<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FLEMING COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
FLEMING COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / 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:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
/X/ 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 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:
N/A
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
- --------------------------------------------------------------------------------
(3) Filing Party:
N/A
- --------------------------------------------------------------------------------
(4) Date Filed:
N/A
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C>
[FLEMING COMPANIES LOGO] 6301 Waterford Boulevard
P.O. Box 26647
Oklahoma City, OK 73126-0647
</TABLE>
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Fleming Companies, Inc. on Wednesday, May 3, 1995, at 10:00 a.m. at the National
Cowboy Hall of Fame, 1700 N.E. 63rd Street, Oklahoma City. The meeting is being
held for the following purposes:
1. To elect one director for a term expiring in 1997 and three directors
for terms expiring in 1998.
2. To consider and act upon a proposal to approve the Economic Value Added
Incentive Bonus Plan for Fleming Companies, Inc. and Its Subsidiaries,
a copy of which is attached to the accompanying Proxy Statement as
Exhibit "A".
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for 1995.
4. To transact other business as may properly come before the meeting or
any adjournment.
The accompanying proxy statement contains complete details on the proposals
and other matters. Shareholders of record as of March 6, 1995, are entitled to
notice of, and to vote at, the meeting. The company's annual report, including
financial statements for the year ended December 31, 1994, is also enclosed.
We hope you can be with us for this year's meeting. Your participation in
the affairs of the company is important, regardless of the number of shares you
hold. To ensure your representation at the meeting whether or not you are able
to be present, please complete and return the enclosed proxy card as soon as
possible.
By Order of the Board of Directors
DAVID R. ALMOND
Senior Vice President
General Counsel and Secretary
Oklahoma City, March 17, 1995
<PAGE> 3
[LOGO]
- --------------------------------------------------------------------------------
PROXY STATEMENT
This proxy statement, which is being mailed to shareholders on or about
March 17, 1995, is furnished in connection with the solicitation of proxies by
the board of directors for use at the annual meeting of shareholders on May 3,
1995, including any adjournments.
The annual meeting is called for the purposes stated in the accompanying
notice. All holders of the company's $2.50 par value common stock as of March 6,
1995, are entitled to vote. As of that date, 37,429,250 shares were outstanding.
On each matter coming before the meeting, a shareholder is entitled to one vote
for each share of stock held as of the record date.
If a proxy is properly signed and is not revoked by the shareholder, the
shares it represents will be voted according to the instructions of the
shareholder. If no specific instructions are given, the shares will be voted as
recommended by the board of directors.
A shareholder may revoke his or her proxy any time before it is voted at
the meeting. Any shareholder who attends the meeting and wishes to vote in
person may revoke his or her proxy at the meeting. Otherwise, a shareholder must
advise the senior vice president -- general counsel and secretary in writing of
revocation of his or her proxy.
The company will bear the cost of solicitation of proxies. Solicitations
will be made primarily by mail, but certain officers or associates of the
company may solicit proxies by telephone without additional compensation.
ELECTION OF DIRECTORS
The company's certificate of incorporation provides that members of the
board of directors will be divided into three classes with staggered three-year
terms. The certificate requires that at each annual meeting, successors to
directors whose terms expire at that meeting will be elected for three-year
terms. At its August 1994 meeting, the board of directors decreased the number
of directors from 11 to 10 and at its March 1995 meeting, it reapportioned the
board into three classes of three, four and three directors with terms expiring
in 1995, 1996 and 1997.
The board of directors has nominated three persons for election as
directors to serve for three-year terms expiring in 1998 and has nominated one
person for a two-year term expiring in 1997 or until their successors are
elected and qualified. All nominees are currently serving as directors and have
consented to serve for the new terms. The board of directors unanimously
recommends a vote FOR the election of each nominee.
2
<PAGE> 4
The persons named on the accompanying proxy card intend to vote in favor of
the four nominees listed below. Should any one or more of these nominees become
unavailable for election, the proxy will be voted for substitute nominees.
The election of directors requires a plurality of the votes cast at the
meeting. If all nominees are elected, the board will be comprised of 10 members,
of which nine are nonmanagement directors and one is an officer of the company.
The office of the corporate secretary tabulates all votes received before
the date of the annual meeting. The company appoints two inspectors of election
to receive the tabulation, tabulate all other votes and certify the results of
all matters voted upon. Neither the corporate law of the State of Oklahoma, the
state in which the company is incorporated, nor the company's certificate of
incorporation or bylaws has any specific provisions regarding the treatment of
abstentions and broker non-votes. It is the company's policy to count
abstentions and broker non-votes for purposes of determining the presence of a
quorum at the meeting. The company's bylaws provide that the ratification of the
appointment of auditors requires approval by the holders of a majority of the
stock having voting power present at the meeting. Therefore, an abstention or
broker non-vote will have no effect on the outcome of the election of directors
and will have the same effect as a vote against the ratification of the
appointment of the auditors.
NOMINEE FOR DIRECTOR TERM EXPIRING IN 1997
Nominee (age), year first became a director
GUY A. OSBORN (59), 1992
Chairman and chief executive officer of Universal Foods
Corp. He joined that company in 1971, became president in 1984
and chairman in 1990. He serves on the boards of Firstar Corp.
(a bank holding company), Firstar Bank of Milwaukee, Wisconsin
Gas Co., WICOR, Inc. (a utility holding company), Milwaukee
Metropolitan Association of Commerce, Boys and Girls Club of
Greater Milwaukee, Greater Milwaukee Committee and Alverno
College and is a trustee of Northwestern Mutual Life Insurance
Company.
Member of the compensation and organization committee and
the nominating committee.
3
<PAGE> 5
NOMINEES FOR DIRECTOR TERMS EXPIRING IN 1998
ROBERT E. STAUTH (50), 1993
Chairman, president and chief executive officer. Mr. Stauth
has been associated with Fleming for a total of 21 years. He
first joined the company in 1966, and after leaving for a brief
time to serve in senior management positions at two retail
chains, he rejoined the company in 1977. In 1987, Mr. Stauth
was elected vice president, serving at the Phoenix division. In
1991, he was promoted to senior vice president -- Western
Region, and in 1992 was named executive vice
president -- division operations. In April 1993, Mr. Stauth was
named president and chief operating officer. He was elected to
the board the following June. In October of the same year, Mr.
Stauth became the chief executive officer and assumed the role
of chairman at the 1994 shareholders' meeting. He serves as a
member of the board of directors of IGA, Inc., the National
American Wholesale Grocers Association (NAWGA), for which he
serves on the government relations and nominating committees,
the Oklahoma State Chamber of Commerce, and the Oklahoma
Business Roundtable. He also serves on the executive steering
committee on ECR and the industry relations committee for the
Food Marketing Institute (FMI). Additionally, he serves on the
Advisory Boards of the University of Oklahoma's College of
Business Administration and Kansas State University.
ARCHIE R. DYKES (64), 1981
Chairman and chief executive officer of Capital City
Holdings, Inc. (a venture capital organization). He is a
director of Whitman Corp., Bradford Capital Partners, the
Employment Corporation and Pet Inc. A former chancellor of the
University of Kansas and of the University of Tennessee, Mr.
Dykes also serves as a trustee of the Kansas University
Endowment Association and of the William Allen White
Foundation.
Chairman of the audit and finance committee and member of
the nominating committee.
JOHN A. McMILLAN (63), 1992
Co-chairman of the board of Nordstrom, Inc. (specialty
store chain). Mr. McMillan has been associated with Nordstrom
for over 35 years, and has served as a member of the office of
chief executive officer since 1971. He was named co-chairman of
the board in 1991. He is a member of the board of directors of
the Fred Hutchinson Cancer Center and of the board of trustees
of Seattle University. He also serves on the board of the
Seattle YMCA.
Member of the compensation and organization committee and
the nominating committee.
4
<PAGE> 6
DIRECTORS WHOSE TERMS EXPIRE IN 1996
JAMES G. HARLOW, JR. (60), 1977
Chairman, president and chief executive officer of Oklahoma
Gas & Electric Co. Mr. Harlow has been associated with this
electric utility company since 1961 and has served as chairman
since 1982. Mr. Harlow is a director of Massachusetts Mutual
Life Insurance Co. and AEGIS Insurance Services, Inc. He was
chairman of Edison Electric Institute in 1991. He is chairman
of the board of trustees of the University of Oklahoma
Foundation and is a trustee of Oklahoma City University.
Chairman of the compensation and organization committee and
member of the nominating committee.
EDWARD C. JOULLIAN III (65), 1984
Chairman and chief executive officer of Mustang Fuel Corp.
(energy development and services) since 1976. Mr. Joullian is a
director of The LTV Corp. and American Fidelity Co. He is also
chairman of the World Scout Foundation, vice president of
Joullian Vineyards, Ltd. and trustee of the Colonial
Williamsburg Foundation.
Member of the audit and finance committee and the
nominating committee.
HOWARD H. LEACH (64), 1974
President of Leach McMicking & Co. (private investment
banking firm) and Leach Capital Corporation, chairman of Hunter
Fan Company (manufacturer of ceiling fans) and two California
agri-business corporations. He is chairman of the Board of
Regents of the University of California and chairman of Foley
Timber Company, Inc., a timber management company. He is also a
director of Frye Copysystems, Inc.
Chairman of the nominating committee and member of the
compensation and organization committee.
DEAN WERRIES (65), 1979
Mr. Werries has been associated with Fleming for 39 years.
He was named president and chief operating officer in 1981,
chief executive officer in 1988 and chairman of the board in
1989. Mr. Werries relinquished the position of president to
John E. Moll in 1989 but reassumed this position upon Mr.
Moll's retirement in 1992. Mr. Werries retired as president and
chief executive officer in 1993 and retired as chairman in
1994. Mr. Werries is past chairman and a director of the Food
Marketing Institute. He is a director of Sonic Industries, Inc.
and Carr-Gottstein Foods Co. He is a trustee of the Food
Industry Crusade Against Hunger, the Oklahoma School of Science
and Mathematics and a member of the board of governors of
Oklahoma Christian University of Science and Arts. In February
1995, Mr. Werries was appointed Secretary of Commerce for the
State of Oklahoma by Governor Frank Keating.
Member of the audit and finance committee and the
nominating committee.
5
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE IN 1997
CAROL B. HALLETT (57), 1993
Senior government relations advisor with Collier, Shannon,
Rill & Scott, Washington, D.C. Prior to joining Collier,
Shannon, Rill & Scott in February 1993, Mrs. Hallett served as
the Commissioner of the United States Customs Service from
November 1989 through January 1993. From September 1986 to May
1989, she served as the U.S. Ambassador to The Commonwealth of
the Bahamas. From July 1983 to August 1986, Mrs. Hallett served
as the national vice chairman and field director of Citizens
for America. Mrs. Hallett also served three terms in the
California legislature and as minority leader in the State
Assembly. Mrs. Hallett is a director of Litton Industries,
Inc., Radix Group International, and the American Association
of Exporters and Importers (AAEI). She is a trustee for the
Junior Statesmen of America and the United States Naval
Institute. Mrs. Hallett also serves on the President's Cabinet
of California Polytechnic State University.
Member of the audit and finance committee and nominating
committee.
LAWRENCE M. JONES (63), 1972
Retired chairman of the board of directors and chief
executive officer, The Coleman Co., Inc. (manufacturer of
outdoor recreational products and associated equipment). Prior
to rejoining Coleman in 1989, Mr. Jones served for 18 months as
Fleming's vice chairman and chief financial officer. Before
that, he was president of Coleman from 1976 to 1985, and
chairman of the executive committee from 1985 to 1987. Mr.
Jones continues to serve on the board of The Coleman Co., Inc.
and is a director of Fourth Financial Corp. and Union Pacific
Corp.
Member of the audit and finance committee and the
nominating committee.
