HANOVER FOODS CORP /PA/
DEF 14A, 1999-08-16
CANNED, FRUITS, VEG, PRESERVES, JAMS & JELLIES
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                            SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
|_|      Preliminary Proxy Statement (Revised Preliminary Copy)
|_|      Confidential, for Use of the Commission Only
         (as permitted by Rule 14a-6(e)(z))
|X|      Definitive Proxy Statement
|_|      Definitive Additional Materials
|_|      Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12

                            HANOVER FOODS CORPORATION
 . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
                (Name of Registrant as Specified In Its Charter)

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box)
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

    1)       Title of each class of securities to which transaction applies:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    2)       Aggregate number of securities to which transaction applies:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    3)       Per  unit  price  or other  underlying  value  of  transaction
             computed  pursuant  to  Exchange  Act Rule 0-11 (Set forth the
             amount on which the filing fee is calculated  and state how it
             was determined.):
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . .
    4) Proposed maximum aggregate value of transaction:
    . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .

    5) Total fee paid:
    ............................................................................
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and


<PAGE>


     identify the filing for which the offsetting fee was paid previously.
     Identify the previous filing by registration statement number, or the Form
     or Schedule and the date of its filing.

    1)       Amount Previously Paid:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    2)       Form, Schedule or Registration Statement No.:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    3)       Filing Party:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    4)       Date Filed:
    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



<PAGE>



                                 August 16, 1999


Dear Hanover Shareholder:

     You are cordially invited to attend the Annual Meeting of Shareholders (the
"Meeting") of Hanover Foods  Corporation (the "Company") to be held on September
16,  1999,  at 4:00 p.m.,  at the  offices of the  Company at 1486 York  Street,
Hanover, Pennsylvania.

     At this  meeting  you are being  asked to elect two  directors.  Your Board
urges you to support the Company's  nominees by voting FOR Clayton J.  Rohrbach,
Jr. and James G. Sturgill on the  Company's  white proxy card  enclosed.  Please
read the attached proxy materials  carefully to make the best informed  decision
possible.

     Also,  enclosed  is the  Company's  Annual  Report  to  Shareholders  which
includes the Company's 1999 financial  results.  Your Company has accomplished a
great deal the past year and we are excited  about its prospects for the future.
During fiscal year 1999,  the Company again  achieved  record levels of earnings
and sales. We believe that the Company is positioned for continued success.

     Whether or not you expect to attend the Meeting in person,  it is important
that your shares be voted at the  Meeting.  I urge you to complete  and sign the
enclosed white proxy card and return it promptly in the envelope provided.

     Thank  you for  your  continued  support  and  interest  in  Hanover  Foods
Corporation.

                                 Sincerely,

                                 /s/ JOHN A. WAREHIME

                                 John A. Warehime
                                 Chairman, President and Chief Executive Officer

<PAGE>

                            HANOVER FOODS CORPORATION
                                1486 YORK STREET
                           HANOVER, PENNSYLVANIA 17331


                 ----------------------------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD SEPTEMBER 16, 1999
                 ----------------------------------------------


To the Shareholders of Hanover Foods Corporation:

     The 1999 Annual Meeting of  Shareholders  (the  "Meeting") of Hanover Foods
Corporation  (the  "Company")  will be held on September 16, 1999, at 4:00 p.m.,
prevailing  time,  at the offices of the  Company,  1486 York  Street,  Hanover,
Pennsylvania, for the purpose of considering and acting upon the following:

          1. To elect two Class B  directors  to hold  office for a term of four
     years and until their respective successors are duly elected and qualified,
     as more fully described in the accompanying Proxy Statement; and

          2. To transact  such other  business as may  properly  come before the
     Meeting.

     Only  shareholders  of record at the close of business on August 10,  1999,
are  entitled  to notice of, and to vote at, the Meeting or any  adjournment  or
postponement thereof.

     If the Meeting is adjourned for one or more periods aggregating at least 15
days because of the absence of a quorum, those shareholders entitled to vote who
attend  the  reconvened  Meeting,  if less  than a quorum  as  determined  under
applicable law, shall nevertheless constitute a quorum for the purpose of acting
upon any matter set forth in this Notice of Annual Meeting.

     YOU ARE CORDIALLY  INVITED TO ATTEND THE MEETING IN PERSON.  WHETHER OR NOT
YOU EXPECT TO ATTEND THE  MEETING  IN  PERSON,  YOU ARE URGED TO SIGN,  DATE AND
PROMPTLY  RETURN THE  ENCLOSED  WHITE PROXY CARD. A  SELF-ADDRESSED  ENVELOPE IS
ENCLOSED  FOR YOUR  CONVENIENCE;  NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.

                                 By Order of the Board of Directors

                                 /s/ JOHN A. WAREHIME

                                 John A. Warehime
                                 Chairman, President and Chief Executive Officer

Hanover, Pennsylvania
August 16, 1999

<PAGE>

                            HANOVER FOODS CORPORATION
                                1486 YORK STREET
                           HANOVER, PENNSYLVANIA 17331
                                 (717) 632-6000

                                 ---------------

                                 PROXY STATEMENT
                         ANNUAL MEETING OF SHAREHOLDERS

                                 ---------------

     The  accompanying  proxy is  solicited by the Board of Directors of Hanover
Foods  Corporation  (the  "Company")  for  use at the  1999  Annual  Meeting  of
Shareholders  (the  "Meeting")  to be held on  September  16, 1999 at 4:00 p.m.,
prevailing  time,  at the offices of the  Company,  1486 York  Street,  Hanover,
Pennsylvania,   and  any  adjournments  or  postponements  thereof.  This  Proxy
Statement and accompanying  proxy card are first being mailed to shareholders on
or about August 16, 1999.

     The only  matter to be  considered  and voted  upon at the  Meeting  is the
election  of two Class B  directors  for a term of four  years  and until  their
respective  successors  are elected and  qualified.  The Board of Directors  has
nominated  Clayton  J.  Rohrbach,  Jr. and James G.  Sturgill  for  election  as
directors of the Company. Messrs. Rohrbach and Sturgill are currently serving on
the Company's  Board of Directors.  Michael A.  Warehime,  a shareholder  of the
Company, has nominated John E. Denton and himself for election as directors.

     The cost of this solicitation will be borne by the Company.  In addition to
solicitation  by mail,  proxies  may be  solicited  in person  or by  telephone,
telegraph  or fax machine by  officers,  directors  or employees of the Company,
without  additional  compensation.  Total  expenditures  for the solicitation of
proxies (including fees of attorneys, accountants, public relations or financial
advisors,   printing,   transportation   and  other  costs   incidental  to  the
solicitation)  are estimated to be $15,000,  and total cash expenditures to date
have  been  approximately  $12,000.  Upon  request,  the  Company  will  pay the
reasonable  expenses  incurred by record  holders of the  Company's  Class A and
Class B Common  Stock who are brokers,  dealers,  banks or voting  trustees,  or
their nominees, for mailing proxy material and annual shareholder reports to the
beneficial owners of the shares they hold of record.

     Only shareholders of record, as shown on the transfer books of the Company,
at the close of business on August 10, 1999 (the "Record  Date") are entitled to
notice of, and to vote at, the Meeting.  On the Record Date,  there were 289,414
shares of Class A Common  Stock  outstanding,  426,474  shares of Class B Common
Stock  outstanding  and 10,000  shares of Series C Convertible  Preferred  Stock
outstanding. The Class A Common Stock, the Class B Common Stock and the Series C
Convertible  Preferred Stock are collectively referred to herein as the "Capital
Stock." On the Record  Date,  the Company  also had 6,548  shares of  non-voting
Series A Preferred Stock and 8,496 shares of non-voting Series B Preferred Stock
outstanding, all of which is currently convertible into Class A Common Stock.

