the Plan.
5.8 Governing Law. This Plan is established under and will be construed
according to the laws of the State of Maine, except to the extent such laws may
be preempted by ERISA.
IN WITNESS WHEREOF, Hannaford Bros. Co. has caused this document to be
executed by its duly authorized officer on this day
of December, 1998.
HANNAFORD BROS. CO.
By:_________________________________
Its Executive Vice President B Human Resources
<PAGE>
SCHEDULE A
CONVERSION FACTORS
Years to Age 65
Normal Retirement Date Normal Retirement Date
45 0.42090
44 0.45050
43 0.48220
42 0.51610
41 0.55240
40 0.59130
39 0.63290
38 0.67740
37 0.72520
36 0.77620
35 0.83090
34 0.88950
33 0.95230
32 1.01950
31 1.15699
30 1.30883
29 1.47642
28 1.66135
27 1.86498
26 2.08937
25 2.33633
24 2.60791
23 2.90660
22 3.23504
21 3.59589
20 3.99229
19 4.27867
18 4.58638
17 4.91731
16 5.27335
15 5.65674
14 6.06954
13 6.51433
12 6.99386
11 7.24889
10 7.50592
9 7.76376
8 8.02145
<PAGE>
7 8.27732
6 8.53006
5 8.77812
4 9.01951
3 9.25226
2 9.47386
1 9.68193
0 9.87330
Exhibit 10.16
HANNAFORD SAVINGS AND INVESTMENT PLAN
(as amended and restated effective generally January 1, 1998)
<PAGE>
Table of Contents
Page
ARTICLE I Purpose
ARTICLE II Definitions
ARTICLE III Participation
3.1 Date of Participation
3.2 Participation Requirements
3.3 Reemployed Eligible Employee
3.4 Change of Employment Status
ARTICLE IV Contributions and Direct Transfers
4.1 Employer Contributions
4.2 Timing of Employer Contributions
4.3 Form of Contributions
4.4 Maximum Contributions
4.5 Return of Contributions
4.6 Nonforfeitable Contributions
4.7 Special Rules For Matching Contributions
4.8 USERRA Make-up Contributions
4.9 Rollover Contributions
4.10 Direct Transfers
ARTICLE V Deferral Elections
5.1 Timing and Method
5.2 Amendment or Termination by Participant
5.3 Limitations on Actual Deferral Percentage
5.4 Restrictions and Adjustments
ARTICLE VI Excess Deferrals
6.1 Limitation on Elective Contributions
6.2 Distribution of Excess Deferral
6.3 Notice by Participant
ARTICLE VII Limitation on Annual Additions
7.1 Limitation For Defined Contribution Plans
7.2 Limitation For Defined Contribution Plan and Defined Benefit Plan
<PAGE>
7.3 Combining and Aggregating Plans
7.4 Reduction of Excess Annual Additions
7.5 Definition of Compensation
7.6 Certain Contributions Treated as Annual Additions
ARTICLE VIII Accounts and Valuation
8.1 Participant Accounts
8.2 Adjustments
8.3 Allocation of Elective Contributions and Matching Contributions
8.4 Allocation of Discretionary Contributions
8.5 Eligible Employees Entitled to Share in Discretionary Contributions
8.6 Allocation of Rollover Contributions and Asset Transfers
8.7 Reports to Participants
ARTICLE IX Distribution, Loans and Withdrawals
9.1 Retirement
9.2 Disability
9.3 Termination of Employment
9.4 Forfeitures
9.5 Distributions to Participants
9.6 Age 70-1/2 In-Service Distributions
9.7 Minimum Amounts to be Distributed to Participants
9.8 Distributions to Surviving Spouses and Beneficiaries
9.9 Distribution to Alternate Payee
9.10 Distributions to Minors and Incompetent Persons
9.11 Loans
9.12 Hardship Withdrawals
9.13 Form of Distribution
9.14 Direct Rollovers
ARTICLE X Top Heavy Provisions
10.1 Top Heavy Requirements
10.2 Minimum Vesting Requirements
10.3 Minimum Contribution Requirement
10.4 Modified Limitation on Allocations
10.5 Present Value Factors
10.6 Benefit Accrual
ARTICLE XI Trust Fund Investments
11.1 Duties
<PAGE>
11.2 Investment Funds
11.3 Company Stock Fund
11.4 Investment of Contributions
11.5 Reinvestment of Account
11.6 Loan Fund
11.7 Voting Rights
ARTICLE XII Finance Committee
12.1 Duties
12.2 Delegation of Ministerial Duties
12.3 Compensation and Reimbursement of Expenses
12.4 Reliance on Reports
12.5 Multiple Signatures
ARTICLE XIII Administrative Committee
13.1 Appointment of Administrative Committee
13.2 Resignation and Removal
13.3 Powers and Duties
13.4 Reporting and Disclosure
13.5 Delegation of Ministerial Duties
13.6 Payment of Plan Expenses
13.7 Compensation and Reimbursement of Expenses
13.8 Uniformity of Rules and Regulations
13.9 Reliance on Reports
13.10 Multiple Signatures
13.11 Confidentiality of Participant Decisions Relating to Company Stock
ARTICLE XIV Claims Procedure
14.1 Filing a Claim For Benefits
14.2 Denial of Claim
14.3 Appeal of Denied Claim
14.4 Decision on Appeal
ARTICLE XV Amendment and Termination
15.1 Amendment
15.2 Accounts Not to be Decreased by Amendment
15.3 Termination
15.4 Notice of Amendment or Termination
ARTICLE XVI Nonalienability of Benefits; Qualified Domestic Relations
<PAGE>
Orders
16.1 Nonalienability of Benefits
16.2 Qualified Domestic Relations Orders
16.3 Notice
16.4 Representative
16.5 Separate Account
16.6 Determination by Administrative Committee
16.7 Definitions
ARTICLE XVII Delegation of Authority by Subsidiaries
17.1 Delegation of Authority by Subsidiaries
ARTICLE XVIII Mergers
18.1 Merger or Consolidation of Plan
18.2 Merger With Hannaford Southeast Savings and Investment Plan
ARTICLE XIX Miscellaneous
19.1 Fiduciary Responsibility
19.2 Prohibited Transactions
19.3 Additional Contributions and Adjustments
19.4 Exclusive Benefit
19.5 Service with Predecessor Employer
19.6 Employment
19.7 Gender
19.8 Governing Law
19.8 Article and Section Headings and Table of Contents
19.10 Impermissible Actions from January 1, 1998, to March 31, 1998
<PAGE>
HANNAFORD SAVINGS AND INVESTMENT PLAN
ARTICLE I
Purpose
The Hannaford Northeast Savings and Investment Plan, originally adopted
effective April 1, 1985, is hereby renamed the Hannaford Savings and Investment
Plan and hereby amended and restated effective generally January 1, 1998.
The purpose of this Plan is to encourage Eligible Employees of the Company
and its subsidiaries to provide for their financial security through regular
savings. The Plan is intended to comply with the requirements of Section 401(a)
and 401(k) of the Code and shall be interpreted to comply with the applicable
provisions of the Code and ERISA, as well as the regulations and rulings issued
thereunder.
ARTICLE II
Definitions
The following terms, when used herein, shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Account" shall mean the account established and maintained by the
Administrative Committee for each Participant which shall reflect the
Participant's share of the Trust Fund; provided such Account shall, in
accordance with Section 8.1, reflect separately the Participant's (a) Elective
Contributions, (b) Matching Contributions, (c) Discretionary Contributions, (d)
Rollover Contributions, and (e) any direct transfer of plan assets made on
behalf of an Employee in accordance with Section 4.10 or 18.2.
2.2 "Actual Deferral Percentage" for any Plan Year shall mean, except as
otherwise provided in Section 2.41, the average of the ratios, calculated
separately for each Eligible Employee, of the amount of Elective Contributions
made on behalf of such Employee for such year to such Employee's compensation
for such year (whether or not the Employee was a Participant for the entire Plan
Year). For purposes of this Section, "compensation" shall mean compensation as
defined in Section 7.5 and, for Plan Years beginning before January 1, 1998,
may, at the election of the Company, include amounts excludable from gross
income under Sections 125, 402(e)(3) and 402(h)(1)(B) of the Code. For Plan
Years beginning on or after January 1, 1998, the Company may elect not to
include such amounts.
2.3 "Administrative Committee" shall mean the Committee appointed in
accordance with Section 13.1.
2.4 "Annual Addition" shall mean the sum of the Employer
<PAGE>
Contributions, employee contributions and forfeitures allocated to the Account
of a Participant for a Limitation Year and the amounts described in Section 7.6.
2.5 "Beneficiary" shall mean the person or persons designated by a
Participant as provided in Section 9.8 to receive any benefits payable under the
Plan following the death of the Participant.
2.6 "Board of Directors" shall mean the Board of Directors of the Company
or any corporation with or into which it may be merged or consolidated.
2.7 "Break in Service" shall have the meaning set forth in subsection (a)
or (b) below, whichever is applicable:
(a) In the case of an hourly Employee, other than an Employee who is
employed as a driver, the term "Break in Service" shall mean a Plan Year in
which such Employee is not credited with more than four hundred and thirty-five
(435) Hours of Service on account of any one or more of the following:
(i) discharge from employment;
(ii) voluntary termination of employment;
(iii) effective December 12, 1994, failure to return to the
employ of an Employer or a Related Employer prior to the expiration of the
period entitling such Employee to reemployment rights under the Uniformed
Services Employment and Reemployment Rights Act of 1994 after a period of
qualified military service (as defined in Section 4.8);
(iv) failure to return to the employ of an Employer or a Related
Employer upon the expiration of any period of absence due to sickness, accident
or disability for which such Employee is entitled to receive benefits under any
welfare plan sponsored by an Employer or a Related Employer; or
(v) failure to return to the employ of an Employer or a Related
Employer when recalled following a temporary period of layoff for a period not
to exceed twelve (12) months.
(b) In the case of a salaried or salaried nonexempt Employee or an
Employee who is employed as a driver, the term "Break in Service" shall mean a
Plan Year in which such Employee is not credited with more than five hundred
(500) Hours of Service on account of any one or more of the following:
(i) discharge from employment;
<PAGE>
(ii) voluntary termination of employment;
(iii) effective December 12, 1994, failure to return to the
employ of an Employer or a Related Employer prior to the expiration of the
period entitling such Employee to reemployment rights under the Uniformed
Services Employment and Reemployment Rights Act of 1994 after a period of
qualified military service (as defined in Section 4.8);
(iv) failure to return to the employ of an Employer or a Related
Employer upon the expiration of any period of absence due to sickness, accident
or disability for which such Employee is entitled to receive benefits under any
welfare plan sponsored by an Employer or a Related Employer; or
(v) failure to return to the employ of an Employer or a Related
Employer when recalled following a temporary period of layoff for a period not
to exceed twelve (12) months.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as from time to
time amended.
2.9 "Company" shall mean Hannaford Bros. Co., a Maine corporation or any
corporation with or into which it may be merged or consolidated.
2.10 "Company Stock" shall mean shares of common stock of the Company.
2.11 "Compensation" shall mean the basic compensation paid, before any
reduction pursuant to a Deferral Election or a benefit election under an
Employer's Code Section 125 plan, by an Employer to an Employee for services
rendered while a Participant, including compensation for incentive hours and
excluding reimbursements or other expense allowances, fringe benefits (cash and
noncash), moving expenses, deferred compensation, welfare benefits, unguaranteed
overtime pay, bonuses, and other irregular payments.
Notwithstanding the foregoing to the contrary, effective January 1, 1994,
the annual Compensation of any Employee in excess of One Hundred Fifty Thousand
Dollars ($150,000.00) (or such higher amount as the Secretary of the Treasury
may prescribe) shall not be taken into account under the Plan. In the event
Compensation is determined based on a period which contains fewer than twelve
(12) calendar months, the annual Compensation limit shall be an amount equal to
the annual Compensation limit for the calendar year in which the period begins
multiplied by a fraction, the numerator of which is the number of full calendar
months in the period and the denominator of which is twelve (12). If
Compensation for a prior Plan Year is taken into account for any Plan Year, such
Compensation shall be subject to the annual Compensation limit in effect for
such prior Plan Year.
<PAGE>
The average percentage of total compensation (as defined in Treasury
Regulation Section 1.414(s)-1(d)(3)(ii) included in the Compensation of Highly
Compensated Employees as a group shall not exceed by more than a de minimis
amount the average percentage of total compensation included in the Compensation
of Non-Highly Compensated Employees as a group. This determination shall be made
in accordance with the provisions of Regulation Section 1.414(s)-1(d)(3), which
is incorporated herein by reference.
2.12 "Contract Employee" shall mean an Employee who is employed as a
warehouse employee and whose employment is governed by a collective bargaining
agreement.
2.13 "Deferral Election" shall mean an election made by an Eligible
Employee in accordance with Section 5.1 or 4.8.
2.14 "Determination Date" shall mean, with respect to any Plan Year, the
last day of the preceding year or, in the case of the first Plan Year of the
Plan, the last day of such Plan Year.
2.15 "Disabled" or "Disability" shall mean a Participant's incapacity to
engage in any substantial gainful activity by reason of any medically determined
physical or mental impairment which can reasonably be expected to result in
death or be of long-continued and indefinite duration as certified by a licensed
physician approved by the Company.
2.16 "Discretionary Contribution" shall mean a contribution made by an
Employer in accordance with Section 4.1(c).
2.17 "Effective Date" of this amendment and restatement shall mean, except
as provided otherwise herein, January 1, 1998.
2.18 "Elective Contribution" shall mean a contribution made by an Employer
on behalf of a Participant pursuant to a Deferral Election, as provided in
Section 4.1(a).
2.19 "Eligibility Computation Period" shall mean the initial twelve (12)
consecutive month period beginning with the date on which the Employee first
performs an Hour of Service and thereafter each Plan Year commencing with the
Plan Year which includes the first anniversary of his or her Employment
Commencement Date.
In the case of an hourly Employee, other than an Employee who is employed
as a driver, if such Employee is credited with eight hundred seventy (870) Hours
of Service in both his or her initial Eligibility Computation Period and in the
Plan Year which includes the first anniversary of his or her Employment
Commencement Date, he or she shall be credited with two (2) Years of
Participation Service.
<PAGE>
In the case of a salaried or salaried nonexempt Employee, or an Employee
who is employed as a driver, if such Employee is credited with one thousand
(1,000) Hours of Service in both his or her initial Eligibility Computation
Period and the Plan Year which includes the first anniversary of his or her
Employment Commencement Date, such Employee shall be credited with two (2) Years
of Participation Service.
In measuring completion of a Year of Participation Service upon
reemployment of an Employee after he or she has incurred a Break in Service, the
term "Eligibility Computation Period" shall mean the twelve (12) consecutive
month period beginning on the Employee's Reemployment Commencement Date and,
where necessary, Plan Years beginning with the Plan Year which includes the
first anniversary of the Employee's Reemployment Commencement Date.
2.20 "Eligible Employee" shall mean an Employee who is eligible to
participate in the Plan as provided in Section 3.1.
2.21 "Employee" shall mean any individual who is employed by an Employer,
excluding Leased Employees.
2.22 "Employer" shall mean the Company and, effective January 1, 1997, any
subsidiary of the Company that adopts the Plan with the consent of the Human
Resources Committee of the Board of Directors. If an Employer is a member of a
group of employers which constitutes a controlled group of corporations (as
defined in Section 414(b) of the Code), which constitutes trades or businesses
(whether or not incorporated) which are under common control (as defined in
Section 414(c) of the Code), or which constitutes an affiliated service group
(as defined in Section 414(m) of the Code and modified in Section 414(o) of the
Code), all such employers shall be considered a single employer as required by
Sections 414(b), 414(c), 414(m) and 414(o) of the Code. For purposes of applying
the limitations of Article VII, the Section 414(b) definition of a controlled
group of corporations and the Section 414(c) definition of trades or businesses
under common control shall be modified as provided in Section 415(h) of the
Code.
2.23 "Employer Contribution" shall mean any Elective Contribution, Matching
Contribution, Discretionary Contribution or such additional contribution as may
be required under Section 9.4 made by an Employer in accordance with the terms
of the Plan.
2.24 "Employment Commencement Date" shall mean the date on which an
Employee first performs an Hour of Service for an Employer or a Related
Employer.
2.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as it may be amended from time to time, and any regulations issued
pursuant thereto as such Act or such regulations affect this Plan.
<PAGE>
2.26 "Excess Deferral" shall mean Elective Contributions in excess of the
limitation of Section 6.1.
2.27 "Excess Elective Contributions" shall mean for any Plan Year the
excess of
(a) the aggregate amount of Employer Contributions taken into account
under Section 5.3 that are paid to the Trust on behalf of Highly Compensated
Eligible Employees for such year, over
(b) the maximum amount of such contributions permitted under Section
5.3.
2.28 "Excess Matching Contributions" shall mean for any Plan Year the
excess of
(a) the aggregate amount of Employer Contributions taken into account
under Section 4.7(a) that are paid to the Trust on behalf of Highly Compensated
Eligible Employees for such year, over
(b) the maximum amount of such contributions permitted under Section
4.7(a).
2.29 "Finance Committee" shall mean the Finance Committee of the Board of
Directors.
2.30 "Five Percent Owner" shall mean any person who owns (or is considered
as owning within the meaning of Section 318 of the Code) more than five percent
(5%) of the outstanding stock of an Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of an Employer.
2.31 "Former Participant" shall mean any individual who ceases to be
employed by an Employer or a Related Employer and is no longer employed by any
of them, and who has not received full distribution of his or her Account.
2.32 "Highly Compensated Eligible Employee" shall mean an Employee who is
eligible to participate in the Plan as provided in Section 3.1 and who is a
Highly Compensated Employee.
2.33 "Highly Compensated Employee" shall mean any Employee who:
(a) was a Five Percent Owner at any time during the Plan Year or the
preceding Plan Year; or
(b) had compensation from an Employer for the preceding Plan Year in
excess of Eighty Thousand Dollars ($80,000.00) or such higher amount in
<PAGE>
effect under Section 414(q) of the Code and was in the Top-Paid Group
for such year.
A former Employee shall be treated as a Highly Compensated Employee if he
or she was a Highly Compensated Employee when such Employee separated from
service or at any time after attaining age fifty-five (55). For purposes of this
Section, "compensation" shall have the meaning given such term under Section
415(c)(3) of the Code (but, for Plan Years beginning before January 1, 1998,
without regard to the exclusions provided under Sections 125, 402(e)(3) and
402(h)(1)(B) of the Code).
The dollar amount in subsection (b) of this Section shall be increased at
the same time and in the same manner as the dollar limitation under Section
415(b)(1)(A) of the Code, except that the base period shall be the calendar
quarter ending September 30, 1996.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the Top-Paid Group,
shall be made in accordance with Section 414(q) of the Code and the regulations
thereunder.
The provisions set forth in this Section shall be effective for Plan Years
beginning after December 31, 1996; provided, however, in determining whether an
Employee is a Highly Compensated Employee for the Plan Year beginning January 1,
1997, such provisions shall be treated as having been in effect for the Plan
Year beginning January 1, 1996.
2.34 "Hour of Service" shall have the meaning set forth in subsection (a)
or (b) below, whichever is applicable:
(a) In the case of an hourly Employee, other than an Employee who is
employed as a driver, the term "Hour of Service" shall mean:
(i) each hour for which such Employee is paid, or entitled to
payment, for the performance of duties for an Employer. Such hours shall be
credited to the computation period in which such duties are performed.
(ii) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer, provided the same hours
shall not be credited under both subsection (a)(i) and this subsection (a)(ii).
These hours shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made.
(b) In the case of a salaried or salaried nonexempt Employee or an
Employee who is employed as a driver, the term "Hour of Service" shall mean:
<PAGE>
(i) each hour for which such an Employee is paid, or entitled to
payment, for the performance of duties for an Employer. Such hours shall be
credited to the computation period in which such duties are performed.
(ii) each hour for which such an Employee is paid, or entitled to
payment, directly or indirectly, by an Employer on account of a period of time
during which no duties were performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including Disability), layoff, jury duty, military duty or leave of absence.
Notwithstanding the preceding sentence,
(aa) no more than five hundred and one (501) Hours of
Service shall be credited under this subsection (b)(ii) to an Employee on
account of any single continuous period during which he or she performs no
duties (whether or not such period occurs in a single computation period),
(bb) Hours of Service shall not be credited if payment is
made or due under a plan maintained solely for the purpose of complying with
applicable workers' compensation, unemployment compensation or disability
insurance laws; and
(cc) Hours of Service shall not be credited if payment is
made solely to reimburse an Employee for medical or medically related expenses
incurred by such Employee.
(iii) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer. The same hours shall not
be credited both under subsection (b)(i) or (b)(ii) and under this subsection
(b)(iii). These hours shall be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.
In the case of any salaried or salaried nonexempt Employee, such
Employee shall be credited with forty-five (45) Hours of Service for each week
such Employee is required to be credited with at least one (1) Hour of Service
in accordance with subsections (b)(i), (b)(ii) or (b)(iii) of this Section.
Hours of Service shall be credited with respect to employment with other
members of an affiliated service group (as defined in Section 414(m) of the
Code), a controlled group of corporations (as defined under Section 414(b) of
the Code) or a group of trades or businesses under common control (as defined
under Section 414(c) of the Code) of which an Employer is a member, and any
other entity required to be aggregated with an Employer pursuant to Section
414(o) of the Code. Hours of Service shall also be credited with respect to any
individual who is treated as an Employee under Section 414(n) or Section 414(o)
of the Code. Hours of Service shall be credited under this subsection only to
the extent required under Section 414(b), (c), (m), (n), (o) (or other
applicable sections) of the Code and the regulations thereunder.
The number of Hours of Service to be credited to each Employee shall be
determined in accordance with the provisions of 29 C.F.R. Sections
2530.200b-2(b), 2(c) and 2530.200b-3(e)(4) which are incorporated herein by
reference.
Each Employee who is absent from work for any period (i) by reason of the
pregnancy of the Employee, (ii) by reason of the birth of a child of the
Employee, (iii) by reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or (iv) for purposes
of caring for such child for a period beginning immediately following such birth
or placement shall, solely for purposes of determining whether such Employee has
incurred a Break in Service, be credited with the Hours of Service which would
normally have been credited to such Employee but for such absence or, if such
Hours of Service cannot be determined, eight (8) Hours of Service for each day
of such absence; provided the total number of Hours of Service credited in
accordance with this paragraph on account of such absence shall not exceed five
hundred and one (501). The Hours of Service described in this paragraph shall be
credited in the computation period in which the absence begins, if the Employee
would be prevented from incurring a Break in Service in such period solely
because the Employee is credited with such Hours of Service or, in all other
cases, in the immediately following computation period.
2.35 "Investment Fund" shall mean an investment fund described in Section
11.2.
2.36 "Investment Manager" shall mean any fiduciary, other than the Trustee
or a named fiduciary (as defined in Section 402(a)(2) of ERISA):
(a) who is appointed by the Finance Committee to manage, acquire, or
dispose of all or any portion of the Trust Fund;
(b) who is (i) registered as an investment adviser under the
Investment Advisers Act of 1940; (ii) is a bank, as defined in said Act; or
(iii) is an insurance company qualified to manage, acquire or dispose of all or
any portion of the Trust Fund under the laws of more than one State; and
(c) who has acknowledged, in writing, that he or she is a fiduciary
with respect to the Plan."