6
<PAGE> 8
THE BOARD OF DIRECTORS
Meetings of Directors. During the past year, the board of directors had
five regular and three special meetings, which included two telephone meetings.
Each director attended 75% or more of the meetings of the board and of
committees of which he or she was a member except for Mr. Osborn who attended
five of the eight board meetings and was unable to attend the May and August
meetings of the compensation and organization committee.
Compensation of Directors. The company pays an annual retainer of $20,000
to nonmanagement directors, plus a fee of $1,000 for each board and committee
meeting attended and an additional $250 for each committee meeting chaired. Such
amounts together with the value of the stock equivalent units described below
yield actual annual compensation of approximately $40,000 for each director.
Directors are not compensated for participation in telephone meetings of the
board of directors or of its committees. In 1992, the company established the
Directors' Stock Equivalent Plan under which nonmanagement members of the board
may be awarded stock equivalent units within certain limits set forth in the
plan. These units represent the right to receive cash equal to the value of
shares of common stock when the director ceases to serve, according to the terms
of the grant. Upon payment of the stock equivalent units, the company will also
pay cash to the participant in an amount equal to dividends or distributions
which he or she would have received if the stock equivalent units had been
awarded as shares of common stock rather than stock equivalent units. In
February 1994, each nonmanagement director was awarded 536 stock equivalent
units having a value at that time of $25.13 per unit; however, the board
determined not to make any such awards for 1995.
Upon his retirement as chairman in 1994, Dean Werries entered into a three
year consulting agreement with the company for $200,000 per year plus
reimbursement of reasonable business, travel and other expenses in consideration
of his agreeing to provide advisory and consulting services to the company. In
addition, Mr. Werries also receives retirement benefits pursuant to the
company's defined benefit plan (the "Pension Plan") and Supplemental Retirement
Plan (the "SRP"). See "Pension Plan."
COMMITTEES OF THE BOARD
The board of directors has three standing committees. The principal
responsibilities of each are as follows.
Audit and Finance Committee. The committee focuses primarily on ethical and
regulatory matters and on the effectiveness of the company's accounting policies
and practices, financial reporting and internal controls, and the internal audit
function. The committee oversees company policies and programs with respect to
ethical standards and regulatory compliance. It annually reviews the selection
of independent auditors and, after consultation with management, recommends the
appointment of independent auditors for board approval and shareholder
ratification. It reviews and discusses the scope of the annual audit with
management and the independent auditors and may request additional review and
audit procedures. The committee reviews and discusses the annual report of the
auditors and the auditors' observa-
7
<PAGE> 9
tions and suggestions regarding accounting and control policies, procedures and
organization, and their adequacy. The committee makes recommendations, as
appropriate, to management based on the auditors' suggestions. The committee
reports its findings to the board at least annually. The committee met twice
during 1994.
Compensation and Organization Committee. The committee oversees the
company's compensation and benefit policies and programs. The committee reviews
the objectives, structure, cost and administration of major compensation and
benefit policies and programs. It annually reviews officers' salaries, stock
options, and other management incentives, and administers the company's stock
option and management incentive plans. The stated policy of the committee is to
motivate the company's executive officers and other associates to enhance the
company's financial performance by focusing on specific business objectives. It
also makes recommendations regarding the selection of the chief executive
officer. The committee met three times during 1994.
Nominating Committee. The committee develops and recommends to the board
guidelines and criteria for selecting persons to serve as directors. It
recommends nominees for election at the annual meeting and candidates to fill
board vacancies. The committee considers and makes recommendations regarding the
composition of the board. The committee met once during 1994.
The committee will consider nominees recommended by shareholders if such
nomination is made pursuant to timely notice in writing in strict accordance
with the company's bylaws. A shareholder desiring to make a nomination should
contact the senior vice president -- general counsel and secretary to obtain a
copy of the bylaws.
8
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The total number of shares of common stock beneficially owned as of January
16, 1995 by each of the present directors, nominees, the chief executive officer
and each of the other five most highly compensated executive officers, and all
of the directors and executive officers as a group, are as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1)
-----------------------------------------------------------------------
<S> <C>
Robert E. Stauth................................... 57,929(2)
Archie R. Dykes.................................... 4,001(3)
Carol B. Hallett................................... 395
James G. Harlow, Jr................................ 1,883(4)
Lawrence M. Jones.................................. 4,693
Edward C. Joullian III............................. 3,000(5)
Howard H. Leach.................................... 12,200
John A. McMillan................................... 3,000
Guy A. Osborn...................................... 1,000
Dean Werries....................................... 62,030(6)
Gerald G. Austin................................... 57,244(7)
E. Stephen Davis................................... 52,561(8)
Thomas L. Zaricki.................................. 7,250(9)
Glenn E. Mealman................................... 38,270(10)
James E. Stuard.................................... 46,103(11)
All directors and executive officers as a group
(25)............................................. 477,938(12)
====================
</TABLE>
- ---------------
(1) Unless otherwise indicated, all shares are owned directly by the named
person and he or she has sole voting and investment power with respect to
such shares. The shares represent less than 1% for each person listed, and
approximately 1.28% for all directors and executive officers as a group,
of the total shares outstanding.
(2) Consists of 7,229 shares owned directly by Mr. Stauth for which he has sole
voting and investment power, 26,700 shares under options presently
exercisable and 24,000 shares awarded under the 1990 Stock Incentive Plan,
subject to forfeiture, for which he has sole voting power.
(3) Consists of 3,416 shares owned directly by Mr. Dykes for which he has sole
voting and investment power, and 585 shares owned jointly by Mr. Dykes and
his wife with whom he shares voting and investment power.
(4) Consists of 1,539 shares owned directly by Mr. Harlow for which he has sole
voting and investment power, and 344 shares owned jointly with his wife
with whom he shares voting and investment power.
(5) Owned by a limited partnership in which Mr. Joullian is a general partner
and for which he shares voting and investment power with the remaining
general partners.
(6) Consists of 42,658 shares owned directly by Mr. Werries, and 19,372 shares
owned by a partnership in which Mr. Werries is the general partner, for all
of which he has sole voting and investment power.
(7) Consists of 12,250 shares owned directly by Mr. Austin for which he has
sole voting and investment power, 29,500 shares under options presently
exercisable, 6,894 shares owned jointly by Mr. Austin and his wife with
whom he shares voting and investment power, 600 shares owned by his wife
and 8,000 shares awarded under the 1990 Stock Incentive Plan, subject to
forfeiture, for which he has sole voting power.
9
<PAGE> 11
(8) Consists of 7,061 shares owned directly by Mr. Davis for which he has sole
voting and investment power, 29,500 shares under the options presently
exercisable, 8,000 shares owned jointly by Mr. Davis and his wife with whom
he shares voting and investment power and 8,000 shares awarded under the
1990 Stock Incentive Plan, subject to forfeiture, for which he has sole
voting power.
(9) Consists of 1,000 shares owned directly by Mr. Zaricki for which he has
sole voting and investment power, 2,250 shares under options presently
exercisable and 4,000 shares awarded under the 1990 Stock Incentive Plan,
subject to forfeiture, for which he has sole voting power.
(10) Consists of 5,068 shares owned directly by Mr. Mealman for which he has
sole voting and investment power, 24,200 shares under options presently
exercisable, 4,202 shares owned jointly by Mr. Mealman and his wife with
whom he shares voting and investment power and 4,800 shares awarded under
the 1990 Stock Incentive Plan, subject to forfeiture, for which he has
sole voting power.
(11) Consists of 6,203 shares owned directly by Mr. Stuard for which he has sole
voting and investment power, 28,100 shares under options presently
exercisable, 7,000 shares owned jointly by Mr. Stuard and his wife with
whom he shares voting and investment power and 4,800 shares awarded under
the 1990 Stock Incentive Plan, subject to forfeiture, for which he has
sole voting power.
(12) Includes 115,865 shares for which directors and executive officers have
sole voting and investment power, 61,773 shares for which they share
voting and investment power with others, 198,700 shares under options
presently exercisable, and 101,600 shares awarded under the 1990 Stock
Incentive Plan, subject to forfeiture, for which they have sole voting
power.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the name and address of each known
shareholder of the company who beneficially owns more than 5% of the company's
common stock, the number of shares beneficially owned by each, and the
percentage of outstanding stock so owned according to information made available
to the company as of February 15, 1995.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------------- -------------------- --------
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109................... 4,101,534(1) 10.96%
Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, New York 10153...................... 3,414,676(2) 9.12%
INVESCO PLC
11 Devonshire Square
London EC2M 4YR
England....................................... 2,394,150(3) 6.40%
</TABLE>
- ---------------
(1) FMR Corp. has the sole power to vote 174,524 shares and the sole power to
dispose of all shares
(2) Sanford C. Bernstein & Co., Inc. has sole power to vote 1,864,241 shares and
to dispose of all shares.
(3) INVESCO PLC shares the power to vote and dispose of all shares.
10
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the compensation
information for the chief executive officer and the four other most highly
compensated executive officers and James E. Stuard, the former executive vice
president -- division operations of the company, who retired effective December
1, 1994 and who would have been one of the four most highly compensated
executive officers but for the fact that he was not an executive officer of the
company as of December 31, 1994, for services rendered in all capacities during
the fiscal years ended December 31, 1994, December 25, 1993 and December 26,
1992.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------
------------------------------------------------ RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) (#) ($)
- ------------------------ ---- --------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert E. Stauth 1994 501,328 311,531 288 598,500 90,000 --
Chairman, President and 1993 325,186 -- 174 -- -- --
Chief Executive Officer 1992 211,320 73,343 174 -- -- --
Gerald G. Austin 1994 315,583 154,282 570 199,500 30,000 --
Executive Vice President 1993 257,432 -- 570 -- -- --
Operations 1992 240,938 35,041 288 -- -- --
E. Stephen Davis 1994 242,135 118,013 288 199,500 30,000 --
Executive Vice President 1993 212,751 -- 288 -- -- --
Scrivner Group 1992 205,775 23,150 288 -- -- --
Thomas L. Zaricki 1994 223,192 89,565 39,350 99,750 15,000 --
Senior Vice President 1993 29,508 -- 19,278 -- -- --
Retail Operations 1992 -- -- -- -- -- --
Glenn E. Mealman 1994 235,465 87,597 1,002 119,700 18,000 --
Executive Vice President 1993 226,745 54,489 570 -- -- --
National Accounts 1992 222,535 31,101 570 -- -- --
James E. Stuard 1994 277,741 120,089 1,002 119,700 18,000 50,000(3)
Former Executive 1993 242,368 38,421 570 -- -- 50,000(3)
Vice President 1992 237,799 68,023 570 -- -- --
Division Operations
</TABLE>
- ---------------
(1) The company provides term life insurance to all associates generally, and
there is no imputed income to the associate with respect to the first
$50,000 of coverage except for highly compensated associates. Accordingly,
the company is required to impute income to the named individuals with
respect to the first $50,000 of coverage and reimburses them for its tax
effect. The amounts shown in this column reflect such tax reimbursement
amounts. The amounts opposite Mr. Zaricki's name reflect the advancement of
certain relocation expenses.
(2) The restricted stock awards reported in this column were made pursuant to
the company's 1990 Stock Incentive Plan. The listed awards were made on
February 16, 1994 and the market price per share on the date of grant was
$24.9375. These restricted shares vest in twenty percent (20%) increments
over a ten-year period (the "Performance Cycle") in the event the price of
the company's common stock reaches certain specified target prices. Unearned
restricted stock will be forfeited at the end of the Performance Cycle. If
and to the extent paid on the company's common stock generally, dividends
declared and paid by the company on the shares of restricted stock are
accrued and not paid until the vesting requirements are met. As of the last
day of fiscal 1994, there were
11
<PAGE> 13
held in escrow for Mr. Stauth 24,000 restricted shares with a value of
$558,000, Mr. Austin 8,000 restricted shares with a value of $186,000, Mr.