     White proxy cards in the form enclosed,  if properly  executed and received
in time for voting,  and not revoked,  will be voted as directed on the proxies.
If no directions to the contrary are

<PAGE>

indicated,  the  persons  named in the  enclosed  white proxy card will vote all
shares of  Capital  Stock  "for"  the  election  of the  nominees  for  director
hereinafter  named.  Sending in a signed  proxy will not affect a  shareholder's
right to attend the Meeting and vote in person since the proxy is revocable. Any
shareholder  who  submits a proxy has the  power to  revoke it by,  among  other
methods:  (i) giving  written notice to the Secretary of the Company at any time
before the proxy is voted; (ii) submitting a duly executed proxy bearing a later
date; or (iii) appearing at the Meeting and giving the Secretary  notice of such
shareholder's intention to vote in person.

     The  presence,  in person or  represented  by proxy,  of the  holders  of a
majority of all votes  entitled to be cast with respect to each class of Capital
Stock will  constitute a quorum for the  transaction of business at the Meeting.
All shares of the Company's  Capital Stock present in person or  represented  by
proxy and  entitled  to vote at the  Meeting,  no  matter  how they are voted or
whether they abstain from voting, will be counted in determining the presence of
a quorum. If the Meeting is adjourned because of the absence of a quorum,  those
shareholders  entitled  to vote  who  attend  the  adjourned  meeting,  although
constituting  less  than  a  quorum  as  provided  herein,   shall  nevertheless
constitute  a quorum for the  purpose of electing  directors.  If the Meeting is
adjourned  for one or more periods  aggregating  at least 15 days because of the
absence  of a  quorum,  those  shareholders  entitled  to vote  who  attend  the
reconvened  Meeting,  if less than a quorum as determined  under applicable law,
shall nevertheless constitute a quorum for the purpose of acting upon any matter
set forth in the Notice of Annual Meeting.

     With  respect to the  election of  directors,  each share of Class A Common
Stock shall be entitled to one-tenth  (1/10) of a vote per share,  each share of
Class B Common  Stock  shall be entitled to one vote per share and each share of
Series C Convertible  Preferred Stock shall be entitled to thirty-five votes per
share. The shares of Class A Common Stock and the shares of Class B Common Stock
shall vote together with the shares of Series C Convertible Preferred Stock as a
single  class of stock,  and not as separate  classes,  in  connection  with the
election  of  directors.  The  election of  directors  will be  determined  by a
plurality  vote and the two  nominees  receiving  the most  "for"  votes will be
elected.  Approval of any other proposal will require the affirmative  vote of a
majority of the shares of Class B Common Stock cast on the  proposal.  Under the
Pennsylvania  Business Corporation Law, an abstention,  withholding of authority
to vote or broker  non-vote  will not have the same legal effect as an "against"
vote and will not be counted in  determining  whether the  proposal has received
the required shareholder vote.

     As used in this Proxy  Statement,  fiscal  1999  refers to the fiscal  year
ended May 30,  1999,  fiscal 1998 refers to the fiscal year ended May 31,  1998,
and fiscal 1997 refers to the fiscal year ended June 1, 1997.


                      BENEFICIAL OWNERSHIP OF CAPITAL STOCK

     The  following  table sets forth as of the Record Date certain  information
with  respect to the  beneficial  ownership  of the  Capital  Stock by: (i) each
person who is known by the Company to be the beneficial owner of more than 5% of
any class of the Company's Capital Stock;  (ii) each of the Company's  directors
and nominees for director;  (iii) each of the executive  officers of the Company


                                      -2-

<PAGE>

named in the Summary  Compensation  Table (the "Named  Officers");  and (iv) the
Company's  directors,  nominees for director and executive  officers as a group.
Except as otherwise indicated, the beneficial owners of the Capital Stock listed
below have sole investment and voting power with respect to such shares.

<TABLE>
<CAPTION>
                                                                            Shares Beneficially Owned (1)
                                                                          ---------------------------------

FIVE PERCENT SHAREHOLDERS                                                    Class      Number   % of Class
                                                                          -----------   ------   ----------
Common Stock
- ------------
<S>                                                                       <C>            <C>         <C>
J. William Warehime ..................................................... Common A       6,234       2.2%
257 Frederick Street                                                      Common B      78,158      18.3
Hanover, PA 17331

Elizabeth W. Stick ...................................................... Common A      15,002       5.2
35 Peyton Road                                                            Common B      44,244      10.4
York, PA 17403

Centre Foods Enterprises, Inc. .......................................... Common A      19,607       6.8
120 Paul Street                                                           Common B          --        --
Hanover, PA 17331

Estate of Meta L. Frey .................................................. Common A       3,872       1.3
425 Westminster Avenue, Cottage 22                                        Common B      27,720       6.5
Hanover, PA 17331

Heartland Advisors, Inc.(2) ............................................. Common A      50,500      17.4
790 North Milwaukee Street                                                Common B          --        --
Milwaukee, WI 53202

Alan A. Warehime Testamentary Trust A(3) ................................ Common A          --        --
Farmers Bank                                                              Common B      39,828       9.3
c/o Dauphin Deposit Bank
13 Baltimore Street
Hanover, PA 17331

Alan A. Warehime Testamentary Trust B(4) ................................ Common A          --        --
Farmers Bank                                                              Common B      76,165      17.9
c/o Dauphin Deposit Bank
13 Baltimore Street
Hanover, PA 17331

Series C Preferred Stock
- ------------------------
Hanover Foods Corporation 401(k) Savings Plan Trust (5) ................. Common A          --        --
1486 York Street                                                          Common B          --        --
Hanover, PA 17331                                                         Preferred C   10,000     100.0
</TABLE>


                                        (Footnotes begin on the following page.)


                                       -3-

<PAGE>

<TABLE>
<CAPTION>
                                                                            Shares Beneficially Owned (1)
                                                                          ---------------------------------

DIRECTORS AND NAMED OFFICERS (6)(8)                                          Class      Number   % of Class
                                                                          -----------   ------   ----------
<S>                                                                       <C>            <C>         <C>
John A. Warehime .......................................................  Common A        2,062        *
                                                                          Common B       44,730     10.5%

Clayton J. Rohrbach, Jr.(7)(8) .........................................  Common A           88        *
                                                                          Common B           --       --

Cyril T. Noel(7)(8)(9) .................................................  Common A          301        *
                                                                          Common B           --       --
                                                                          Preferred A       432        *
                                                                          Preferred B       360        *

T. Edward Lippy ........................................................  Common A          385        *
                                                                          Common B           --       --

Arthur S. Schaier(7)(8) ................................................  Common A          500        *
                                                                          Common B           --       --

James G. Sturgill, CPA, CVA ............................................  Common A          100        *
                                                                          Common B           --       --

James A. Washburn ......................................................  Common A           --       --
                                                                          Common B           --       --

Gary T. Knisely, Esq(9) ................................................  Common A        1,688        *
                                                                          Common B           --       --
                                                                          Preferred A        16        *

Pietro D. Giraffa, Jr. .................................................  Common A           --       --
                                                                          Common B           --       --

Edward L. Boeckel, Jr. .................................................  Common A           --       --
                                                                          Common B           --       --

Alan T. Young ..........................................................  Common A           --       --
                                                                          Common B           --       --

All directors and executive officers as a group (total of 11)(7)(10) ...  Common A        5,124      1.8
                                                                          Common B       44,730     10.5
                                                                          Preferred A       448      6.9
                                                                          Preferred B       360      4.2
                                                                          Preferred C    10,000    100.0
</TABLE>

* Less than one percent.

(1)  The  securities   "beneficially  owned"  by  a  person  are  determined  in
     accordance  with the definition of "beneficial  ownership" set forth in the
     regulations  of the Securities and Exchange  Commission  and,  accordingly,
     include  securities  owned by or for the spouse,  children or certain other
     relatives of such person as well as other securities as to which the person
     has or shares voting or investment power or has the right to acquire within
     60 days after the


                                       -4-

<PAGE>

     Record  Date.  The same shares may be  beneficially  owned by more than one
     person.  Beneficial  ownership  may  be  disclaimed  as to  certain  of the
     securities.

