<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
FLEMING COMPANIES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE> 2
<TABLE>
<S> <C>
6301 Waterford Boulevard
P.O. Box 26647
LOGO Oklahoma City, OK 73126-0647
</TABLE>
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NOTICE OF ANNUAL MEETING
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Fleming Companies, Inc. on Wednesday, April 30, 1997, at 10:00 a.m. at the
National Cowboy Hall of Fame, 1700 N.E. 63rd Street, Oklahoma City, Oklahoma.
The meeting is being held for the following purposes:
1. To elect two directors for terms expiring in 2000.
2. To consider and act upon a proposal to approve the Fleming Companies,
Inc. Associate Stock Purchase Plan, 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 1997.
4. To consider a shareholder proposal relating to the company's preferred
share purchase rights.
5. 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 3, 1997, are entitled to
notice of, and to vote at, the meeting. The company's annual report, including
financial statements for the year ended December 28, 1996, 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.
ADMISSION TO THE MEETING WILL BE BY TICKET ONLY. IF YOU ARE A SHAREHOLDER OF
RECORD AND PLAN TO ATTEND THE MEETING IN PERSON, PLEASE CHECK THE APPROPRIATE
BOX ON THE PROXY CARD AND AN ADMISSION TICKET WILL BE MAILED TO YOU. BENEFICIAL
OWNERS WHO PLAN TO ATTEND MAY OBTAIN ADMISSION TICKETS IN ADVANCE BY SENDING
WRITTEN REQUESTS, ALONG WITH PROOF OF OWNERSHIP, SUCH AS A BANK OR BROKERAGE
FIRM ACCOUNT STATEMENT, TO THE MANAGER, CORPORATE SECRETARY DEPARTMENT, FLEMING
COMPANIES, INC., 6301 WATERFORD BLVD., P.O. BOX 26647, OKLAHOMA CITY, OK 73118.
SHAREHOLDERS WHO DO NOT PRESENT ADMISSION TICKETS AT THE MEETING WILL BE
ADMITTED UPON VERIFICATION OF OWNERSHIP AT THE ADMISSIONS COUNTER.
By Order of the Board of Directors
DAVID R. ALMOND
Senior Vice President
General Counsel and Secretary
Oklahoma City, March 18, 1997
<PAGE> 3
LOGO
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PROXY STATEMENT
This proxy statement, which is being mailed to shareholders on or about
March 18, 1997, is furnished in connection with the solicitation of proxies by
the board of directors for use at the annual meeting of shareholders on April
30, 1997, 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 3,
1997, are entitled to vote. As of that date, 37,799,958 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 or in person without additional
compensation. The company has engaged Morrow & Co., Inc. to assist in the
solicitation of proxies for the annual meeting at an anticipated cost of
$10,000.
PROPOSAL NO. 1
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 July 1996 meeting, the board of directors decreased its number
from ten to nine by the reason of the death of James G. Harlow, Jr., and, at its
February 1997 meeting, the board of directors decreased its number from nine to
eight by reason of the retirement of Lawrence M. Jones (a director since 1972)
from the board. The current board is comprised of three classes of two, three
and three directors with terms expiring in 1997, 1998 and 1999.
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<PAGE> 4
The board of directors has nominated two persons for election as directors
to serve for three-year terms expiring in 2000 or until their successors are
elected and qualified. Each nominee is currently serving as a director and has
consented to serve for the new term.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE.
The persons named on the accompanying proxy card intend to vote in favor of
the two nominees listed below. Should either or both of these nominees become
unavailable for election, the proxy will be voted for substitute nominees. If
both nominees are elected, the board will be comprised of eight members, of
which six are nonmanagement directors, one is an officer of the company and one
is responsible for the operations of one of the company's retail chains.
The company's transfer agent will tabulate all votes received before the
date of the annual meeting. The company will appoint two inspectors of election
to receive the transfer agent's 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 Proposal No. 1,
the election of directors, requires a plurality of the votes cast at the
meeting. The company's bylaws also provide that matters such as Proposal No. 2,
adoption of the Associate Stock Ownership Plan, Proposal No. 3, the appointment
of the auditors and Proposal No. 4, approval of the shareholder proposal, shall
be decided by the holders of a majority of the stock having voting power present
in person or represented by proxy at the meeting. Therefore, an abstention will
have no effect on Proposal No. 1 and will have the same effect as a vote against
Proposal Nos. 2, 3 and 4. Broker non-votes will have no effect on the outcome of
any of the proposals.
