Harris Teeter 2012 Annual Report Download - page 119

obligations being incurred by the Wilmington Landlord in connection with the construction of shop space adjacent
to the Harris Teeter store.
William T. Dickson and Michael A. Dickson (sons of Thomas W. Dickson) together own all of the equity
interests in the Wilmington Landlord. In determining whether to approve the transactions described above, the Board
took into consideration the report of an independent certified real estate appraiser, which found the rental rate to
be at or slightly below market and the $150,000 of improvement allowance as well as the lease extension terms
to be in favor of Harris Teeter. As a result, the Board approved the amendments and transactions. The amounts
paid to the Wilmington Landlord under the lease, as amended, for Fiscal 2012 was approximately $532,310. The
terms of the lease, as amended, are, in the Company’s opinion, no less favorable than the Company would have
been able to negotiate with an unrelated party.
R. Stuart Dickson (the father of Thomas W. Dickson) retired from the Company as an executive officer effective
May 1, 2002, retired from his position as Chairman of the Executive Committee of the Board effective March 31,
2006, and retired from the Board at the 2008 Annual Meeting. At the time of his retirement as an executive officer,
he became eligible to receive retirement benefits earned during his employment with the Company. The targeted
aggregate annual retirement benefit pursuant to the SERP, Pension Plan and Social Security was $241,573. In
addition, beginning in January 2003, R. Stuart Dickson began to receive monthly payments for a fifteen-year period
pursuant to, and in accordance with the terms of, an historical deferred compensation plan in the amount of $19,899.
In recognition of R. Stuart Dickson’s 38 years of service as a Company executive and his invaluable contributions
to the Company, upon the approval of the Board of Directors, the Company entered into a Supplemental Executive
Retirement Plan (the “March 2006 Retirement Plan”) that provides an annual life-time payment in the amount of
$98,000, paid in equal monthly installments. The March 2006 Retirement Plan became effective as of March 31,
2006, and the first of the monthly payments began on April 1, 2006.
R. Stuart Dickson has been permitted to continue to use the Company’s parking facilities and administrative
support for personal purposes, but is required to reimburse the Company for such usage. Consistent with past
practice, he may also request to use Company aircraft for personal purposes, subject to availability and approval
by the Company. No reimbursement to the Company was historically required for such use, nor is reimbursement
currently required or expected to be required in the future. However, Internal Revenue Service regulations require
reporting of such use as taxable income to the individual, determined in accordance with rates prescribed by those
regulations. Currently R. Stuart Dickson is not an employee or director of the Company, but continues to receive
the retirement benefits earned as an employee with the Company. The terms of the retirement benefits provided
to R. Stuart Dickson were approved by the Board of Directors in March 2006 as specified above based upon his
contributions to the Company and based on the belief of the Board of Directors that such benefits were merited
by his service to the Company. The terms of those benefits are, in the Company’s opinion, no more favorable to
R. Stuart Dickson than the Company would have provided to other executives for similar services, based on the
relative contributions and service of R. Stuart Dickson.
On June 13, 2012, in connection with the previously disclosed transactions with Lowes Foods, Harris Teeter
assumed from Lowes Foods a lease for property located at 10828 Providence Road in Charlotte, North Carolina.
In Fiscal 2012, pursuant to the lease, Harris Teeter paid to Promenade Shopping Center, LLC (the “Promenade
Landlord”) $279,439 (consisting of $248,831 in rent, plus certain reimbursements and pass-through payments).
Subsequent to Fiscal 2012, the payments due to the Promenade Landlord through the stated lease expiration of
December 6, 2025 are estimated, based upon current levels of expenditures, to total approximately $1,008,618 per
year. John P. Derham Cato is a director of the Company. Trusts established by members of Mr. Cato’s family, and
in which Mr. Cato and his siblings have certain economic interests, own 90% of the equity interests in the Promenade
Landlord, with the remaining 10% equity interest owned by an unrelated third party. A member of his immediate
family also is a manager of an entity that is a manager of the Promenade Landlord. In determining whether to approve
these transactions, the Board took into consideration the fact that (a) the overall transactions with Lowes Foods
were in the best interest of the Company; (b) the lease assumption was a required part of such transactions; (c)
the lease assumption was entered into in the ordinary course of Harris Teeter’s business; and (d) the lease, which
was entered into in 2004 by unrelated parties, remained unchanged as a result of the lease assumption. As a result,
the Board approved the related party transactions described above. The terms of Harris Teeter’s assumption are,
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