(2)  As reported by Heartland Advisors, Inc. ("Heartland") in Amendment Three to
     Schedule 13G dated  February 4, 1999.  Heartland  reported  sole voting and
     sole  dispositive  power with respect to the shares  held.  Such shares are
     held in investment  advisory  accounts of  Heartland.  The interests of one
     such account, Heartland Value Fund, relates to more than 5% of the class.

(3)  Includes shares held by the Alan A. Warehime  Testamentary  Trust A. Voting
     and  dispositive  power with  respect to such  shares is shared by the five
     trustees, each of whom has one vote. A majority vote of such individuals is
     required to vote or dispose of such shares.  Trustees of such trust include
     John A. Warehime,  Chairman,  President and Chief Executive  Officer of the
     Company, Cyril T. Noel, a director of the Company,  Sally Yelland,  Michael
     Warehime and the Dauphin Deposit Bank.

(4)  Includes shares held by the Alan A. Warehime  Testamentary  Trust B. Voting
     and  dispositive  power with  respect to such  shares is shared by the five
     trustees, each of whom has one vote. A majority vote of such individuals is
     required to vote or dispose of such shares.  Trustees of such trust include
     John A. Warehime,  Chairman,  President and Chief Executive  Officer of the
     Company, Cyril T. Noel, a director of the Company,  Sally Yelland,  Michael
     Warehime and the Dauphin Deposit Bank.

(5)  The Hanover Foods  Corporation  401(k) Savings Plan ("401(k)  Plan") may be
     deemed to  beneficially  own the  shares  held by such  plan.  The Series C
     Preferred Stock is currently  convertible into shares of the Class A Common
     Stock on a one for one basis. The trustees of such plan are Directors Noel,
     Rohrbach and Schaier. See Footnote 9 below.

(6)  The address of the Directors and Named Officers is that of the Company.

(7)  Does not include 298 shares of the Company's Class B Common Stock and 1,998
     shares of the  Company's  Class A Common Stock held by John R. Miller,  Jr.
     which are  subject to the April 22,  1997  Voting  Agreement.  This  Voting
     Agreement  provides  that John  Miller,  Jr.  will  vote all  shares of the
     Company's  common  stock,  which he is  entitled to vote as directed by the
     Board of Directors,  provided  Clayton J. Rohrbach,  Jr., Arthur S. Schaier
     and Cyril T. Noel, or a majority of them, vote in favor of the matter.

(8)  Excludes  10,000 shares of the Series C Preferred  Stock held by the 401(k)
     Plan Trust. In their capacity as co-trustees of such plan,  Directors Noel,
     Rohrbach  and Schaier  have shared  voting and  dispositive  power over the
     10,000 shares held by the 401(k) Plan Trust. Shares held by the 401(k) Plan
     Trust are voted by a majority of the plan trustees.  Mr. Noel has indicated
     his  intention  to abstain from voting as he is a nominee for election as a
     director.  The Series C Preferred Stock is convertible  into Class A Common
     Stock on a one for one basis.

(9)  Shares of Series A or B Preferred Stock are convertible into Class A Common
     Stock on an equitable basis. The current  conversion ratio is 3.1 shares of
     Series A or B Preferred  Stock to one share of Class A Common  Stock.  Such
     conversion  ratio is subject to change based upon current book value of the
     Class A Common Stock.

(10) Includes  10,000 of Series C Preferred  Stock held by the 401(k) Plan Trust
     for the benefit of Plan participants. See footnotes 5 and 8 above.



                                      -5-

<PAGE>

                              ELECTION OF DIRECTORS

     The Company's Amended and Restated By-laws (the "By-laws") provide that the
Board of  Directors  shall  consist  of not less  than  seven  and not more than
fifteen  directors,  with the exact number fixed by the Board of Directors.  The
current number of directors is fixed at seven,  however,  the Board of Directors
has adopted a resolution which offers to enlarge the Board from seven persons to
eight  persons on or before  September  30,  1999 in order to permit  Michael A.
Warehime  to  become a member of the Board if he is  willing  to serve,  without
prejudice to the legal rights he has asserted against John A. Warehime,  members
of the Board or the Company.  The Amended and Restated Articles of Incorporation
and amendments  thereto (the "Articles of Incorporation") of the Company provide
that the Board of Directors shall be divided into four classes, having staggered
terms of office, which are as equal in number as possible,  and that the members
of each class of  directors  are to be elected for a term of four years or until
their successors are elected and shall qualify.  Holders of Class A and B Common
Stock are not  permitted to cumulate  their votes for the election of directors.
The Company has interpreted the provisions of its Articles of Incorporation  not
to permit cumulative voting by the holders of the Series C Preferred Stock.

     At the Meeting,  shareholders will elect two Class B directors to serve for
a term of four years and until  their  respective  successors  are  elected  and
qualified.  Unless  directed  otherwise,  the person named in the enclosed white
proxy card intends to vote such proxy "for" the election of the listed  nominees
or, in the event of inability of either of the nominees to serve for any reason,
for the election of such other  person or persons as the Board of Directors  may
designate  to fill the  vacancy.  The Board has no  reason to  believe  that the
nominees will not be candidates or will be unable to serve.

     The  following  table  sets  forth  information,  as of  the  Record  Date,
concerning  the  Company's  directors  and nominees for election to the Board of
Directors. Mssrs. Rohrbaugh and Sturgill, both current directors, were nominated
by the Board of Directors to serve as  directors  for a term of four years.  The
nominees  have  consented to being named in the Proxy  Statement and to serve if
elected.

                                                               Director   Term
             Name               Age(1)  Position                Since    Expires
- ------------------------------  ------  ---------------------  --------  -------

                                    Nominees
                                    --------
Clayton J. Rohrbach, Jr. .....    79    Director                 1984     2003
James G. Sturgill, CPA, CVA ..    58    Director                 1994     2003

                          Directors Remaining in Office
                          -----------------------------
Arthur S. Schaier ............    57    Director                 1994     2000

T. Edward Lippy ..............    69    Director                 1994     2000

John A. Warehime .............    61    Chairman of the Board    1985     2001

James A. Washburn ............    49    Director                 1996     2001

Cyril T. Noel (2) ............    74    Director                 1983     2002

(1)  Age as of Record Date.

(2)  Mr. Noel served on the Board from May 1983 until June 1994 and from October
     1994 to present.


                                      -6-

<PAGE>

THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE "FOR" THE  ELECTION OF THE  NOMINEES
NAMED IN THIS PROXY STATEMENT FOR DIRECTORS OF THE COMPANY.

     The following  information  about the Company's  directors and nominees for
directors is based, in part, upon information supplied by such persons.

     John A.  Warehime  has served as Chairman of the Board and Chief  Executive
Officer of the Company  since 1989 and as a Director of the Company  since 1985.
Mr. Warehime has 48 years of experience in the food processing industry.

     Clayton J. Rohrbach, Jr. is currently retired. Prior to his retirement, Mr.
Rohrbach  was  employed at CPC  International,  a large New York Stock  Exchange
traded food company located in Englewood Cliffs,  New Jersey,  from 1984 through
1985 as Vice President of Marketing.

     James G.  Sturgill,  CPA, CVA, has been the Managing  Partner at Sturgill &
Associates,   LLP,  a  public  accounting  firm  headquartered  in  Westminster,
Maryland,  since  1993.  Prior to 1993,  he was  employed at  Sturgill,  Rager &
Lehman, a firm located in Westminster, Maryland from 1980 to 1993.

     Arthur S. Schaier has been a  shareholder,  General  Manager of Earnhardt's
Dodge Motor  Companies  located in Gilbert,  Arizona,  since 1981.  Mr.  Schaier
currently  serves as Director of ADI, the Phoenix,  Arizona  Metropolitan  Dodge
Dealers advertising organization and Board of Directors MOPAR Parts.

     T. Edward  Lippy has been the Vice  President  of Lippy  Brothers,  Inc., a
family farming  company  located in Hampstead,  Maryland,  since 1994. Mr. Lippy
currently  serves as a director  for the  following  entities:  Vice  Chairman &
Director  of Farmers & Merchants  Bank since 1989 and  director of Ag First Farm
Credit Bank since  1988.  Additionally,  Mr.  Lippy,  served as the  Chairman of
Baltimore  Farm Credit Bank from 1990  through  1992 and as Chairman of the Farm
Credit Council, Washington, D.C. from 1993 through 1997.