Davis 8,000 restricted shares with a value of $186,000, Mr. Zaricki 4,000
restricted shares with a value of $93,000, Mr. Mealman 4,800 restricted
shares with a value of $111,600 and Mr. Stuard 4,800 restricted shares with
a value of $111,600.
(3) The $50,000 paid in each of 1993 and 1994 represent payments under a
consulting agreement. See "Termination of Employment and Change of Control
Arrangements -- Other Arrangements."
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE OFFICERS
The policy of the compensation and organization committee (the
"Committee"), implemented through the compensation programs described below, is
to motivate executive officers and other associates to enhance the company's
financial performance by focusing attention on specific business objectives
emphasizing teamwork among associates and to reward such executive officers and
other associates based on corporate and individual performance.
Compensation for the company's executive officers is generally comprised of
base salary, bonus and awards of stock options or restricted stock. Decisions
with respect to compensation, except for that of the chief executive officer
(the "CEO"), are made by the Committee, composed of four nonmanagement
directors, upon the recommendation of the CEO. The Committee separately
determines the CEO's compensation. The Committee's decisions are submitted to
the full board of directors for its information and review only. Earnings of the
company and the market value of its stock are considered subjectively by the
members of the Committee in setting the CEO's and other executive officers' base
salaries. Also, some bonus awards are based in part on earnings performance. The
CEO who is also a director does not participate in the board's review of the
Committee's decisions regarding his compensation. Decisions about awards under
certain of the company's stock-based compensation plans are made solely by the
Committee in order for awards to comply with Securities and Exchange Commission
Rule 16b-3.
Salary. In determining salary for fiscal 1994, the Committee relied on the
company's salary administration program, the objectives of which are to attract,
retain and motivate productive executive officers and other management
associates. For each job classification, the program requires a written job
description, an evaluation of the job with assigned points based on the nature
of the job, its functions and the level of the position, and an assigned salary
range based on the total point value. Annual salaries are adjusted based on
individual performance. In addition, each member of the Committee reviews the
earnings of the company and the market value of the company's common stock for
the previous fiscal year-end, and, based on these factors, the Committee makes a
subjective determination of the nature and extent of salary adjustments. The
Committee generally sets salaries in the high end of the assigned salary range.
In order to measure competitiveness, the Committee also considers salary surveys
comparing company jobs with similar jobs held by employees of companies included
in the company's peer group. See "Company Performance." The company believes its
executive salaries are generally higher than executive salaries of companies in
its peer group with the exception of SUPERVALU, Inc.
12
<PAGE> 14
Bonuses. Bonus awards are determined, within the Committee's discretion,
with reference to company and individual performance measured against criteria
established under the Fleming Companies, Inc. Incentive Compensation Program
("FICP"). The Committee establishes the company criteria annually in February or
March, which criteria may be adjusted based on internal and external business
factors. Pursuant to the FICP, the Committee assigns a weight to each criterion,
which, in conjunction with targets for each criterion, guides the Committee's
determination of performance units earned by each executive officer. When the
executive officer's performance units equal a predetermined number, he becomes
eligible to receive a bonus. Bonuses under the FICP for 1994 for executive
officers were based fifty percent on the attainment by the company of targeted
goals based on sales (20%) and earnings (30%) of the company's core business
operations (the "Corporate Objectives"). The remaining fifty percent was tied to
the attainment of specified key business objectives (40%) and specified personal
objectives (10%) (collectively, the "Other Objectives"). The Other Objectives
are unique to each of the executive officers and are designed to reflect
specifically expected achievements related to the company generally or the
division or by the corporate sub unit for which such executive officer has
primary responsibility as well as certain specified personal goals.
Although the company failed to meet the earnings goal, it exceeded the top
target goal for the sales portion of the Corporate Objectives such that each
executive officer received the maximum number of performance units associated
with such objective. When combined with the performance units earned in
connection with their achievement of the Other Objectives, each executive
officer was eligible for a bonus for 1994. However, since the achievement of the
sales portion of the Corporate Objectives was due in part to a large acquisition
by the company which was completed in August 1994, the Committee utilized its
discretion under the FICP and reduced bonus awards to executive officers by
twenty-eight and one-half percent (28.5%).
Bonuses for the executive officers and other corporate officers of the
company (currently totalling 25 in number) for 1995 and future years will be
determined under the Economic Value Added Incentive Bonus Plan if approved by
the shareholders at this annual meeting. Bonuses for all other eligible
associates for 1995 will be determined under the FICP. See "Economic Value Added
Incentive Bonus Plan."
Restricted Stock and Stock Options. As described in footnote two to the
Summary Compensation Table above, pursuant to the 1990 Stock Incentive Plan, the
Committee can award restricted stock to executive officers and other key
management associates which vests upon the attainment of targeted profit and/or
other performance criteria. The Committee believes that restricted stock awards
build stock ownership and provide a long-term focus since the stock is
restricted from being sold, transferred, or assigned until vested, and is
forfeitable. Awards granted in 1990 and 1991 representing 56,467 shares of
restricted stock, of which 5,860 shares were held by Mr. Stauth, 6,255 shares by
Mr. Austin, 5,177 shares by Mr. Davis, 5,608 shares by Mr. Mealman, and 6,183 by
Mr. Stuard, were forfeited as of December 31, 1994, the end of the performance
cycle, because the targeted profit and performance criteria were not attained as
to those shares. In February 1994, the Committee awarded a total of 101,600
shares
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<PAGE> 15
of restricted stock to its executive officers, the vesting of which is tied to
targeted increases in the price of the company's common stock. The named
executive officers each were awarded shares of restricted stock. See "Summary
Compensation Table." The Committee's decisions as to the number of shares
awarded to each executive officer were based on the nature of the executive's
position and the level of responsibility associated with such position.
Pursuant to the company's 1990 Stock Option Plan, at March 1, 1995 there
were 94,050 options available for grant to executive officers and other key
management associates. In February 1994, the Committee granted a total of
384,000 options to its executive officers of which 256,000 were performance
options, the exercisability of which is tied to targeted increases in the price
of the company's common stock. The named executive officers each received stock
options and performance related stock options. See "Stock Option
Information -- Option Grants." The Committee's decision as to the number of
options granted to each executive officer was based on the nature of the
executive's position and the level of responsibility associated with such
position.
CHIEF EXECUTIVE OFFICER
The salary for the CEO was determined by the Committee in accordance with
the policies set forth above for all executive officers. In order to reflect his
leadership, responsibilities and vision with respect to the company, the CEO
received a 17 percent merit increase in February 1994. In August 1994, he
received an additional seven percent salary increase based on the closing of an
acquisition which increased the size of the company by one-third.
The bonus for the CEO was based on the attainment by the company of the
sales portion of the Corporate Objectives and the attainment by the CEO of the
Other Objectives with the same weighing as set forth above for all executive
officers. In the case of the CEO, his Other Objectives were comprised of (i) 15
key business objectives relating to, among other things, the reengineering of
the company, the development of the Economic Value Added Incentive Bonus Plan
(see "Economic Value Added Incentive Bonus Plan"), implementation of a new
flexible marketing plan and the development of a strategy for long-term growth
of shareholder value and (ii) five personal objectives relating to, among other
things, communications with associates and communications with shareholders and
others. The bonus award for the CEO was determined by the Committee in
accordance with the FICP and the achievement by the company of the top target
goal for the sales portion of the Corporate Objectives and attainment by the CEO
of 18 out of 20 of his Other Objectives. However, as with the other executive
officers, the CEO's bonus was reduced by twenty-eight and one-half percent
(28.5%) in view of the fact that the achievement of the sales portion of the
Corporate Objectives was due in part to the closing of a large acquisition.
The CEO was also awarded 24,000 shares of restricted stock, valued at the
date of grant at $598,500 and a total of 90,000 stock options, 60,000 of which
are performance related options. The number of shares of restricted stock
awarded and the number and type of stock options granted to the CEO were based
on his position and level of responsibilities.
14
<PAGE> 16
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Although no executive officer's salary for fiscal 1994 exceeded the
limitations on deductibility under Section 162(m) of the Internal Revenue Code,
as amended ("Section 162(m)"), the Committee has adopted and the board of
directors has ratified the following policy regarding Section 162(m):
Section 162(m) limits the deductibility of certain compensation paid by the
company to certain of its executive officers. For fiscal 1994, Section
162(m) did not apply to any compensation paid to an executive officer by
the company. However, it is possible that future circumstances may warrant
compensation payments which will not qualify as a tax deductible expense.
It shall be the policy of the Committee to compensate executive officers
based on performance, and the Committee recognizes that flexibility with
respect to the payment of compensation must be insured in order to maintain
this policy. Accordingly, although the Committee will to the extent
possible attempt to qualify all compensation payments for deductibility
under Section 162(m), circumstances may arise which require it to authorize
compensation which is not deductible under Section 162(m).
<TABLE>
<S> <C>
James G. Harlow, Jr., Chairman John A. McMillan
Howard H. Leach Guy A. Osborn
</TABLE>
15
<PAGE> 17
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the company, the S&P 500 composite index and an index of peer
companies selected by the company with the investment weighted based on market
capitalization at the beginning of each year.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FLEMING, S&P 500 INDEX, & PEER INDEX
<TABLE>
<CAPTION>
FLEMING
MEASUREMENT PERIOD COMPANIES,
(FISCAL YEAR COVERED) INC. S&P 500 PEER INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 121 97 93
1991 121 126 103
1992 116 136 112
1993 94 150 123
1994 93 152 99
</TABLE>
The total cumulative return on investment (change in the year-end stock
price plus reinvested dividends) for each year for the company, the peer group
and the S&P 500 composite is based on the stock price or composite index at the
end of calendar 1989.
Companies in the peer group are as follows: Fleming Companies, Inc.,
SUPERVALU, Inc., Nash Finch Co., Super Food Services, Inc., Richfood Holdings,
Inc., and Super Rite Corp. Due to unavailable data, performance for Super Rite
Corp. in the peer index has been excluded for the years 1989 through 1991.
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<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The company's Compensation and Organization Committee consists of James G.
Harlow, Jr., chairman, Howard H. Leach, John A. McMillan and Guy A. Osborn.
STOCK OPTION INFORMATION
OPTION GRANTS
The following table sets forth information concerning the grant of stock
options to the named executive officers during the fiscal year ended December
31, 1994.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS EXERCISE OR
SECURITIES GRANTED TO BASE GRANT DATE
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1)(2) FISCAL YEAR ($/SH) DATE VALUE $(3)
- ---------------------------- ------------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert E. Stauth............ 30,000 5.6 24.9375 2-15-04 141,720
60,000 6.1 24.9375 2-15-04 283,440
Gerald G. Austin............ 10,000 1.9 24.9375 2-15-04 47,240
20,000 2.0 24.9375 2-15-04 94,480
E. Stephen Davis............ 10,000 1.9 24.9375 2-15-04 47,240
20,000 2.0 24.9375 2-15-04 94,480
Thomas L. Zaricki........... 5,000 0.9 24.9375 2-15-04 23,620
10,000 1.0 24.9375 2-15-04 47,240
Glenn E. Mealman............ 6,000 1.1 24.9375 2-15-04 28,344
12,000 1.2 24.9375 2-15-04 56,688
James E. Stuard............. 6,000 1.1 24.9375 2-15-04 28,344
12,000 1.2 24.9375 2-15-04 56,688
</TABLE>
- ---------------
(1) The listed options are a combination of (i) stock options which are
exercisable in four twenty-five percent (25%) increments on the first
through fourth anniversaries of the date of grant ("Stock Options") and
(ii) stock options which are exercisable in ten percent (10%) increments
only if the price of the company's common stock reaches certain specified
target prices ("Performance Stock Options). The Stock Option information
appears on the first line opposite the executive's name and the Performance
Stock Option information appears on the second line opposite the
executive's name.