2.37 "Key Employee" shall mean any Employee or former Employee (and the
Beneficiary of such Employee) who at any time during the Plan Year or the four
(4) preceding Plan Years is:
(a) an officer of an Employer having annual compensation (as
<PAGE>
defined in Section 7.5) from an Employer greater than fifty percent (50%) of the
amount in effect under Section 415(b)(1)(A) of the Code for any Plan Year (but
in no event shall more than fifty (50) Employees or, if less, the greater of
three (3) or ten percent (10%) of all Employees be treated as Key Employees by
reason of being officers);
(b) A person owning (or considered as owning within the meaning of
Section 318 of the Code) more than a one-half percent (1/2%) interest, as well
as one of the ten (10) largest interests in an Employer, and having annual
compensation (within the meaning of Section 7.5) from such Employer of more than
the limitation in effect under Section 415(c)(1)(A) of the Code for any Plan
Year;
(c) a Five Percent Owner; or
(d) a person who has annual compensation (as defined in Section 7.5)
from an Employer of more than One Hundred and Fifty Thousand Dollars
($150,000.00) and who would be described in (c) above if one percent (1%) was
substituted for five percent (5%).
The determination of who is a Key Employee shall be made in accordance with
Section 416(i)(1) of the Code and the regulations thereunder, the provisions of
which are incorporated herein by reference. For purposes of determining annual
compensation under this Section, amounts excluded from gross income under
Sections 125, 402(e)(3), 402(h)(1)(B) and 403(b) of the Code shall be taken into
account.
2.38 "Leased Employee" shall mean any person who is not an Employee but
who provides services to an Employer if:
(a) such services are provided pursuant to an agreement between the
Employer and any leasing organization;
(b) such person has performed services for the Employer (or for the
Employer and any related person determined in accordance with Section 414(n)(6)
of the Code) on a substantially full-time basis for a period of at least one (l)
year; and
(c) such services are performed under the primary direction or control
by the Employer.
2.39 "Limitation Year" shall mean a calendar year (or any other twelve (12)
consecutive month period adopted for all qualified plans of an Employer pursuant
to a written resolution adopted by such Employer). If the Limitation Year is
amended to a different twelve (12) consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
<PAGE>
2.40 "Matching Contribution" shall mean a contribution made by an Employer
in accordance with Section 4.1(b) on behalf of a Participant who has made a
Deferral Election.
2.41 "Matching Contribution Percentage" shall mean for any Plan Year the
average of the ratios, calculated separately for each Eligible Employee, of the
amount of Matching Contributions made on behalf of such Employee for such year
and, at the election of the Company, the amount of Elective Contributions made
on behalf of such Employee for such year to such Employee's compensation for
such year. For purposes of this Section, "compensation" shall mean compensation
as defined in Section 7.5 and, for Plan Years beginning before January 1, 1998,
may, at the election of the Company, include amounts excludable from gross
income under Sections 125, 402(e)(3) and 402(h)(1)(B) of the Code. For Plan
Years beginning on or after January 1, 1998, the Company may elect not to
include such amounts. Notwithstanding the foregoing provisions of this Section
or Section 2.2 to the contrary, no Elective Contributions may be taken into
account in calculating the Matching Contribution Percentage for any Eligible
Employee unless the requirement of Section 5.3(a) is satisfied both with and
without the exclusion of such Elective Contributions in calculating the
Employee's Actual Deferral Percentage.
2.42 "Named Fiduciary" or "Named Fiduciaries" shall mean, with respect to
the operation and administration of the Plan, the Administrative Committee, and
with respect to the management of the Trust Fund, the Finance Committee.
2.43 "Non-Key Employee" shall mean any Employee who is not a Key Employee.
2.44 "Normal Retirement Age" shall mean age sixty-five (65).
2.45 "Participant" shall mean an Eligible Employee who elects to
participate in the Plan in accordance with Section 5.1 or 4.8, and each other
Eligible Employee on whose behalf an Employer makes a Discretionary
Contribution.
2.46 "Permissive Aggregation Group" shall mean each plan of an Employer
which is included in a Required Aggregation Group and any other plan or plans of
such Employer which, when considered as a group with the Required Aggregation
Group, continues to satisfy the requirements of Sections 401(a)(4) and 410 of
the Code.
2.47 "Plan" shall mean the Hannaford Savings and Investment Plan.
2.48 "Plan Year" shall mean the twelve (12) consecutive month period
ending December 31.
<PAGE>
2.49 "Reemployment Commencement Date" shall mean the first day for which an
Employee is entitled to be credited with an Hour of Service after the first
Eligibility Computation Period in which the Employee incurs a Break in Service
following an Eligibility Computation Period in which the Employee is credited
with more than the number of Hours of Service determined in accordance with
subsection (a) or (b) below, whichever is applicable:
(a) In the case of an hourly Employee, other than an Employee who is
employed as a driver, four hundred and thirty-five (435) Hours of Service; and
(b) In the case of a salaried or salaried Nonexempt Employee or an
Employee who is employed as a driver, five hundred (500) Hours of Service.
In the case of an Employee who is credited with no Hours of Service in an
Eligibility Computation Period beginning after the Employee's Reemployment
Commencement Date, the Employee shall be treated as having a new Reemployment
Commencement Date as of the first day for which the Employee is entitled to be
credited with an Hour of Service after such Eligibility Computation Period.
2.50 "Related Employer" shall mean the Company or any subsidiary thereof.
2.51 "Required Aggregation Group" shall mean each plan of an Employer in
which a Key Employee is a participant and each other plan of such Employer which
enables any plan of the Employer in which a Key Employee is a participant to
meet the requirements of Sections 401(a)(4) or 410 of the Code.
2.52 "Rollover Contribution" shall mean a contribution made by an Employee
in accordance with Section 4.9.
2.53 "Top Heavy" shall mean that as of the Determination Date:
(a) The Top Heavy Ratio for the Plan exceeds sixty percent (60%), if
the Plan is not included in a Required Aggregation Group;
(b) The Top Heavy Ratio for the Required Aggregation Group which
includes the Plan exceeds sixty percent (60%), if the Plan is included in a
Required Aggregation Group, but is not included in a Permissive Aggregation
Group; or
(c) The Top Heavy Ratio for the Permissive Aggregation Group which
includes the Plan exceeds sixty percent (60%), if the Plan is included in a
Permissive Aggregation Group.
<PAGE>
2.54 "Top Heavy Ratio" shall mean:
(a) If the Plan is not included in a Required Aggregation Group, a
fraction, the numerator of which is the sum of the Account balances of Key
Employees under the Plan and the denominator of which is the sum of the Account
balances of all Participants under the Plan; or
(b) If the Plan is included in a Required Aggregation Group or a
Permissive Aggregation Group, a fraction, the numerator of which is the sum of
the account balances of Key Employees under all defined contribution plans
included in such group and the present value of the accrued benefits of Key
Employees under all defined benefit plans included in such group and the
denominator of which is the sum of the account balances of all participants
under all defined contribution plans included in such group and the present
value of the accrued benefits of all participants under all defined benefit
plans included in such group.
The account balances, as well as the present value of accrued benefits,
shall be determined, as of the Valuation Date coinciding with the Determination
Date, in accordance with the provisions of Section 416(g) of the Code and the
regulations thereunder which are incorporated herein by reference. In
determining the Top Heavy Ratio for any Plan Year, if an individual is a Non-Key
Employee with respect to the Plan or with respect to any other plan which is
included in the same Required Aggregation Group or Permissive Aggregation Group
as the Plan, but was a Key Employee with respect to the Plan or such other plan
for any prior plan year, any account balance or accrued benefit for such
individual shall not be taken into account. In addition, any account balance or
accrued benefit of any individual who has not performed services for an Employer
at any time during the five (5) year period ending on the Determination Date
shall not be taken into account; provided, however, if such individual
subsequently performs services for an Employer, his or her account balance or
accrued benefit shall be taken into account, as required by regulations, in a
subsequent Plan Year.
2.55 "Top-Paid Group" shall mean for any Plan Year the group of Employees
consisting of the top twenty percent (20%) of Employees based on compensation
(as defined for purposes of Section 2.33) received from an Employer during such
year. For purposes of determining the number of Employees in the Top-Paid Group,
the following Employees shall be excluded:
(a) Employees who have not completed six (6) months of service;
(b) Employees who normally work less than seventeen and one-half
(17-1/2) hours per week;
(c) Employees who normally work less than six (6) months during any
year;
<PAGE>
(d) Employees who have not attained age twenty-one (21);
(e) Employees who are nonresident aliens and who receive no earned
income (within the meaning of Section 911(d)(2) of the Code) from an Employer
that constitutes income from sources within the United States (within the
meaning of Section 861(a) (3) of the Code).
The Company may elect to apply subsections (a), (b), (c) or (d) of this Section
by substituting a shorter period of service, a smaller number of hours or
months, or a lower age than that specified in each subsection.
2.56 "Trust" shall mean the Hannaford Savings and Investment Trust, as
amended from time to time.
2.57 "Trustee" shall mean the person or persons appointed by the Finance
Committee to serve as trustee(s) of the Trust.
2.58 "Trust Fund" shall mean the property held in the Trust for the
benefit of the Participants and their Beneficiaries.
2.59 "USERRA" shall mean the Uniformed Services Employment and Reemployment
Rights Act of 1994, 38 U.S.C. Section 4301 et seq., as in effect on December 12,
1994 (without regard to any subsequent amendment).
2.60 "Valuation Date" shall mean, effective January 1, 1998, each business
day on which the New York Stock Exchange is open; provided, however, when such
term is used in the context of Article X, such term shall mean the last business
day of each Plan Year.
2.61 "Vesting Computation Period" shall mean a Plan Year. If the Plan Year
is changed, the Vesting Computation Period shall be deemed to include a
corresponding twelve (12) consecutive month period. The new Vesting Computation
Period shall commence within the prior Vesting Computation Period so that the
new period overlaps the prior period. Each hourly Employee, other than an
Employee who is employed as a driver, shall be credited with one (1) Year of
Vesting Service if he or she is credited with at least eight hundred and seventy
(870) Hours of Service in only the prior Vesting Computation Period; one (1)
Year of Vesting Service if he or she is credited with at least eight hundred and
seventy (870) Hours of Service in only the new Vesting Computation Period; and
two (2) Years of Vesting Service if he or she is credited with at least eight
hundred and seventy (870) Hours of Service in each of the two (2) overlapping
Vesting Computation Periods. Each salaried or salaried nonexempt Employee, and
each Employee who is employed as a driver, shall be credited with one (1) Year
of Vesting Service if he or she is credited with at least one thousand (1,000)
Hours of Service in only the prior Vesting Computation Period; one (1) Year of
Vesting Service if he or she is credited with at least one thousand (1,000)
Hours of Service in only the new Vesting Computation Period; and two (2) Years
of Vesting Service if he or she is credited with at least one
<PAGE>
thousand (1,000) Hours of Service in each of the two (2) overlapping Vesting
Computation Periods.
2.62 "Year of Participation Service" shall have the meaning set forth in
subsection (a) or (b) below, whichever is applicable:
(a) In the case of an hourly Employee, other than an Employee who is
employed as a driver, an Eligibility Computation Period during which such
Employee has completed eight hundred and seventy (870) or more Hours of Service.
(b) In the case of a salaried or salaried nonexempt Employee, or an
Employee who is employed as a driver, an Eligibility Computation Period during
which such Employee has completed one thousand (1,000) or more Hours of Service.
2.63 "Year of Vesting Service" shall have the meaning set forth in
subsection (a) or (b) below, whichever is applicable:
(a) In the case of an hourly Employee, other than an Employee who is
employed as a driver, a Vesting Computation Period during which such Employee
has completed eight hundred and seventy (870) or more Hours of Service.
(b) In the case of a salaried or salaried nonexempt Employee, or an
Employee who is employed as a driver, a Vesting Computation Period during which
such Employee has completed one thousand (1,000) or more Hours of Service.
For purposes of determining the number of a Participant's Years of Vesting
Service, all service with an Employer or Related Employer shall be taken into
account; provided, however, in the case of a Participant who is first employed
by the Company or one of its subsidiaries in its Southeast Division, service
prior to March 1, 1993, shall be disregarded.
In the case of a Participant who incurs a Break in Service or period of
consecutive Breaks in Service, such Participant shall be credited with his or
her Years of Vesting Service prior to such Break in Service in accordance with
subsection (c) or (d) below, whichever is applicable:
(c) a Participant who had a nonforfeitable right to all of his or her
Account when he or she incurred the Break in Service shall receive credit for
all Years of Vesting Service prior to his or her Break in Service.
(d) a Participant who did not have a nonforfeitable right to all of
his or her Account when he or she incurred the Break in Service shall receive
credit for Years of Vesting Service prior to his or her Break in
<PAGE>
Service if he or she completes a Year of Vesting Service thereafter and the
number of his or her consecutive Breaks in Service is less than five (5).
ARTICLE III
Participation
3.1 Date of Participation. Except as hereinafter provided, each Employee
who is in the employ of an Employer on the Effective Date and who meets the
requirements of Section 3.2 on or before November 30, 1997, shall be eligible to
participate in the Plan as of the Effective Date. Each other Employee who
thereafter meets the requirements of Section 3.2 shall be eligible to
participate in the Plan as of the first day of the second month following the
month in which he or she meets such requirements, provided he or she is still in
the employ of an Employer on such date. Notwithstanding the foregoing provisions
to the contrary, each Employee who was a participant in the Hannaford Southeast
Savings and Investment Plan as of December 31, 1997, shall be eligible to
participate in the Plan as of the Effective Date, provided he or she is still in
the employ of an Employer on the Effective Date.
3.2 Participation Requirements. Each Employee who has attained age
twenty-one (21) and completed one (1) Year of Participation Service shall be
eligible to participate in the Plan.
3.3 Reemployed Eligible Employee. An Eligible Employee who is reemployed by
an Employer shall again be eligible to participate in the Plan as of the date he
or she completes one (1) Hour of Service.
3.4 Change of Employment Status.
(a) An Employee whose employment status changes by reason of being
transferred from the employ of a Related Employer that has not adopted the Plan
to the employ of an Employer shall be eligible to participate in the Plan as of
the later of the first day of the second month following the date his or her of
employment status changes or the first day of the second month following the
month in which he or she meets the requirements of Section 3.2.
(b) A Participant whose employment status changes by reason of being
transferred to the employ of a Related Employer that has not adopted the Plan
shall nevertheless continue to participate in the Plan, but without the right to
make a Deferral Election or share in an allocation of Employer Contributions
occurring after the date his or her employment status changes, until the date he
or she ceases to be employed by the Company and any other Related Employer.
<PAGE>
ARTICLE IV
Contributions and Direct Transfers
4.1 Employer Contributions. For each Plan Year, each Employer shall
contribute to the Plan:
(a) The Elective Contributions to be made in accordance with Section
5.1 or 4.8 on behalf of each Participant in its employ during such year; and
(b) The Matching Contributions, if any, to be made on behalf of each
Participant in its employ during such year who has made a Deferral Election for
such year at the rate determined in accordance with subparagraph (i) or (ii)
below, whichever is applicable; provided, however, no Matching Contribution may
be made with respect to any Excess Deferral or Excess Elective Contribution or
any Elective Contribution which is returned to the Participant pursuant to
Section 7.4(b):
(i) In the case of a Participant, other than a Contract Employee:
(aa) $1.00 for each dollar of Elective Contributions made
on his or her behalf, up to 1% of his or her Compensation;
(bb) $0.50 for each dollar of Elective Contributions made
on his or her behalf in excess of 1% and not exceeding 5% of his or her
Compensation; and
(cc) $0.25 for each dollar of Elective Contributions made
on his or her behalf in excess of 5% and not exceeding 9% of his or her
Compensation; and
(ii) In the case of a Participant who is a Contract Employee:
(aa) $1.00 for each dollar of Elective Contributions made
on his or her behalf up to 1% of his or her
Compensation; and
(bb) $0.25 for each dollar of Elective Contributions made
on his or her behalf in excess of 1% and not exceeding
4% of his or her Compensation; and
(c) the Discretionary Contributions, if any, in such amount as may be
determined by the Human Resources Committee of the Board of Directors.
4.2 Timing of Employer Contributions. Elective Contributions shall be paid
to the Trust as of the earliest date on which such contributions can reasonably
be segregated from the general assets of the Participant's
<PAGE>
Employer; provided in no event shall the date determined pursuant to this
provision occur later than the fifteenth (15th) business day of the month
following the month in which such contributions would otherwise have been
payable to the Participant in cash (the "maximum time period"), unless an
Employer extends the maximum time period as provided in 29 C.F.R. Section
2510.3-102(d). Matching Contributions and Discretionary Contributions, if any,
with respect to any Plan Year shall be paid to the Trust at such time or times
as may be determined by the Company, but not later than the date prescribed by
law for filing its federal income tax return for its taxable year which ends
with or within such Plan Year, including extensions which have been granted for
filing such return.
4.3 Form of Contributions. Elective Contributions shall be made in cash.
Matching Contributions and Discretionary Contributions may, at the election of
the Human Resources Committee of the Board of Directors, be made in cash or in
Company Stock, or any combination thereof; provided any contribution in the form
of Company Stock shall be valued at its fair market value as of the date of
contribution.
4.4 Maximum Contributions. In no event shall the contributions made by an
Employer for any Plan Year exceed the maximum amount which such Employer is
permitted to deduct for federal income tax purposes or cause the Annual Addition
for any Participant to exceed the amount permitted under the Plan.
4.5 Return of Contributions. Contributions by each Employer are conditioned
upon the initial qualification of the Plan under Section 401(a) of the Code and
upon their deductibility under Section 404 of the Code. Upon the request of any
Employer, any contributions attributable to such Employer (a) which are made by
reason of a mistake of fact, (b) which are conditioned upon the initial
qualification of the Plan, or (c) for which a deduction is disallowed shall be
returned to the Employer within one (1) year of the mistaken payment of the
contribution, denial of qualification (provided the application for
qualification is made by the time prescribed by law for filing such Employer's
federal income tax return for its taxable year in which the Plan is adopted, or
such later date as the Secretary of the Treasury may prescribe), or disallowance
of the deduction. In the event of a denial of qualification, the amount
contributed for the period during which the Plan was not qualified may be
returned. In the event of a mistake of fact or a disallowance of deduction, the
amount which may be returned to such Employer is the excess of the amount
contributed over the amount that would have been contributed had there not
occurred a mistake of fact or an error in determining the deduction. Earnings
attributable to any excess contribution shall not be returned, and losses
attributable thereto shall reduce the amount which may be returned.
The portion of any contribution returned to an Employer in accordance with
this Section that represents Elective Contributions shall be paid
<PAGE>
promptly by such Employer to the Participants on whose behalf such contributions
were made.
4.6 Nonforfeitable Contributions. Each Participant shall have a fully
vested and nonforfeitable interest in his or her Elective Contributions Account
at all times. Each Participant shall have a vested and nonforfeitable interest
in his or her Matching Contributions Account and Discretionary Contributions
Account as provided in Section 9.3.
A reemployed Employee's period of qualified military service (as defined in
Section 4.8) shall be taken into account as required by law for purposes of
determining the nonforfeitability of contributions made on behalf of such
individual under the Plan.
4.7 Special Rules For Matching Contributions.
(a) The Matching Contribution Percentage for Highly Compensated
Eligible Employees for any Plan Year commencing after December 31, 1996, shall
not exceed the greater of:
(i) the Matching Contribution Percentage for all other Eligible
Employees for the preceding Plan Year multiplied by 1.25; or
(ii) the lesser of the Matching Contribution Percentage for all
other Eligible Employees for the preceding Plan Year multiplied by 2, or the
Matching Contribution Percentage for such Eligible Employees for the preceding
Plan Year plus two percent (2%).
Notwithstanding the foregoing provisions to the contrary, with respect
to the Plan Year commencing January 1, 1997, the Company may elect, pursuant to
IRS Notice 97-2, to apply this subsection (a) by substituting the phrase "such
Plan Year" for the phrase "the preceding Plan Year."
(b) For purposes of this Section, if two or more qualified plans
maintained by the Employer are treated as one plan to meet the requirements of
Section 401(a)(4), Section 410(b) or Section 401(m) of the Code, such plans
shall be treated as a single plan. If a Highly Compensated Eligible Employee
participates in any other qualified plan maintained by the Employer to which
Matching Contributions are made, all such contributions for Plan Years ending
with or within the same calendar year shall be aggregated for purposes of this
Section. If a Highly Compensated Eligible Employee participates in two or more
cash or deferred arrangements that have different plan years, all cash or
deferred arrangements with Plan Years ending with or within the same calendar
year shall be treated as a single arrangement. Plans may be aggregated in order
to satisfy Section 401(m) of the Code only if they have the same plan year.
<PAGE>
(c) Notwithstanding any other provision of this Section to the
contrary, the limitation prescribed in subsection (a) above shall not apply to
Contract Employees, and Contract Employees shall be excluded for purposes of
applying such limitation to other Employees.
(d) To the extent Elective Contributions are taken into account under
this Section, any Elective Contributions returned to a Participant pursuant to
Section 7.4(b) shall be disregarded.
(e) Any Matching Contribution which is attributable to an Excess
Deferral or Excess Elective Contribution shall be forfeited and shall be
disregarded for purposes of subsection (a) of this Section. Forfeitures shall be
used to reduce Employer Contributions.
(f) For purposes of this Section, Matching Contributions shall be
treated as made for a Plan Year to which they relate if such contributions are
made no later than the end of the twelve (12) month period beginning on the day
after the close of the Plan Year. Each Employer shall maintain records
sufficient to demonstrate satisfaction of this Section and the amount of any
Elective Contributions taken into account under this Section. The determination
and treatment of the individual Matching Contribution Percentage of any Eligible
Employee shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(g) In the event that the Matching Contribution Percentage of the
Highly Compensated Eligible Employees for any Plan Year exceeds the limitation
of subsection (a) above, the Administrative Committee shall, within two and
one-half (2-1/2) months after the end of such year, distribute the Excess
Matching Contributions to the extent nonforfeitable (plus any income and minus
any loss allocable thereto) to such Highly Compensated Eligible Employees on the
basis of the amount of Employer Contributions made on behalf of each such
Employee and taken into account under Section 2.41 and shall designate such
distribution as a distribution of Excess Matching Contributions (plus any income
and minus any loss allocable thereto). To the extent the Excess Matching
Contributions are forfeitable, they shall be forfeited in accordance with the
provisions of Section 9.4; provided, however, that forfeitures of Excess
Matching Contributions may not be allocated to the accounts of Participants
whose Matching Contributions are reduced pursuant to this subsection (g).
(h) Excess Matching Contributions shall be adjusted for any income or
loss up to the date of distribution (or forfeiture). The income or loss
allocable to Excess Matching Contributions shall be determined by the same
manner in which income or loss is allocated to Participants' Accounts under
Article VIII.