     James A. Washburn has been the Chairman and Chief Executive Officer of Park
100 Foods, a food manufacturing company, located in Tipton, Indiana, since 1991.
Prior thereto,  Mr.  Washburn was the President and Chief  Executive  Officer of
Hamilton  Medaris  Corporation  and H.M.C.  Transportation  located in  Fishers,
Indiana.

     Cyril T. Noel is  currently  retired.  Mr. Noel was the Vice  President  of
Finance of the Company from 1985 through 1994.  Mr. Noel has served on the Board
from May 1983 until June 15, 1994 and from October 18, 1994 to the present.


Board of Directors, Committees and Attendance at Meetings

     The Board of Directors held ten meetings  during fiscal 1999. Each director
attended 75% or more of the meetings of the Board and  committees  of which they
were members during fiscal 1999.


                                      -7-

<PAGE>

     The Board of  Directors  has  appointed a  Compensation  Committee  to make
recommendations  to the  Board  of  Directors  concerning  compensation  for the
Company's executive officers;  and take such other actions as may be required in
connection with the Company's  compensation and incentive  plans.  During fiscal
1999, the Compensation Committee held two meetings.  Members of the Compensation
Committee include Directors Rohrbach and Schaier. The Report of the Compensation
Committee is contained elsewhere herein.

     The Board of  Directors  also has  appointed an Audit  Committee  to, among
other  things,  review the  Company's  financial  and  accounting  practices and
policies  and the scope and results of the  Company's  annual  audit.  The Audit
Committee  also   recommends  to  the  Board  the  selection  of  the  Company's
independent  public   accountants.   Members  of  the  Audit  Committee  include
Directors, Noel, Lippy and Sturgill. The Audit Committee met twice during fiscal
1999.

     During fiscal 1999, the Company formed a Strategic Planning Committee. This
committee is responsible for the evaluation of potential acquisition  candidates
and the formulation and implementation of the Company's Strategic Business Plan.
Members of this Committee  include Directors Lippy,  Washburn and Sturgill.  The
Strategic Planning Committee met two times during fiscal 1999.

     The Board of Directors has not appointed a standing  Nominating  Committee.
The  function of  nominating  directors  is carried  out by the entire  Board of
Directors.  Pursuant to the By-laws,  a  shareholder  may  nominate  persons for
election as director,  provided that the  shareholder  (i) is a  shareholder  of
record at the time of the  nomination  and is entitled to vote at the meeting of
shareholders  for the  Board  seat to which  the  nomination  relates,  and (ii)
complies with the notice  procedures  of Article III,  Section 3 of the By-laws.
That section as currently in effect  provides  that the  nominating  shareholder
must deliver notice of the nomination to the Company's  Secretary not later than
June 1 of the  calendar  year in which  the  meeting  to elect the  director  or
directors is to be held. The required  notice must contain  certain  information
including  information  about the nominee,  as  prescribed  in the By-laws.  The
By-laws are subject to amendment from time to time.


Director Compensation

     During  fiscal year 1999,  each  director of the Company was paid an annual
retainer  of $12,000  payable in equal  monthly  installments  of $1,000.  Board
Members also receive a fee of $1,500 for each quarterly  Board meeting  attended
in  person  and  $750  for each  quarterly  Board  meeting  which  the  director
participated  in by telephone.  Directors are paid $1,000 for each special Board
meeting  attended in person and $500 for each special  Board  meeting  which the
director participated in by telephone.  In addition, an annual fee of $1,000 per
year was paid for  service  as a  committee  chairman.  Committee  members  also
received a fee of $1,000 for each committee  meeting attended in person and $500
for each committee meeting which the director participated in by telephone.

     In addition,  James Sturgill,  a director and one of the nominees  provides
consulting  services  on a hourly  fee basis.  See  "Certain  Relationships  and
Related Transactions."


                                      -8-

<PAGE>

                             EXECUTIVE COMPENSATION

Summary Compensation Table

     The  following   table  sets  forth  certain   information   regarding  the
compensation paid to the Chief Executive Officer and each of the four other most
highly  compensated  executive  officers of the Company for services rendered in
all capacities during the past three fiscal years.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                            Annual Compensation
                                 ----------------------------------------
           Name and              Fiscal                      Other Annual    All Other
      Principal Position          Year    Salary     Bonus   Compensation  Compensation
- -------------------------------  ------  --------  --------  ------------  ------------
<S>                               <C>    <C>       <C>        <C>            <C>
1) John A. Warehime               1999   $606,375  $502,000   $ 7,070(1)     $785,000(2)(4)(5)
     Chairman and                 1998    578,000   584,000    39,753         580,888
     Chief Executive Officer      1997    633,348   625,000    86,269         389,120

2) Gary T. Knisely                1999   $200,000  $ 88,100       -0-        $ 89,000(3)(4)(5)
     Executive V.President        1998    192,500    96,250       -0-          69,500
     Secretary & Counsel          1997    171,250   175,000       -0-          54,729

3) Alan T. Young                  1999   $134,000  $ 59,429       -0-        $  8,000(4)(5)
     V.P.--Purchasing &           1998    126,764    63,420       -0-           9,500
     Transportation               1997    115,240   115,240       -0-           5,762

4) Robert W. Shelton (6)          1999   $110,000  $ 85,800       -0-             -0-
     President--L.K. Bowman Co.   1998      9,168       -0-       -0-             -0-

5) Pietro D. Giraffa, Jr.         1999   $120,000  $ 53,220       -0-        $  8,000(4)(5)
     V.P.--Controller             1998    120,000    60,000       -0-           9,500
                                  1997     95,000    95,000       -0-           4,472
</TABLE>
(1)  Includes  legal and  accounting  fees in the  amount  of  $3,097  and other
     perquisites  paid  pursuant  to the  June  12,  1995  Employment  Agreement
     including the value of a company car and country club dues totaling $3,973.
     See "Employment Agreements and Change in Control Severance Agreement."

(2)  Includes the  Company's  payment for premiums of $153,000 for  split-dollar
     life  insurance  policy for Mr.  Warehime  and the  accrual of  $624,000 to
     reflect supplemental pension benefits to be paid pursuant to Mr. Warehime's
     Employment Agreement dated June 12, 1995, as amended February 13, 1997.

(3)  Includes the Company's accrual of $81,000 to reflect  supplemental  pension
     benefits to be paid pursuant to Mr. Knisely's Employment  Agreement,  dated
     January 23, 1997.

(4)  Includes the Company's matching  contributions  pursuant to the 401(k) Plan
     made to the accounts of Messrs..  Warehime,  Knisely,  Young and Giraffa in
     the amount of $8,000 each.

(5)  Excludes   payments  made  to  such  individuals  in  connection  with  the
     termination of the Pension Plan. See "Pension Plan" herein.

(6)  On May 1, 1998,  Robert W. Shelton was employed as President,  L.K. Bowman,
     Co. when the Company  acquired the assets of L.K. Bowman Co., Inc. and L.K.
     Bowman Pacific, Inc.

     The Company did not grant any options to the Named  Officers  during fiscal
1999.


                                      -9-

<PAGE>

Pension Plan

     On January 23, 1997,  the Board of Directors  took action to terminate  its
Pension  Plan,  effective  April  15,  1997.  The  accrued  benefits  due to the
participants  was calculated as of August 31, 1992, due to previous Board action
to cease  benefit  accruals  as of such date.  On June 26,  1997,  the  Internal
Revenue Service issued a determination letter indicating that the termination of
the Pension Plan does not  adversely  affect its  qualification  for federal tax
purposes.  The  distribution  of the plan assets was  completed on September 17,
1997.  Amounts  distributed to the Named Officers,  Messrs.  Warehime,  Knisely,
Young,  Shelton and Giraffa,  in connection  with the termination of the Pension
Plan were $414,086, $55,375, $36,397, -0- and $76,128, respectively.