(2) The vesting of all listed options accelerates in the case of a change of
control of the company. See "Termination of Employment and Change in
Control Arrangements -- Other Arrangements."
(3) Based on Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
assumptions as to variables such as risk free interest rate, stock price
volatility and future dividend yield as follows: the options are assumed to
be exercised at the end of the ten year term; yield volatility of 19.00;
annual dividend yield of 5.1% and a risk free rate of return of 7.9%.
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<PAGE> 19
OPTION EXERCISES
The following table sets forth information concerning each exercise of
stock options by the named executive officers during the fiscal year ended
December 31, 1994 with information regarding the value as of the fiscal year-end
of any unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(1)
------------- -------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Robert E. Stauth................. -- -- 26,700/76,500 --
Gerald G. Austin................. -- -- 29,500/25,500 --
E. Stephen Davis................. -- -- 29,500/25,500 --
Thomas L. Zaricki................ -- -- 2,250/12,750 --
Glenn E. Mealman................. -- -- 24,200/15,300 --
James E. Stuard.................. -- -- 28,100/15,300 --
</TABLE>
- ---------------
(1) The values shown in this column are based on a market price of the company's
common stock at 1994 fiscal year-end of $23.25 per share. None of the
options held at the end of the fiscal year was in-the-money.
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<PAGE> 20
PENSION PLAN
The following table illustrates estimated annual benefits payable under the
company's Pension Plan to the named executive officers upon retirement, assuming
retirement at age 65, including amounts attributable to the company's SRP which
provides benefits that would otherwise be denied participants due to certain
limitations on qualified benefit plans in the Internal Revenue Code of 1986, as
amended (the "Code"):
Pension Plan Table
Years of Service
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35 40
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000......... $ 125,000 $ 137,500 $ 150,000 $ 162,500 $ 175,000 $ 187,500 $ 200,000
300,000......... 150,000 165,000 180,000 195,000 210,000 225,000 240,000
350,000......... 175,000 192,500 210,000 227,500 245,000 262,500 280,000
400,000......... 200,000 220,000 240,000 260,000 280,000 300,000 320,000
450,000......... 225,000 247,500 270,000 292,500 315,000 337,500 360,000
500,000......... 250,000 275,000 300,000 325,000 350,000 375,000 400,000
550,000......... 275,000 302,500 330,000 357,500 385,000 412,500 440,000
600,000......... 300,000 330,000 360,000 390,000 420,000 450,000 480,000
650,000......... 325,000 357,500 390,000 422,500 455,000 487,500 520,000
700,000......... 350,000 385,000 420,000 455,000 490,000 525,000 560,000
750,000......... 375,000 412,500 450,000 487,500 525,000 562,500 600,000
800,000......... 400,000 440,000 480,000 520,000 560,000 600,000 640,000
850,000......... 425,000 467,500 510,000 552,500 595,000 637,500 680,000
</TABLE>
The estimated number of years of credited service for each of the named
executive officers is as follows: Mr. Stauth, 18; Mr. Austin, 35; Mr. Davis, 34;
Mr. Zaricki, 1; Mr. Mealman, 37, and Mr. Stuard, 30.
Benefit amounts payable under the Pension Plan are (i) payable on a
straight life basis computed as a percentage of final average compensation
(consisting of salaries, wages, commissions and bonuses) for the five calendar
plan years during the last ten years of the associate's career for which such
average is the highest, (ii) subject to offset for Social Security and (iii)
limited by the Employee Retirement Income Security Act of 1974, as amended, and
by the Code. There is also an additional dollar limitation on benefits which an
associate may earn under all of the company's qualified pension plans.
The SRP is a defined benefit supplementary plan which provides retirement
benefits for each of the named executive officers with the exception of Mr.
Zaricki who is not a participant in the plan. Benefit amounts payable under the
SRP are intended to provide a retirement benefit which is offset by amounts
payable from other retirement plans, including the Pension Plan and Social
Security payments. The SRP benefit is based upon a percentage of the
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<PAGE> 21
participant's total highest annual compensation paid during the last three years
of employment. The percentage ranges from 50% to 80%. Retirement payments
commence upon retirement after age 65 (or with the consent of the company, after
age 55) or upon termination of an eligible associate within three years after a
change of control of the company. See "Termination of Employment and Change in
Control Arrangements -- SRP and Trust Agreement."
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements. On March 2, 1995, the company entered into
employment agreements with all of the named executives with the exception of Mr.
Stuard (See "-- Other Arrangements"). The provisions of the employment
agreements are effective upon a "change of control" of the company (as defined
in the agreements) and for a period of three years thereafter. Upon a change of
control, the executive is to receive an annual base salary equal to the greater
of (i) his base salary at the time of the change of control and (ii) the highest
average annual base salary paid to the executive during any of the three out of
the five fiscal years immediately preceding the change of control which yield
the highest annual base salary. In addition, the executive will receive an
annual bonus equal to the highest annual bonus paid to the executive during any
of the five fiscal years immediately preceding the change of control. The
executive will also be entitled to all of the benefits and to participate in all
of the plans in effect immediately preceding the change of control that are
available to other key management associates.
Pursuant to the terms of the employment agreements, in the event following
a change of control, or in anticipation of a change of control, the executive is
terminated for other than "cause" (as such term is defined in the agreement),
death or disability or he terminates his employment for "good reason" (as such
term is defined in the agreement), then the executive is to receive a lump sum
cash payment comprised of the following amounts: (i) his base salary through the
date of termination at the annual rate in effect on the date of termination or,
if higher, at the highest annual rate in effect at any time during the 36 month
period preceding the change of control date through the date of termination (the
"Highest Base Salary"); (ii) the prorated portion of his prior year's annual
bonus (the "Recent Bonus"); (iii) the product obtained by multiplying 2.99 times
the sum of the Highest Base Salary and the Recent Bonus; and (iv) any amounts
previously deferred by the executive (plus any accrued interest thereon) and any
accrued vacation pay. In addition, for the remainder of the employment period or
such longer period as any plan or policy may provide, the executive shall also
be entitled to participate in all plans and continue all benefits at least equal
to those he would have received had he not been terminated. Any such payments to
be received by the executive shall be "grossed up" to cover any excise tax,
interest or penalties imposed under the Code. The employment agreements also
provide for indemnification from the company to the executive and for officers'
and directors' insurance coverage for the executive for a period of five years
following the termination date. For a period of 30 days following the first year
after a change of control, the executive can terminate his employment for any
reason and receive all the benefits of the agreement as if he had terminated for
good reason. Under the employment agreements,
20
<PAGE> 22
assuming a change of control on December 31, 1994, and termination of employment
of the named executive for other than cause, death or disability or by the
executive for good reason, the company would be required to pay the following
amounts: Mr. Stauth, $3,013,913; Mr. Austin, $1,674,603; Mr. Davis, $1,355,646;
Mr. Zaricki, $1,115,220; and Mr. Mealman, $1,145,234. Prior to entering into the
employment agreements, the foregoing officers, except for Mr. Zaricki, had been
parties to severance agreements with the company. The employment agreements
replaced the severance agreements.
SRP and Trust Agreement. The SRP provides for retirement benefits to be
paid to each of the named executive officers upon retirement or in the event his
employment is terminated for other than "cause" (as such term is defined in the
SRP), death or disability or he terminates his employment for "good reason" (as
such term is defined in the SRP) within three years after a change in control of
the company or in anticipation of a change of control of the company. Assuming a
change of control on December 31, 1994 and the termination of employment of the
following persons within three years after that, the company would be required
under the SRP to pay the following amounts annually for life to the following
named executives: Mr. Stauth, $213,163, Mr. Austin, $106,340, Mr. Davis,
$113,148, and Mr. Mealman, $88,829. Mr. Zaricki does not currently participate
in the SRP. Due to his retirement in December 1994, this provision is no longer
applicable to Mr. Stuard.
The company has entered into a Supplemental Income Trust (the "Trust"). The
board of directors has empowered the Committee in its sole discretion to fund
the Trust as it deems appropriate from time to time in order to satisfy the
company's obligations to associates with respect to the SRP and the employment
agreements, as well as severance agreements and employment agreements available
to certain associates who are not named executive officers, including
obligations arising following a change in control of the company. The Trust
assets relating to company contributions are always subject to the claims of
general creditors of the company. No associate with any right to or interest in
any benefit or future payments under the Trust will have any right to or
security interest in any specific asset of the Trust or any right to assign any
benefits or rights which he or she may expect to receive from the Trust.
Other Arrangements. Pursuant to the provisions of the company's 1990 Stock
Incentive Plan, in the event of a change of control of the company, the
Committee, in its sole discretion, may accelerate the vesting and payment of any
award or may determine that a payment instead of an award may be made. Under
Phase III of this plan, adopted in February 1994, which covers the named
executive officers, a participant is entitled to receive a cash payment equal to
his annual base salary if the event occurs in the first year of the performance
cycle, two-thirds of his annual base salary if the event occurs in the second
year of the performance cycle and one-third of his annual base salary if the
event occurs in the third year of the performance cycle. In addition, the
participant shall receive a "gross up" payment to cover any applicable excise
tax, interest or penalties imposed under the Code. Pursuant to the provisions of
the company's 1990 Stock Option Plan, in the event of a change of control of the
company, all options outstanding under the plan, with and without SARs, will
become automatically fully
21
<PAGE> 23
vested and immediately exercisable with such acceleration to occur without
requirement of any further act by the company or any plan participant. All of
the named executive officers participate in the above-described plans.
Mr. Stuard has entered into an agreement with the company pursuant to which
he will act as a consultant following his retirement. Under the agreement, in
recognition of his valuable service to the company, he received a $50,000
payment in 1993 and an additional payment of $50,000 in December 1994. At his
retirement in December, 1994, he commenced receipt of his retirement benefits
under the Pension Plan and the SRP. He also received health insurance for which
the company pays premiums until he reaches age 65.
William M. Lawson, Jr., senior vice president -- corporate
development/international operations, became an executive officer of the company
in August 1994. From January through July of 1994, a Phoenix-based law firm with
whom he was a member received a total of $102,224 from the company for legal
services rendered to the company.
ECONOMIC VALUE ADDED INCENTIVE BONUS PLAN
GENERAL
On March 2, 1995, the board of directors, subject to shareholder approval,
adopted the Economic Value Added Incentive Bonus Plan for Fleming Companies,
Inc. and Its Subsidiaries (the "EVA Incentive Plan") which will provide a system
for determining incentive compensation to be paid to key associates who are
selected to be participants and who contribute to the long term growth and
profitability of the company. In the event the EVA Incentive Plan is approved by
the shareholders, it will replace the FICP for the 25 executive officers and
other corporate officers of the company with respect to their bonus
determinations for 1995 and future years. The Company intends to expand the
number of participants in EVA for 1996 and future years to approximately 1225
additional associates of which approximately 215 (including the 25 officer
associates) will participate in the Bonus Bank feature. The remaining
approximately 1035 participants will receive 100% of any Final Declared Bonus on
an annual basis. To the extent the EVA Incentive Plan is expanded in the future
to cover all current FICP participants, the FICP will be terminated. The EVA
Incentive Plan will be administered by the Committee. See "Committees of the
Board". Although shareholder approval is not required to implement the plan, the
board of directors has requested such approval in order to ensure deductibility
under the Code for income tax purposes of amounts paid to executive officer
associates. See "Report of the Compensation Committee." In the event of a
negative vote on the EVA Incentive Plan, it will be terminated. A description of
the EVA Incentive Plan appears below. A copy of the EVA Incentive Plan is
attached to this proxy statement as Exhibit "A" and the description contained
herein is qualified in its entirety by reference to the complete text of the EVA
Incentive Plan. Capitalized terms not defined in this summary shall have the
meaning ascribed to them in the EVA Incentive Plan.