(i) The amount of any Highly Compensated Eligible Employee's Excess
Matching Contributions shall be determined by reducing contributions
<PAGE>
on behalf of all such Employees in the order of their respective amounts of
Employer Contributions taken into account under Section 2.41, beginning with the
highest such amount. The determination of the amount of Excess Matching
Contributions with respect to the Plan shall be made after first determining the
amount of Excess Deferrals under Article VI and then determining the amount of
Excess Elective Contributions under Section 5.3.
4.8 USERRA Make-up Contributions. The provisions of this Section shall be
effective December 12, 1994. In addition to any Elective Contributions made in
accordance with Section 5.1, an Eligible Employee who is reemployed by his or
her Employer following a period of qualified military service may elect to have
such Employer make Elective Contributions on his or her behalf in accordance
with this Section; provided, such Elective Contributions do not exceed the
maximum amount of Elective Contributions that such Employer would have been
permitted to make on behalf of such Eligible Employee in accordance with the
limitations of Articles VI and VII of the Plan and Sections 402(g), 404(a) and
415 of the Code during such Employee's period of qualified military service if
such Employee:
(a) had continued to be employed by such Employer during such period;
and
(b) received Compensation from such Employer equal to:
(i) the Compensation the Employee would have received during such
period if the Employee were not in qualified military service, based on the rate
of pay the Employee would have received from such Employer but for the absence;
or
(ii) if the Compensation the Employee would have received during
such period is not reasonably certain, the Employee's average Compensation from
the Employer during the twelve (12) month period immediately preceding the
period of qualified military service (or, the period of employment immediately
preceding the period of qualified military service, if shorter).
Elective Contributions made in accordance with this Section shall be net of
any Elective Contributions actually made during an Employee's period of
qualified military service. Any Elective Contributions on behalf of an Eligible
Employee pursuant to this Section 4.8 shall be made during the period which
begins on the date of reemployment of such Employee with his or her Employer and
the duration of which is equal to the lesser of (i) three (3) times the period
of qualified military service and (ii) five (5) years.
An Employer shall make Matching Contributions with respect to any
additional Elective Contributions made in accordance with this Section which
would have been required had such Elective Contributions actually been made
during the period of qualified military service; provided such Matching
Contributions do not exceed the maximum amount of Matching Contributions
<PAGE>
that such Employer would have been permitted to make on behalf of such Eligible
Employee in accordance with the limitations of Article VII of the Plan and
Sections 404(a) and 415 of the Code during such Employee's period of qualified
military service.
Any Elective Contributions or Matching Contributions made by an Employer on
behalf of an Eligible Employee pursuant to this Section 4.8 shall not be subject
to any otherwise applicable limitation contained in Section 402(g), 404(a), or
415 of the Code and shall not be taken into account in applying such limitations
to other contributions or benefits under the Plan or any other plan maintained
by such Employer with respect to the year in which such contributions are made.
Any such Elective Contributions and Matching Contributions shall not be taken
into account, either for the Plan Year in which they are made or for the Plan
Year to which they relate, for purposes of Sections 4.7, 5.3, or Article X of
the Plan and for purposes of Sections 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 401(m), 410(b), or 416 of the Code.
No provision of this Section 4.8 shall be construed to require any
crediting of earnings to a Participant's Account with respect to any Employer
Contribution before such Employer Contribution is actually made or any
allocation of any forfeiture with respect to a period of qualified military
service.
For purposes of this Section, "qualified military service" shall mean
service entitling an individual to reemployment rights under USERRA, provided
such individual is reemployed or initiates reemployment with an Employer within
the period prescribed by USERRA.
An election by an Eligible Employee to have his or her Employer make
additional Elective Contributions on his or her behalf pursuant to this Section
4.8 shall be made by such written, telephonic or electronic means as shall be
prescribed by the Administrative Committee.
4.9 Rollover Contributions. An Employee who has received an eligible
rollover distribution (as defined in Section 402(c)(4) of the Code) from an
employee's trust described in Section 401(a) of the Code which is exempt from
tax under Section 501(a) of the Code may transfer all or any portion of such
distribution to the Trust, provided the transfer is made to the Trust not later
than the sixtieth (60th) day following the day on which the Employee received
such distribution. In addition, an Employee who receives a distribution from an
individual retirement account (within the meaning of Section 408(a) of the
Code), which account is attributable solely to a rollover contribution (as
defined in Section 402(c)(5) of the Code) from an employee's trust described in
Section 401(a) of the Code which is exempt from tax under Section 501(a) of the
Code, may transfer the entire amount distributed to the Trust, provided the
transfer is made to the Trust not later than the sixtieth (60th) day following
the day on which the Employee received such distribution. Notwithstanding the
foregoing to the contrary,
<PAGE>
an Employee who has received an eligible rollover distribution (as hereinabove
defined) solely by reason of the death of his or her spouse or a distribution
from an individual retirement account (as hereinabove defined), which account is
attributable solely to a rollover contribution (as hereinabove defined) from an
employee's trust described in Section 401(a) of the Code which is exempt from
tax under Section 501(a) of the Code of amounts received by reason of the death
of his or her spouse, may not transfer any portion of such distribution to the
Trust.
A Rollover Contribution shall be credited to a Rollover Contributions
Account on behalf of the contributing Employee, and such Employee shall have a
fully vested and nonforfeitable interest in his or her Rollover Contributions
Account. The Rollover Contributions Account of any Employee who is not a
Participant shall be administered, invested and distributed as if such account
constituted an Elective Contributions Account. The Rollover Contributions
Account of a Participant shall be administered, invested and distributed in the
same manner and at the same time as his or her Elective Contributions Account.
4.10 Direct Transfers. The Administrative Committee may direct the Trustee
to transfer the assets credited to the Account of a Participant or Former
Participant to another employer's retirement plan, provided immediately prior to
the transfer, the transferee plan contains a provision permitting such transfer
and is qualified under Section 401(a) of the Code and the related trust is
exempt under Section 501(a) of the Code.
The assets of another profit sharing plan may, with the prior consent of
the Administrative Committee, be directly transferred to the Trust, provided
immediately prior to the transfer, the transferor plan contains a provision
permitting such transfer and is qualified under Section 401(a) of the Code and
the related trust is exempt under Section 501(a) of the Code. Upon receipt, the
Administrative Committee shall credit the Account of each Employee who
participated in the transferor plan with the portion of the transferred assets
standing to the credit of such Employee under the transferor plan immediately
prior to such transfer, provided such amount shall be separately accounted for
in accordance with Section 8.1. With respect to a Participant who has an
outstanding loan balance under the transferor plan at the time of the transfer,
the promissory note evidencing such loan shall be transferred to this Plan and
the outstanding loan balance shall be treated in accordance with the provisions
of Section 9.11 as an outstanding loan balance under this Plan.
Except as hereinafter provided or as otherwise provided in Article IX or
XVIII, each elective, matching or other type of contribution comprising the
Transfer Account of any Employee shall be administered, invested and distributed
in accordance with the provisions of this Plan applicable to such type of
contribution. Each type of contribution comprising the Transfer Account which
was not fully vested under the transferor plan as of
<PAGE>
the date of the transfer shall remain subject to the vesting schedule set forth
in the transferor plan. Each type of contribution comprising the Transfer
Account which was fully vested under the transferor plan as of the date of the
transfer shall remain fully vested under this Plan.
Notwithstanding the foregoing provisions of this Section to the contrary,
this Plan shall not accept any direct or indirect transfers from a plan (other
than the Hannaford Southeast Savings and Investment Plan) which is subject to
Section 401(a)(11) of the Code.
ARTICLE V
Deferral Elections
5.1 Timing and Method. Any Eligible Employee may participate in the Plan by
electing to defer part of his or her Compensation each payroll period, provided
that an Eligible Employee may not defer less than one percent (1%) nor more than
fifteen percent (15%) of his or her Compensation each Plan Year. The amount
deferred shall be contributed to the Plan by the Employer on behalf of the
electing Eligible Employee. A Deferral Election shall be made by such written,
telephonic or electronic means as shall be prescribed by the Administrative
Committee.
A Deferral Election received by the Administrative Committee on any
business day (by 4 p.m. on Fridays) shall be effective with the paycheck the
Participant receives in the first week beginning after the business day on which
such election was received by the Administrative Committee. A Deferral Election
made on any non-business day (or made after 4 p.m. on Fridays) shall be treated
as received by the Administrative Committee on the next following business day,
and it shall be effective in accordance with the rule set forth in the preceding
sentence. A deemed Deferral Election pursuant to Section 18.2 shall be effective
January 1, 1998. A Deferral Election shall remain in effect until amended or
terminated in accordance with Section 5.2.
If a Participant terminates a Deferral Election in accordance with Section
5.2, such Participant may subsequently make another Deferral Election. Such
subsequent Deferral Election shall become effective in accordance with the rules
set forth above with respect to an initial Deferral Election.
5.2 Amendment or Termination by Participant. A Participant may amend his
or her Deferral Election to increase or decrease the deferral percentage within
the limits of Section 5.1 or may terminate his or her Deferral Election at any
time. An amendment or termination shall be made by such written, telephonic or
electronic means as shall be prescribed by the Administrative Committee, and
shall become effective in accordance with the rules set forth in Section 5.1
with respect to an initial Deferral Election.
<PAGE>
5.3 Limitations on Actual Deferral Percentage. In the event a Highly
Compensated Employee participates in two or more cash or deferred arrangements
(under Section 401(k) of the Code) that have different plan years, for purposes
of this Section, all such arrangements ending with or within the same calendar
year shall be treated as a single arrangement. For purposes of this Section,
this Plan and any other Code Section 401(k) plan maintained by an Employer shall
be treated as a single plan if such plans are treated as one plan for purposes
of Section 401(a)(4) or 410(b) of the Code or if a Highly Compensated Eligible
Employee participates in such other plan. Plans may be aggregated to satisfy
Section 401(k) of the Code only if such plans have the same plan year.
(a) The Actual Deferral Percentage for Highly Compensated Eligible
Employees for any Plan Year commencing after December 31, 1996, shall not exceed
the greater of:
(i) the Actual Deferral Percentage for all other Eligible
Employees for the preceding Plan Year multiplied by 1.25; or
(ii) the lesser of the Actual Deferral Percentage for all other
Eligible Employees for the preceding Plan Year multiplied by 2, or the Actual
Deferral Percentage for such Eligible Employees for the preceding Plan Year plus
two percent (2%).
(b) The sum of the Actual Deferral Percentage for Highly Compensated
Eligible Employees and the Matching Contribution Percentage for Highly
Compensated Eligible Employees for any Plan Year commencing after December 31,
1996, shall not exceed the greater of:
(i) the sum of (1) the greater of the Actual Deferral Percentage
for all other Eligible Employees for the preceding Plan Year multiplied by 1.25,
or the Matching Contribution Percentage for all other Eligible Employees for the
preceding Plan Year multiplied by 1.25, and (2) the lesser of the Actual
Deferral Percentage for all other Eligible Employees for the preceding Plan Year
plus 2, or the Matching Contribution Percentage for all other Eligible Employees
for the preceding Plan Year plus 2, provided that in no event shall such
percentage plus 2 exceed such percentage multiplied by 2.
(ii) the sum of (1) the lesser of the Actual Deferral Percentage
for all other Eligible Employees for the preceding Plan Year multiplied by 1.25
or the Matching Contribution Percentage for all other Eligible Employees for the
preceding Plan Year multiplied by 1.25, and (2) the greater of the Actual
Deferral Percentage for all other Eligible Employees for the preceding Plan Year
plus 2 or the Matching Contribution Percentage for all other Eligible Employees
for the preceding Plan Year plus 2, provided that in no event shall such
percentage plus 2 exceed such percentage multiplied by 2.
<PAGE>
(c) Notwithstanding the foregoing provisions of this Section to the
contrary, the limitations prescribed in subsections (a) and (b) above and the
provisions of Section 5.4 shall apply separately to Contract Employees and all
other Employees.
Subsection (b) of this Section shall not apply if the respective Actual
Deferral Percentage and Matching Contribution Percentage of the Highly
Compensated Eligible Employees for any Plan Year commencing after December 31,
1996, does not exceed the respective Actual Deferral Percentage and Matching
Contribution Percentage of all other Eligible Employees for the preceding Plan
Year multiplied by 1.25.
Notwithstanding the foregoing provisions of this Section to the contrary,
with respect to the Plan Year commencing January 1, 1997, the Company may elect,
pursuant to IRS Notice 97-2, to apply subsections (a) and (b) of this Section by
substituting the phrase "such Plan Year" for the phrase "the preceding Plan
Year" in said subsections and in the paragraph immediately preceding this
paragraph.
For purposes of this Section, Elective Contributions and Matching
Contributions must be made before the last day of the twelve (12) month period
immediately following the Plan Year to which such contributions relate. Any
Elective Contributions returned to a Participant pursuant to Section 7.4(b)
shall be disregarded.
Each Employer shall maintain records sufficient to demonstrate compliance
with this Section. The determination and treatment of the contributions on
behalf of any Participant that are taken into account for purposes of this
Section shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
5.4 Restrictions and Adjustments. The Administrative Committee may restrict
the deferral percentages elected by Participants if the Administrative Committee
determines such restriction is necessary to comply with Section 4.4, Section
5.3, Article VI, or Article VII.
In the event that the Actual Deferral Percentage of the Highly Compensated
Eligible Employees for any Plan Year exceeds the limitations prescribed in
Section 5.3(a), the Administrative Committee shall, within two and one-half
(2-1/2) months after the end of such year, distribute the Excess Elective
Contributions (plus any income and minus any loss allocable thereto) to such
Highly Compensated Eligible Employees on the basis of the amount of Employer
Contributions made on behalf of each such Employee and taken into account under
Section 2.2 and shall designate such distribution as a distribution of Excess
Elective Contributions (plus any income and minus any loss allocable thereto).
The amount of any Highly Compensated Eligible Employee's Excess Elective
Contributions shall be determined by reducing contributions on
<PAGE>
behalf of such Employees in the order of their respective amounts of Employer
Contributions taken into account under Section 2.2, beginning with the highest
such amount. The amount of Excess Elective Contributions with respect to a
Highly Compensated Eligible Employee for any Plan Year shall be reduced by the
amount of Excess Deferrals previously distributed to such Employee under Article
VI for the calendar year ending with or within the Plan Year; provided, however,
that notwithstanding the distribution of an Excess Deferral in accordance with
Section 6.2 to a Highly Compensated Eligible Employee, such distributed amount
shall be taken into account under Section 5.3.
Excess Elective Contributions shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to Excess Elective
Contributions shall be determined by the same manner in which income or loss is
allocated to Participants' Accounts under Article VIII of the Plan.
In the event that the sum of the Actual Deferral Percentage for Highly
Compensated Eligible Employees and the Matching Contribution Percentage for
Highly Compensated Eligible Employees for any Plan Year exceeds the limitations
prescribed in Section 5.3(b), the Administrative Committee shall, within two and
one-half (2-1/2) months after the end of such year, reduce the Matching
Contribution Percentage for Highly Compensated Employees in the manner
prescribed in subsection (g) through (i) of Section 4.7.
ARTICLE VI
Excess Deferrals
6.1 Limitation on Elective Contributions. Effective January 1, 1997, the
Elective Contributions that may be allocated to a Participant's Account for any
calendar year shall not exceed Nine Thousand Five Hundred Dollars ($9,500.00),
reduced by the amount of any employer contributions for such year on behalf of
such Participant pursuant to an election to defer compensation under any
qualified cash or deferred arrangement within the meaning of Section 401(k) of
the Code, any simplified employee pension or cash arrangement within the meaning
of Section 402(h)(1)(B) of the Code, any eligible deferred compensation plan
under Section 457 of the Code, any plan within the meaning of Section 501(c)(18)
of the Code, any salary reduction agreement for the purchase of an annuity
contract under Section 403(b) of the Code, and any elective employer
contribution under Section 408(p)(2)(A)(i) of the Code.
For purposes of this Section, any Elective Contributions returned to a
Participant pursuant to Section 7.4(b) shall be disregarded. The dollar
limitation of this Section shall be automatically adjusted to reflect any cost
of living adjustment made under Section 402(g)(5) of the Code.
<PAGE>
6.2 Distribution of Excess Deferral. In the event that the limitation of
Section 6.1 is exceeded with respect to any Participant for any calendar year,
not later than April 15 of the following calendar year, the Administrative
Committee shall distribute the Excess Deferral (plus any income and minus any
loss allocable thereto) to such Participant and designate such distribution as a
distribution of an Excess Deferral (plus any income and minus any loss allocable
thereto), provided that the Administrative Committee has received the notice
prescribed in Section 6.3. Excess Deferrals shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to Excess
Deferrals shall be determined by the same manner in which income or loss is
allocated to the Participants' Accounts under Article VIII of the Plan.
The amount of Excess Deferral with respect to a Participant for any
calendar year shall be reduced by the amount of any Excess Elective
Contributions previously distributed to such Participant for the Plan Year
beginning with or within the calendar year.
6.3 Notice by Participant. It shall be the responsibility of the
Participant to notify the Administrative Committee of any Excess Deferral for a
calendar year. Such notice shall be made by such written, telephonic or
electronic means as shall be prescribed by the Administrative Committee; shall
specify the amount of the Excess Deferral; shall state that if the Excess
Deferral is not distributed, such excess shall be includable in the
Participant's gross income under Section 402(g) of the Code; and shall be
submitted to the Administrative Committee not later than March 1 of the
following calendar year. A Participant shall be deemed to have notified the
Administrative Committee of an Excess Deferral to the extent such Participant
has an Excess Deferral for a calendar year, taking into account only Elective
Contributions under the Plan and any other plans of his or her Employer subject
to Section 402(g) of the Code.
ARTICLE VII
Limitation on Annual Additions
7.1 Limitation For Defined Contribution Plans. The Annual Additions which
may be allocated to the Account of a Participant for a Limitation Year shall not
exceed the lesser of:
(a) Thirty Thousand Dollars ($30,000.00); or
(b) Twenty-five percent (25%) of the Participant's compensation (as
defined in Section 7.5) for the Limitation Year,
reduced by the sum of (i) the annual additions allocated within such Limitation
Year to the accounts of such Participant under all other qualified defined
contribution plans maintained by an Employer and (ii) the contributions on
behalf of such Participant to welfare benefit funds (as defined in Section
419(e) of the Code) and individual medical benefit
<PAGE>
accounts (as defined in Section 415(l)(2) of the Code) which, as hereinafter
provided, are treated as annual additions to a defined contribution plan. The
dollar limitation of this Section shall be automatically adjusted to reflect any
cost of living adjustment made under Section 415(d) of the Code.
If an Annual Addition allocated to a Participant's Account for a Limitation
Year when added to the sum of (i) the Annual Additions previously allocated
within such year to the Participant's Account, (ii) the annual additions
previously allocated within such year to the Participant's accounts under all
other qualified defined contribution plans maintained by an Employer and (iii)
the aforesaid contributions to welfare benefit funds (as defined in Section
419(e) of the Code) and individual medical benefit accounts (as defined in
Section 415(l)(2) of the Code) exceeds the limitation set forth in this Section,
such excess shall be reduced as hereinafter provided in this Article.
If the allocation of an Annual Addition to a Participant's Account
coincides with the allocation of an annual addition to such Participant's
account or accounts under one or more other qualified defined contribution plans
maintained by an Employer and/or the allocation of a contribution on behalf of
such Participant to one or more welfare benefit funds (as defined in Section
419(e) of the Code) or individual medical benefit accounts (as defined in
Section 415(l)(2) of the Code) which, as hereinafter provided, are treated as an
annual addition to a defined contribution plan and such allocations exceed the
limitation set forth in this Section, the excess attributable to this Plan,
which shall be reduced as hereinafter provided in this Article, shall be equal
to the product determined by multiplying the total excess by a fraction, the
numerator of which is the Annual Additions previously allocated to the
Participant's Account within such Limitation Year and the denominator of which
is the sum of the Annual Additions previously allocated to the Participant's
Account within such Limitation Year and the annual additions previously
allocated to the Participant's accounts under such other plans within such
Limitation Year.
The limitation set forth in this Section may be applied on the basis of
reasonable estimates of compensation for the Limitation Year, provided such
estimates are uniformly determined for all Participants. As soon as practicable
after the end of each Limitation Year, the limitation shall be applied on the
basis of actual compensation.
Notwithstanding the foregoing, the compensation limitations of Section
7.1(b) shall not apply to any contribution for medical benefits (within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise
treated as an Annual Addition under Section 415(h)(1) or Section 419A(d)(2) of
the Code.
7.2 Limitation For Defined Contribution Plan and Defined Benefit Plan.
If a Participant also participates or has participated in a qualified
<PAGE>
defined benefit plan maintained by an Employer, then in addition to the
limitation set forth in the preceding Section, the sum of the fractions
determined under subsections (a) and (b) below for any Limitation Year shall not
exceed 1.0.
(a) A fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all qualified defined benefit plans (whether or
not terminated) maintained by the Employer and the denominator of which is the
lesser of (i) the dollar limitation in effect under Section 415(b)(1)(A) of the
Code for such year multiplied by 1.25, or (ii) the amount which may be taken
into account under Section 415(b)(1)(B) of the Code with respect to the
Participant for such year multiplied by 1.4.
For purposes of this subsection (a), "projected annual benefits" shall
mean the annual retirement benefit (adjusted to an actuarially equivalent
straight life annuity, if such benefit is expressed in a form other than a
straight life annuity, or qualified joint and survivor annuity) to which the
Participant would be entitled under the terms of the plan, assuming:
(i) the Participant will continue employment until normal
retirement age under the plan (or current age, if later); and
(ii) the Participant's compensation for the current Limitation
Year and all other relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
Notwithstanding the foregoing, if the Participant participated as of
the first day of the first Limitation Year beginning after December 31, 1986, in
one or more qualified defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction shall not be
less than one hundred twenty-five percent (125%) of the sum of the annual
benefits which the Participant accrued under such plans as of the close of the
last Limitation Year beginning before January 1, 1987, disregarding any changes
in the terms and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the qualified defined benefit plans individually and in
the aggregate satisfied the requirements of Section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(b) A fraction, the numerator of which is the sum of the annual
additions to the Participant's accounts under all qualified defined contribution
plans (whether or not terminated) maintained by an Employer for the current and
all prior Limitation Years (including the annual additions attributable to the
Participant's nondeductible voluntary contributions under all qualified defined
benefit plans, whether or not terminated, maintained by an Employer) and the
contributions on behalf of the Participant to all welfare benefit funds (as
defined in Section 419(e) of
<PAGE>
the Code) and individual medical benefit accounts (as defined in Section
415(l)(2) of the Code) maintained by an Employer which, as hereinafter provided,
are treated as annual additions to a defined contribution plan and the
denominator of which is the sum of the lesser of the following amounts
determined for the current Limitation Year and all prior Limitation Years in
which the Participant performed service for the Employer (regardless of whether
a defined contribution plan was maintained by the Employer): (i) the dollar
limitation in effect under Section 415(c)(1)(A) of the Code for such year
multiplied by 1.25, or (ii) thirty-five percent (35%) of the Participant's
compensation for such year.