401(k) Plan

     On April 2, 1990, the Company adopted a defined  contribution benefit plan,
known as the Company's 401(k) Savings Plan (the "401(k) Plan").  The 401(k) Plan
was amended on June 5, 1992,  April 4, 1994,  April 28, 1995,  July 25, 1997 and
December 14, 1997 to read in its present  form.  Non-union,  full-time  domestic
employees and those employees who are members of Local 56 of the United Food and
Commercial  Workers Union are eligible to  participate  after  completion of one
year of service. Each eligible employee has the option to defer up to 16% of his
or her total  annual cash  compensation  per year.  As of December  31st of each
year, the Company, at its discretion,  may make matching  contributions equal to
one hundred percent of each participating  employee's account for the first five
percent of compensation  deferred by each employee.  These  contributions may be
made in cash,  Company Stock,  or a combination  of cash and Company Stock.  The
401(k) Plan provides various  investment  options.  The 401(k) Plan provides for
loans to plan  participants  but does not  permit  early  withdrawals.  Matching
contributions  made by the  Company to the  accounts of the Named  Officers  are
included in the Summary Compensation Table contained previously herein.


Employment Agreements and Change in Control Severance Agreement

     On June 12, 1995, the Company entered into a five year employment agreement
with its Chief Executive Officer,  John A. Warehime, at an annual base salary of
$650,000 with such compensation  payable  retroactively  from April 1, 1994 (the
"1995  Employment  Agreement").  The 1995  Employment  Agreement  was amended on
February 13, 1997 (the "Amended  Employment  Agreement") to, among other things,
reduce the annual base salary  payable  under the  agreement to $498,866,  which
modification  was applied  retroactively to April 1, 1994 (the effective date of
the 1995  Employment  Agreement) and modified the method of calculating  bonuses
payable to the employee under such agreement.  As a result of these  retroactive
changes, Mr. Warehime is required to reimburse the Company for $83,024 in excess
compensation  previously  paid to him through the  deduction of such amount from
annual  base  salary  increases  provided  for under  the  terms of the  Amended
Employment  Agreement and to waive accrued bonuses payable for fiscal 1997 under
the 1995 Employment Agreement which would have equaled $2,250,000. The principal
terms of Mr. Warehime's  employment  arrangements with the Company as amended by
the Amended Employment Agreement are set forth below.


                                      -10-

<PAGE>

     The Amended  Employment  Agreement  provides for annual  increases (but not
decreases)  in the  employee's  annual  salary equal to the greater of 5% of the
prior year's  salary or the annual  percentage  increase in the  Consumer  Price
Index  (CPI).  Mr.  Warehime's  annual  base salary for fiscal 1999 and 1998 was
$606,000 and $578,000,  respectively.  Unless  terminated  by either party,  the
Amended Employment  Agreement  automatically renews annually on each anniversary
date so that five years always remain on the term of the agreement. In the event
the  employee  is  terminated  without  cause,  or in  the  event  the  employee
terminates his employment after a reduction (without his written consent) of his
duties or authority,  compensation  or similar  events,  the Amended  Employment
Agreement  provides for the payment of the salary and bonus (including all other
benefits) over the remaining term of the agreement.  In the event of termination
due to death or disability,  the Amended  Employment  Agreement provides for the
same payment to the employee (or in the event of the death of the employee,  his
spouse or  descendants)  for one year and thereafter the payment of supplemental
pension  benefits as  described  below.  In  addition,  the  Amended  Employment
Agreement  provides for the reimbursement by the Company of the employee's legal
and  accounting  fees up to $75,000 per year and  reasonable  business  expenses
incurred by the employee in  connection  with the  business of the Company.  The
Amended  Employment  Agreement  also  provides the employee  with various  other
benefits including the use of an automobile, disability and life insurance and a
club membership.

     The annual  bonus  payable to the  employee  under the  Amended  Employment
Agreement is equal to $100,000  plus 10% of the Company's  pretax  earnings over
$5.0 million  provided that no annual bonus is payable if pretax earnings of the
Company are less than $5.0  million.  The Amended  Employment  Agreement  limits
salary and the annual bonus payment  described above to an aggregate of not more
than $1.0 million annually. Annual bonuses can be paid in cash or Class A Common
Stock at the option of the employee.  For the years ended May 30, 1999,  and May
31, 1998 and June 1, 1997,  the bonus accrued under this agreement was $394,000,
$422,500, and $450,000 respectively.

     The Amended Employment  Agreement also provides for the annual payment of a
long-term  performance bonus based upon the Company's performance over the prior
five-year period as measured by its average sales growth and average increase in
operating  profits as compared to an industry  peer group over the same  period.
The bonus  payable is  calculated  based upon a formula set forth in the Amended
Employment  Agreement,   with  such  calculation  performed  by  an  independent
management  consulting  firm  retained  by  the  Company  and  approved  by  the
Compensation  Committee of the Board of  Directors.  For the years ended May 30,
1999,  May 31, 1998 and June 1, 1997,  the long-term  performance  bonus accrued
under this agreement was $108,000, $162,000 and $185,000 respectively.

     The Amended Employment Agreement was revised effective as of August 1, 1997
to make certain  clarifying  changes and to require  that bonus  payments to Mr.
Warehime  in any  taxable  year in excess of $1.0  million  would be  subject to
shareholder  approval.  At a meeting of the holders of the Class B Common  Stock
held on August 14, 1997, John A. Warehime,  in his capacity as voting trustee of
approximately 52% of the Class B Common Stock, approved such bonus payments.


                                      -11-

<PAGE>

     The Amended Employment  Agreement provides for annual supplemental  pension
benefits, commencing upon the earlier of (a) five years after termination of the
employee  (or one year  following  his death or  disability)  or (b) the date of
retirement,  payable during the life of the employee and upon his death, for the
life of his spouse. Such annual  supplemental  pension benefits are equal to 60%
of average total  compensation  (including  bonuses) over the latest  three-year
period prior to retirement, assuming retirement at age 65 or later. Supplemental
pension benefits are reduced based upon an established formula to the extent the
employee retires prior to age 65. The net present value of the cost of providing
this future  benefit is recognized  by the Company over the  remaining  expected
years of service.  The expense recognized under this agreement was approximately
$624,000,  $411,000 and $350,000 for the years ended May 30, 1999,  May 31, 1998
and June 1, 1997. The projected benefit obligation was approximately  $7,474,000
and $1,123,000 at May 30, 1999 and May 31, 1998, respectively.

     On January 23,  1997,  the  Company  entered  into a  five-year  employment
agreement with Gary T. Knisely, Executive Vice President,  Secretary and Counsel
of the Company,  at an annual salary of $175,000 with such compensation  payable
retroactively from June 1, 1996 (the "Knisely Agreement").  Unless terminated by
either  party,  the  Knisely  Agreement  automatically  renews  annually on each
anniversary  date so that five years always remain on the term of the agreement.
The Knisely  Agreement  provides for annual salary increases (but not decreases)
equal to the greater of 5% of the prior year's  salary or the annual  percentage
increase in the CPI, as well as incentive bonuses and various other benefits. As
of May 30, 1999, the aggregate liability of the Company under this agreement for
the next five years is estimated to be $1,173,000  excluding annual  performance
bonuses.  In the event the employee is terminated without cause, or in the event
the employee  terminates his employment  after a reduction  (without his written
consent) of his duties or authority, compensation or similar events, the Knisely
Agreement  provides for the payment of the salary and bonus (including all other
benefits) over the remaining term of the agreement.  In the event of termination
due to death or disability,  the Knisely  Agreement  provides for the payment of
salary and bonus  (including all other  benefits) to the employee (or his spouse
or other  descendants in the event of the employee's death) for the later of one
year from the date of such termination or the death of the employee.