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<PAGE> 24
DESCRIPTION OF THE EVA INCENTIVE PLAN
The EVA Incentive Plan is designed to better align eligible associates'
compensation with shareholder interests, and to promote the maximization of
shareholder value over the long term while rewarding associates for creating
shareholder value and not rewarding associates for allowing value to erode.
The plan is structured around an economic value added ("EVA") concept, a
financial measurement system or tool, expressed as a formula. EVA is the net
operating profit of the company or unit of the company after taxes ("NOPAT"),
less a charge for the capital employed by the company or unit in order to
produce such profit. NOPAT is net income as determined under generally accepted
accounting principles with adjustments. The capital charge is determined by
measuring all capital employed to produce the NOPAT and multiplying such capital
employed by a weighted average cost of capital rate or required return.
The EVA Incentive Plan is composed of the following components: (i) the
Target Bonus, to be established by the Committee for each participant at the
beginning of each Plan Period; (ii) an Actual EVA which is the economic value
added performance for a given year of the company or an Operating Unit to which
the participant is assigned and is based on actual performance, (iii) a Target
EVA, which is automatically set each year based on the average of the prior
year's Actual EVA and the prior year's Target EVA plus a fixed dollar amount
known as the Expected Improvement; and (iv) a Performance Multiple Factor which
is also expressed as a fixed dollar amount and is used to determine the extent
to which a difference between the Actual EVA and the Target EVA impacts the
actual bonus awarded the participants. The Performance Multiple Factor is fixed
each year and reflects the historical volatility of the company's business. The
plan also utilizes a Bonus Multiple, which is made up of the sum of the
Performance Multiple (the difference between the Actual EVA and the Target EVA
divided by the Performance Multiple Factor) and the Target Multiple (fixed at
1). The Initial Declared Bonus is calculated by multiplying the Target Bonus by
the Bonus Multiple. In the case of some participants, such amount is divided
into two parts: the Direct Portion and the Individual Portion. The Individual
Portion is multiplied by an Individual Performance Factor ("IPF") ranging from
0-150%. The IPF for each participant depends on the achievement by that
participant of his stated personal key business objectives.
For the Executive Officer Group, the Final Declared Bonus is deposited into
a participant's Bonus Bank which is then added to the Beginning Bonus Bank
Balance to calculate the Available Bonus Bank Balance. Bonus payments are then
made to the Executive Officer Group participant from the Available Bonus Bank
Balance. During years one through four a participant is included in the EVA
Incentive Plan, the payout schedule will be: 67%, 50%, 40% and 33%,
respectively, and will remain 33% after year four. A Final Declared Bonus may be
negative when Target EVA is not attained. If negative declarations continue, a
participant's Bonus Bank will have a negative balance. This does not result in a
cash cost to the participant, but the participant will not be entitled to a
bonus until the Bonus Bank again has a positive
23
<PAGE> 25
balance. Upon retirement, death or termination without Cause, the Bonus Bank
Balance will be paid to the participant or his estate, as applicable.
The following is an example calculation of a bonus for a hypothetical
associate assuming an Actual EVA of $200,000,000, a Target EVA of $160,000,000,
a Performance Multiple Factor of $80,000,000 and a Target Bonus of $10,000.
Seventy percent (70%) of the bonus is based upon total company results (the
Direct Portion) and thirty percent (30%) upon achievement of individual key
business objectives (the Individual Portion) which is affected by an Individual
Performance Factor of 110%:
EVA CALCULATION
Actual EVA ($200,000,000) - Target EVA ($160,000,000) = $40,000,000 /
Performance Multiple Factor ($80,000,000) = .50 (the Performance Multiple).
The Performance Multiple (.50) + the Target Multiple (1.00) = the Bonus Multiple
(1.50).
The Target Bonus ($10,000) X the Bonus Multiple (1.50) = $15,000 (the Initial
Declared Bonus).
<TABLE>
<CAPTION>
BONUS CALCULATION
----------------------------------
DIRECT INDIVIDUAL TOTAL
------- ---------- -------
<S> <C> <C> <C>
Portion.................................................. 70% 30% 100%
Initial Declared Bonus................................... $10,500 $4,500 $15,000
Individual Performance Factor (IPF)...................... 110%
Final Declared Bonus..................................... $10,500 $4,950 $15,450
</TABLE>
BONUS BANK CALCULATION*
<TABLE>
<CAPTION>
AMOUNT
------------------------
<S> <C>
Beginning Bonus Bank Balance $0
+ Final Declared Bonus =...................................... $15,450 (Available
Bonus Bank Balance)
Available Bonus Bank Balance
X Payout Percentage (67%) =................................... $10,352 (Bonus Bank
Payout)
Available Bonus Bank Balance ($15,450) -- Bonus Bank Payout ($10,352) =
Ending Bonus Bank Balance ($5,098)
</TABLE>
- ---------------
*Applicable only to the Executive Officer Group
24
<PAGE> 26
THE COMMITTEE
The EVA Incentive Plan will be administered by the Committee composed of
not less than three members of the board of directors. No member of the
Committee will be an associate of the company or eligible to receive bonuses
under the plan. The Committee is authorized and has complete discretion to
formulate policies and to establish rules and regulations for the administration
of the EVA Incentive Plan and to set or establish the Target Bonus, the Target
EVA, the Expected Improvement and the Performance Multiple Factor. Final
Declared Bonus payments under the EVA Incentive Plan will only be made with the
approval of the Committee whose decision is to be made on or before March 15 of
the year subsequent to each Plan Period. The Committee has the discretion to
authorize a Gross-Up Payment to cover any excise tax, interest or penalties
imposed under the Code with respect to payments made under the plan. The
Committee can reduce or eliminate the payment of any bonus under the EVA
Incentive Plan. The Committee cannot increase the amount of any Final Declared
Bonus.
PARTICIPANTS
Other than the current 25 participants, it is impossible at this time to
determine who among the eligible associates may be selected to be participants
in the EVA Incentive Plan. It is expected, however, that these determinations
will be made on the basis of the associate's responsibilities and present and
potential contribution to the success of the company and its subsidiaries as
indicated by the Committee's evaluation of such associate's position. Among
those who may qualify as recipients of bonuses under the EVA Incentive Plan will
be directors who are officers of the company, officers and other key associates
of the company and its subsidiaries who occupy executive, administrative,
professional and technical positions. The only current nominee for election as a
director who will be eligible to participate in the EVA Incentive Plan is Robert
E. Stauth. The EVA Incentive Plan will only cover executive officers and other
corporate officers (25 participants) for 1995. The company intends to expand the
EVA Incentive Plan to cover approximately 1225 additional associates in 1996 and
future years, however, only approximately 215 (including the current 25
participants), the Executive Officer Group, will participate in the Bonus Bank
feature of the plan and the remaining approximately 1035 participants, the
Non-Executive Officer Group, will be paid 100% of any Final Declared Bonus on an
annual basis.
25
<PAGE> 27
NEW PLAN BENEFITS
The following table sets forth the bonus amounts to be received by named
executive officers, other than Mr. Stuard, and the other specified groups for
the fiscal year ended December 30, 1995, assuming the EVA Incentive Plan is
approved by the shareholders. Since Actual EVA is not yet determinable for
fiscal 1995, all amounts have been calculated assuming (i) Target EVA (adopted
by the Committee on March 1, 1995 for the 25 executive and other corporate
officers to be covered in 1995) equals Actual EVA and (ii) where applicable,
that the Individual Performance Factor is 100%:
<TABLE>
<CAPTION>
EVA INCENTIVE PLAN
NAME AND POSITION DOLLAR VALUE($)(1)
- ----------------------------------------------------------------------- ------------------
<S> <C>
Robert E. Stauth....................................................... 393,819
Chairman, President and Chief Executive Officer
Gerald G. Austin....................................................... 164,619
Executive Vice President Operations
E. Stephen Davis....................................................... 140,700
Executive Vice President Scrivner Group
Thomas L. Zaricki...................................................... 117,133
Senior Vice President Retail Operations
Glenn E. Mealman....................................................... 89,016
Executive Vice President National Accounts
Executive Group(14).................................................... 1,568,314
Non-Executive Director Group........................................... -0-(2)
Non-Executive Officer Employee Group(11)............................... 424,938
</TABLE>
- ---------------
(1) Amounts shown reflect 67% of the Final Declared Bonus since the remainder is
credited to the participant's Bonus Bank.
(2) Non-executive directors are not eligible to participate in the EVA Incentive
Plan.
BUSINESS CRITERIA
The amount of bonus to be paid to participants under the EVA Incentive Plan
will be dependent upon the increase in the Actual EVA results realized by the
company and/or by the Operating Unit for which the associate performs services
and upon the participant's individual performance in the attainment of certain
key business objectives.
CHANGE OF CONTROL
In the event there has been a Change of Control of the company, the
Committee, in its sole discretion, may (i) accelerate the vesting and payment of
all Available Bonus Bank Balances and the pro-rata amount of the bonus for the
year in which the Change of Control occurs, provided, however, no negative
amounts will be applied to determine the final amount
26
<PAGE> 28
of the Bonus Bank payments or (ii) determine that a payment in lieu of such
amounts shall be made.
EFFECTIVE DATE
The effective date of the EVA Incentive Plan is January 1, 1995, upon
approval of the shareholders at this annual meeting.
AMENDMENTS
The EVA Incentive Plan may be amended, suspended or terminated at any time
at the sole discretion of the board of directors of the company. The Committee
may revise the various rates and percentages as provided in the plan from time
to time with respect to any future year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE ECONOMIC VALUE ADDED INCENTIVE BONUS PLAN FOR FLEMING COMPANIES,
INC. AND ITS SUBSIDIARIES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY ON THEIR PROXIES A CONTRARY
CHOICE.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors and executive officers, and persons who own more than ten percent of
common stock, to file with the Securities and Exchange Commission and the New
York Stock Exchange initial reports of beneficial ownership and reports of
changes in beneficial ownership of common stock of the company. Such persons are
also required by applicable regulations 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 to be filed, during 1994 all
Section 16(a) filing requirements were complied with except for one late filing
by Mark Batenic, a senior vice president of the company.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the audit and finance committee, the board of
directors has reappointed Deloitte & Touche LLP as independent auditors for 1995
and is requesting
27
<PAGE> 29
ratification by the shareholders. Deloitte & Touche LLP has audited the
consolidated financial statements since 1967.
Services performed by Deloitte & Touche LLP for the 1994 fiscal year
included, among others, the audit of annual financial statements and
consultations concerning various tax and accounting matters. Representatives of
Deloitte & Touche LLP will attend the meeting, have the opportunity to make a
statement if they so desire, and be available to answer questions.
Ratification of the appointment of independent auditors requires the
affirmative vote by the holders of a majority of the stock having voting power
present at the meeting. The board of directors unanimously recommends a vote FOR
the ratification of the appointment of Deloitte & Touche LLP.
SHAREHOLDER PROPOSALS
Any proposals of shareholders intended to be presented at the 1996 annual
meeting must be received not later than November 24, 1995, to be considered for
inclusion in the proxy statement and form of proxy relating to the meeting. No
shareholder proposals were received for inclusion in this proxy statement.
OTHER BUSINESS
The board of directors knows of no business which will be presented for
action at the meeting other than that described in the notice of annual meeting.
If other matters come before the meeting, the proxies will be voted according to
the judgment of the persons named on the proxy card.
It is important that the proxies be returned promptly. Therefore,
shareholders who do not expect to attend the annual meeting in person are
requested to complete and return the proxy card as soon as possible.
By Order of the Board of Directors
DAVID R. ALMOND
Senior Vice President
General Counsel and Secretary
28
<PAGE> 30
EXHIBIT A
ECONOMIC VALUE ADDED
INCENTIVE BONUS PLAN FOR FLEMING COMPANIES, INC.