If an Employee was a participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
qualified defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction shall be adjusted if
the sum of the fractions under this Section would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (i)
the excess of the sum of said fractions over 1.0 multiplied by (ii) the
denominator of this fraction, shall be permanently subtracted from the numerator
of this fraction. The adjustment shall be calculated using the fractions as they
would be computed as of the end of the last Limitation Year beginning before
January 1, 1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before January
1, 1987, shall not be recomputed to treat all employee contributions as Annual
Additions.
If the sum of said fractions for any Limitation Year exceeds 1.0, the
Annual Additions allocated to the Participant's Account for such Limitation Year
shall be reduced, as hereinafter provided in this Article, until the sum of the
fractions does not exceed 1.0 or the rate of accrual of the Participant's
accrued benefit under the defined benefit plan shall be reduced until the sum of
the fractions does not exceed 1.0.
7.3 Combining and Aggregating Plans. For purposes of applying the
limitations described in this Article:
(a) All qualified defined benefit plans (without regard to whether a
plan has been terminated) ever maintained by an Employer shall be treated as one
defined benefit plan; and
(b) All qualified defined contribution plans (without regard to
whether a plan has been terminated) ever maintained by an Employer shall be
treated as one defined contribution plan.
<PAGE>
7.4 Reduction of Excess Annual Additions. If, as a result of a reasonable
error in estimating a Participant's annual compensation (as defined in Section
7.5), a reasonable error in determining the amount of elective deferrals (within
the meaning of Section 402(g)(3) of the Code) that may be made with respect to
any Participant under the limitations of Section 415 of the Code, or under other
limited facts and circumstances that the Commissioner of the Internal Revenue
Service finds justify the availability of the rules set forth below, the Annual
Additions allocated to the Account of any Participant would cause the
limitations set forth in the preceding Sections of this Article for any
Limitation Year to be exceeded, the following rules shall apply to the extent
necessary to reduce such excess, and the excess amounts shall not be deemed
Annual Additions in such Limitation Year:
(a) Any nondeductible voluntary employee contributions (and the
earnings thereon) to the extent they would reduce the excess amount, shall be
returned to the Participant;
(b) Any Elective Contributions (and, effective for Limitation Years
beginning after December 31, 1995, the earnings thereon) to the extent they
would reduce the excess amount, shall be returned to the Participant;
(c) If after the application of subsections (a) and (b) an excess
amount still exists and the Participant is covered by the Plan at the end of the
Limitation Year, the excess amount allocated to the Participant's Account for
such year shall be used to reduce Employer Contributions for the next Limitation
Year and for each succeeding Limitation Year, if necessary, for such
Participant;
(d) If after the application of subsections (a) and (b) an excess
amount still exists and the Participant is not covered by the Plan at the end of
the Limitation Year, the excess amount allocated to the Participant's Account
for such Limitation Year shall be held unallocated in a suspense account. The
suspense account shall be applied to reduce Employer Contributions for all
remaining Participants in the next Limitation Year and each succeeding
Limitation Year, if necessary.
If a suspense account is in existence at any time during a Limitation Year
pursuant to subsection (d) of this Section, it shall not participate in the
allocation of the Investment Funds' income, expenses, gains and losses. If a
suspense account is in existence at any time during a particular Limitation
Year, all amounts in the suspense account must be allocated and reallocated to
Participants' Accounts before any Employer Contributions or employee
contributions may be made to the Plan for that Limitation Year. For purposes of
subsections (c) and (d) excess amounts may not be distributed to Participants or
Former Participants.
7.5 Definition of Compensation. Except as hereinafter provided, for
purposes of applying the limitations of this Article, the term
<PAGE>
"compensation" shall mean, with respect to a Limitation Year, the total
compensation paid by an Employer to an Employee for services rendered while an
Employee that constitutes wages as defined in Section 3401(a) of the Code and
all other payments by an Employer to an Employee for services rendered while an
Employee for which an Employer is required to furnish the Employee a written
statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code without regard
to any rules that limit the remuneration included in wages based on the nature
or location of the employment or services performed. Notwithstanding the
foregoing to the contrary, effective January 1, 1998, "compensation" shall
include any elective deferrals within the meaning of Section 402(g)(3) of the
Code and any amount which is contributed or deferred by an Employer at the
election of an Employee and which is not includable in the gross income of the
Employee by reason of Section 125 or 457 of the Code.
For Limitation Years beginning prior to January 1, 1998, for purposes of
applying the limitations of this Article, "compensation" for a Limitation Year
shall mean the compensation actually paid or includable in gross income during
such Limitation Year. Notwithstanding the preceding sentence "compensation" with
respect to a Participant who is permanently and totally disabled (within the
meaning of Section 22(e)(3) of the Code) shall mean the compensation such
Participant would have received for the Limitation Year if he or she had been
paid at the rate in effect immediately before becoming permanently and totally
disabled; provided, such imputed compensation may be taken into account only if
the Participant is not a Highly Compensated Employee and contributions made on
behalf of such Participant are nonforfeitable when made.
Notwithstanding the foregoing to the contrary, for purposes of Sections
2.2, 2.41 and 10.3(b), effective January 1, 1994, the annual "compensation" of
any Employee in excess of One Hundred Fifty Thousand Dollars ($150,000.00) (or
such higher amount as the Secretary of the Treasury may prescribe) shall not be
taken into account. In the event "compensation" is determined based on a period
of time which contains fewer than twelve (12) calendar months, the annual
compensation limit shall be an amount equal to the annual compensation limit for
the Limitation Year in which the period begins multiplied by a fraction, the
numerator of which is the number of full calendar months in the period and the
denominator of which is twelve (12). If "compensation" for a prior Limitation
Year is taken into account for any Limitation Year, such compensation shall be
subject to the annual compensation limit in effect for such prior Limitation
Year.
7.6 Certain Contributions Treated as Annual Additions. For purposes of
this Article:
(a) Excess Matching Contributions and Excess Elective Contributions
shall be treated as Annual Additions;
<PAGE>
(b) Amounts derived from contributions which are paid or accrued in
taxable years ending after December 31, 1985, and which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee (as defined in Section 419A(d)(3) of the Code) under a welfare benefit
fund (as defined in Section 419(e) of the Code) maintained by the Employer,
shall be treated as annual additions to a defined contribution plan; and
(c) Contributions allocated after March 31, 1984, to an individual
medical benefit account (as defined in Section 415(l)(2) of the Code) which is
part of a defined benefit plan maintained by the Employer shall be treated as
annual additions to a defined contribution plan.
ARTICLE VIII
Accounts and Valuation
8.1 Participant Accounts. The Administrative Committee shall establish and
maintain a separate Account for each Participant which shall separately reflect:
(a) The Participant's Elective Contributions and the income, expenses,
gains and losses of the Trust Fund attributable thereto (such portion of a
Participant's Account shall be referred to as his or her "Elective Contributions
Account");
(b) The Participant's Matching Contributions, if any, and the income,
expenses, gains and losses of the Trust Fund attributable thereto (such portion
of a Participant's Account shall be referred to as his or her "Matching
Contributions Account");
(c) the Participant's share of Discretionary Contributions, if any,
and the income, expenses, gains and losses of the Trust Fund attributable
thereto (such portion of a Participant's Account shall be referred to as his or
her "Discretionary Contributions Account");
(d) The Participant's Rollover Contributions and the income, expenses,
gains and losses of the Trust Fund attributable thereto (such portion of a
Participant's Account shall be referred to as his or her "Rollover Contributions
Account"); and
(e) The assets transferred from another qualified plan on behalf of
the Participant in accordance with Section 4.10 or Article XVIII and the income,
expenses, gains and losses of the Trust Fund attributable thereto (such portion
of a Participant's Account shall be referred to as his or her "Transfer
Account").
8.2 Adjustments. The Trustee shall adjust the Participants' Accounts as of
each Valuation Date as follows:
<PAGE>
(a) First, determine the net fair market value of each Investment Fund
as of the close of business on such date.
(b) Second, allocate the income, expenses, gains and losses of each
Investment Fund among the Accounts in proportion to the Account balances (to the
extent invested in such fund) as of the preceding Valuation Date.
(c) Third, reduce the separate Account of each Participant to reflect
distributions, loans and withdrawals made from such Account since the preceding
Valuation Date.
(d) Fourth, credit each Participant's Account with the contributions
made on his or her behalf, the assets transferred from another qualified plan in
accordance with Section 4.10 or Article XVIII, and the Participant's loan
repayments since the preceding Valuation Date.
(e) Fifth, adjust each Participant's Account to reflect transfers
among the Investment Funds.
(f) Notwithstanding the foregoing provisions of this Section to the
contrary, the Administrative Committee may debit in a uniform and
nondiscriminatory manner the Account of any Participant or Former Participant as
of any Valuation Date in the amount of any reasonable expense attributable to
such Participant's or Former Participant's exercise of control over his or her
Account since the preceding Valuation Date. The Administrative Committee shall
establish, in writing, reasonable procedures to inform Participants and Former
Participants that such expenses may be charged to their Accounts pursuant to
this Section 8.2(f), to inform each Participant or Former Participant at least
annually of the actual expenses incurred with respect to his or her Account, and
to otherwise carry out this subsection. A Participant's or Former Participant's
"exercise of control over his or her Account" shall include but not be limited
to the following:
(i) a request for a loan pursuant to Section 9.11;
(ii) a request for a hardship withdrawal distribution pursuant
to Section 9.12; and
(iii) an investment direction pursuant to Section 11.4 or Section
11.5.
8.3 Allocation of Elective Contributions and Matching Contributions. Any
Elective Contributions and Matching Contributions made on behalf of a
Participant shall be allocated to his or her Account as of the Valuation Date
coinciding with or next following the date on which such contributions are
received by the Trustee; provided, however, that any such contributions made
after a Valuation Date that are attributable to the period ending with such date
shall be allocated as of such date.
<PAGE>
8.4 Allocation of Discretionary Contributions. As of the last Valuation
Date of each Plan Year, the Trustee shall allocate the Discretionary
Contribution, if any, for such Plan Year to the separate Accounts of the
Eligible Employees entitled to share therein in proportion to their respective
amounts of compensation for such Plan Year. For purposes of this Section,
"compensation" shall have the meaning given such term in Section 2.11, except
that it shall include compensation paid for services rendered while an Eligible
Employee; provided, however, compensation paid for services rendered while a
Contract Employee shall not be taken into account.
8.5 Eligible Employees Entitled to Share in Discretionary Contributions. An
Eligible Employee shall be entitled to share in the Discretionary Contribution
for a Plan Year (i) if, in the case of an hourly Employee, other than an
Employee who is employed as a driver, he or she is credited with at least eight
hundred and seventy (870) or more Hours of Service during such Plan Year, or, in
the case of a salaried or salaried nonexempt Employee, or an Employee who is
employed as a driver, he or she is credited with at least one thousand (1,000)
Hours of Service during such Plan Year, remains in the employ of an Employer on
the last business day of such Plan Year, and is not a Contract Employee on such
date, or (ii) if he or she dies, retires after having attained Normal Retirement
Age or retires on account of Disability during such Plan Year; provided at the
time of such retirement or death he or she is not a Contract Employee.
In the event application of the preceding sentence would cause the Plan to
fail to satisfy the requirements of Section 410(b) of the Code for any Plan
Year, the following provisions shall apply:
(a) An Eligible Employee shall be entitled to share in the
Discretionary Contribution for a Plan Year (i) if, in the case of an hourly
Employee, other than an Employee who is employed as a driver, he or she is
credited with more than four hundred and thirty-five (435) Hours of Service
during such Plan Year, or, in the case of a salaried or salaried nonexempt
Employee, or an Employee who is employed as a driver, he or she is credited with
more than five hundred (500) Hours of Service during such Plan Year, remains in
the employ of an Employer on the last business day of such Plan Year, and is not
a Contract Employee on such date, or (ii) if he or she dies, retires after
having attained Normal Retirement Age or retires on account of Disability during
such Plan Year; provided at the time of such retirement or death he or she is
not a Contract Employee.
(b) If after applying subsection (a) above the Plan would fail to
satisfy the requirements of Section 410(b) of the Code, an Eligible Employee
shall be entitled to share in the Discretionary Contribution for a Plan Year if
he or she remains in the employ of an Employer on the last business day of such
Plan Year and is not a Contract Employee on such date, without regard to the
number of Hours of Service credited during such year, or if he or she dies,
retires after having attained Normal Retirement Age or retires
<PAGE>
on account of Disability during such Plan Year; provided at the time of such
retirement or death he or she is not a Contract Employee.
(c) If after applying subsections (a) and (b) of this Section the Plan
would fail to satisfy the requirements of Section 410(b) of the Code, an
Eligible Employee shall be entitled to share in the Discretionary Contribution
for a Plan Year (i) if, in the case of an hourly Employee, other than an
Employee who is employed as a driver, he or she is credited with more than four
hundred and thirty-five (435) Hours of Service during such Plan Year, or, in the
case of a salaried or salaried nonexempt Employee, or an Employee who is
employed as a driver, he or she is credited with more than five hundred (500)
Hours of Service during such Plan Year, and is not a Contract Employee,
regardless of whether he or she remains in the employ of an Employer on the last
business day of such year; or (ii) if he or she dies, retires after having
attained Normal Retirement Age or retires on account of Disability during such
Plan Year; provided at the time of such retirement or death he or she is not a
Contract Employee.
8.6 Allocation of Rollover Contributions and Asset Transfers. Any Rollover
Contribution and any direct transfer of plan assets in accordance with Section
4.10 or Article XVIII made on behalf of an Employee shall be allocated to his or
her Account as of the Valuation Date coinciding with or next following the date
such contribution or transfer is received by the Trustee.
8.7 Reports to Participants. The Administrative Committee shall, at least
annually, determine each Participant's share of the Trust Fund and furnish each
Participant with a statement summarizing his or her Account.
ARTICLE IX
Distribution, Loans and Withdrawals
9.1 Retirement. When a Participant attains Normal Retirement Age, he or she
shall have a fully vested and nonforfeitable right to his or her Account.
Following retirement, such Participant shall receive distribution of his or her
Account in such manner and at such time as hereinafter provided.
9.2 Disability. If a Participant retires on account of a Disability, such
Participant shall have a fully vested and nonforfeitable right to his or her
Account. Such Participant shall receive distribution of his or her Account in
such manner and at such time as hereinafter provided.
9.3 Termination of Employment. If a Participant ceases to be employed by an
Employer or a Related Employer and is no longer employed by any of them prior to
attaining Normal Retirement Age for any reason other than Disability or death,
such Participant shall receive distribution of the vested portion of his or her
Account in such manner and at such time as
<PAGE>
hereinafter provided. The vested portion of such Participant's Account shall be
equal to the sum of the following:
(a) Such Participant's Elective Contributions Account, Rollover
Contributions Account, and the portion of his or her Transfer Account that was
fully vested and nonforfeitable as of the date of transfer;
(b) Such Participant's vested percentage of his or her Matching
Contributions Account and Discretionary Contributions Account determined in
accordance with the following schedule:
Number of Participant's
Years of Vesting Service Vested Percentage
Less than 5 0%
5 or more 100%
; and
(c) Such Participant's vested percentage of his or her Transfer
Account determined in accordance with Section 4.10.
Notwithstanding the foregoing provisions of this Section to the contrary,
each Participant shall have a full vested and nonforfeitable right to his or her
Account balance as of December 31, 1997 (plus the earnings thereon), except for
the portion of such Account balance, if any, which is attributable to a Transfer
Account balance and which was not fully vested. The vested percentage of such
Transfer Account balance shall be determined in accordance with subsection (c)
above.
Notwithstanding the foregoing provisions of this Section to the contrary,
each Participant who is a Contract Employee and each other Participant (other
than a Participant who was first employed by the Company or one of its
subsidiaries in its Southeast Division) who has completed at least three (3)
Years of Vesting Service as of December 31, 1997, shall have a fully vested and
nonforfeitable right to his or her Account at all times.
9.4 Forfeitures. If a Participant is not vested in any portion of his or
her Matching Contributions Account, Discretionary Contributions Account, and
matching contributions and discretionary contributions sub-accounts under his or
her Transfer Account at the time he or she ceases to be employed by an Employer
or a Related Employer and is no longer employed by any of them, the balance of
such accounts and sub-accounts shall be forfeited as of the date he or she
ceases to be employed by an Employer or a Related Employer and is no longer
employed by any of them. If such Participant is reemployed by an Employer or any
Related Employer prior to incurring five (5) consecutive Breaks in Service, the
balance of his or her Matching Contributions Account, Discretionary
Contributions Account and
<PAGE>
matching contributions and discretionary contributions sub-accounts under his or
her Transfer Account as of the Valuation Date coinciding with or next following
the date he or she ceased to be employed shall be restored.
Restoration shall be made by the end of the Plan Year following the Plan
Year in which the Participant is reemployed by an Employer or any Related
Employer. Restoration shall first be made out of forfeitures and to the extent
forfeitures are insufficient, then out of Employer Contributions.
The amounts forfeited by Participants in any Plan Year shall be used to
make restoration in accordance with this Section and, to the extent forfeitures
exceed the amounts required to make restoration, to reduce Employer
Contributions. The amount, if any, by which forfeitures occurring during a Plan
Year exceed the sum of the amounts required to make restoration and the amount
required to be contributed by an Employer for such Plan Year shall be credited
to an excess forfeiture account, which shall be adjusted for the income,
expenses, gains and losses attributable thereto in the same manner provided for
adjustment of Accounts. On the Valuation Date coinciding with the last day of
the next succeeding Plan Year, the excess forfeiture account shall be closed and
treated as a forfeiture occurring in such Plan Year. This procedure shall be
repeated for each Plan Year in which forfeitures occurring during such year
exceed the sum of the amount required to make restoration and the amount
required to be contributed by an Employer for such year, subject, however, to
such modification as may be required by the Section governing termination of the
Plan.
9.5 Distributions to Participants. Effective January 1, 1998, and except as
hereinafter provided, the vested portion of each Participant's Account shall be
distributed in a lump sum. Subject to the provisions of subsections (c), (d),
(e), (f) and (g) below, a Participant may elect to receive distribution of the
vested portion of his or her Account as of any Valuation Date which occurs:
(a) after the date he or she ceases to be employed by an Employer or
a Related Employer and is no longer employed by any of them;
(b) after any of the following events:
(i) the termination of the Plan by the Participant's Employer,
without the establishment or maintenance of another defined contribution plan
(other than an employee stock ownership plan as defined in Section 4975(e)(7) of
the Code);
(ii) the sale or other disposition by an Employer to an unrelated
corporation of substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used by such Employer in a trade or business of the
Employer, if the Participant continues employment with the corporation acquiring
such assets; or
<PAGE>
(iii) the sale or other disposition by an Employer of such
Employer's interest in a subsidiary (within the meaning of Section 409(d)(3) of
the Code), to an unrelated entity if the Participant continues employment with
such subsidiary.
The Participant's Account shall be valued as of the first Valuation Date which
is administratively practicable following receipt of such election by the
Administrative Committee or the Valuation Date specified in said election, if
later, and distribution shall be made in a lump sum as soon as practicable
thereafter. An election pursuant to this Section 9.5 shall be made by such
written, telephonic or electronic means as may be prescribed by the
Administrative Committee.
(c) Notwithstanding the foregoing provisions of this Section to the
contrary, if the value of the vested portion of a Participant's Account does not
exceed the applicable cash-out amount as of the Valuation Date following the
date he or she ceases to be employed by an Employer or a Related Employer and is
no longer employed by any of them (and did not exceed the applicable cash-out
amount, as of the date of any prior distribution), his or her Account shall be
distributed in a lump sum as soon as practicable after such Valuation Date. For
purposes of this subsection (a), the "applicable cash-out amount" means Three
Thousand Five Hundred Dollars ($3,500.00) before January 1, 1998, and Five
Thousand Dollars ($5,000.00) on or after January 1, 1998.
(d) Notwithstanding the foregoing provisions of this Section to the
contrary, distribution to a Participant shall be made not later than the
sixtieth (60th) day after the later of the close of the Plan Year in which the
Participant attains the Normal Retirement Age or in which the Participant ceases
to be employed by an Employer or a Related Employer and is no longer employed by
any of them.
(e) Notwithstanding the foregoing provisions of this Section to the
contrary, a Participant may elect to receive or commence receiving distribution
of the vested portion of his or her Transfer Account balance, if any, which was
allocated to such Participant's account under the Hannaford Southeast Savings
and Investment Plan as of June 30, 1995, at such time and in such manner as
provided in Exhibit A to this Plan; provided, however, this subsection (e) shall
not apply if such vested portion does not exceed Three Thousand Five Hundred
Dollars ($3,500.00) as of such date (and did not exceed Three Thousand Five
Hundred Dollars ($3,500.00) as of the date of any prior distribution).
(f) Notwithstanding the foregoing provisions of this Section to the
contrary, effective January 1, 1997:
(i) distribution of the Account of a Participant who is not a
Five Percent Owner shall be made not later than April 1 of the calendar
<PAGE>
year following the later of the calendar year in which the Participant attains
age seventy and one-half (70-1/2) or the calendar year in which the Participant
retires; and
(ii) distribution of the Account of a Participant who is a Five
Percent Owner shall be made later than April 1 of the calendar year following
the calendar year in which the Participant attains age seventy and one-half
(70-1/2).
For purposes of this subsection (f) and subsections (g) and (h), a
Five Percent Owner shall mean a Participant who is a Five Percent Owner with
respect to the Plan Year ending with or within the calendar year in which such
Participant attains age seventy and one-half (70-1/2).
(g) Notwithstanding the foregoing provisions of subsection (f) to the
contrary, and in accordance with Treas. Reg. ' 1.411(d)-4 Q&A-10, a Participant
who is not a Five Percent Owner, who attains age seventy and one-half (70-1/2)
before January 1, 1999, and who first became a Participant before January 1,
1999, may elect to receive not later than April 1, 1999, his or her vested
Account balance as of December 31, 1998. An election pursuant to this subsection
(g) shall be made at such time and in such manner as provided in Section 9.6.
(h) Notwithstanding the foregoing provisions of subsections (f) and
(g) to the contrary, a Participant who is not a Five Percent Owner and who had
commenced receiving distribution of his or her vested Account balance in
accordance with Section 401(a)(9) of the Code prior to its amendment by the
Small Business Job Protection Act of 1996, shall continue receiving annual
installments of the minimum amount determined in accordance with Section 9.7.
Such Participant shall receive a lump sum distribution of his or her Account not
later than sixty (60) days after the close of the Plan Year in which he or she
ceases to be employed by an Employer or a Related Employer and is no longer
employed by any of them.
9.6 Age 70-1/2 In-Service Distributions. Each Participant who is required
to receive a distribution pursuant to Section 9.5(f)(ii) and who continues in
the employ of an Employer or a Related Employer, and each Participant to whom
Section 9.5(g) applies and who continues in the employ of an Employer or a
Related Employer, may elect, in lieu of receiving a lump sum distribution of his
or her Account, to receive annual installments of the minimum amount determined
in accordance with Section 9.7. Such annual installments shall be paid over a
period not to exceed the life expectancy of the Participant or the joint life
and last survivor expectancy of the Participant and his or her spouse; provided,
such distribution must be made over a period such that the present value of the
payments to be made to the Participant must be greater than fifty percent (50%)
of the present value of the payments to be made to the Participant and the
Participant's spouse determined as of the date the Participant ceases to be
employed by an Employer or a Related Employer and is no longer employed by any
of them.