     The  Knisely  Agreement  also  provides  for  annual  supplemental  pension
benefits equal to 60% of the employee's average annual  compensation  (including
bonuses but excluding  other  benefits)  over the three most recent fiscal years
prior to the employee's termination if the employee is no longer employed by the
Company and the employee  has  attained the age of 55. Such annual  supplemental
pension  benefits are payable for the remainder of the lifetime of the employee.
The net present value of the cost of providing  this future  pension  benefit is
recognized  by the  Company  over  Mr.  Knisely's  expected  remaining  years of
service.  The expense  recognized for  supplemental  pension benefits under this
agreement was approximately $81,000 and $60,000 for the years ended May 30, 1999
and  May  31,  1998,   respectively.   The  projected  benefit   obligation  was
approximately  $188,000  and  $107,000  at  May  30,  1999  and  May  31,  1998,
respectively.


                                      -12-

<PAGE>

     The Company also entered into a change in control severance  agreement with
Alan T.  Young  which  provides  for  termination  compensation  if Mr.  Young's
employment is terminated:  (i)  involuntarily or (ii)  voluntarily,  following a
reduction in base  salary,  duties and  responsibilities,  within 24 months of a
change in  control.  A "change in  control"  shall be deemed to occur if John A.
Warehime ceases to be Chief  Executive  Officer of the Company or ceases to have
the power and authority of the Chief Executive Officer. Pursuant to the terms of
this agreement,  any payment due thereunder shall be made over a two year period
no less  frequently  than  monthly and all  payments  during any 12 month period
shall not in the aggregate exceed the officer's total cash compensation  (salary
and bonus)  received from the Company  during fiscal 1999.  Amounts paid to such
officer during fiscal 1999 are included in the Summary Compensation Table.

     All payments  made  pursuant to this  agreement  are subject to the further
conditions that: (i) the officer maintain the  confidentiality  of the Company's
trade secrets,  customer lists and other proprietary information of the Company;
(ii) for a period of two years following the termination of the officer, neither
the officer or his employer or business associate shall enter into or attempt to
enter into any  business  relationship,  solicit  for  employment  or employ any
person,  employed by the Company or its affiliates at any time within six months
prior  to the  officer's  termination;  and  (iii)  for a  period  of two  years
following the  termination,  the officer  shall not directly or indirectly  own,
manage,  operate,  join or  participate  in any  capacity,  any entity  which is
primarily engaged in a business which competes with any significant  business of
the Company or its affiliates. If Mr. Young was terminated on May 30, 1999 under
circumstances  entitling him to severance  payments  pursuant to this agreement,
the aggregate amount due to Mr. Young under this agreement was $387,000.


Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive  officers,  directors and persons who  beneficially  own more than ten
percent of a  registered  class of the  Company's  Common Stock to file with the
Securities  and Exchange  Commission  ("SEC")  initial  reports of ownership and
reports of changes,  in ownership of Common Stock and other equity securities of
the  Company.  Executive  officers,  directors  and  greater  than  ten  percent
shareholders  are required by SEC  regulation to furnish the Company with copies
of all Section 16(a) forms they file.

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were required,  all Section 16(a) filing requirements  applicable to the
Company's executive officers,  directors and greater than ten percent beneficial
shareholders were complied with during the year ended May 30, 1999


                                      -13-

<PAGE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During fiscal 1999, the Company and its subsidiaries,  in the normal course
of  business,  purchase and sell goods and  services to related  companies.  The
Company  believes  all  of  these  transactions  were  completed  on  terms  and
conditions as available at the time for  non-affiliates.  These transactions are
summarized below.

     During fiscal 1999, the Company rented  equipment  from,  ARWCO Company and
Warehime Enterprises, Inc. The rental payments pursuant to such lease agreements
totaled  $15,000  during  fiscal  1998.  John A.  Warehime,  the Chairman of the
Company,  owns 33.3% of the outstanding stock of ARWCO  Corporation.  J. William
Warehime, a shareholder of the Company, and John A. Warehime own 44.4% and 14.8%
of the outstanding stock of Warehime Enterprises, Inc., respectively.

     During  fiscal  1999,  the Company  stored raw potatoes at its Centre Hall,
Pennsylvania  plant  for  Snyder's  of  Hanover,  Inc.,  Hanover,   Pennsylvania
("Snyder's"),  for a total rental of $188,000. The following shareholders of the
Company  are  over  5%  shareholders  of  Snyder's  who are  also 5% or  greater
shareholders  of  the  Company:   J.  William  Warehime  (13.7%  shareholder  of
Snyder's),  Jane Elizabeth Stick (7.0%  shareholder of Snyder's) and John A. and
Patricia M. Warehime (7.2% shareholder of Snyder's).

     During fiscal 1999,  the Company  leased a two story farm house,  adjoining
one story guest house and adjoining  ground  located on Trolley Road,  R.D. # 3,
Hanover,   Heidelberg   Township,   Pennsylvania,   for  customer   housing  and
entertainment  and temporary  new employee  housing from John A. and Patricia M.
Warehime for a total of $58,000.

     During fiscal 1999, the Company purchased $956,000 of contracted vegetables
from Lippy  Brothers,  Inc. T. Edward  Lippy,  a director of the  Company,  owns
approximately 37.0% of the outstanding stock of Lippy Brothers, Inc.

     During fiscal 1999,  the Company  retained  James G.  Sturgill,  CPA, CVA a
director of the Company,  as a financial  consultant  to provide  financial  and
accounting  services to the Company.  During  fiscal 1999,  the Company paid Mr.
Sturgill a total of $48,000 in consulting fees.

     During  fiscal 1999,  the Company sold $2.6 million of frozen food products
to Park 100  Foods,  Tipton,  Indiana.  James A.  Washburn,  a  director  of the
Company, owns approximately 80% of the outstanding stock of Park 100 Foods.

     During fiscal 1996, the Company  repurchased 5,148 shares of Class B Common
Stock from Cyril T. Noel and Frances L. Noel for $367,567.  In  connection  with
this  transaction,  the  Company  provided  the  Noels  with a note to fund  the
repurchase price.  During fiscal 1999, the Company paid $74,000 of principal and
interest on this note.


                                      -14-

<PAGE>

Compensation Committee Report on Executive Compensation

     Hanover Foods has designed its executive  compensation  program to attract,
motivate  and  retain  talented  executives.  Toward  this  end,  the  executive
compensation program provides:

     o    A base  salary  program and  benefits  to attract and retain  talented
          executives who  demonstrate  the qualities  required in Hanover Food's
          business  operations and who meet the Company's  established goals and
          standards.

     o    Annual  incentive bonus payments that are highly variable based on the
          achievement   of   the   Company's    pre-tax   earnings   goals   and
          pre-established  individual  goals.  These  incentive  bonuses  reward
          individuals whose performance  contributes to achieving  strategic and
          financial  corporate  objectives,  which increase  shareholder  value.
          Additionally, the long-term component of the Chief Executive Officer's
          bonus is  determined  pursuant  to a  formula  based on the  Company's
          performance  over the prior five years as compared to an industry peer
          group over the same period.

     The  Company's  officer  compensation  program is comprised of base salary,
annual cash incentive  compensation and various benefits generally  available to
all full-time employees of the Company, including participation in group medical
and life insurance  plans and a 401(k) plan. The Company seeks to be competitive
with compensation  programs offered by companies in the food processing industry
and other  companies  of similar size located in its market area based on formal
and informal surveys conducted by the Company.

     Base  Salary.  The Company  has entered  into  employment  agreements  with
Messrs.  Warehime  and Knisely  pursuant to which they were  entitled to receive
annual base salaries of $606,375 and $200,000 during fiscal 1999,  respectively.
Pursuant to the terms of the employment  agreements,  such salaries are adjusted
each year in accordance  with the Consumer  Price Index.  The Board of Directors
believes that the compensation  levels established in the employment  agreements
were  consistent with  competitive  practices for executives at this level based
upon an evaluation  performed on these  employment  agreements by an independent
management consulting firm.

     The Company also entered into change in control  severance  agreement  with
Mr. Alan T. Young,  which provide for severance  payments to this officer in the
event that he is terminated,  voluntarily (following a reduction in base salary,
duties and  responsibilities)  or involuntarily,  in connection with a change in
control of the Company. This agreement does not establish a base salary for such
officer.