AND ITS SUBSIDIARIES
Fleming Companies, Inc., an Oklahoma corporation, hereby adopts the
Economic Value Added Incentive Bonus Plan for Fleming Companies, Inc. and Its
Subsidiaries upon the following terms and conditions:
ARTICLE I
NAME AND PURPOSE OF PLAN
1.01 Name of the Plan. This Plan shall be known as the Economic Value Added
Incentive Bonus Plan For Fleming Companies, Inc. and Its Subsidiaries.
1.02 Purpose of the Plan. The purpose of the Plan is to align the interest
of Associates in the Plan with shareholder's interests, to motivate
outstanding performance and to reward Associates for significant value
creation. The plan will provide a system of incentive compensation
which will promote the maximization of shareholder value over the long
term. In order to better align eligible Associate incentives with
shareholder interests, incentive compensation will reward the creation
of value as defined in the Plan. The Plan will tie incentive
compensation to Economic Value Added ("EVA") and, thereby, reward
eligible Associates for creating value but will not reward eligible
Associates for allowing value to erode. EVA will be used as the
performance measure of value creation. EVA reflects the benefits and
costs of capital employment. Associates create value when they employ
capital in an endeavor that generates a return that exceeds the cost of
the capital employed. Associates erode value when they employ capital
in an endeavor that generates a return that is less than the cost of
capital employed. By imputing the cost of capital to the operating
profits generated by a business unit, EVA measures the total value
created (or eroded) by Associates.
ARTICLE II
DEFINITIONS
Unless the context provides a different meaning, the following terms shall
have the following meanings.
2.01 "Actual EVA" means Economic Value Added performance for a given fiscal
year of the Company and Plan Period based on actual performance.
A-1
<PAGE> 31
2.02 "Allocated Target Bonus" means for certain Participants that portion or
percentage of the Target Bonus allocated between the Company and/or the
Operating Unit(s).
2.03 "Available Bonus Bank Balance" means the sum of an amount equal to the
Beginning Bonus Bank Balance and the Final Declared Bonus.
2.04 "Associate" shall mean any person employed by the Company on the basis
of an employer-employee relationship who receives remuneration for
personal services rendered to the Company.
2.05 "Beginning Bonus Bank Balance" means the amount of money in a
Participant's Bonus Bank account on the first day of each Plan Period,
as determined under Section 3.09.
2.06 "Board" or "Board of Directors" means the duly elected and acting board
of directors of Fleming Companies, Inc., an Oklahoma corporation.
2.07 "Bonus Bank" means a Participant's bonus account into which a portion
of each year's bonus may be deposited for future payout.
2.08 "Bonus Bank Payout" means the amount that on an annual basis is paid to
the Participant.
2.09 "Bonus Multiple" is the sum of the Performance Multiple plus the Target
Multiple and represents the level of EVA performance for any given
bonus calculation. The Bonus Multiple is multiplied by the
Participant's Target Bonus to determine the Initial or Final Declared
Bonus, as the case may be.
2.10 "Capital" means the net investment employed in the operations of the
Company or an Operating Unit of the Company and is defined as (i)
indebtedness, lease obligations and stockholders' equity or (ii) assets
less non-interest-bearing liabilities.
2.11 "Capital Charge" means net capital employed by the Company or an
Operating Unit times weighted average Cost of Capital rate for the
Company or such Operating Unit.
2.12 "Cause" or termination for "Cause" of a Participant's employment by the
Company shall mean termination for one of the following reasons: (i)
the conviction of the Participant of a felony by a federal or state
court of competent jurisdiction; (ii) an act or acts of dishonesty
taken by the Participant and intended to result in personal enrichment
of the Participant at the expense of the Company; (iii) the
Participant's "willful" failure to follow a direct lawful written order
from his/her supervisor, within the reasonable scope of the
Participant's duties, which failure is not cured within 30 days; or
(iv) the Participant's failure to perform his/her specified duties and
responsibilities for a period of 45 days as determined by his/her
supervisor after a warning in writing.
A-2
<PAGE> 32
2.13 "Committee" means the compensation and organization committee
designated by the Board of Directors which committee shall administer
the Plan and make all decisions for the Board of Directors and the
Company related to the Plan.
2.14 "Company" means Fleming Companies, Inc., an Oklahoma corporation or its
successor, and such term shall include any Subsidiary.
2.15 "Cost of Capital" for either the Company or an Operating Unit means the
weighted average of the cost to the Company or the Operating Unit, as
the case may be, for borrowed money or lease obligations (including the
amount of capitalized operating leases) plus the equivalent cost of the
use of the amount of equity supplied by the shareholders, such cost
being for the business risk adjusted for the tax benefits of debt
financing.
2.16 "Direct Portion" means that portion of certain of the Participant's
Initial Declared Bonus fixed by the Committee attributable to the
attainment of EVA by the Company and, if applicable, the Participant's
Operating Unit and together with the Individual Portion constitutes the
Final Declared Bonus.
2.17 "Disability" means any Participant who shall be mentally or physically
disabled from properly or fully performing his/her duties and
responsibilities of employment with the Company for a period of 120
consecutive days, or 180 days, even though not consecutive, within any
360-day period, all as determined by the Committee in good faith and
supported by medical evidence.
2.18 "Economic Value Added" or "EVA" means the excess NOPAT that remains
after subtracting the Capital Charge, expressed as follows: EVA =
NOPAT -- Capital Charge.
2.19 "Ending Bonus Bank Balance" means the amount of money in a
Participant's Bonus Bank account as of the last day of each Plan
Period, after application of Section 3.09.
2.20 "Executive Officer Group" means a select group of key management
Associates who are highly compensated and who are members of the Board
and also officers of the Company, executive officers, other officers
and other Associates who occupy executive or administrative positions
within the Company.
2.21 "Expected Improvement" determined for the Company and each Operating
Unit means a dollar amount based on the expected performance of the
Company over several years and is tied to the share price of the
Company's stock. It does not vary from year to year unless there is a
significant change in the Capital employed.
2.22 "Final Declared Bonus" means the amount of the finally determined
Participant's bonus for a Plan Period calculated by multiplying the
Participant's Target Bonus by the Bonus Multiple unless the bonus
results from the application of the Individual Performance Factor. If
the Individual Performance Factor is applicable, then the
A-3
<PAGE> 33
Final Declared Bonus means the sum of the Direct Portion and the
Individual Portion of the Initial Declared Bonus after application of
the Individual Performance Factor. The Final Declared Bonus can be
positive or negative.
2.23 "Individual Performance Factor" means the component (ranging from
0-150%) by which the Individual Portion of the Participant's Initial
Declared Bonus is multiplied to determine the Individual Portion of the
Participant's Final Declared Bonus and is based upon the achievement of
stated key business objectives.
2.24 "Individual Portion" means that portion of certain of the Participant's
Initial Declared Bonus fixed by the Committee to which is applied the
Individual Performance Factor in order to reflect the achievement (or
failure to achieve) of stated key business objectives and together with
the Direct Portion constitutes the Final Declared Bonus.
2.25 "Initial Declared Bonus" means the amount of the initially determined
Participant's bonus for a Plan Period calculated by multiplying the
Participant's Target Bonus or, in respect to Participants whose bonuses
are divided between the Company and Operating Unit(s), their Allocated
Target Bonus by the Bonus Multiple. It is determined before the
allocation of the bonus between the Direct Portion and the Individual
Portion. The Initial Declared Bonus may be positive or negative.
2.26 "Net Operating Profit After Tax" or "NOPAT" means the after tax
operating earnings of the Company for the Plan Period in question
adjusted for non-operating activities.
2.27 "Non-Executive Officer Group" means a group of key Associates who
occupy administrative, professional and technical positions with the
Company.
2.28 "Operating Unit" means a business segment or unit of the Company
identified by the Committee for the purpose of calculating EVA and EVA
based bonus awards for certain Participants.
2.29 "Participant" means any Associate of the Company designated by the
Committee as a Participant in the Plan with respect to any Plan Period,
more particularly defined in Section 3.01 below.
2.30 "Payout Percentage (%)" has the meaning set forth in Section 3.09.
2.31 "Performance Multiple" is the factor used to determine the Bonus
Multiple and is calculated by subtracting the Target EVA from the
Actual EVA and dividing the result by the Performance Multiple Factor
to obtain the Performance Multiple.
2.32 "Performance Multiple Factor" means the component which determines the
degree to which a difference between Actual EVA and Target EVA impacts
the Initial Declared Bonus. It is expressed as a fixed dollar amount
and reflects the historical volatility of the Company's business.
A-4
<PAGE> 34
2.33 "Performance Weighting" means the percentage of an Associate's bonus
which is based on Operating Unit(s) or total Company performance.
2.34 "Plan" means the Economic Value Added Incentive Bonus Plan for Fleming
Companies, Inc. and Its Subsidiaries.
2.35 "Plan Period" means any annual period corresponding to the Company's
fiscal year with respect to which EVA is calculated for the Company
and/or the Operating Unit(s) for purposes of calculating bonus awards
to any Participant under the Plan.
2.36 "Subsidiary" shall mean any corporation which is consolidated with the
Company under generally accepted accounting principles.
2.37 "Target Bonus" means the potential bonus set annually by the Committee
for each Participant. The Initial Declared Bonus equals the Target
Bonus when Target EVA is achieved.
2.38 "Target EVA" means the average of the prior year's Actual EVA and the
prior year's Target EVA, plus the Expected Improvement.
2.39 "Target Multiple" means a factor used to determine the Bonus Multiple
which is always 1.0.
ARTICLE III
THE PLAN
3.01 Plan Participation. The Plan shall apply to Participants selected by
the Committee from two groups of Associates (i) the Executive Officer
Group and (ii) the Non-Executive Officer Group. Only the Executive
Officer Group shall be eligible to participate in the Bonus Bank
portion (Section 3.09) of the Plan.
3.02 Target Bonus. Target Bonuses for each Participant will be determined
annually by the Committee prior to March 15th for the current Plan
Period.
3.03 Target EVA. The Target EVA for Plan Period 1 of the Plan for each
Participant and each year thereafter will be equal to the average of
the prior year's Actual EVA and prior years Target EVA plus the
Expected Improvement.
3.04 Expected Improvement. The Expected Improvement is a factor that is used
to assure that a minimum level of improvement is achieved in order to
earn bonus awards. The Expected Improvement is fixed by the Committee
each Plan Period for the total Company and each Operating Unit and is
added to the average of the prior year's Actual EVA and prior year's
Target EVA to calculate the current year's Target EVA. Expected
Improvement for each Operating Unit is determined based on the
Operating Unit's historical and prospective EVA performance as well as
capital employed. The dollar amount does not change from year to year
unless there is a significant change in the Capital employed.
A-5
<PAGE> 35
3.05 Performance Multiple Factor. The Performance Multiple Factor is the EVA
component which determines the degree to which a difference between
Actual EVA and Target EVA impacts the Final Declared Bonus. The
Performance Multiple Factor is a dollar amount fixed by the Committee
each Plan Period for the total Company and each Operating Unit to
reflect the historical volatility of the business.
3.06 Bonus Multiple Calculation. The Target Bonus (or Allocated Target Bonus
for those Participants whose bonuses are calculated based upon
Operating Unit operations, as well as the total Company) is multiplied
by the Bonus Multiple to calculate the Initial Declared Bonus.
3.07 Performance Weighting. For each Plan Period the Committee will
determine for each Participant, if applicable, the Performance
Weighting percentages for the Company and the applicable Operating
Unit.
3.08 Direct Portion and Individual Portion. Where applicable, bonuses will
be based on both a Direct Portion and an Individual Portion each
expressed as percentages of the Initial Declared Bonus. The Direct
Portion is the amount of the Initial Declared Bonus that becomes a
portion of the Final Declared Bonus based on actual EVA performance.
The Individual Portion will be calculated as the non-direct portion of
the Initial Declared Bonus (Initial Declared Bonus -- Direct Portion).