<PAGE>
The first two installments under this Section may be paid in the calendar year
following the calendar year in which the Participant attains age seventy and
one-half (70-1/2); thereafter, one installment shall be paid in each calendar
year.
For purposes of this Section, and with respect to a Participant to whom
Section 9.5(g) applies, the term "Account" shall mean the Participant=s Account
balance as of December 31, 1998.
An election shall be made by such written, electronic or telephonic means
as may be prescribed by the Administrative Committee and must be delivered to
the Administrative Committee at least thirty (30) days in advance of the date
distribution is required to commence pursuant to Section 9.5(f)(ii) or 9.5(g).
9.7 Minimum Amounts to be Distributed to Participants. The amount to be
distributed each year to a Participant pursuant to Section 9.5(f)(ii), beginning
in the calendar year following the calendar year in which he or she attains age
seventy and one-half (70-1/2), shall not be less than the quotient obtained by
dividing the Participant's Account balance at the beginning of such year by the
life expectancy of the Participant (or the joint life and last survivor
expectancy of the Participant and his or her spouse) determined as of the
beginning of such year and reduced by one (1) for each year thereafter.
The amount to be distributed each year to a Participant who makes an
election pursuant to Section 9.5(g), beginning in the 1999 Plan Year, shall not
be less than the quotient obtained by dividing the Participant=s Account balance
as of December 31, 1998, by the life expectancy of the Participant (or the joint
life and last survivor expectancy of the Participant and his or her spouse)
determined as of January 1, 1999, and reduced by one (1) for each year
thereafter.
Notwithstanding the above, if the Participant (or his or her spouse, in the
event the Participant dies before distribution of his or her Account is made or
commences) so elects prior to the time distribution is to commence pursuant to
Section 9.5(f)(ii), 9.5(g) or 9.8, the applicable life expectancy or joint life
and last survivor expectancy shall be recalculated pursuant to the regulations
under Section 401(a)(9) of the Code. Such election shall be irrevocable. In the
absence of such election, life expectancy shall not be recalculated. The life
expectancy of a nonspouse Beneficiary may not be recalculated.
Distribution shall be made in accordance with the regulations under Section
401(a)(9) of the Code, including Regulation 1.401(a)(9)-2, which shall override
any distribution options in the Plan inconsistent therewith.
<PAGE>
9.8 Distributions to Surviving Spouses and Beneficiaries. Upon the death of
a Participant, the balance of the Participant's Account shall be distributed to
his or her surviving spouse or, if the Participant is not survived by a spouse
or the Participant's surviving spouse consents, to the Participant's designated
Beneficiary. To be effective, the consent of the Participant's surviving spouse
must be in writing, must acknowledge the effect thereof and must be witnessed by
a notary public. Notwithstanding the foregoing to the contrary, if a Participant
is legally separated and has a court order to that effect, no spousal consent
shall be required to designate a nonspouse Beneficiary.
The Participant=s surviving spouse or Beneficiary may elect to receive the
Participant=s Account as of any Valuation Date which occurs after the date of
the Participant=s death. The Participant's Account shall be valued as of the
first Valuation Date which is administratively practicable following receipt of
such election by the Administrative Committee or the Valuation Date specified in
said election, if later, and distribution shall be made in a lump sum as soon as
practicable thereafter; provided, in no event shall distribution of a
Participant=s Account be made later than December 31 of the calendar year which
contains the fifth (5th) anniversary of the date of the Participant=s death.
Subject to the preceding provisions of this Section, each Participant from
time to time, by completing and signing a form furnished by the Administrative
Committee, may designate any person or persons (who may be designated
concurrently, contingently or successively) to receive any benefits payable upon
his or her death. Each beneficiary designation shall revoke all prior
designations by the Participant and shall be effective only when filed in
writing with the Administrative Committee during the Participant's lifetime. If
a Participant fails to designate a Beneficiary, distribution shall be made to
his or her surviving spouse, but if the Participant is not survived by a spouse,
to such of the Participant's issue who survive him or her, such issue to take
per stirpes, but if the Participant is not survived by a spouse or any issue,
then to the Participant's estate. If a designated Beneficiary does not survive
the Participant and no successor Beneficiary has been designated, distribution
shall be made to the Participant's estate.
Notwithstanding the foregoing provisions of this Section to the contrary, a
surviving spouse or Beneficiary may elect to receive or begin receiving
distribution of the portion of the Participant's Transfer Account balance, if
any, which was allocated to such Participant's account under the Hannaford
Southeast Savings and Investment Plan as of June 30, 1995, at such time and in
such manner as provided in Exhibit A to this Plan; provided, however, this
paragraph shall not apply if such portion does not exceed Three Thousand Five
Hundred Dollars ($3,500.00) as of such date (and did not exceed Three Thousand
Five Hundred Dollars ($3,500.00) as of the date of any prior distribution).
<PAGE>
9.9 Distribution to Alternate Payee. In the event that all or a portion of
a Participant's Account is immediately distributable to an alternate payee,
pursuant to a qualified domestic relations order, the Administrative Committee
shall distribute the amount payable to such alternate payee in a lump sum as
soon as practicable after determining that such order is qualified in accordance
with Article XVI. Except as otherwise provided in the domestic relations order,
such distribution shall be made as of the first Valuation Date which is
administratively practicable following the date that it is determined that the
order is qualified. If the amount to be distributed in accordance with this
Section exceeds Three Thousand Five Hundred Dollars ($3,500.00) (Five Thousand
Dollars ($5,000.00), effective January 1, 1998), no distribution shall be made
without the consent of the alternate payee. Such consent shall be made by such
written, telephonic or electronic means as may be prescribed by the
Administrative Committee.
In the event that all or a portion of a Participant's Account is payable to
an alternate payee pursuant to a qualified domestic relations order, but is not
immediately distributable under such order, the Administrative Committee shall
direct the Trustee to establish a separate account within the meaning of Section
16.5(b) on behalf of the alternate payee as soon as practicable after
determining that such order is qualified in accordance with Article XVI. The
Administrative Committee shall distribute the amount payable from such account
to such alternate payee in a lump sum at such time as is provided by the terms
of such order. Distribution of a separate account pursuant to this Section 9.9
may be made prior to the Participant's "earliest retirement age" as defined in
Section 16.7.
9.10 Distributions to Minors and Incompetent Persons. If any person to whom
benefits shall be distributed under the Plan shall be a minor, or if the
Administrative Committee shall determine that such person is incompetent by
reason of mental or physical disability, the Administrative Committee may direct
the Trustee to distribute such benefits in one or more of the following ways to
be determined by the Administrative Committee:
(a) directly to such minor or incompetent person; or
(b) to a legal or natural guardian or other relative of such minor, or
to the legal guardian or conservator of such incompetent person or to any adult
person with whom such incompetent person temporarily or permanently resides.
The receipt by such minor, incompetent person, guardian, conservator,
relative or other person shall be a complete discharge of the Trustee, the
Administrative Committee, and the Trust Fund, and the Trustee and Administrative
Committee shall be without any responsibility to see to the application of any
such distributions.
<PAGE>
9.11 Loans. The Administrative Committee may direct the Trustee to make a
loan or loans from the vested portion of a Participant's Account to a
Participant or Beneficiary who is a "party in interest" as defined in Section
3(14) of ERISA, subject to the following:
(a) An application for a loan shall be made by such written,
telephonic or electronic means as shall be prescribed by the Administrative
Committee. The application shall contain such information as the Administrative
Committee may reasonably request.
(b) The amount of each loan shall be determined with reference to the
fair market value of the Participant's Account as of the most recent Valuation
Date for which valuation data has been received by the Administrative Committee.
(c) No loan shall be made in an amount less than Five Hundred Dollars
($500.00).
(d) Any loan made on or after January 1, 1987, when added to the
balance of all other outstanding loans with respect to a Participant's Account
from the Plan, shall not exceed the lesser of:
(i) Fifty Thousand Dollars ($50,000.00), reduced by the excess,
if any, of:
(aa) the Participant's highest outstanding loan balance
under the Plan for the one (1) year period ending on the day before such loan is
made, over
(bb) the Participant's loan balance under the Plan on the
day such loan is made, or
(ii) Fifty percent (50%) of the Participant's vested interest in
his or her Account.
The total of the unpaid balances of all loans (including accrued but
unpaid interest) made with respect to a Participant's Account under the Plan and
all other qualified retirement plans maintained by his or her Employer shall not
exceed the maximum amount which may be loaned in accordance with the limitations
of Section 72(p) of the Code.
(e) Each loan shall be evidenced by a promissory note bearing a
reasonable rate of interest as determined by the Administrative Committee taking
into consideration interest rates currently being charged by commercial lenders
for loans made under similar circumstances, and shall be adequately secured in
such manner as the Administrative Committee may determine. Collateral for a loan
may consist of an assignment of not more
<PAGE>
than fifty percent (50%) of a Participant's vested interest in his or her
Account. In the event of default on a loan, the Administrative Committee shall,
after giving the Participant or Beneficiary written notice of the default and an
opportunity to cure the default, in accordance with the terms and conditions of
such loan, foreclose upon the collateral to the extent necessary to satisfy the
Participant's obligation. If the collateral for such loan is the Participant's
vested interest in his or her Account, such foreclosure may not occur prior to
the Participant's termination of employment.
(f) Each loan shall be made for such term and, subject to subsection
(e) above, upon such terms and conditions as the Administrative Committee shall
determine; provided that substantially level amortization, with payments not
less frequently than quarterly, shall be required over the term of such loan
(except with respect to any period, not to exceed one (1) year, that the
Participant is on a leave of absence, as provided in the written administrative
procedures established pursuant to Section 9.11(l)), and further provided that
the term shall not exceed five (5) years.
(g) Each loan shall be treated and accounted for as an investment of a
Participant's Account. The Trustee shall establish a loan fund to which it shall
transfer the amount of each loan from the other Investment Funds in which the
Participant's Account is invested in proportion to the amounts invested in such
funds as of the date such loan is made. Amounts of principal and interest paid
on any loan shall be transferred from the loan fund to the Investment Funds in
accordance with the Participant's investment election in effect at the time of
payment.
(h) For purposes of this Section 9.11, the Rollover Contributions
Account of any Participant shall be deemed part of his or her Elective
Contributions Account.
(i) No distribution (other than a deemed distribution under Section
72(p) of the Code) shall be made to any Participant or Former Participant or to
a Beneficiary of any Participant until all unpaid loans with respect to the
Participant's Account, including accrued interest thereon, have been paid in
full. Notwithstanding the preceding sentence to the contrary, in the event a
Participant or Beneficiary receives or commences to receive distribution of his
or her Account pursuant to Section 9.5 or 9.8, and at the time of such
distribution there remains outstanding any unpaid loans with respect to his or
her Account, then
(i) the Account of the Participant or Beneficiary shall be
reduced prior to any such distribution by the amount of the principal and
accrued interest outstanding on such loan;
(ii) the loan shall be deemed to be paid in full as of the date
the distribution is made or commences; and
<PAGE>
(iii) such Participant or Beneficiary shall be treated as
receiving or commencing to receive a distribution of his or her entire Account.
(j) The Administrative Committee shall suspend the obligation to repay
any loan made to a Participant pursuant to this Section 9.11 for any period
during which such Participant is performing service in the "uniformed services"
(as defined in USERRA), whether or not such service is "qualified military
service" within the meaning of Section 4.8, and such suspension shall not be
taken into account for purposes of Sections 72(p), 401(a), or 4975(d)(1) of the
Code.
(k) The Administrative Committee shall follow a uniform and
nondiscriminatory policy in making loans to assure that loans are available to
all Participants and Beneficiaries who are "parties in interest" on a reasonably
equivalent basis as required under 29 C.F.R. Section 2550.408b-1 and to further
assure that the Plan meets the requirements of Section 401(a)(4) of the Code.
(l) The Administrative Committee shall establish, in writing,
administrative procedures to carry out the provisions of this Section 9.11.
9.12 Hardship Withdrawals. The Administrative Committee may direct the
Trustee to make a hardship withdrawal distribution to a Participant or Former
Participant from his or her Elective Contributions Account subject to the
following:
(a) Each request for a hardship withdrawal shall be made by such
written, telephonic or electronic means as may be prescribed by the
Administrative Committee. The request shall specify the reason for such
withdrawal and shall include such other information and documentation as the
Administrative Committee may request.
(b) A hardship withdrawal shall be made only in cash and may not
exceed the sum of the Elective Contributions (and income allocable thereto as of
December 31, 1988) allocated to the Participant's Account.
(c) A hardship withdrawal shall be permitted only if the distribution
is on account of an immediate and heavy financial need of the Participant and is
necessary to satisfy such financial need.
(i) A financial need may qualify as immediate and heavy without
regard to whether such need was foreseeable or voluntarily incurred by the
Participant. The following shall be deemed immediate and heavy financial needs:
(aa) Payment of medical expenses described in Section 213(d)
of the Code previously incurred by the Participant, his or her spouse or
dependent (within the meaning of Section 152 of the Code) or payment
<PAGE>
necessary for such persons to obtain medical care described in Section 213(d)
of the Code;
(bb) Costs directly related to the purchase (excluding
mortgage payments) of a principal residence of the Participant;
(cc) Payment of tuition, related educational fees and room
and board expenses for the next twelve (12) months of post-secondary education
for the Participant, his or her spouse or dependent (within the meaning of
Section 152 of the Code); and
(dd) Payment to prevent eviction of the Participant from his
or her principal residence or foreclosure on the mortgage of the Participant's
principal residence.
The above list of deemed immediate and heavy financial needs shall not be
exclusive, and other needs may qualify as immediate and heavy financial needs.
(ii) A distribution shall be treated as necessary to satisfy an
immediate and heavy financial need of the Participant only to the extent the
amount of such distribution is not reasonably available to the Participant from
other resources. The Administrative Committee may reasonably rely on the
Participant's representations that the need cannot be relieved by insurance, by
reasonable liquidation of the Participant's assets, by termination of the
Participant's Deferral Election or by other distributions or loans from the Plan
or from commercial lenders. A Participant's resources shall be deemed to include
those assets of his or her spouse and minor children that are reasonably
available to the Participant.
(iii) The amount of an immediate and heavy financial need may
include any amounts necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the distribution.
(d) Withdrawals shall be charged against the Investment Funds in which
the withdrawing Participant's Account is invested in proportion to the amounts
invested in such funds as of the date such withdrawal is made.
(e) A request for a hardship distribution shall be treated as a claim
for benefits under Article XIV. A hardship withdrawal shall be made as soon as
practicable following approval of the request by the Administrative Committee.
(f) The Administrative Committee may from time to time establish rules
governing withdrawals, including withdrawal minimums and the extent to which
withdrawals shall be limited because of Plan loans. Such rules shall be applied
on a uniform and nondiscriminatory basis.
<PAGE>
9.13 Form of Distribution. Distribution of a Participant's Account shall be
made in cash. However, a Participant (or his or her surviving spouse or
designated Beneficiary, in the event of the Participant=s death) may elect that
distribution of that portion of his or her Account which is invested in the
Company Stock Fund be distributed in whole shares of Company Stock. Such
election shall be made by such written, telephonic or electronic means, and at
such time, as shall be prescribed by the Administrative Committee.
9.14 Direct Rollovers.
(a) A Participant who is entitled to receive an eligible rollover
distribution may elect to have such distribution (or a portion thereof not less
than Five Hundred Dollars ($500.00)) made directly to an eligible retirement
plan ("direct rollover election").
An alternate payee who is entitled to receive an eligible rollover
distribution pursuant to a qualified domestic relations order under Article XVI
and who is the spouse or a former spouse of a Participant may make a direct
rollover election as if such alternate payee were the Participant.
A surviving spouse who is entitled to receive an eligible rollover
distribution by reason of the Participant's death may make a direct rollover
election; provided that such election is restricted to an eligible retirement
plan that is an individual retirement account described in Section 408(a) of the
Code or an individual retirement annuity described in Section 408(b) of the
Code.
(b) No earlier than ninety (90) days and no later than thirty (30)
days before an eligible rollover distribution is to be made, the Administrative
Committee shall provide the Participant, alternate payee, or surviving spouse,
as the case may be, with a written explanation of -
(i) the rules under which he or she may make a direct rollover
election;
(ii) the legal requirement that federal income tax be withheld
from the distribution if he or she does not elect a direct rollover;
(iii) the rules under which the amount that he or she actually
receives will not be subject to federal income tax if such amount is transferred
("rolled over") within sixty (60) days after being received pursuant to Section
402(c) of the Code;
(iv) the rules, if applicable, for receiving special income tax
averaging, or capital gain treatment, under Section 402(d) of the Code; and
<PAGE>
(v) the Plan provisions under which a direct rollover election
with respect to one payment in a series of periodic payments will apply to all
subsequent payments until such election is changed.
Notwithstanding the foregoing to the contrary, if an eligible rollover
distribution is one of a series of periodic payments, the explanation required
by this subsection shall be provided annually as long as such payments continue.
(c) A direct rollover election shall be made in such manner and at
such time as the Administrative Committee shall prescribe, and shall include:
(i) the name of the eligible retirement plan;
(ii) a statement that such plan is an eligible retirement plan;
and
(iii) any other information necessary to permit a direct rollover
by the means selected by the Administrative Committee.
An election to make a direct rollover with respect to one payment in a
series of periodic payments shall apply to all subsequent payments in the series
until such election is changed; such change with respect to subsequent payments
may be made at any time.
(d) Notwithstanding subsection (b) to the contrary, if an individual
after receiving the written explanation required by subsection (b),
affirmatively elects to make or not make a direct rollover, an eligible rollover
distribution may be made less than thirty (30) days after the date such written
explanation was given, provided the Administrative Committee has informed such
individual, in writing, of his or her right to a period of at least thirty (30)
days to make such election.
(e) As used in this Section, the following terms shall have the
following meanings:
(i) "Eligible Retirement Plan" shall mean
(aa) an individual retirement account, described in Section
408(a) of the Code;
(bb) an individual retirement annuity described in Section
408(b) of the Code (other than an endowment contract);
(cc) a trust described in Section 401(a) of the Code which
is exempt from tax under Section 501(a) of the Code and which is part of a
defined contribution plan described in Section 414(i) of the Code that permits
rollover contributions; or
<PAGE>
(dd)an annuity plan described in Section 403(a) of the Code.
(ii) "Eligible Rollover Distribution" shall mean a distribution
from the Plan of Two Hundred Dollars ($200.00) or more, excluding the following:
(aa) effective January 1, 1997, a distribution pursuant to
Section 9.5(f) or 9.8 to the extent such distribution is required under Section
401(a)(9) of the Code;
(bb) a return of Elective Contributions pursuant to
Section 7.4;
(cc) a corrective distribution pursuant to Section 4.7,
5.4 or 6.2;
(dd) a distribution which is one of a series of
substantially equal periodic payments (not less frequently than annually) made
(i) for the life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and his or her designated
Beneficiary, or (ii) for a specified period of ten (10) years or more; and
(ee) effective for distributions made after December 31,
1998, a distribution pursuant to Section 9.12.
ARTICLE X
Top Heavy Provisions
10.1 Top Heavy Requirements. Notwithstanding any provision of this Plan to
the contrary, if the Plan is or becomes Top Heavy, then the provisions of this
Article shall become applicable and supersede any conflicting provisions of this
Plan.
10.2 Minimum Vesting Requirements. Except as hereinafter provided, each
Participant shall continue to have a fully vested and nonforfeitable interest in
his or her Account. The vested percentage of each Participant in the portion of
his or her Matching Contributions Account and Discretionary Contributions
Account which was allocated after December 31, 1997, and the portion of his or
her Transfer Account which was not fully vested under the transferor plan as of
the date of the transfer shall be determined in accordance with the following
schedule:
Number of Participant's
Years of Vesting Service Vested Percentage
Less than 3 0%
3 or more 100%
<PAGE>
Notwithstanding the foregoing provisions of this Section to the contrary,
each Participant who is a Contract Employee and each other Participant (other
than a Participant who was first employed by the Company or one of its
subsidiaries in its Southeast Division) who has completed at least three (3)
Years of Vesting Service as of December 31, 1997, shall continue to have a fully
vested and nonforfeitable interest in his or her Account.
10.3 Minimum Contribution Requirement. Except as hereinafter provided, for
each Plan Year in which the Plan is Top Heavy, each Employer shall contribute,
on behalf of each Eligible Employee who is a Non-Key Employee and who has not
separated from its employ by the end of the Plan Year, an amount which, when
added to the Discretionary Contributions allocated to such Eligible Employee=s
Account, shall be equal to the lesser of:
(a) three percent (3%) of such Eligible Employee's compensation (as
defined in Section 7.5); or
(b) the percentage of such Eligible Employee's compensation (as
defined in Section 7.5) which is equal to the largest percentage determined by
dividing the Employer Contributions allocated to the Account of each Key
Employee by such Key Employee's compensation (as so defined).
The preceding sentence shall be applied by substituting four percent (4%) for
three percent (3%) for each Plan Year in which:
(i) the Plan is included in a Required Aggregation Group or a
Permissive Aggregation Group which includes a qualified defined benefit plan and
the Top Heavy Ratio does not exceed ninety percent (90%); and
(ii) the limitation set forth in Section 7.2 would be exceeded
if 1.0 is substituted for 1.25 wherever 1.25 appears in said limitation.
The minimum contribution shall be made on behalf of each Eligible Employee
who is a Non-Key Employee and who remains in the service of the Employer on the
last day of the Plan Year, regardless of the number of Hours of Service such
Eligible Employee is credited with during such Plan Year.
Notwithstanding any provision of this Section to the contrary, for each
Plan Year in which the Plan is Top Heavy, an Eligible Employee who is a Non-Key
Employee and who is also covered by a qualified defined benefit plan maintained
by his or her Employer, shall accrue a minimum benefit (as required by Section
416(c)(1) of the Code) and a minimum contribution shall not be made on behalf of
such Eligible Employee under this Plan. The preceding sentence shall be applied
by substituting "three percent (3%)" for "two percent (2%)" in Section
416(c)(1)(B)(i) of the Code and by increasing
<PAGE>
(but not by more than ten percentage points) the percentage provided in Section
416(c)(1)(B)(ii) of the Code for each Plan Year in which:
(i) the Plan is included in a Required Aggregation Group or a
Permissive Aggregation Group which includes a qualified defined benefit plan and
the Top Heavy Ratio does not exceed ninety percent (90%); and
(ii) the limitation set forth in Section 7.2 would be exceeded
if 1.0 is substituted for 1.25 wherever 1.25 appears in said limitation.
For purposes of satisfying the minimum contribution requirement of this
Section, Elective Contributions and Matching Contributions shall not be taken
into account.