     The  Compensation  Committee  decided on base  salaries for Messrs.  Young,
Shelton and Giraffa for fiscal 1999,  in the amounts of  $134,000,  $110,000 and
$120,000 respectively, (representing increases of 5.7%, 0% and 0%, respectively)
and annual bonus amounts reflected in the Summary  Compensation Table based upon
fiscal 1999 performance of the Company and the individual.

     In arriving  at these  decisions,  the  Compensation  Committee  considered
individual  contributions  during  fiscal  1999 as well  as  annual  performance
reviews completed by supervising officers.


                                      -15-

<PAGE>

     Annual Incentive Compensation. Under his employment agreement, Mr. Warehime
is entitled to receive an annual  bonus if the  Company's  pre-tax  earnings are
$5.0  million or more.  Such bonus is equal to $100,000  plus 10% of all pre-tax
earnings over $5.0  million.  Such bonus is limited to a maximum of $1.0 million
per year. Mr.  Warehime is also entitled to a long-term  annual bonus based upon
the  Company's  performance  over the past five years as measured by its average
sales growth percentage  ("Sales  Performance  Index") and average percentage of
operating  profits  to  sales   ("Profitability   Index")  as  compared  to  the
performance  of  companies  in an  industry  peer  group.  The  bonus  amount is
determined  by a formula  contained in Mr.  Warehime's  employment  agreement as
calculated by an independent management consulting firm retained by the Company.

     Annual cash bonuses of up to 100% of an  officer's  base salary are paid to
the Company's officers,  other than the Chief Executive Officer,  based upon the
Company's  pre-tax  earnings,  such  individual's  contribution to the Company's
earnings,   and  the  achievement  of  certain   individual   performance  goals
established for each officer.

     Stock  Options.  The Company does not currently  utilize stock options as a
means of compensating  its executive  officers and key employees,  however,  the
Compensation Committee may consider implementing an option plan in the future.

     Compensation  of  Chief  Executive  Officer.  Pursuant  to  his  employment
agreement, Mr. Warehime's annual base salary for fiscal 1999 was $606,375, which
represents an increase of $48,875 from fiscal 1998. The increased amount was not
paid to Mr.  Warehime  as he is required to  reimburse  the Company  $83,024 for
excess  compensation   previously  paid  to  him.  Mr.  Warehime  completed  his
reimbursement  of $83,024 to the Company  effective May 15, 1999.  Mr.  Warehime
also was paid a bonus (which  represents  both short and long term components of
Mr.  Warehime's  bonus) pursuant to his employment  agreement as a result of the
achievement  of certain levels of pre-tax income by the Company and increases in
the Company's sales performance index and profitability index as compared to its
peers.

     Policy  with  respect  to  Section  162(m) of the  Internal  Revenue  Code.
Generally,  Section  162(m)  of the  Internal  Revenue  Code  of  1986,  and the
regulations promulgated thereunder  (collectively,  "Section 162(m)"),  denies a
deduction  to any  publicly  held  Company,  such as the  Company,  for  certain
compensation  exceeding  $1,000,000  paid  during a  taxable  year to the  chief
executive officer and the four other highest paid executive officers, excluding,
among other things,  certain  performance-based  compensation.  The Compensation
Committee evaluates to what extent Section 162(m) will apply to its compensation
programs.  In order to bring bonus payments to Mr. Warehime under his Employment
Agreement  in  excess  of  $1,000,000   into  compliance  with  Section  162(m),
shareholders  of the Class B Common  Stock  approved  such bonus  payments  at a
meeting held in August 1997.


                      Members of the Compensation Committee

               Clayton J. Rohrbach, Jr.         Arthur S. Schaier


                                      -16-


<PAGE>

Stock Performance Graph

     The following  graph shows a comparison of the cumulative  total return for
the  Company's  Class A Common  Stock,  the NASDAQ  Stock Market and the Hanover
Composite Index (defined  below),  assuming an investment of $100 in each on May
20, 1994, the earliest date such information is available,  and the reinvestment
of all  dividends.  The data  points used for the  performance  graph are listed
below.

     The following  graph is required to be included in these proxy materials by
SEC regulations;  however, in reviewing these materials shareholders are advised
that since the Company's Class A Common Stock is not actively traded, it can not
be properly  compared to companies whose securities are traded on an exchange or
the NASDAQ Stock Market.

     The Hanover  Composite  Index  reflects the  performance  of the  following
publicly traded companies in industries  similar to that of the Company:  Seneca
Foods Corp., United Foods, Inc. and Dean Foods.







                                     [GRAPH]







<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Performance Graph Data Points   4/2/95  3/31/96   6/2/96   6/1/97  5/31/98  5/30/99
- -----------------------------------------------------------------------------------
<S>                            <C>      <C>      <C>      <C>      <C>      <C>
Hanover Foods Corporation      $100.00  $ 77.06  $ 61.47  $ 63.22  $ 94.38  $112.34

Hanover Composite Index         100.00    90.22    88.57   136.34   178.30   141.78

NASDAQ                          100.00   132.77   152.17   172.02   217.83   307.34
- -----------------------------------------------------------------------------------
</TABLE>


                                      -17-

<PAGE>

                              SHAREHOLDER PROPOSALS

     Pursuant  to recent  amendments  to the  proxy  rule  under the  Securities
Exchange  Act, the  Company's  shareholders  are notified  that the deadline for
providing the Company timely notice of any shareholder  proposal to be submitted
outside of the Rule 14a-8 process for consideration at the Company's 2000 Annual
Meeting of  Shareholders  (the  "Meeting")  will be July 2, 2000. As to all such
matters  which the  Company  does not have  notice on or prior to July 2,  2000,
discretionary  authority  shall be  granted  to the  persons  designated  in the
Company's  proxy  related  to the 2000  Meeting to vote on such  proposal.  This
change in procedure  does not affect the Rule 14a-8  requirements  applicable to
inclusion of shareholder  proposals in the Company's proxy materials  related to
the 2000  Meeting.  A  shareholder  proposal  regarding the 2000 Meeting must be
submitted  to the Company at its office  located at 1486 York  Street,  P.O. Box
334, Hanover,  Pennsylvania,  17331, by April 18, 2000 to receive  consideration
for inclusion in the Company's 2000 proxy materials. Any such proposal must also
comply with the proxy rules under the  Securities  Exchange Act,  including Rule
14a-8.


                           INDEPENDENT PUBLIC AUDITORS

     The Company's  independent  public auditors for fiscal 1999 was the firm of
KPMG LLP, Harrisburg,  Pennsylvania. A representative of KPMG LLP is expected to
be  present  at the  Meeting  and to be  available  to  respond  to  appropriate
questions.  The representative  will have the opportunity to make a statement if
he so desires.


                                  OTHER MATTERS

     The Company is not presently  aware of any matters  (other than  procedural
matters) which will be brought before the Meeting which are not reflected in the
attached  Notice  of the  Meeting.  The  enclosed  proxy  confers  discretionary
authority to vote with respect to any and all of the following  matters that may
come  before  the  Meeting:  (i)  matters  which the  Company  does not know,  a
reasonable  time  before  the proxy  solicitation,  are to be  presented  at the
Meeting;  (ii)  approval of the minutes of a prior meeting of  shareholders,  if
such  approval  does not  amount  to  ratification  of the  action  taken at the
Meeting;  (iii) the  election  of any person to any office for which a bona fide
nominee named in this Proxy  Statement is unable to serve or for good cause will
not serve;  (iv) any proposal  omitted from this Proxy Statement and the form of
proxy  pursuant  to Rules 14a-8 or 14a-9 under the  Securities  Exchange  Act of
1934; and (v) matters incident to the conduct of the Meeting. In connection with
such matters,  the persons  named in the enclosed  proxy will vote in accordance
with their best judgment.


                   ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K

     This Proxy  Statement is  accompanied  by the  Company's  Annual  Report to
Shareholders for fiscal 1999.