In order to determine the Individual Portion of the Final Declared
Bonus, the Individual Portion of the Initial Declared Bonus is
multiplied by the Participant's Individual Performance Factor. The
Individual Performance Factor range is 0-150%. The sum of Direct
Portion of the Final Declared Bonus and Individual Portion of the Final
Declared Bonus is the Final Declared Bonus. The Committee will
determine annually for each Participant, if applicable, the Direct
Portion Percentage and the Individual Portion Percentage of the Initial
Declared Bonus.
3.09 Bonus Bank. The Bonus Bank exists to encourage Participants in the
Executive Officer Group to focus on long-term Company and/or Operating
Unit(s) performance by placing a component or portion of each year's
Final Declared Bonus at risk. Each Executive Officer Group Participant,
upon becoming a Participant in the Plan, will begin with a zero balance
in his/her Bonus Bank. The Bonus Bank will operate as follows:
<TABLE>
<C> <S>
-- The Final Declared Bonuses plus an amount equal to the Beginning
Bonus Bank Balance will equal the Available Bonus Bank Balance.
-- Bonus Bank Payout will be determined by multiplying the Available
Bonus Bank Balance for each Executive Officer Group Participant by
the Payout Percentage (%) for the indicated Plan Period.
</TABLE>
A-6
<PAGE> 36
<TABLE>
<CAPTION>
PLAN PAYOUT
PERIOD PERCENTAGE(%)
-------------------------------------------------- -------------
<S> <C>
Plan Period 1..................................... 67
Plan Period 2..................................... 50
Plan Period 3..................................... 40
Plan Period 4 & thereafter........................ 33
</TABLE>
<TABLE>
<C> <S>
-- The Bonus Bank Payout shall first be paid out of any positive Final
Declared Bonus earned for the applicable Plan Period.
-- To the extent, if any, that a positive Final Declared Bonus exceeds
the Bonus Bank Payout, such excess shall be credited to the
Beginning Bonus Bank Balance.
-- In the event that the Bonus Bank Payout exceeds the Final Declared
Bonus, the amount by which the Bonus Bank Payout exceeds the
greater of (i) the Final Declared Bonus or (ii) zero shall be paid
from and reduce the Beginning Bonus Bank Balance.
-- The Beginning Bonus Bank Balance shall be reduced by the amount of
any negative Final Declared Bonus.
-- The Beginning Bonus Bank Balance after adjustment under the
preceding three paragraphs will equal the Ending Bonus Bank
Balance. The Ending Bonus Bank Balance will become the Beginning
Bonus Bank Balance for the following year's EVA bonus calculation.
</TABLE>
3.10 Working Plan Example -- Executive Officer Group. The following
represents an example of the mechanics of the Plan. The assumptions for
the example are as follows:
An Executive Officer Group Participant has his/her bonus based Twenty-Five
Percent (25%) on total Company results and Seventy-Five Percent (75%) on
Operating Unit results. The Individual Portion is determined to be Thirty
Percent (30%) of the Initial Declared Bonus with an Individual Performance
Factor of One Hundred Ten Percent (110%). The Target Bonus is $10,000. (This
example is illustrative only as the Performance Multiple Factor, the Performance
Weighting ratios, the Direct and Individual Portions of the Initial Declared
Bonus and the Individual Performance Factor will not be the same for each
Participant and will not be factors in determining bonuses for some
Participants.)
A-7
<PAGE> 37
THE EVA BONUS CALCULATION
<TABLE>
<CAPTION>
OPERATING
THE COMPANY UNIT
------------ ---------
<C> <S> <C> <C> <C>
Actual EVA $200,000,000 $2,100,000
- Target EVA $160,000,000 $2,000,000
------------------------------ ------------ ----------
= Actual EVA - Target EVA $ 40,000,000 $ 100,000
/ Performance Multiple Factor $ 80,000,000 $ 500,000
------------------------------ ------------ ----------
= Performance Multiple 0.50x 0.20x
+ Target Multiple 1.00x 1.00x
------------------------------ ------------ ----------
= Bonus Multiple 1.50x 1.20x
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPERATING
THE COMPANY UNIT TOTAL
------------ --------- --------
<C> <S> <C> <C> <C>
Performance Weighting 25% 75% 100%
Allocated Target Bonus $ 2,500 $ 7,500 $ 10,000
x Bonus Multiple 1.50x 1.20x
------------------------------ ------------ ---------
= Initial Declared Bonus $ 3,750 $ 9,000 $ 12,750
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIRECT INDIVIDUAL TOTAL
------------ --------- --------
<C> <S> <C> <C> <C>
Portion 70% 30% 100%
Initial Declared Bonus $ 8,925 $ 3,825 $ 12,750
Individual Performance Factor N/A 110%
Final Declared Bonus $ 8,925 $ 4,208 $ 13,133
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C> <C> <C>
Bonus Bank*
Beginning Bonus Bank Balance $ 0
+ Final Declared Bonus $ 13,133
------------------------------ ---------
= Available Bonus Bank Balance $ 13,133
x Payout Percentage 67% (first year)
------------------------------ ---------
= BONUS BANK PAYOUT $ 8,799
------------------------------ ---------
Ending Bonus Bank Balance $ 4,334
*Applicable only to the Executive Officer Group.
</TABLE>
A-8
<PAGE> 38
3.11 Non-Executive Officer Group Participants. The Plan as described in this
Article III, with the exception of Section 3.09, shall be applicable to
Participants in the Non-Executive Group. The Bonus Bank as provided in
Section 3.09 shall not be applicable to the Non-Executive Officer
Group.
ARTICLE IV
PLAN ADMINISTRATION
4.01 New Associates/Promotions. New Associates who qualify for the Plan and
Associates promoted into the Plan will participate on a pro rata basis
in the year of entry. The Bonus Bank Payout schedule for these
Associates will be as established as set forth in Section 3.09 of
this Plan.
4.02 Transfers. For the year of the transfer of a Participant from one
Operating Unit to another Operating Unit, the amount of the Target
Bonus shall be divided between Operating Units pro rata as to the
Company's accounting periods. All other components applicable to the
computation of the transferring Participant's Final Declared Bonus for
the year of transfer shall be applied to the portion of the Target
Bonus allocated to each Operating Unit.
4.03 Voluntary Resignations. Voluntary resignations or terminations will
result in the forfeiture of the balance in the Participant's Bonus
Bank. The Bonus Bank Payout for the immediately preceding year shall
also be forfeited unless the Bonus Bank Payouts for such year for all
Plan Participants, including such terminating Participant, have been
approved for payment by the Committee.
4.04 Retirement. A Participant who retires from the Company under normal
rules and procedures established by the Company and has a positive Bank
Balance shall receive full payment of his/her Bonus Bank including the
pro rata portion of any positive Final Declared Bonus and Bonus Bank
Payout attributable to such Participant under the Plan computed on a
pro rata basis for the year in which he/she retires subject to the
provisions of Section 6.04 of this Plan; provided, however, that in
determining the amount of the Final Declared Bonus for the year of
retirement, no negative amounts will be applied to determine the final
amount of the Bonus Bank to be paid to such retiring Participant. Such
payment may be made over one or two years.
4.05 Termination With Cause. Termination with Cause will result in the
forfeiture of the Participant's Bonus Bank. The Bonus Bank Payout for
the immediately preceding year shall also be forfeited unless the Bonus
Bank Payouts for such year for all Plan Participants, including such
terminating Participant, have been approved for payment by the
Committee.
4.06 Termination Without Cause. A Participant who is terminated without
Cause and who has a positive Bank Balance in his/her Bonus Bank shall
receive full payment of
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<PAGE> 39
his/her Bonus Bank at the regular time for making bonus payments with
respect to the year of such termination, including the pro rata portion
of any positive Final Declared Bonus and Bonus Bank Payout attributable
to such Participant under the Plan computed on a pro rata basis for the
year in which termination occurs, subject to the provisions of Section
6.04 of this Plan; provided, however, that in determining the amount of
the Final Declared Bonus for the year of termination, no negative
amounts will be applied to determine the final amount of the Bonus Bank
to be paid to such terminating Participant.
4.07 Death/Disability. A Participant who dies or suffers Disability while in
employment with the Company shall receive full payment of his/her Bank
Balance and pro-rata bonus for the year in which he/she dies or becomes
disabled, including the pro rata portion of any positive Final Declared
Bonus and Bonus Bank Payout attributable to such Participant under the
Plan; provided, however, no negative amounts will be applied to
determine the final amount of the Bonus Bank to be paid to such
disabled Participant or the estate of such deceased Participant. Such
payment will be made at the regular time for making bonus payments in
respect to the year of such death or Disability.
ARTICLE V
GENERAL PROVISIONS
5.01 Withholding of Taxes. The Company shall have the right to withhold the
amount of taxes, which in the determination of the Company, are
required to be withheld under law with respect to any amount due or
paid under the Plan.
5.02 Expenses. All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by the Company.
5.03 No Prior Right or Offer. Except and until expressly granted pursuant to
the Plan, nothing in the Plan shall be deemed to give any Associate any
contractual or other right to participate in the benefits of the Plan.
No award to any such Participant in any Plan Period shall be deemed to
create a right to receive any award or to participate in the benefits
of the Plan in any subsequent Plan Period.
5.04 Claims for Benefits. In the event a Participant (a "claimant") desires
to make a claim with respect to any of the benefits provided hereunder,
the claimant shall submit evidence satisfactory to the Committee of
facts establishing his entitlement to a payment under the Plan. Any
claim with respect to any of the benefits provided under the Plan shall
be made in writing within ninety (90) days of the event which the
claimant asserts entitles him to benefits. Failure by the claimant to
submit his claim within such ninety (90) day period shall bar the
claimant from any claim for benefits under the Plan.
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5.05 Appeal of Decisions. In the event that a claim which is made by a
claimant is wholly or partially denied, the claimant will receive from
the Committee a written explanation of the reason for denial and the
claimant or his duly authorized representative may appeal the denial of
the claim to the Committee at any time within ninety (90) days after
the receipt by the claimant of written notice from the Committee of the
denial of the claim. In connection therewith, the claimant or his duly
authorized representative may request a review of the denied claim; may
review pertinent documents; and may submit issues and comments in
writing. Upon receipt of an appeal, the Committee shall make a decision
with respect to the appeal and, not later than sixty (60) days after
receipt of a request for review, shall furnish the claimant with a
decision in writing, including the specific reasons for the decision
written in a manner calculated to be understood by the claimant, as
well as specific reference to the pertinent provisions of the Plan upon
which the decision is based. In reaching its decision, the Committee
shall have complete discretionary authority to determine all questions
arising in the interpretation and administration of the Plan, and to
construe the terms of the Plan, including any doubtful or disputed
terms and the eligibility of a Participant for benefits.
5.06 Action Taken in Good Faith; Indemnification. The Committee may employ
attorneys, consultants, accountants or other persons and the
Committee, the Company's directors and officers shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon all Associates
who have received, or may be entitled to receive awards, the Company
and all other interested parties. No member of the Committee, nor any
officer, director, Associate or representative of the Company, or any
of its affiliates acting on behalf of or in conjunction with the
Committee, shall be personally liable for any action, determination,
or interpretation, whether of commission or omission, taken or made
with respect to the Plan, except in circumstances involving actual bad
faith or willful misconduct. In addition to such other rights of
indemnification as they may have as members of the Board of Directors,
as members of the Committee or as officers or Associates of the
Company, all members of the Committee and any officer, Associate or
representative of the Company acting on their behalf shall be fully
indemnified and protected by the Company with respect to any such
action, determination or interpretation against the reasonable
expenses, including attorneys' fees actually and necessarily incurred,
in connection with the defense of any civil or criminal action, suit
or proceeding, or in connection with any appeal therein, to which they
or any of them may be a party by reason of any action taken or failure
to act under or in connection with the Plan or an award granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by Company) or paid by them in satisfaction of a judgment in
any action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that the
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actions or omissions of the persons seeking indemnification under this
Section 5.06 constituted bad faith or willful misconduct and provided
that such person claiming indemnification shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the
same. Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or
proceeding if such person claiming indemnification is entitled to be
indemnified as provided in this Section.