10.4 Modified Limitation on Allocations. The limitation of Section 7.2
shall be applied by substituting 1.0 for 1.25 whenever 1.25 appears in said
limitation for each Plan Year in which the Plan is included in a Required
Aggregation Group or a Permissive Aggregation Group which includes a qualified
defined benefit plan and the Top Heavy Ratio exceeds ninety percent (90%).
10.5 Present Value Factors. For purposes of determining the Top Heavy
Ratio, the present value of accrued benefits under all defined benefit plans
included in a Required Aggregation Group or a Permissive Aggregation Group shall
be based on the following factors:
Interest: Six and one-half percent (6.5%) per annum
Mortality: 1971 Group Annuity Mortality Table, using male rates
for all individuals
10.6 Benefit Accrual. For purposes of determining the Top Heavy Ratio, the
accrued benefit of any Non-Key Employee under all defined benefit plans included
in a Required Aggregation Group or a Permissive Aggregation Group shall be
determined under the method used for accrual purposes for all such plans of an
Employer or, if no method is prescribed, as if such benefit accrued no more
rapidly than the slowest rate permitted under Section 411(b)(1)(C) of the Code.
ARTICLE XI
Trust Fund Investments
11.1 Duties. The Trustee shall receive and hold all contributions made by
an Employer together with such other assets as may be transferred to it in
accordance with the provisions of the Plan. In addition, the Trustee shall make
distributions as directed by the Administrative Committee in accordance with the
provisions of Article IX.
<PAGE>
11.2 Investment Funds. The Trustee shall establish a Company Stock Fund and
one or more other Investments Funds as the Finance Committee may from time to
time direct. The Finance Committee shall direct that each Investment Fund, other
than the Company Stock Fund, shall be invested:
(a) at the discretion of a duly appointed Investment Manager in
accordance with such investment guidelines and objectives as may be established
by the Finance Committee; or
(b) in such investments as the Finance Committee may specify for such
Investment Fund.
The Finance Committee may from time to time change its direction with
respect to any Investment Fund and may, at any time, eliminate any Investment
Fund. Whenever an Investment Fund is eliminated, the Trustee shall promptly
liquidate the assets of such Investment Fund and reinvest the proceeds thereof
in accordance with the direction of the Finance Committee.
The Trustee shall transfer to each Investment Fund such portion of the
assets of the Trust as the Administrative Committee may from time to time direct
in accordance with the terms of the Plan. All interest, dividends and other
income received with respect to, and any proceeds realized from the sale or
other disposition of, assets held in any Investment Fund shall be credited to
and reinvested in such Investment Fund, and all expenses properly attributable
to any Investment Fund shall be paid therefrom unless paid by the Employers.
11.3 Company Stock Fund. The Trustee shall establish a Company Stock Fund
which shall be invested primarily in shares of Company Stock. The Trustee shall,
as soon as practicable, apply amounts allocated to the Company Stock Fund to
purchase Company Stock on the open market at current market value. Pending
investment in Company Stock, the Trustee shall invest amounts allocated to and
dividends or other amounts received by the Company Stock Fund in short-term cash
equivalents including, but not limited to, short-term debt obligations issued or
guaranteed by the United States government, money market funds and savings
accounts, as directed by the Finance Committee or its delegatee. Notwithstanding
the provisions of this Section 11.3 to the contrary, the Trustee shall be under
no duty or obligation to invest any assets of the Trust in shares of Company
Stock unless (i) such shares constitute "qualifying employer securities" within
the meaning of Section 407 of ERISA and (ii) such investment is not prohibited
by Section 404, 406 or 407 of ERISA.
11.4 Investment of Contributions. Effective July 1, 1997, each Participant
may direct that contributions made on his or her behalf shall be invested in any
one or more of the Investment Funds, provided the percentage of contributions to
be invested in any Investment Fund must be one percent (1%), or any multiple
thereof. An investment direction shall be made by
<PAGE>
such written, telephonic or electronic means as shall be prescribed by the
Administrative Committee.
A Participant's investment direction, if received by the Administrative
Committee prior to the date he or she commences participation, shall be
effective as of said date. If a Participant does not make an investment
direction or an investment direction is not received by the Administrative
Committee before he or she commences participation, the contributions on behalf
of such Participant shall be invested in the fund which presents the least risk
of loss as determined by the Finance Committee. An investment direction received
by the Administrative Committee after the date a Participant commences
participation shall be effective as of the first business day of the month
following receipt by the Administrative Committee or as soon as practicable
thereafter. A deemed investment direction pursuant to Section 3.4(a) of the
January 1, 1993 amendment and restatement of this Plan (as amended by the Third
Amendment thereto) shall be effective as of the date of the affected
individual's change in employment status.
Notwithstanding the foregoing to the contrary, effective January 1, 1998,
an investment direction received by the Administrative Committee after the date
a Participant commences participation shall be effective as soon as practicable
following receipt by the Administrative Committee. A deemed investment direction
pursuant to Section 18.2 shall be effective January 1, 1998.
Once each month, a Participant may modify an investment direction to have
future contributions on his or her behalf invested in the Investment Funds in
proportions other than those previously elected, but in multiples of one percent
(1%). An election modifying a previous investment direction shall be made by
such written, telephonic or electronic means as shall be prescribed by the
Administrative Committee and shall be effective as of the first business day of
the month following receipt by the Administrative Committee or as soon as
practicable thereafter.
Notwithstanding the preceding paragraph to the contrary, effective January
1, 1998, a Participant may modify at any time an investment direction to have
future contributions on his or her behalf invested in the Investment Funds in
proportions other than those previously elected, but in multiples of one percent
(1%). An election modifying a previous investment direction shall be made by
such written, telephonic or electronic means as shall be prescribed by the
Administrative Committee and shall be effective as soon as practicable following
receipt by the Administrative Committee.
11.5 Reinvestment of Account. Effective July 1, 1997, once each month, a
Participant, Former Participant, surviving spouse or Beneficiary may elect to
reinvest all or a portion of the balance of his or her Account in any one or
more of the Investment Funds, provided the portion invested in any Investment
Fund must be one percent (1%), or any multiple thereof, of such balance. An
election to reinvest all or a portion of an Account
<PAGE>
balance shall be made by such written, telephonic or electronic means as shall
be prescribed by the Administrative Committee and shall be effective as of the
first business day of the month following receipt by the Administrative
Committee or as soon as practicable thereafter.
Notwithstanding the foregoing to the contrary, effective January 1, 1998, a
Participant, Former Participant, surviving spouse or Beneficiary may elect at
any time to reinvest all or a portion of the balance of his or her Account in
any one or more of the Investment Funds, provided the portion invested in any
Investment Fund must be one percent (1%), or any multiple thereof, of such
balance. An election to reinvest all or a portion of an Account balance shall be
made by such written, telephonic or electronic means as shall be prescribed by
the Administrative Committee and shall be effective as soon as practicable
following receipt by the Administrative Committee.
11.6 Loan Fund. Participant loans and payments of principal and interest
shall be credited to and charged against the loan fund established by the
Trustee in accordance with Section 9.11(g).
11.7 Voting Rights. Stock held in the Company Stock Fund shall be voted by
the Trustee in accordance with the terms of the Trust.
ARTICLE XII
Finance Committee
12.1 Duties. The Finance Committee shall be a Named Fiduciary within the
meaning of Section 402(a)(2) of ERISA and shall have the following powers and
duties:
(a) to appoint and remove the Trustee and establish the terms of the
Trust agreement;
(b) to direct the Trustee to establish one or more Investment Funds
and to change or eliminate any Investment Fund other than the Company Stock
Fund;
(c) to appoint one or more Investment Managers to direct the
investment of the assets of the Trust or such portion thereof as may be
designated by the Finance Committee; to remove any Investment Manager; and to
establish investment guidelines and objectives which shall be binding on such
Investment Managers;
(d) to limit the investment of one or more Investment Funds to such
shares of stock, bonds, mortgages, notes, mutual fund shares, deposit
administration, investment or group annuity contracts issued by a legal reserve
life insurance company or other property of any kind, real or personal, as the
Finance Committee may deem appropriate;
<PAGE>
(e) to establish investment guidelines and objectives which shall be
binding on the Trustee;
(f) to employ or retain counsel, accountants and other consultants,
including professional investment advisers, as it deems to be in the best
interests of the Plan;
(g) to direct the Trustee to employ and transfer all of the assets of
the Trust or such portion thereof as the Finance Committee may designate to one
or more custodians selected by it; and
(h) to approve and accept accounts rendered by the Trustee.
A majority of the Finance Committee shall constitute a quorum, and an
action of the majority present at any meeting shall be deemed the action of the
Finance Committee. Any member of the Finance Committee may participate in a
meeting of the Finance Committee through conference telephone or similar
communications equipment by means of which all individuals participating in the
meeting can hear each other. Any action of the Finance Committee may be taken
without a meeting if all members of the Finance 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.
12.2 Delegation of Ministerial Duties. The Finance Committee may, by a
writing signed by a majority of its members, delegate to any member or members
of the Committee or to any Employee or Employees, severally or jointly, the
authority to perform any ministerial act in connection with the administration
of the Plan.
12.3 Compensation and Reimbursement of Expenses. The members of the Finance
Committee shall be entitled to reasonable compensation for services rendered and
to reimbursement of expenses properly and actually incurred, in the performance
of their duties on behalf of the Plan, but no person so serving who already
receives compensation from an Employer or any Related Employer for services
rendered as an employee shall receive compensation for such services, except for
reimbursement of expenses properly and actually incurred and not otherwise
reimbursed.
12.4 Reliance on Reports. The Finance Committee shall be entitled to rely
upon all certificates and reports made by any agent, attorney, accountant,
actuary or other consultant, including any investment adviser, employed to
assist in the performance of its duties.
12.5 Multiple Signatures. A majority of the members of the Finance
Committee or any one member authorized by such Committee shall have authority to
execute all documents, reports or other memoranda necessary or appropriate to
carry out the actions and decisions of the Finance Committee. The Trustee, any
investment manager or any other interested party may rely
<PAGE>
upon any document, report or other memorandum so executed as evidence of the
Finance Committee action or decision indicated thereby.
ARTICLE XIII
Administrative Committee
13.1 Appointment of Administrative Committee. The Human Resources Committee
of the Board of Directors shall appoint an Administrative Committee of not less
than four (4) individuals who shall have authority to control and manage the
administration of the Plan. A majority of the Administrative Committee shall
constitute a quorum, and an action of the majority at any meeting shall be
deemed the action of the Administrative Committee. Any member of the
Administrative Committee may participate in a meeting through conference
telephone or similar communications equipment by means of which all individuals
participating can hear each other. Any action of the Administrative Committee
may be taken without a meeting if all members of the Administrative 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.
13.2 Resignation and Removal. Any person appointed to serve as a member of
the Administrative Committee shall serve at the pleasure of the Human Resources
Committee of the Board of Directors and may be removed by delivery of written
notice of removal, which shall take effect at the date specified therein. Any
member of the Administrative Committee may resign at any time by delivering to
the Human Resources Committee a written notice of resignation, which shall take
effect at a date specified therein. The Human Resources Committee, as soon as
practicable following delivery of a written notice of removal or receipt of a
written notice of resignation of any member of the Administrative Committee,
shall consider the appointment of a successor.
13.3 Powers and Duties. The Administrative Committee shall be a Named
Fiduciary within the meaning of Section 402(a)(1) of ERISA with the following
powers and complete discretionary authority to control and manage the operation
and administration of the Plan:
(a) To determine all questions concerning the eligibility of Employees
to participate in and receive benefits under the Plan;
(b) To compute the amount of benefits payable to any Participant or
Beneficiary;
(c) To authorize and direct the Trustee with respect to the payment
of benefits;
(d) To furnish the Trustee with such information, statements and
reports as will enable the Trustee to comply with the reporting and disclosure
requirements under ERISA and the Code;
<PAGE>
(e) To interpret the provisions of the Plan and to make rules and
regulations for the administration of the Plan, including, without limitation,
rules for tendering and voting Company securities;
(f) To maintain all the necessary records for the administration of
the Plan;
(g) To employ or retain counsel, accountants, actuaries or such other
consultants as may be required to assist in administering the Plan;
(h) To act as agent for service of legal process; and
(i) To give written notice to all interested parties (as defined in
the regulations prescribed under Section 7476(b)(1) of the Code), in the form
and manner, and at such time as prescribed by such regulations, of an
application for an advance determination with respect to the initial
qualification of the Plan or to the effect of an amendment or termination of the
Plan.
Except as specifically delegated to the Administrative Committee by the
Finance Committee, the Administrative Committee shall have no power or authority
over the investment of the assets of the Trust and nothing in this Section 13.3
shall be construed as granting such power and authority. The Finance Committee,
in accordance with the provisions of Article XI, shall have exclusive authority
and discretion to manage and control the investment of the Trust Fund.
13.4 Reporting and Disclosure. The Administrative Committee shall furnish
to each Participant and to each other person who is receiving benefits under the
Plan, and shall file with the Secretary of Labor and the Secretary of Treasury,
all reports, disclosures and notifications as are required under the Code.
13.5 Delegation of Ministerial Duties. The Administrative Committee may
delegate to any member or members of the Committee or to any other person or
persons, severally or jointly, the authority to perform any ministerial act in
connection with the administration of the Plan.
13.6 Payment of Plan Expenses. Notwithstanding any provision of the Plan or
Trust to the contrary, payment of any reasonable expenses of administering the
Plan, as determined by the Administrative Committee, shall be made from the
Trust Fund, unless paid by an Employer. If such expenses are incurred as a
result of services provided to the Plan or Trust by a party in interest (as
defined in Section 3(14) of ERISA), no payment shall be made from the Trust Fund
unless such payment (a) satisfies the applicable requirements of Section 408 of
ERISA and the regulations thereunder; or (b) is otherwise exempt from the
applicable prohibited transaction rules of the Code and ERISA.
<PAGE>
13.7 Compensation and Reimbursement of Expenses. The members of the
Administrative Committee shall be entitled to reasonable compensation for
services rendered and to reimbursement of expenses properly and actually
incurred, in the performance of their duties on behalf of the Plan, but no
person so serving who already receives compensation from an Employer or any
Related Employer for services rendered as an Employee shall receive compensation
from the Plan, except reimbursement of expenses properly and actually incurred
and not otherwise reimbursed.
13.8 Uniformity of Rules and Regulations. In the administration of the Plan
and the interpretation and application of its provisions, the Administrative
Committee shall exercise its powers and authority in a nondiscriminatory manner,
and shall apply uniform administrative rules and regulations in order to assure
substantially the same treatment to Participants in similar circumstances.
13.9 Reliance on Reports. The Administrative Committee shall be entitled to
rely upon all certificates and reports made by any counsel, accountant, actuary
or other consultant employed or retained to assist in administering the Plan.
13.10 Multiple Signatures. A majority of the members of the Administrative
Committee or any one member authorized by such Committee shall have authority to
execute all documents, reports or other memoranda necessary or appropriate to
carry out the actions and decisions of the Administrative Committee. The Trustee
or any other interested party may rely upon any document, report or other
memorandum so executed as evidence of the Administrative Committee action or
decision indicated thereby.
13.11 Confidentiality of Participant Decisions Relating to Company Stock.
The Administrative Committee shall establish procedures designed to safeguard
the confidentiality of information relating to the purchase, holding and sale of
Company Stock, and the exercise of voting, tender and similar rights with
respect thereto, by Participants, Former Participants, surviving spouses and
Beneficiaries. The Administrative Committee shall be responsible for ensuring
that such procedures meet the applicable requirements of ERISA Reg. '
2550.404c-1(d)(2). In the event the Administrative Committee determines that a
particular situation involves a potential for undue Employer or Related Employer
influence upon Participants, Former Participants, surviving spouses and
Beneficiaries within the meaning of ERISA Reg. ' 2550.404c-1(d)(2), the
Administrative Committee shall promptly appoint an independent fiduciary to
perform the role of the Administrative Committee and carry out activities with
respect to such situation. Such independent fiduciary shall not be a person
affiliated with an Employer within the meaning of ERISA Reg. '
2550.404c-1(e)(3).
<PAGE>
ARTICLE XIV
Claims Procedure
14.1 Filing a Claim For Benefits. A Plan Participant or other person
entitled to benefits under the Plan may make a claim for Plan benefits by filing
a written request with the Administrative Committee upon a form to be furnished
to it for such purpose.
14.2 Denial of Claim. If a claim is wholly or partially denied, the
Administrative Committee shall furnish the claimant with written notice setting
forth in a manner calculated to be understood by the claimant:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information necessary
for the claimant to perfect his or her claim and an explanation why such
material or information is necessary; and
(d) Appropriate information as to the steps to be taken if the
claimant wishes to submit his or her claim for review.
Such notice shall be furnished to the claimant within ninety (90) days after
receipt of his or her claim, unless special circumstances require an extension
of time for processing such claim. If an extension of time for processing is
required, the Administrative Committee shall, prior to the termination of the
initial ninety (90) day period, furnish the claimant with written notice
indicating the special circumstances requiring an extension and the date by
which the Committee expects to render its decision. In no event shall an
extension exceed a period of ninety (90) days from the end of the initial ninety
(90) day period.
14.3 Appeal of Denied Claim. A claimant may request the Administrative
Committee to review a denied claim. Such request shall be in writing and must be
delivered to the Administrative Committee within sixty (60) days after receipt
by the claimant of written notification of denial of claim. A claimant or his or
her duly authorized representative may:
(a) Review pertinent documents, and
(b) Submit issues and comments in writing.
14.4 Decision on Appeal. The Administrative Committee shall notify the
claimant of its decision on review not later than sixty (60) days after receipt
of a request for review, unless special circumstances require an extension of
time for processing, in which case a decision shall be rendered as soon as
possible but not later than one hundred twenty (120) days after
<PAGE>
receipt of a request for review. If an extension of time for review is required
because of special circumstances, written notice of the extension must be
furnished to the claimant prior to the commencement of the extension. The
Administrative Committee's decision on review shall be in writing and shall
include specific reasons for the decision, as well as specific references to the
pertinent Plan provisions on which the decision is based.
ARTICLE XV
Amendment and Termination
15.1 Amendment. The Company, through the Human Resources Committee of its
Board of Directors, reserves the right to amend the Plan from time to time,
provided that no amendment shall, except as otherwise provided in this Plan or
authorized by law, permit any part of the Trust Fund to revert to an Employer or
Related Employer or permit any part of the Trust Fund to be used for, or
diverted to, purposes other than the exclusive benefit of the Participants,
their surviving spouses and Beneficiaries. Each such amendment shall be
effective with respect to a subsidiary of the Company that has adopted the Plan
without further action by the subsidiary.
If the vesting schedule in effect under the Plan is amended, each
Participant who has completed at least three (3) Years of Vesting Service may
elect to have the vested percentage of his or her Account determined without
regard to such amendment. The Administrative Committee shall promptly give each
such Participant written notice of the adoption of such amendment and the
availability of the election to have the vested percentage of his or her Account
determined without regard to such amendment. An election by a Participant shall
be in writing and shall be effective if filed with the Administrative Committee
at any time during the period beginning with the date such amendment is adopted
and ending on the later of (i) the date which is sixty (60) days after the day
such amendment is adopted, (ii) the date which is sixty (60) days after the day
such amendment becomes effective, or (iii) the date which is sixty (60) days
after the day the Participant receives written notice of such amendment. An
election once made shall be irrevocable. For purposes of this Section, a
Participant shall be considered to have completed three (3) Years of Vesting
Service if the Participant has completed three (3) years of Vesting Service
prior to the expiration of the period in which an election could be made.
15.2 Accounts Not to be Decreased by Amendment. No Amendment shall, except
to the extent permitted under Section 412(c)(8) of the Code, decrease a
Participant's Account balance or, except to the extent permitted by regulations,
eliminate an optional form of benefit. In addition, no amendment shall have the
effect of decreasing a Participant's vested interest determined without regard
to such amendment as of the later of the date such amendment is adopted or the
date it becomes effective.
<PAGE>
15.3 Termination. The Company, through the Human Resources Committee of its
Board of Directors, may terminate the Plan at any time in its entirety or with
respect to any Employer or any division by written notice delivered to the
Trustee. The Plan shall terminate with respect to any Employer on the earliest
of the following dates:
(a) The date the Employer is judicially declared bankrupt or
insolvent;
(b) The date the Employer permanently discontinues contributions
under the Plan;
(c) The date the Employer is merged or consolidated with another
corporation and the Employer is not the surviving corporation or substantially
all its assets are sold, unless the surviving or purchasing corporation makes
provision to continue the Plan with the consent of the Company; or
(d) The date the Employer withdraws from the Plan.
If an Employer permanently discontinues contributions or the Plan is
otherwise completely or partially terminated for any other reason, each affected
Participant shall have a fully vested and nonforfeitable interest in his or her
Account. Subject to the applicable consent requirements of Section 411(a)(11) of
the Code and the regulations thereunder, the Administrative Committee shall
direct the Trustee to make distributions pursuant to the applicable provisions
of Article IX as soon as practicable following such event.
15.4 Notice of Amendment or Termination. In the case of an application for
an advance determination as to whether a Plan amendment or termination affects
the continuing qualification of the Plan, the Administrative Committee shall
furnish each interested party (as defined by the regulations prescribed under
Section 7476(b)(1) of the Code) with written notice, in the form and manner, and
at such time as prescribed by such regulations, of the adoption of any amendment
or Plan termination.
ARTICLE XVI
Nonalienability of Benefits; Qualified Domestic Relations Orders
16.1 Nonalienability of Benefits. Except as expressly provided below, the
benefits provided under the Plan shall not be subject to alienation, assignment,
garnishment, attachment, execution (other than the collection by the United
States on a judgment resulting from an unpaid tax assessment) or levy of any
kind (other than a federal tax levy made pursuant to Section 6331 of the Code),
and any attempt to cause such benefits to be so subjected will not be
recognized.
<PAGE>
Notwithstanding the foregoing to the contrary, and effective August 5,
1997, this Section 16.1 shall not apply to any offset of a Participant's Account
balance against an amount that the Participant is ordered or required to pay to
the Plan, and the Plan shall not be treated as failing to meet the requirements
of Sections 401(a)(13) or 401(k) of the Code solely by reason of such an offset,
provided:
(a) the order or requirement to pay arises:
(i) under a judgment of conviction for a crime involving
the Plan;
(ii) under a civil judgment (including a consent order or decree)
entered by a court in an action brought in connection with a violation (or
alleged violation) of Part 4 of Subtitle B of Title I of ERISA; or
(iii) pursuant to a settlement agreement between the Secretary of
Labor and the Participant, or a settlement agreement between the Pension Benefit
Guaranty Corporation and the Participant, in connection with a violation (or
alleged violation) of Part 4 of Subtitle B of Title I of ERISA by a fiduciary or
any other person;
(b) the judgment, order, decree or settlement agreement expressly
provides for the offset of all or a part of the amount ordered or required to be
paid to the Plan against the Participant's Account balance; and
(c) if the Participant has a spouse at the time at which the offset is
to be made:
(i) either such spouse has consented in writing to such offset
and such consent is witnessed by a notary public (or it is established to the
satisfaction of the Plan Administrator that such consent may not be obtained
because there is no spouse or the spouse cannot be located), or an election to
waive the right of the spouse to either a qualified joint and survivor annuity
or a qualified preretirement survivor annuity is in effect in accordance with
the requirements of Section 417(a) of the Code;
(ii) such spouse is ordered or required in such judgment, order,
decree or settlement to pay an amount to the Plan in connection with a violation
of Part 4 of Subtitle B of Title I of ERISA; or
(iii) in such judgment, order, decree or settlement, such spouse
retains the right to receive the survivor annuity under a qualified joint and
survivor annuity provided pursuant to Section 401(a)(11)(A)(i) of the Code and
under a qualified preretirement survivor annuity provided pursuant to Section
401(a)(11)(A)(ii) of the Code, determined as if:
<PAGE>
(aa) the Participant terminated employment on the date of
the offset;
(bb) there was no offset;
(cc) the Plan permitted commencement of benefits only on
or after Normal Retirement Age;
(dd) the Plan provided only the minimum-required qualified
joint and survivor annuity; and
(ee) the amount of the qualified preretirement survivor
annuity is equal to the amount of the survivor annuity payable under the
minimum-required qualified joint and survivor annuity.