                                      -18-

<PAGE>

     EACH PERSON  SOLICITED  HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR FISCAL 1999 AS FILED WITH THE  SECURITIES  AND  EXCHANGE
COMMISSION,  WITHOUT  CHARGE,  EXCEPT FOR  EXHIBITS TO THE REPORT,  BY SENDING A
WRITTEN REQUEST TO:

                         HANOVER FOODS CORPORATION
                         P.O. BOX 334
                         1486 YORK STREET
                         HANOVER, PENNSYLVANIA 17331
                         ATTENTION:     John A. Warehime, Chairman,
                                        President and Chief Executive Officer


                                        By Order of the Board of Directors

                                        /s/ GARY T. KNISELY

                                        Gary T. Knisely
                                        Executive Vice President, Secretary and
                                        Counsel

Hanover, Pennsylvania
August 16, 1999





                                      -19-

<PAGE>

                                    EXHIBIT A

                      INFORMATION CONCERNING THE DIRECTORS
                             AND EXECUTIVE OFFICERS

     The  following  table  sets  forth  the  name  and  the  present  principal
occupation or employment  (except with respect to the directors  whose principal
occupation  is set  forth  in the  Proxy  Statement),  and the  name,  principal
business  and address of any  corporation  or other  organization  in which such
employment is carried on, of the directors and executive officers of the Company
who may assist in  soliciting  proxies from the Company's  stockholders.  Unless
otherwise indicated below, the principal business address of each such person is
1486 York Street, P.O. Box 334, Hanover, PA 17331 and such person is an employee
of the Company. Directors are indicated with an asterisk.

<TABLE>
<CAPTION>
       NAME AND PRINCIPAL           PRESENT OFFICE OR OTHER PRINCIPAL OCCUPATION
        BUSINESS ADDRESS                            OR EMPLOYMENT
       ------------------           --------------------------------------------
<S>                                 <C>
John A. Warehime* ..............    Chairman of the Board of the Company

Clayton J. Rohrbach, Jr.* ......    Retired; Formerly Vice President of Marketing at CPC International
The Barclay, Apt. 724
3546 South Ocean Boulevard
Palm Beach, FL 33480

Cyril T. Noel* .................    Retired; Formerly Vice President of Finance
3442 North Street
McSherrystown, PA 17344

T. Edward Lippy* ...............    Vice President at Lippy Brothers, Inc.
209 Lees Mill Road
Hampstead, MD 21074

Arthur S. Schaier* .............    Corporate General Manager -- Earnhardt Motor Companies
890 West San Marcos Drive
Chandler, AZ 85224

James G. Sturgill, CPA, CVA* ...    Managing Partner at Sturgill & Associates,LLP
4833 Wentz Road
Manchester, MD 21102-1243

James A. Washburn* .............    Chairman and CEO at Park 100 Foods
12643 Royce Court
Carmel, IN 46033

Gary T. Knisely, Esq. ..........    Executive Vice President, Secretary and Counsel of the Company

Alan T. Young ..................    Vice President of Purchasing & Transportation of the Company

Robert W. Shelton ..............    President, L. K. Bowman, division of the Company

Pietro D. Giraffa, Jr. .........    Vice President and Controller of the Company

Edward L. Boeckel, Jr. .........    Treasurer of the Company
</TABLE>

<PAGE>

                                    EXHIBIT B

              TRANSACTIONS IN THE SECURITIES OF THE COMPANY WITHIN
                THE PAST TWO YEARS AND CERTAIN OTHER TRANSACTIONS

     The following  table sets forth  information  with respect to all purchases
and sales of  shares of Class A Common  Stock,  Class B Common  Stock,  Series A
Preferred  Stock,  Series B Preferred  Stock and Series C Preferred Stock of the
Company by the Company and the directors  and executive  officers of the Company
during the past two years.

<TABLE>
<CAPTION>
                                  # of Shares     # of Shares       # of Shares        # of Shares        # of Shares
                                   of Class A      of Class B       of Series A        of Series B        of Series C
                                 Common Stock--  Common Stock--  Preferred Stock--  Preferred Stock--  Preferred Stock--
             NAME                Purchased/Sold  Purchased/Sold   Purchased/Sold     Purchased/Sold     Purchased/Sold      Date
- -------------------------------  --------------  --------------  -----------------  -----------------  -----------------  --------
<S>                                 <C>               <C>              <C>                <C>                <C>          <C>
John A. Warehime ..............     1,718 / -         - / -            - / -              - / -              - / -        09/18/98
                                      200 / -         - / -            - / -              - / -              - / -        11/30/98
                                      200 / -         - / -            - / -              - / -              - / -        01/19/99

Clayton J. Rohrbach, Jr. ......       - / -           - / -            - / -              - / -              - / -        ________

Cyril T. Noel .................       - / -           - / -            - / -              - / -              - / -        ________

T. Edward Lippy ...............       - / -           - / -            - / -              - / -              - / -        ________

Arthur S. Schaier .............       - / -           - / -            - / -              - / -              - / -        ________

James G. Sturgill, CPA, CVA ...       100 / -           - / -            - / -              - / -              - / -      03/24/99

James A. Washburn .............       - / -           - / -            - / -              - / -              - / -        ________

Gary T. Knisely, Esq. .........       - / -           - / -            - / -              - / -              - / -        ________

Pietro D. Giraffa, Jr. ........       - / -           - / -            - / -              - / -              - / -        ________

Alan T. Young .................       - / -           - / -            - / -              - / -              - / -        ________

Edward L. Boeckel, Jr. ........       - / -           - / -            - / -              - / -              - / -        ________
</TABLE>

<PAGE>

                                      PROXY
                            HANOVER FOODS CORPORATION
              ANNUAL MEETING OF SHAREHOLDERS ON SEPTEMBER 16, 1998
   SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HANOVER FOODS CORPORATION

The undersigned hereby constitutes and appoints GARY T. KNISELY and JEFFREY A.
WAREHIME, and each of them, as attorneys and proxies for the undersigned, with
full power of substitution, for and in the name, place and stead of the
undersigned, to appear at the Annual Meeting of Shareholders of Hanover Foods
Corporation (the "Company") to be held on the 16th day of September, 1999, and
at any postponement or adjournment thereof, and to vote all of the shares of the
Company which the undersigned is entitled to vote, with all the powers and
authority the undersigned would possess if personally present.


PROPOSAL 1. The election of Clayton J. Rohrbach, Jr. as a Class B director of
            the Company to hold office for a term of four years and until his
            successor is duly elected and qualified.

            To WITHHOLD       FOR       To Vote For ____________________________
             AUTHORITY
                [ ]           [ ]       Date: ____________________________, 1999


            The election of James G. Sturgill as a Class B director of the
            Company to hold office for a term of four years and until his
            successor is duly elected and qualified.

            To WITHHOLD       FOR       To Vote For ____________________________
             AUTHORITY
                [ ]           [ ]       Date: ____________________________, 1999


Proposal 2. To transact such other business as may properly come before the
            Annual Meeting.

             To WITHHOLD       FOR
              AUTHORITY
                 [ ]           [ ]


THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS TO THE CONTRARY ARE
INDICATED, THE PROXY AGENTS INTEND TO VOTE FOR THE ELECTION FOR THE NOMINEE
LISTED ABOVE.

BOTH PROXY AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTE (OR, IF
ONLY ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS
CONFERRED BY THIS PROXY, DISCRETIONARY AUTHORITY IS CONFERRED BY THIS PROXY AS
TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.


        (Please date this Proxy)

- ----------------------------------------


The undersigned hereby acknowledges receipt of the Company's 1999 Annual Report
to Shareholders, Notice of the Company's 1999 Annual Meeting of Shareholders and
the Proxy Statement relating thereto.

Please sign your name exactly as it appears on this proxy indicating any
official position or representative capacity. If shares are registered in more
than one name, all owners must sign.

Signature(s)

- ----------------------------------------

- ----------------------------------------


                    This Proxy may be signed in counterpart.
          PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
                         ENCLOSED POSTAGE PAID ENVELOPE.



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