5.07 Rights Personal to Associate. Any rights provided to an Associate under
the Plan shall be personal to such Associate, shall not be transferable
(except by will or pursuant to the laws of descent or distribution),
and shall be exercisable, during his/her lifetime, only by such
Associate.
5.08 Distributions upon Termination of Plan. Upon termination of the Plan by
the Board of Directors, which the Board of Directors has reserved the
right to do at any time, all of the Participants shall have the right
to receive the benefits of a Participant who has been terminated
without Cause as provided in Section 4.06 of this Plan.
5.09 Suspension of the Plan. In the event of a suspension of the Plan by the
Board of Directors, which the Board of Directors has reserved the right
to do at any time, no awards under the Plan for the Plan Period during
which such suspension occurs shall affect the calculation of awards for
any subsequent period in which the Plan is continued.
ARTICLE VI
LIMITATIONS
6.01 No Continued Employment. Neither the establishment of the Plan nor the
grant of an award under the Plan shall be deemed to constitute an
express or implied contract of employment of any Participant for any
period of time or in any way abridge the rights of the Company to
determine the terms and conditions of employment or to terminate the
employment of any Associate with or without Cause at any time.
6.02 No Vested Rights. Except as expressly provided herein, no Associate or
other person shall have any claim of right (legal, equitable, or
otherwise) to any award, allocation, or distribution or any right,
title, or vested interest in any amounts in his/her Bonus Bank and no
officer or employee of the Company or any other person shall have any
authority to make representations or agreements to the contrary. No
interest conferred herein to a Participant shall be assignable or
subject to claim by a Participant's creditors.
6.03 Not Part of Other Benefits. The benefits provided in this Plan shall
not be deemed a part of any other benefit provided by the Company to
its Associates. The Company
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assumes and shall have no obligation to Participants except as
expressly provided in the Plan. This is a complete statement of the
terms and conditions of the Plan.
6.04 Approval By The Committee. On or before March 15th of the year
subsequent to each Plan Period, the Committee shall review the Final
Declared Bonuses of each Participant for the preceding Plan Period and
approve or reject such bonuses. In addition, the Committee has the
right to reduce or eliminate the amount of the Final Declared Bonus of
any Participant during any Plan Period in the event the Committee
determines in its sole discretion such amount to be excessive or is not
warranted. The Committee cannot, however, increase Final Declared
Bonuses for any of the Participants.
6.05 Other Plans. Nothing contained herein shall limit the Company's power
to grant bonuses to Associates of the Company, whether or not they are
Participants in this Plan.
ARTICLE VII
ACCELERATION ON CHANGE OF CONTROL
7.01 Change of Control. In the event that there has been a Change of Control
(as defined hereafter), the Committee, in its sole discretion, may (i)
accelerate the vesting and payment of all Bonus Banks and the pro-rata
amount of the bonus for the year in which the Change of Control occurs,
provided, however, no negative amounts will be applied to determine the
final amount of the Bonus Banks to be paid to such Participants or (ii)
determine that a payment in lieu of such amounts shall be made.
Anything in this Plan to the contrary notwithstanding, if a
Participant's employment with the Company is terminated prior to the
date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Plan as to such
terminated Participant, a Change of Control shall mean the date
immediately prior to the date of such termination. For the purpose of
this Plan, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more (the "Triggering
Percentage") of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, in the event the "Incumbent
Board" (as such term is hereinafter defined) pursuant to
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Section 7 of the Rights Agreement between the Company and the
Liberty National Bank and Trust Company of Oklahoma City dated as
of July 7, 1986 together with any additional amendments thereto
(collectively the "Rights Agreement") lowers the threshold amounts
set forth in Section 1(a) or 3(a) of the Rights Agreement, the
Triggering Percentage shall be automatically reduced to equal the
threshold set pursuant to Section 7 of the Rights Agreement; and
provided, further, however, that the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company; (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, (iv) any acquisition previously
approved by the Incumbent Board, (v) any acquisition approved by
the Incumbent Board within five (5) business days after the
Company has notice of such acquisition, or (vi) any acquisition by
any corporation pursuant to a transaction which complies with
clauses (i), (ii), and (iii) of subsection (c) of this Section
7.01; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, appointment or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for purposes of this definition, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, share exchange, merger or consolidation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 70% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any
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employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior
to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination or
were elected, appointed or nominated by the Board; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or, (ii) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which
following such sale or other disposition, (A) more than 70% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) less than 20% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
any Person (excluding any employee benefit plan (or related trust)
of the Company or such corporation), except to the extent that
such Person owned 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities prior to the sale
or disposition, and (C) at least a majority of the members of the
board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such sale
or other disposition of assets of the Company or were elected,
appointed or nominated by the Board.
7.02 Certain Additional Payments by the Company.
(a) Anything in this Plan to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by
the Company to or for the benefit of the Participant (whether paid
or payable or distributed or distributa-
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ble pursuant to the terms of this Plan or otherwise, but
determined without regard to any additional payments required
under this Section 7.02) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any interest or penalties are
incurred by the Participant with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then,
the Committee may, in its sole discretion, authorize an additional
payment (a "Gross-Up Payment") to the Participant in an amount
such that after payment by the Participant of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Participant retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. In the event the Committee determines that Gross-Up
Payments shall be made to the Participants, the procedures set
forth in Section 7.02(b) through 7.02(d) shall apply.
(b) Subject to the provisions of Subsection 7.02(c) below, all
determinations required to be made under this Section 7.02,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte &
Touche LLP, Oklahoma City, Oklahoma or such other certified public
accounting firm as may be designated by the Participant (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Participant within 15
business days of the receipt of notice from the Participant that
there has been a Payment which would be subject to the Excise Tax,
or such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of Control,
the Participant shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7.02, shall be paid by the
Company to the Participant within five days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Participant, it shall furnish
the Participant with a written opinion that failure to report the
Excise Tax on the Participant's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments
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which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Subsection 7.02(c) and the Participant
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Participant.
(c) The Participant shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than ten business days after the Participant is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Participant shall not pay such claim prior to the
expiration of the 30-day period following the date on which he
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Participant in writing prior to
the expiration of such period that it desires to contest such
claim, the Participant shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Participant harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Subsection 7.02(c),
the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its
sole option, either direct the Participant to pay the tax claimed
and sue for a refund or contest the
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claim in any permissible manner, and the Participant agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Participant to
pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Participant, on an interest-free
basis and shall indemnify and hold the Participant harmless, on an
after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Participant with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Participant shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Participant of an amount advanced
by the Company pursuant to Subsection 7.02(c), the Participant
becomes entitled to receive any refund with respect to such claim,
the Participant shall (subject to the Company's complying with the
requirements of Subsection 7.02(c)) promptly pay to the Company
the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the
receipt by the Participant of an amount advanced by the Company
pursuant to Subsection 7.02(c), a determination is made that the
Participant shall not be entitled to any refund with respect to
such claim and the Company does not notify the Participant in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 Authority. Except as otherwise expressly provided herein, full power
and authority to interpret and administer this Plan shall be vested in
the Committee. The Committee may from time to time make such decisions
and adopt such rules and regulations for implementing the Plan as it
deems appropriate for any Participant under the Plan. Any decision
taken by the Committee arising out of or in connection with the
construction, administration, interpretation and effect of the Plan
shall be final, conclusive and binding upon all Participants and any
person claiming under or
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through them except only with respect to appeals of decisions with
respect to claims as provided in Section 5.05 of the Plan.
8.02 Notice. Any notice to be given pursuant to the provisions of the Plan
shall be in writing and directed to the appropriate recipient thereof
at his/her business address or office location.
8.03 Effective Date. This Plan shall be effective as of January 1, 1995.
8.04 Amendments. This Plan may be amended, suspended or terminated at any
time at the sole discretion of the Board of Directors of the Company.
The Committee may revise the various rates and percentages as provided
in the Plan from time to time with respect to any future Plan Period.
Notwithstanding the foregoing, after approval by the Committee pursuant
to Section 6.04 of this Plan, no change in the Plan shall be effective
to eliminate or diminish the distribution of any award that has been
allocated to the Bonus Bank of a Participant prior to the date of such
amendment, suspension or termination contrary to the terms of the Plan
in effect as of the date on which such award was made. Notice of any
amendment, suspension or termination of the Plan shall be given
promptly to each Participant.
8.05 Restrictions on Alienation. No right or benefit under this Plan shall
be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities, or torts of the person entitled to such
benefit. If any Participant under this Plan should become bankrupt or
attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge any right to a benefit under this Plan, then such right or
benefit shall, in the discretion of the Committee cease, and in such
event, the Committee may hold or apply the same or any part thereof for
the benefit of such Participant, his or her spouse, children, or other
dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion, may deem proper.
8.06 No Trust. No action under this Plan by the Company, its Board of
Directors or the Committee shall be construed as creating a trust,
escrow or other secured or segregated fund in favor of the Participant
or any other persons otherwise entitled to benefits hereunder. The
status of the Participant with respect to any liabilities assumed by
the Company hereunder shall be solely that of an unsecured creditor of
the Company who employs such Participant. Any asset acquired or held by
the Company in connection with liabilities assumed by it hereunder,
shall not be deemed to be held under any trust, escrow or other secured
or segregated fund for the benefit of the Participant or to be security
for the performance of the obligations of the Company or any
Subsidiary, but shall be, and remain a general, unpledged, unrestricted
asset of the Company at all times subject to the claims of general
creditors of the Company.
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<PAGE> 49
8.07 Withholding and Other Employment Taxes. The Company shall comply with
all federal and state laws and regulations respecting the withholding,
deposit and payment of any income or other taxes relating to any
payments made under this Plan.
8.08 Applicable Law. This Plan shall be construed in accordance with the
provisions of the laws of the State of Oklahoma.
8.09 Articles and Section Titles and Headings. The titles and headings at
the beginning of each Article and Section shall not be considered in
construing the meaning of any provisions in this Plan.
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<PAGE> 50
P R O X Y
FLEMING COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
Robert E. Stauth, Harry L. Winn, Jr. or David R. Almond is hereby constituted
the proxy of the undersigned with full power of substitution to represent and
vote all shares of stock of the undersigned at the annual meeting of
shareholders of Fleming Companies, Inc., or any adjournment thereof, to be held
May 3, 1995, at 10:00 a.m.
I. Election of Directors
Withhold authority to
For all nominees vote for all nominees
/___/ listed below /___/ listed below
Robert E. Stauth, Archie R. Dykes and John A. McMillan (for three-year
terms), and Guy A. Osborn (for two-year term)
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
________________________________
II. Approval of the Economic Value Added Incentive Bonus Plan for Fleming
Companies, Inc. and Its Subsidiaries
/___/ For /___/ Against /___/ Abstain
III. Ratification of Deloitte & Touche LLP as independent auditors for 1995.
/___/ For /___/ Against /___/ Abstain
IV. In their discretion, on such other business as may properly come before
the meeting or any adjournment thereof.
The shares represented by this proxy will be voted as specified,
or if no direction is indicated, they will be voted FOR the election of
the directors nominated by the board and FOR Items II and III. The board
of directors recommends a vote FOR each of these items.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
[LOGO] SEE REVERSE SIDE FOR MATTERS TO BE VOTED ON
I RESERVE THE RIGHT TO REVOKE THIS PROXY AT ANY TIME BEFORE THE EXERCISE
THEREOF.
----------------------------------
Signature
---------------------, 1995
----------------------------------
Please sign exactly as name
appears below, indicating
official position or
representative capacity.
FOR JOINT ACCOUNTS EACH OWNER SHOULD SIGN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