For purposes of subsection (c)(iii), the term "minimum-required qualified
joint and survivor annuity" means the qualified joint and survivor annuity which
is the actuarial equivalent of the Participant's accrued benefit (within the
meaning of Section 411(a)(7) of the Code) and under which the survivor annuity
is fifty percent (50%) of the amount of the annuity which is payable during the
joint lives of the Participant and his or her spouse.
16.2 Qualified Domestic Relations Orders. The provisions of Section 16.1
shall apply to the creation, assignment or recognition of a right to any benefit
payable with respect to a Participant, including the creation, assignment or
recognition of any right, pursuant to a domestic relations order, except that
said provisions shall not apply if the order is determined to be a qualified
domestic relations order.
16.3 Notice. Upon the receipt of any domestic relations order by the Plan,
the Administrative Committee shall promptly notify, in writing, the Participant
and any alternate payee named in the domestic relations order (at the address
included in the domestic relations order) of the receipt of such order and the
Plan's procedures for determining the qualified status of such domestic
relations order.
16.4 Representative. Any alternate payee named in a domestic relations
order received by the Plan shall have the right to designate, by notice in
writing to the Administrative Committee, a representative for the receipt of
copies of notices that are sent to the alternate payee with respect to such
domestic relations order.
16.5 Separate Account.
(a) During any period in which the issue of whether a domestic
relations order is a qualified domestic relations order is being determined (by
the Administrative Committee, by a court of competent jurisdiction, or
<PAGE>
otherwise), the Administrative Committee shall direct the Trustee to separately
account for the amounts, if any, which would have been payable to any alternate
payee during such period if the order had been determined to be a qualified
domestic relations order.
(b) In the event an alternate payee does not receive an immediate
distribution pursuant to a domestic relations order which is determined by the
Administrative Committee or by a court of competent jurisdiction to be a
qualified domestic relations order, the Administrative Committee shall direct
the Trustee to establish a separate account in the Plan in the name of the
alternate payee as soon as practicable following such determination. An
alternate payee shall have the same rights and protections as a Participant with
respect to such account and shall be entitled to receive distribution of such
account in accordance with Section 9.5.
16.6 Determination by Administrative Committee.
(a) Within ninety (90) days after receipt of a domestic relations
order, the Administrative Committee shall determine whether such order is a
qualified domestic relations order and shall notify, in writing, the Participant
and each alternate payee named in such order of such determination.
(b) If the Administrative Committee shall determine that the domestic
relations order is a qualified domestic relations order and such order provides
that the benefits required to be paid thereunder are immediately distributable,
the Administrative Committee shall direct the Trustee to pay to each alternate
payee named in such order, the benefits required to be paid thereunder,
including any amounts segregated in accordance with subsection (a) of Section
16.5 (plus any interest thereon). If the Administrative Committee shall
determine that the domestic relations order is a qualified domestic relations
order and such order does not provide that the benefits required to be paid
thereunder are immediately distributable, the Administrative Committee shall
direct the Trustee to establish a separate account in accordance with Section
16.5(b).
(c) If the Administrative Committee shall determine that the domestic
relations order is not a qualified domestic relations order, the notice required
by the first paragraph of this Section shall include a statement of the specific
reason or reasons for the Administrative Committee's determination and the
Administrative Committee shall direct the Trustee to continue to segregate, in
accordance with Section 16.5(a), during the eighteen (18) month period beginning
with the date on which the first payment would be required to be made under such
domestic relations order, any amounts which would have been payable to any
alternate payee during such eighteen (18) month period if the order had been
determined to be a qualified domestic relations order, unless such order shall
sooner be determined, by the Administrative Committee or a court of competent
jurisdiction, to be a qualified domestic relations order, in which event the
<PAGE>
Administrative Committee shall direct the Trustee to make payment of any such
segregated amount (plus any interest thereon) to each alternate payee named in
the order or to establish a separate account in the name of each alternate payee
named in the order in accordance with the second paragraph of this Section. If
neither the Administrative Committee nor a court of competent jurisdiction shall
determine within said period of eighteen (18) months that such domestic
relations order is a qualified domestic relations order; then, upon expiration
of said period, the Administrative Committee shall direct the Trustee to pay any
such segregated amount (plus any interest thereon) to the person or persons who
would have been entitled to such amounts if there had been no order.
16.7 Definitions. As used in this Article, the following terms shall have
the meanings hereinafter set forth:
(a) "Alternate payee" shall mean any spouse, former spouse, child or
other dependent of a Participant who is recognized by a domestic relations order
as having a right to receive all, or a portion of, the benefits payable under
the Plan with respect to such Participant.
(b) "Domestic relations order" shall mean any judgment, decree or
order (including approval of a property settlement agreement) which relates to
the provision of child support, alimony payments or marital property rights of a
spouse, former spouse, child or other dependent of a Participant, and is made
pursuant to a state domestic relations law (including a community property law).
(c) "Earliest retirement age" shall mean the earlier of:
(i) the date on which the Participant is entitled to a
distribution under the Plan, or
(ii) the later of the date the Participant attains age fifty
(50), or the earliest date on which the Participant could begin receiving
payments under the Plan if he or she separated from service.
(d) "Qualified domestic relations order" shall mean a domestic
relations order which:
(i) creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to, receive all or a
portion of the benefits payable with respect to a Participant under the Plan;
and
(ii) clearly specifies:
(aa) the name and the last known mailing address (if any) of
the Participant and the name and mailing address of each alternate payee covered
by the order;
<PAGE>
(bb) the amount or percentage of the Participant's benefits
to be paid by the Plan to each such alternate payee, or the manner in which such
amount or percentage is to be determined;
(cc) the number of payments or period to which such order
applies; and
(dd) each plan to which such order applies; and
(iii) does not require the Plan to:
(aa) provide any type or form of benefits, or any option,
not otherwise provided under the Plan;
(bb) provide increased benefits (determined on the basis
of actuarial value); or
(cc) pay benefits to an alternate payee which are required
to be paid to another alternate payee under another order previously determined
to be a qualified domestic relations order.
In the case of any payment to an alternate payee before a Participant has
separated from service, a domestic relations order shall not be treated as
failing to meet the requirements of clause (aa) of subparagraph (iii) solely
because such order requires that payment of benefits be made to an alternate
payee:
(i) on or after the date on which the Participant attains (or
would have attained) the earliest retirement age;
(ii) as if the Participant has retired on the date on which such
payment is to begin under such order; and
(iii) in any form in which such benefits may be paid under the
Plan to the Participant (other than in the form of a joint and survivor annuity
with respect to the alternate payee and his or her subsequent spouse).
ARTICLE XVII
Delegation of Authority by Subsidiaries
17.1 Delegation of Authority by Subsidiaries. Each subsidiary of the
Company that adopts the Plan hereby irrevocably grants to the Company, its Board
of Directors, the Finance Committee and the Administrative Committee exclusive
authority to exercise all the powers conferred on them by the terms of the Plan,
including the power vested in the Human Resources Committee of the Board of
Directors to amend or terminate the Plan, and each adopting subsidiary
irrevocably appoints the Company, its Board of Directors, the Finance Committee
and the Administrative Committee as its
<PAGE>
agents for such purposes. In addition, each subsidiary of the Company that
adopts the Plan shall automatically become a party to the Trust without further
action on its part.
ARTICLE XVIII
Mergers
18.1 Merger or Consolidation of Plan. In case of any merger or
consolidation of the Plan with, or transfer of assets and liabilities of the
Plan to, any other plan qualified under Section 401(a) and Section 501(a) of the
Code, provision must be made so that each Participant would, if the Plan then
terminated, receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he or she would have been
entitled to receive immediately before the merger, consolidation or transfer if
the Plan had then terminated.
18.2 Merger With Hannaford Southeast Savings and Investment Plan. Effective
January 1, 1998, the Plan shall be merged with the Hannaford Southeast Savings
and Investment Plan (the "Southeast Plan"). The provisions of this Section shall
be applicable to such merger and shall supersede any conflicting provisions of
this Plan.
(a) The assets of the Southeast Plan shall be directly transferred to
the Plan as of January 1, 1998. Upon receipt, the Administrative Committee shall
direct the Trustee to establish and maintain an account on behalf of each
participant and former participant under the Southeast Plan and shall direct the
Trustee to credit such account with the portion of the transferred assets
standing to the credit of such participant or former participant under the
Southeast Plan immediately prior to such transfer, provided such amount shall be
separately accounted for in accordance with Section 8.1. With respect to a
participant in the Southeast Plan who has an outstanding loan balance under such
plan at the time of the transfer, the promissory note evidencing such loan shall
be transferred to this Plan and the outstanding loan balance shall be treated in
accordance with the provisions of Section 9.11 as an outstanding loan balance
under this Plan.
(b) Each elective, matching or other type of contribution comprising
the Transfer Account created pursuant to subsection (a) above shall be
administered, invested and distributed in accordance with the provisions of this
Plan applicable to such type of contribution.
(c) The deferral election and investment direction of a participant
(and former participant, in the case of an investment direction) in effect under
the Southeast Plan as of December 31, 1997, shall be deemed a Deferral Election
under Section 5.1 and an investment direction under Section 11.4 of this Plan.
<PAGE>
(d) Notwithstanding the foregoing provisions of this Plan to the
contrary, a participant or former participant in the Southeast Plan may elect to
have the vested portion of the Transfer Account created pursuant to Section
18.2(a) of this Plan, if any, which was allocated to his or her account balance
under the Southeast Plan as of June 30, 1995, distributed at such time and in
such manner as provided in Exhibit A to this Plan; provided, however, this
subsection (d) shall not apply if such vested portion does not exceed Three
Thousand Five Hundred Dollars ($3,500.00) as of such date (and did not exceed
Three Thousand Five Hundred Dollars ($3,500.00) as of the date of any prior
distribution).
ARTICLE XIX
Miscellaneous
19.1 Fiduciary Responsibility.
(a) Allocation of Responsibility. All fiduciaries with respect to the
Plan and Trust shall be required to meet the prudence, diversification and other
fiduciary responsibilities of applicable law to the extent such requirements and
responsibilities apply to them, provided each fiduciary shall be responsible for
carrying out only the requirements, responsibilities and duties placed upon such
fiduciary by provisions of the Plan and Trust. In particular:
(i) An Investment Manager shall have full investment
responsibility with respect to the assets of the Trust for which it has the
power of investment direction. Except as otherwise provided by law, the other
fiduciaries, including but not limited to, the Trustee and the Finance
Committee, shall have no duty or responsibility with respect to the investment
of such assets as long as they are subject to the investment direction of such
Investment Manager.
(ii) The Trustee shall have no duty or responsibility with
respect to investment of assets of the Trust so long as they are invested at the
direction of the Finance Committee or a duly appointed Investment Manager.
(iii) The Administrative Committee shall have no duty or
responsibility with respect to the investment of the assets of the Trust.
(iv) The fiduciaries, including but not limited to, the Trustee,
the Finance Committee, the Administrative Committee and any Investment Manager
shall have no responsibility for the investment elections made by Participants,
Former Participants, surviving spouses or Beneficiaries, or for the exercise of
voting, tender or similar rights by Participants, Former Participants, surviving
spouses or Beneficiaries except as otherwise provided by applicable law.
<PAGE>
(b) Fiduciary Duties. Each fiduciary shall exercise the powers granted
to it and shall discharge its duties under the Plan solely in the interest of
the Participants, their surviving spouses and Beneficiaries and:
(i) for the exclusive purpose of
(aa) providing benefits to Participants, their surviving
Spouses and Beneficiaries, and
(bb) defraying reasonable expenses of administering
the Plan;
(ii) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims; and
(iii) by diversifying the investments of the Plan so as to
minimize the risk of large losses, unless under the circumstances it is clearly
prudent not to do so.
19.2 Prohibited Transactions. Neither the Trustee, nor the Finance
Committee, nor any Investment Manager, nor any Participant or Former Participant
who directs the investment of his or her Account shall engage in a transaction
which the Trustee, Finance Committee, Investment Manager, Participant or Former
Participant knows or should know is prohibited by Section 406 or 407(a) of ERISA
or by Section 4975 of the Code, unless an appropriate exemption or exemptions
have been granted by the Department of Labor under Section 408 of ERISA and the
Department of the Treasury under Section 4975(c)(2) of the Code.
19.3 Additional Contributions and Adjustments. An Employer shall contribute
such additional amounts, and shall direct the Trustee or Administrative
Committee to make such adjustments to, and distributions from, Participants=
Accounts, to the extent necessary to correct any operational defect pursuant to
the Internal Revenue Service=s Employee Plans Compliance Resolution System or
any successor system, policy or program to the foregoing.
19.4 Exclusive Benefit. Except as otherwise provided in the Plan or
authorized by the Code, in no event shall any part of the Trust Fund be used
for, or diverted to, purposes other than for the exclusive benefit of the
Participants, their surviving spouses and Beneficiaries.
19.5 Service with Predecessor Employer. Service with a predecessor employer
shall, to the extent required by the Code and regulations, be treated as service
with an Employer or Related Employer.
19.6 Employment. Participation in the Plan shall not give any Participant
the right to be retained in the employ of the Employer or any other right not
specified herein.
19.7 Gender. When necessary to the meaning hereof, and except when
otherwise indicated by the context, either the masculine or the neuter pronoun
shall be deemed to include the masculine, the feminine and the neuter.
19.8 Governing Law. This Plan shall be governed and construed by the laws
of the United States of America. To the extent that the laws of the United
States of America shall not be held to have preempted local law, the Plan shall
be administered under the laws of the State of Maine.
19.9 Article and Section Headings and Table of Contents. The Article and
Section headings and Table of Contents are inserted for convenience of reference
and shall not be considered in the construction of the Plan.
19.10 Impermissible Actions from January 1, 1998, to March 31, 1998.
Notwithstanding any other provision of this Plan to the contrary, during the
period beginning January 1, 1998, and ending March 31, 1998, the following
actions shall not be permitted:
(a) An amendment to a Deferral Election pursuant to Section 5.2;
(b) A reinstatement of a Deferral Election pursuant to the last
paragraph of Section 5.1;
(c) An investment direction pursuant to Section 11.4 or 11.5;
(d) A loan pursuant to Section 9.11; and
(e) A hardship withdrawal pursuant to Section 9.12 (other than a
hardship withdrawal made solely on account of an unforeseeable immediate and
heavy financial need within the meaning of Section 9.12(c)(i)).
IN WITNESS WHEREOF, Hannaford Bros. Co. has caused this document to be
executed by its duly authorized officer on this day of , 1998.
HANNAFORD BROS. CO.
By:________________________________
Its
<PAGE>
Exhibit A
SECTION 5.04 - WHEN BENEFITS START.
Benefits under the Plan begin when a Member retires, dies or ceases to be an
Employee, whichever applies, as provided in the preceding sections of this
article. Benefits which begin before Normal Retirement Date for a Member who
became Totally Disabled when he was an Employee shall be deemed to begin because
he is Totally Disabled. The start of benefits is subject to the qualified
election procedures of Article VI.
Unless otherwise elected, benefits shall begin before the sixtieth day following
the close of the Plan Year in which the latest date below occurs:
(a) The date the Member attains the earlier of (i) age 65 or (ii) the
later of Normal Retirement Age or age 62.
(b) The tenth anniversary of the Member's Entry Date.
(c) The date the Member ceases to be an Employee.
Notwithstanding the foregoing, the failure of a Member and spouse to consent to
a distribution while a benefit is immediately distributable, within the meaning
of Section 6.03, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this section.
The Member may elect to have benefits begin after the latest date for beginning
benefits described above, subject to the following provisions of this section.
The Member shall make the election in writing and deliver the signed election to
the Plan Administrator before Normal Retirement Date or the date he ceases to be
an Employee, if later. The election must describe the form of distribution and
the date benefits will begin. The Member shall not elect a date for beginning
benefits or a form of distribution which would result in a benefit payable when
he dies which would be more than incidental within the meaning of governmental
regulations.
Benefits shall begin by the Member's Required Beginning Date, as defined in
Section 6.02. Distribution of the Vested Account resulting from Contributions
made after the Member's Required Beginning Date shall begin by the April 1
following the calendar year in which such Contributions were made.
If a Member receives a taxable distribution (including a withdrawal) of any part
of his Vested Account, he may be subject to a Federal tax penalty. The tax
penalty does not apply if the distribution is:
(a) made on or after age 59-1/2;
(b) made on account of the Member's death to his Beneficiary or estate;
<PAGE>
(c) made on account of being disabled;
(d) part of a series of periodic payments after separation from service
that are substantially equal, at least annual, and based on the life expectancy
of the Member or the Member and his Beneficiary; or
(e) made after separation from service after the attainment of age 55.
In addition, no tax is imposed on amounts received and paid during the taxable
year for medical expenses in an amount not to exceed that deducible under Code
Section 213. Disabled means that a Member is disabled to the extent he is unable
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 be of long-continued and indefinite duration. Proof of the existence of
the disability will be in such form and manner as the Secretary of the Treasury
may require.
Contributions which are used to compute the Actual Deferral Percentage, as
defined in Section 3.07, (Elective Deferral Contributions, Qualified Nonelective
Contributions, and Qualified Matching Contributions) may be distributed upon
disposition by us of substantially all of the assets used by us in a trade or
business disposition by us of our interest in a subsidiary if the transferee
corporation is not a Controlled Group member, the Employee continues employment
with the transferor corporation and the transferor corporation continues to
maintain the Plan. The distribution must be a total distribution.
ARTICLE VI - DISTRIBUTION OF BENEFITS
The provisions of this article shall apply on or after August 23, 1984, to any
Member who is credited with at least one Hour of Service or one hour of paid
leave on or after that date and to such other Members as provided in Section
6.05. If the Effective Date of our Plan is before January 1, 1984, the
provisions of the Prior Plan as in effect on the day before the TEFRA Compliance
Date shall apply before August 23, 1984. If the Effective Date of our Plan is on
or after January 1, 1984, and before August 23, 1984, the provisions of the Plan
as originally adopted shall apply before August 23, 1984.
SECTION 6.01 - AUTOMATIC FORMS OF DISTRIBUTION.
Unless a qualified election of an optional form of benefit has been made within
the election period (see Section 6.03), the automatic form of benefit payable to
or on behalf of a Member is determined as follows:
(a) The automatic form of retirement benefit for a Member who does not die
before his Annuity Starting Date shall be the Qualified Joint and Survivor Form.
<PAGE>
(b) The automatic form of death benefit for a Member who dies before his
Annuity Starting Date shall be:
(1) A Qualified Preretirement Survivor Annuity for a Member who has a
spouse to whom he has been continuously married throughout the one-year period
ending on the date of his death. The spouse may elect to start receiving the
death benefit on any first day of the month on or after the Member dies and by
the date the Member would have been age 70-1/2. If the spouse dies before
benefits start, the Member's Vested Account, determined as of the date of the
spouse's death, shall be paid to the spouse's Beneficiary.
(2) A single sum payment to the Member's Beneficiary for a Member who
does not have a spouse who is entitled to a Qualified Preretirement Survivor
Annuity.
Before a death benefit will be paid on account of the death of a Member who does
not have a spouse who is entitled to a Qualified Preretirement Survivor Annuity,
it must be established to the satisfaction of a plan representative that the
Member does not have such a spouse.
SECTION 6.02 - OPTIONAL FORMS OF DISTRIBUTION AND DISTRIBUTION REQUIREMENTS.
(a) For purposes of this section, the following terms are defined:
Applicable Life Expectancy means Life Expectancy (or Joint and Last
Survivor Expectancy) calculated using the attained age of the Member (or
Designated Beneficiary) as of the Member's (or Designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date Life Expectancy was first calculated. If Life
Expectancy is being recalculated, the Applicable Life Expectancy shall be the
Life Expectancy so recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being recalculated such
succeeding calendar year.
Designated Beneficiary means the individual who is designated as the
beneficiary under the Plan in accordance with Code Section 401(a)(9) and the
regulations thereunder.
Distribution Calendar Year means a calendar year for which a minimum
distribution is required. For distributions beginning before the Member's death,
the first Distribution Calendar Year is the calendar year immediately preceding
the calendar year which contains the Member's Required Beginning Date. For
distributions beginning after the Member's death, the first Distribution
Calendar Year is the calendar year in which distributions are required to begin
pursuant to (e) below.
Joint and Last Survivor Expectancy means joint and last survivor expectancy
computed by use of the expected return multiples in Tables V and
<PAGE>
VI of section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Member (or spouse, in the case of
distributions described in (e)(2)(ii) below) by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Member (or spouse) and shall apply to
all subsequent years. The life expectancy of a nonspouse Beneficiary may not be
recalculated.
Life Expectancy means life expectancy computed by use of the expected
return multiples in Tables V and VI of section 1.72-9 of the Income Tax
Regulations.
Unless otherwise elected by the Member (or spouse, in the case of distributions
described in (e)(2)(ii) below) by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Member (or spouse) and shall apply to all subsequent
years. The life expectancy of a nonspouse Beneficiary may not be recalculated.
Member's Benefit means
(1) The Account balance as of the last valuation date in the calendar
year immediately preceding the Distribution Calendar Year (valuation calendar
year) increased by the amount of any contributions or forfeitures allocated to
the Account balance as of the dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation calendar
year after the valuation date.
(2) For purposes of (1) above, if any portion of the minimum
distribution for the first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required Beginning Date, the amount
of the minimum distribution made in the second Distribution Calendar Year shall
be treated as if it had been made in the immediately preceding Distribution
Calendar Year.
Required Beginning Date means, for a Member, the first day of April of the
calendar year following the calendar year in which the Member attains age
70-1/2, unless otherwise provided in (1), (2) or (3) below:
(1) The Required Beginning Date for a Member who attains age 70 -1/2
before January 1, 1988, and who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in which the later of
retirement or attainment of age 70 -1/2 occurs.
(2) The Required Beginning Date for a Member who attains age 70 -1/2
before January 1, 1988, and who is a 5-percent owner is the first day of April
of the calendar year following the later of
<PAGE>
(i) the calendar year in which the Member attains age 70 -1/2,or
(ii) the earlier of the calendar year with or within which ends
the Plan Year in which the Member becomes a 5-percent owner, or the calendar
year in which the Member retires.