3
<PAGE> 5
NOMINEES FOR DIRECTOR TERMS EXPIRING IN 2000
<TABLE>
<S> <C>
Nominee (age), year first became a director
[FLEMING DIR. CAROL B. HALLETT (59), 1993
PHOTO/HALLETT] President and chief executive officer of the Air Transport
Association of America, Washington, D.C. Prior to joining
the Air Transport Association in April 1995, Mrs. Hallett
served as senior government relations advisor with Collier,
Shannon, Rill & Scott from February 1993 to March 1995. From
November 1989 through January 1993, Mrs. Hallett served as
the Commissioner of the United States Customs Service. 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. and
the American Association of Exporters and Importers. She is
a trustee for the Junior Statesmen of America. Mrs. Hallett
also serves on the President's Cabinet of California
Polytechnic State University.
Member of the audit and finance committee and the corporate
governance committee.
[FLEMING DIR. GUY A. OSBORN (61), 1992
PHOTO/OSBORN] Chairman 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.
Chairman of the compensation and organization committee and
member of the nominating committee.
</TABLE>
4
<PAGE> 6
DIRECTORS WHOSE TERMS EXPIRE IN 1998
<TABLE>
<S> <C>
Name (age), year first became a director
[FLEMING DIR. ROBERT E. STAUTH (52), 1993
PHOTO/STAUTH] Chairman and chief executive officer. Mr. Stauth has been
associated with Fleming for a total of 24 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 relinquished the position of president to
William J. Dowd in July 1995. He serves as a member of the
board of directors of IGA, Inc.; the Food Distributors
International Association, for which he is vice chairman and
serves on the government relations and nominating
committees; the Food Marketing Institute, for which he
serves on the executive steering committee on Efficient
Consumer Response; the Oklahoma State Chamber of Commerce;
the State Fair Board of Oklahoma and the Oklahoma Business
Roundtable. Additionally, he is chairman of the Advisory
Board of the University of Oklahoma's College of Business
Administration.
[FLEMING DIR. ARCHIE R. DYKES (66), 1981
PHOTO/DYKES] Chairman and chief executive officer of Capital City
Holdings, Inc. (a venture capital organization). He is a
director of Whitman Corp., Bradford Capital Partners and the
Employment Corporation. 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 corporate governance committee.
[FLEMING DIR. JOHN A. McMILLAN (65), 1992
PHOTO/McMILLAN] Member of the board of directors and executive committee of
Nordstrom, Inc. (specialty store chain). Mr. McMillan has
been associated with Nordstrom for over 38 years. He served
as co-chairman of the board from 1991 to 1995 and as a
member of the office of chief executive officer from 1971 to
1995. 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.
</TABLE>
5
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<TABLE>
<S> <C>
Name (age), year first became a director
[FLEMING DIR. JACK W. BAKER (59), 1996
PHOTO/BAKER] Chief executive of Baker's Supermarkets, a family owned
independent retail chain acquired by Fleming in 1992. Mr.
Baker has been associated with Baker's for his entire
business career. He is president, chief executive officer
and an owner of PDM, Inc., an Omaha, Nebraska based real
estate development firm, and is chairman of the Board of
Governors of the Knights of Ak-Sar-Ben. He also served as
chairman of the Greater Omaha Chamber of Commerce in 1993
and vice chairman of the Food Marketing Institute from 1993
to 1995.
Member of the corporate governance committee and the
nominating committee.
[FLEMING DIR. EDWARD C. JOULLIAN III (67), 1984
PHOTO/JOULLIAN] Chairman and chief executive officer of Mustang Fuel Corp.
(energy development and services) since 1964. Mr. Joullian
is a director of The LTV Corp. and American Fidelity Co. He
is a trustee of the Colonial Williamsburg Foundation.
Chairman of the corporate governance committee and member of
the audit and finance committee.
[FLEMING DIR. HOWARD H. LEACH (66), 1974
PHOTO/LEACH] President of Leach McMicking & Co. (private investment
banking firm) and Leach Capital Corporation, chairman of
Hunter Fan Company (manufacturer of ceiling fans) and a
California agri-business corporation. He is a member and
past chairman of the Board of Regents of the University of
California and chairman of Foley Timber Company, Inc., an
owner and manager of timber property. He is also a director
of Frye Copysystems, Inc.
Chairman of the nominating committee and member of the
compensation and organization committee.
</TABLE>
THE BOARD OF DIRECTORS
Meetings of Directors. During the past year, the board of directors had six
regular and three special meetings, which included three telephone meetings.
Each director attended 75% or more of the aggregate of the total number of
meetings of the board and of committees of which he or she was a member except
for Mr. McMillan who, due in part to health reasons, was able to attend only six
of the nine board meetings and two of four meetings of committees of which he
was a member.