(3) The Required Beginning Date of a Member who is not a 5-percent
owner and who attains age 70 -1/2 during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
A Member is treated as a 5-percent owner for purposes of this section if such
Member is a 5-percent owner as defined in Code Section 416(i) (determined in
accordance with Code Section 416 but without regard to whether the Plan is
top-heavy) at any time during the Plan Year ending with or within the calendar
year in which such owner attains age 66 -1/2 or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this section, they must
continue to be distributed, even if the Member ceases to be a 5-percent owner in
a subsequent year.
(b) The optional forms of retirement benefit shall be the following: a
straight life annuity; single life annuities with certain periods of five, ten,
or fifteen years; a single life annuity with installment refund; survivorship
life annuities with installment refund and survivor percentages of 50, 66 2/3,
or 100; fixed period annuities for any period of whole months which is not less
than sixty and does not exceed the Life Expectancy of the Member and the named
Beneficiary as provided in (d) below where the Life Expectancy is not
recalculated: and a series of installments chosen by the Member with a minimum
payment each year beginning with the year the Member turns age 70 -1/2. The
payment for the first year in which a minimum payment is required will be made
by April 1 of the following calendar year. The payment for the second year and
each successive year will be made by December 31 of that year. The minimum
payment will be based on a period equal to the Joint and Last Survivor
Expectancy of the Member and the Member's spouse, if any, as provided in (d)
below where the Joint and Last Survivor Expectancy is recalculated. The balance
of the Member's Vested Account if any, will be payable on the Member's death to
his Beneficiary in a single sum. If not prohibited in Item Y of the Adoption
Agreement - Plus, a single sum payment is also available.
Election of an optional form is subject to the qualified election provisions of
Article VI.
Any annuity contract distributed shall be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan to a Member or spouse
shall comply with the requirements of this Plan.
<PAGE>
(c) The optional forms of death benefit are a single sum payment and any
annuity that is an optional form of retirement benefit. However, a series of
installments shall not be available if the Beneficiary is not the spouse of the
deceased Member.
(d) Subject to Section 6.01, joint and survivor annuity requirements, the
requirements of this section shall apply to any distribution of a Member's
interest and will take precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this section apply to calendar
years beginning after December 31, 1984.
All distributions required under this section shall be determined and made in
accordance with the proposed regulations under Code Section 401(a)(9), including
the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2
of the proposed regulations.
The entire interest of a Member must be distributed or begin to be distributed
no later than the Member's Required Beginning Date.
As of the first Distribution Calendar Year, distributions, if not made in a
single sum, may only be made over one of the following periods (or combination
thereof):
(1) the life of the Member,
(2) the life of the Member and a Designated Beneficiary.
(3) a period certain not extending beyond the Life Expectancy of the
Member, or
(4) a period certain not extending beyond the Joint and Last Survivor
Expectancy of the Member and a Designated Beneficiary.
If the Member's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the Required
Beginning Date:
(5) Individual account:
(i) If a Member's Benefit is to be distributed over
(A) a period not extending beyond the Life Expectancy of the
Member or the Joint Life and Last Survivor Expectancy of the Member and the
Member's Designated Beneficiary or
(B) a period not extending beyond the Lite Expectancy of the
Designated Beneficiary, the amount required to be distributed for each calendar
year beginning with the distributions for the first Distribution Calendar Year,
must be at least equal to the quotient obtained
<PAGE>
by dividing the Member's Benefit by the Applicable Life Expectancy.
(ii) For calendar years beginning before January 1, 1989, if the
Member's spouse is not the Designated Beneficiary, the method of distribution
selected must assure that at least 50% of the present value of the amount
available for distribution is paid within the Life Expectancy of the Member.
(iii) For calendar year beginning after December 31, 1988, the
amount to be distributed each year, beginning with distributions for the first
Distribution Calendar Year shall not be less than the quotient obtained by
dividing the Member's Benefit by the lesser of
(A) the Applicable Life Expectancy or
(B) if the Member's spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set forth in Q&A-4
of section 1.401(a)(9)-2 of the proposed regulations.
Distributions after the death of the Member shall be distributed using the
Applicable Life Expectancy in (5)(i)above as the relevant divisor without regard
to Proposed Regulations section 1.401(a)(9)-2.
(iv) The minimum distribution required for the Member's first
Distribution Calendar Year must be made on or before the Member's Required
Beginning Date. The minimum distribution for the Distribution Calendar Year for
other calendar years, including the minimum distribution for the Distribution
Calendar Year in which the Member's Required Beginning Date occurs, must be made
on or before December 31 of that Distribution Calendar Year.
(6) Other forms:
(i) If the Member's Benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of Code Section 401(a)(9) and the
proposed regulations thereunder
(e) Death distribution provisions:
(1) Distribution beginning before death. If the Member dies after
distribution of his interest has begun, the remaining portion of such interest
will continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Member's death.
(2) Distribution beginning after death. If the Member dies before
distribution of his interest begins, distribution of the Member's entire
interest shall be completed by December 31 of the calendar year containing the
fifth anniversary of the Member's death except to the extent that an election is
made to receive distributions in accordance with (i) or (ii) below.
(i) if any portion Of the Member's interest is payable to a
Designated Beneficiary, distributions may be made over the life or over a period
certain not greater than the Life Expectancy of the Designated Beneficiary
commencing on or before December 31 of the calendar year immediately following
the calendar year in which the Member died;
(ii) if the Designated Beneficiary is the Member's surviving
spouse, the date distributions are required to begin in accordance with (i)
above shall not be earner than the later of
<PAGE>
(A) December 31 of the calendar year immediately following
the calendar year in which the Member died and
(B) December 31 of the calendar year in which the Member
would have attained age 70 -1/2.
If the Member has not made an election pursuant to this (e)(2) by the time of
his death, the Member's Designated Beneficiary must elect the method of
distribution no later than the earlier of
(iii) December 31 of the calendar year in which distributions
would be required to begin under this subparagraph, or
(iv) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Member.
If the Member has no Designated Beneficiary, or if the Designated Beneficiary
does not elect a method of distribution, distribution of the Member's entire
interest must be completed by December 31 of the calendar year containing the
fifth anniversary of the Member's death.
(3) For purposes of (e)(2) above, if the surviving spouse dies after
the Member, but before payments to such spouse begin, the provisions of (e)(2)
above, with the exception of (e)(2)(ii) therein, shall be applied as if the
surviving spouse were the Member.
(4) For purposes of this (e), any amount paid to a child of the Member
will be treated as if it had been paid to the surviving spouse if the amount
becomes payable to the surviving spouse when the child reaches the age of
majority.
(5) For purposes of this (e), distribution of a Member's interest is
considered to begin on the Member's Required Beginning Date (or if (e)(3) above
is applicable, the date distribution is required to begin to the surviving
spouse pursuant to (e)(2) above). If distribution in the form of an annuity
irrevocably commences to the Member before the Required Beginning Date, the date
distribution is considered to begin is the date distribution actually commences.
SECTION 6.03 - ELECTION PROCEDURES.
The Member, Beneficiary, or spouse shall make any election under this section in
writing. The Plan Administrator may require such individual to complete and sign
any necessary documents as to the provisions to be made. Any election permitted
under (a) and (b)below shall be subject to the qualified election provisions of
(c) below.
(a) Retirement Benefits. A Member may elect his Beneficiary or Contingent
Annuitant and may elect to have retirement benefits distributed under any of the
optional forms of retirement benefit described in Section 6.02.
(b) Death Benefits. A Member may elect his Beneficiary and may elect to
have death benefits distributed under any of the optional forms of death benefit
described in Section 6.02.
If the Member has not elected an optional form of distribution for the death
benefit payable to his Beneficiary, the Beneficiary may, for his own benefit
elect the form of distribution, in like manner as a Member.
The Member may waive the Qualified Preretirement Survivor Annuity by naming
someone other than his spouse as Beneficiary.
<PAGE>
In lieu of the Qualified Preretirement Survivor Annuity described in Section
6.01, the spouse may, for his own benefit waive the Qualified Preretirement
Survivor Annuity by electing to have the benefit distributed under any of the
optional forms of death benefit described in Section 6.02.
(c) Qualified Election. The Member, Beneficiary or spouse may make an
election at any time during the election period. The Member, Beneficiary, or
spouse may revoke the election made (or make a new election) at any time and any
number of times during the election period. An election is effective only if it
meets the consent requirements below.
The election period as to retirement benefits is the 90-day period ending on the
Annuity Starting Date. An election to waive the Qualified Joint and Survivor
Form may not be made before the date he is provided with the notice of the
ability to waive the Qualified Joint and Survivor Form. If the Member elects the
series of installments, he may elect on any later date to have the balance of
his Vested Account paid under any of the optional forms of retirement benefit
available under the Plan. His election period for this election is the 90-day
period ending on the Annuity Starting Date for the optional form of retirement
benefit elected.
A Member may make an election as to death benefits at any time before he dies.
The spouse's election period begins on the date the Member dies and ends on the
date benefits begin. The Beneficiary's election period begins on the date the
Member dies and ends on the date benefits begin. An election to waive the
Qualified Preretirement Survivor Annuity may not be made by the Member before
the date he is provided with the notice of the ability to waive the Qualified
Preretirement Survivor Annuity. A Member's election to waive the Qualified
Preretirement Survivor Annuity which is made before the first day of the Plan
Year in which he reaches age 35 shall become invalid on such date. An election
made by a Member after he ceases to be an Employee will not become invalid on
the first day of the Plan Year in which he reaches age 35 with respect to death
benefits from that part of his Account resulting from Contributions made before
he ceased to be an Employee.
If the Member's Vested Account has at any time exceeded $3,500, any benefit
which is (1) immediately distributable or (2) payable in a form other than a
Qualified Joint and Survivor Form or a Qualified Preretirement Survivor Annuity
requires the consent of the Member and the Member's spouse (or where either the
Member or the spouse has died, the survivor). The consent of the Member or
spouse to a benefit which is immediately distributable must not be made before
the date the Member or spouse is provided with the notice of the ability to
defer the distribution. Such consent shall be made in writing. The consent shall
not be made more than 90 days before the Annuity Starting Date. Spousal consent
is not required for a benefit which is immediately distributable in a Qualified
Joint and Survivor Form. Furthermore, if spousal consent is not required because
the Member is electing an optional form of retirement benefit that is not a life
annuity pursuant to (d) below, only the Member need consent to the distribution
of a benefit payable in a form that is not a life annuity and which is
immediately distributable. Neither the consent of the Member nor the Member's
spouse shall be required to the extent that a distribution is required to
satisfy Code Section 401(a)(9) or Code Section 415. In addition, upon
termination of this Plan if the Plan does not offer an annuity option (purchased
from a commercial provider), the Member's Account balance may, without the
Member's consent be distributed to the Member or transferred to another defined
contribution plan (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7)) within the same Controlled Group. A benefit is
immediately distributable if any part of the benefit could be distributed to the
Member (or surviving spouse) before the Member attains (or would have attained
if not deceased) the older of Normal Retirement Age or age 62. If the
<PAGE>
Qualified Joint and Survivor Form is waived, the spouse has the right to limit
consent only to a specific Beneficiary or a specific form of benefit The spouse
can relinquish one or both such rights. Such consent shall be made in writing.
The consent shall not be made more than 90 days before the Annuity Starting
Date. If the Qualified Preretirement Survivor Annuity is waived, the spouse has
the right to limit consent only to a specific Beneficiary. Such consent shall be
in writing. The spouse's consent shall be witnessed by a plan representative or
notary public. The spouse's consent must acknowledge the effect of the election,
including that the spouse had the right to limit consent only to a specific
Beneficiary or a specific form of benefit, if applicable, and that the
relinquishment of one or both such rights was voluntary. Unless the consent of
the spouse expressly permits designations by the Member without a requirement of
further consent by the spouse, the spouse's consent must be limited to the form
of benefit, if applicable, and the Beneficiary (including any Contingent
Annuitant), class of Beneficiaries, or contingent Beneficiary named in the
election. Spousal consent is not required. however, if the Member establishes to
the satisfaction of the plan representative that the consent of the spouse
cannot be obtained because there is no spouse or the spouse cannot be located. A
spouse's consent under this paragraph shall not be valid with respect to any
other spouse. A Member may revoke a prior election without the consent of the
spouse. Any new election will require a new spousal consent, unless the consent
of the spouse expressly permits such election by the Member without further
consent by the spouse. A spouse's consent may be revoked at any time within the
Member's election period.
Before the first Yearly Date in 1989, the Member's Account which results from
deductible Voluntary Contributions shall not be taken into account in
determining whether the Member's Vested Account has exceeded $3,500 and an
election as to the distribution of a Member's Vested Account which results from
deductible Voluntary Contributions is not subject to the consent requirements
above and may be made any time before such distribution is to begin.
(d) Special Rule for Profit Sharing Plans. As provided in the preceding
provisions of the Plan, if a Member has a spouse to whom he has been
continuously married throughout the one-year period ending on the date of the
Member's death, the Member's Vested Account, including the proceeds payable
under any Insurance Policy on the Member's life, shall be paid to such spouse.
However, if there is no such spouse or if the surviving spouse has already
consented in a manner conforming to the qualified election requirements in (c)
above, the Vested Account shall be payable to the Member's Beneficiary in the
event of the Member's death.
The Member may waive the spousal death benefit described above at any time
provided that no such waiver shall be effective unless it satisfies the
conditions of (c) above (other than the notification requirement referred to
therein) that would apply to the Member's waiver of the Qualified Preretirement
Survivor Annuity.
This subsection (d) applies if with respect to the Member, the Plan is not a
direct or indirect transferee after December 31, 1984, of a defined benefit
plan, money purchase plan (including a target plan), stock bonus or profit
sharing plan which is subject to the survivor annuity requirements of Code
Section 401(a)(11) and Code Section 417. If the above condition is met spousal
consent is not required for electing an optional form of retirement benefit that
is not a life annuity. If the above condition is not met. the consent
requirements of this Article shall be operative.
SECTION 6.04 - NOTICE REQUIREMENTS.
(a) Optional forms of retirement benefit. The Plan Administrator shall
furnish to the Member and the Member's spouse a written explanation of
<PAGE>
the optional forms of retirement benefit in Section 6.02, including the material
features and relative values of these options, in a manner that would satisfy
the notice requirements of Code Section 417(a)(3) and the right of the Member
and the Member's spouse to defer distribution until the benefit is no longer
immediately distributable. The Plan Administrator shall furnish the written
explanation by a method reasonably calculated to reach the attention of the
Member and the Member's spouse no less than 30 days and no more than 90 days
before the Annuity Starting Date.
(b) Qualified Joint and Survivor Form. The Plan Administrator shall furnish
to the Member a written explanation of the following: the terms and conditions
of the Qualified Joint and Survivor Form; the Member's right to make, and the
effect of, an election to waive the Qualified Joint and Survivor Form; the
rights of the Member's spouse; and the right to revoke an election and the
effect of such a revocation. The Plan Administrator shall furnish the written
explanation by a method reasonably calculated to reach the attention of the
Member no less than 30 days and no more than 90 days before the Annuity Starting
Date.
After the written explanation is given, a Member or spouse may make written
request for additional information. The written explanation must be personally
delivered or mailed (first class mail, postage prepaid) to the Member or spouse
within thirty days from the date of the written request The Plan Administrator
does not need to comply with more than one such request by a Member or spouse.
The Plan Administrator's explanation shall be written in nontechnical language
and will explain the terms and conditions of the Qualified Joint and Survivor
Form and the financial effect upon the Member's benefit (in terms of dollars per
benefit payment) of electing not to have benefits distributed in accordance with
the Qualified Joint and Survivor Form.
(c) Qualified Preretirement Survivor Annuity. The Plan Administrator shall
furnish to the Member a written explanation of the following: the terms and
conditions of the Qualified Preretirement Survivor Annuity; the Member's right
to make, and the effect of, an election to waive the Qualified Preretirement
Survivor Annuity; the rights of the Member's spouse; and the right to revoke an
election and the effect of such a revocation. The Plan Administrator shall
furnish the written explanation by a method reasonably calculated to reach the
attention of the Member within the applicable period. The applicable period for
a Member is whichever of the following periods ends last:
(1) the period beginning one year before the date the individual
becomes a Member and ending one year after such date; or
(2) the period beginning one year before the date the Member's spouse
is first entitled to a Qualified Preretirement Survivor Annuity and ending one
year after such date.
If such notice is given before the period beginning with the first day of the
Plan Year in which the Member attains age 32 and ending with the close of the
Plan Year preceding the Plan Year in which the Member attains age 35, an
additional notice shall be given within such period. If a Member ceases to be an
Employee before attaining age 35, an additional notice shall be given within the
period beginning one year before the date he ceases to be an Employee and ending
one year after such date.
After the written explanation is given, a Member or spouse may make written
request for additional information. The written explanation must be personally
delivered or mailed (first class mail, postage prepaid) to the Member or spouse
within thirty days from the date of the written request. The Plan Administrator
does not need to comply with more than one such request by a Member or spouse.
<PAGE>
The Plan Administrator's explanation shall be written in nontechnical language
and will explain the terms and conditions of the Qualified Preretirement
Survivor Annuity and the financial effect upon the spouse's benefit (in terms of
dollars per benefit payment) of electing not to have benefits distributed in
accordance with the Qualified Preretirement Survivor Annuity.
SECTION 6.05 - TRANSITIONAL RULES.
In modification of the preceding provisions of this Plan, distributions
(including distributions to a five-percent owner of us) may be made in a form
which would not have caused this Plan to be disqualified under Code Section
401(a)(9) as in effect before the TEFRA Compliance Date. The form must be
elected by the Member or, if the Member has died, by the Beneficiary. The
election must be made in writing and signed before January 1, 1984. The election
will only be applicable if the Member has an Account as of December 31, 1983.
The Member's or Beneficiary's election must specify when the distribution is to
begin, the form of distribution and the Contingent Annuitant and/ or
Beneficiaries listed in the order of priority, if applicable. A distribution
upon death will not be covered by this transitional rule unless the election
contains the required information described above with respect to the
distributions to be made when the Member dies. Distributions in the process of
payment on January 1, 1984, are deemed to meet the above requirements if the
form of distribution was elected in writing and the form met the requirements of
Code Section 401(a)(9) as in effect before the TEFRA Compliance Date. If the
election under this paragraph is revoked, any subsequent distribution must meet
the requirements of Code Section 401(a)(9) and the proposed regulations
thereunder. If an election is revoked subsequent to the date distributions are
required to begin, the Plan must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9) and the proposed regulations thereunder, but for
the Code Section 242(b)(2) election. For calendar years beginning after December
31, 1988, such distribution must meet the minimum distribution incidental
benefit requirements in section 1.401(a)(9)-2 of the proposed regulations. Any
changes in the election will be considered a revocation of the election.
However, the mere substitution or addition of another Beneficiary (one not named
in the election) under the election will not be considered to be a revocation of
the election, so long as such substitution or addition does not alter the period
over which distributions are to be made under the election, directly or
indirectly (for example, by altering the relevant measuring life). In the case
in which an amount is transferred or rolled over from one plan to another plan,
the rules in Q&A J-2 and Q&A J-3 of section 1.401(a)(9)-1 of the proposed
regulations shall apply. A Member's election of an optional form of retirement
benefit shall be subject to his spouse's consent as provided in Section 6.03.
A Member, who would not otherwise receive the benefits prescribed by the
previous sections of this article, will be entitled to the following benefits:
(a) If he is living and not receiving benefits on August 23, 1984, he will
be given the opportunity to elect to have the prior sections of this article
apply, if he is credited with at least one Hour of Service under this Plan or a
predecessor plan in a plan year beginning on or after January 1, 1976, and he
had at least ten Years of Service when he separated from service.
(b) If he is living and not receiving benefits on August 23, 1984 he will
be given the opportunity to elect to have his benefits paid according to the
following provisions of this section, if he is credited with at least one Hour
of Service under this Plan or a predecessor plan on or after September 2, 1974,
and he is not credited with any service in a plan year
<PAGE>
beginning on or after January 1, 1976.
The respective opportunities to elect (as described in (a) and (b) above) must
be afforded to the appropriate Members during the period beginning on August 23,
1984, and ending on the date benefits would otherwise begin to such Member.
Any Member who has elected according to (b) above and any member who does not
elect under (a) above or who meets the requirements of (a) above except that
such Member does not have at least ten Years of Service when he separated from
service, shall have his benefits distributed in accordance with the following if
benefits would have been payable in the form of a life annuity:
(c) Automatic joint and survivor annuity. If benefits in the form of a life
annuity become payable to a married Member who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age; or
(2) dies on or after Normal Retirement Age while still working
for us; or
(3) begins to receive payments on or after the qualified early
retirement age; or
(4) separates from service on or after attaining Normal Retirement Age
(or the qualified early retirement age) and after satisfying the eligibility
requirements for the payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits; then such benefits will be paid under
the Qualified Joint and Survivor Form, unless the Member has elected otherwise
during the election period. The election period must begin at least six months
before the Member attains qualified early retirement age and end not more than
90 days before benefits begin. Any election hereunder will be in writing and may
be changed by the Member at any time.
(d) Election of early survivor annuity. A Member who is employed after
attaining the qualified early retirement age will be given the opportunity to
elect, during the election period, to have a Qualified Preretirement Survivor
Annuity payable on death. Any election under this provision will be in writing
and may be changed by the Member at any time. The election period begins on the
later of (1) the 90th day before the Member attains the qualified early
retirement age, or (2) the Member's Entry Date, and ends on the date the Member
terminates employment.
(e) For purposes of this paragraph, qualified early retirement age is the
latest of:
(1) the earliest date, under the Plan, on which the Member may elect
to receive retirement benefits,
(2) the first day of the 120th month beginning before the Member
reaches Normal Retirement Age, or
(3) the Member's Entry Date.
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, 333-41381,
and 333-53109) of our report dated January 21, 1999, on our audits of the
consolidated financial statements of Hannaford Bros. Co. and Subsidiaries as of
January 2, 1999 and January 3, 1998, and for each of the three years in the
period ended January 2, 1999, which report is included in this Annual Report on
Form 10-K.
s/PricewaterhouseCoopers, LLP
Portland, Maine
February 23, 1999
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 59,722
<SECURITIES> 0
<RECEIVABLES> 23,619
<ALLOWANCES> 750
<INVENTORY> 201,219
<CURRENT-ASSETS> 295,878
<PP&E> 1,281,822
<DEPRECIATION> 458,454
<TOTAL-ASSETS> 1,284,538
<CURRENT-LIABILITIES> 259,599
<BONDS> 361,589
0
0
<COMMON> 31,754
<OTHER-SE> 631,596
<TOTAL-LIABILITY-AND-EQUITY> 1,284,538
<SALES> 3,323,588
<TOTAL-REVENUES> 3,323,588
<CGS> 2,480,346
<TOTAL-COSTS> 2,480,346
<OTHER-EXPENSES> 664,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,577
<INCOME-PRETAX> 152,308
<INCOME-TAX> 57,661
<INCOME-CONTINUING> 94,647
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 94,647
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.21
</TABLE>