Compensation of Directors. During fiscal 1996, the company paid 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
6
<PAGE> 8
compensation of approximately $40,000 for each nonmanagement 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 directors 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. These units are not entitled to any voting
rights. 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. Effective as of
January 1, 1997, the Directors' Stock Equivalent Plan was amended and renamed
the Amended and Restated Directors' Compensation and Stock Equivalent Unit Plan.
Under the plan as amended, nonmanagement directors receive an annual retainer of
$16,000 plus the other fees described above. In addition, the amended plan
provides for annual awards of 1,000 stock equivalent units, upon the same terms
described above, to each nonmanagement director. Such amounts are expected to
yield annual compensation for 1997 of approximately $40,000 for each
nonmanagement director. Awards of 670 units and 1,000 units, respectively, were
made to each participant in the plan in 1996 and 1997.
COMMITTEES OF THE BOARD
The board of directors has four 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 the annual report of the auditors and
the auditors' observations 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 1996.
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
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<PAGE> 9
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 twice during 1996.
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. Copies of the "Guidelines for Board Composition" and
"Guidelines for Board Candidates", which the committee has used during the past
five years, are attached to this proxy statement as Exhibits B-1 and B-2,
respectively. The committee met twice during 1996. At its meeting in February
1997, the board renamed and reconstituted the "Nominating/Governance Committee"
as the "Nominating Committee", removing the corporate governance function from
its responsibilities. 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.
Corporate Governance Committee. The committee considers matters relating to
corporate governance and establishes standards which are reviewed annually for
governing the operation of the company by the board through management. The
committee will also annually assess board and board committee effectiveness. The
committee was created by the board at its meeting in February 1997 and,
consequently, did not meet in 1996. Attached to this proxy statement as Exhibit
C is a copy of the Corporate Governance Statement of Policy adopted by the board
of directors which outlines responsibilities and corporate governance standards
under which the board of directors will manage the company.
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<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The total number of shares of common stock and stock equivalent units
beneficially owned as of February 12, 1997 by each of the present directors,
nominees, the chief executive officer and each of the other four 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 OWNERSHIP(1)
------------------------------
COMMON STOCK
NAME OF BENEFICIAL OWNER STOCK EQUIVALENT UNITS(2)
------------------------ ------- -------------------
<S> <C> <C>
Robert E. Stauth........................ 87,793(3) --
Jack W. Baker........................... 485,718(4) --
Archie R. Dykes......................... 4,147(5) 3,064
Carol B. Hallett........................ 945 2,206
Edward C. Joullian III.................. 6,000(6) 3,064
Howard H. Leach......................... 12,200 3,064
John A. McMillan........................ 3,000 3,064
Guy A. Osborn........................... 1,000 3,064
William J. Dowd......................... 27,000(7) --
E. Stephen Davis........................ 60,456(8) --
Harry L. Winn, Jr....................... 20,300(9) --
Thomas L. Zaricki....................... 15,798(10) --
------- -------
All directors and executive officers as
a group (21).......................... 836,183(11) 17,526
======= =======
</TABLE>
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(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,
except for Mr. Baker whose ownership constitutes 1.28% of the total
outstanding shares. The shares listed for all directors and executive
officers as a group constitute 2.21% of the total shares outstanding.
(2) The stock equivalent units listed are owned as indicated by the
nonmanagement directors. They have been awarded under the Amended and
Restated Directors' Compensation and Stock Equivalent Unit Plan and are
payable only in cash when the director ceases to be a director of the
company. See "Compensation of Directors."
(3) Consists of 15,793 shares owned jointly by Mr. Stauth and his wife with whom
he shares voting and investment power, 48,000 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.
(4) Consists of 413,768 shares owned directly by Mr. Baker, 66,700 shares owned
jointly with his wife with whom he shares voting and investment power, 2,850
shares under options presently exercisable and 2,400 shares awarded under
the 1990 Stock Incentive Plan, subject to forfeiture, for which he has sole
voting power.
(5) Consists of 3,520 shares owned directly by Mr. Dykes for which he has sole
voting and investment power, and 627 shares owned jointly by Mr. Dykes and
his wife with whom he shares voting and investment power.
(6) 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.
(7) Consists of 11,000 shares under options presently exercisable and 16,000
shares awarded under the 1990 Stock Incentive Plan, subject to forfeiture,
for which Mr. Dowd has sole voting power.
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<PAGE> 11
(8) Consists of 7,206 shares owned directly by Mr. Davis for which he has sole
voting and investment power, 36,250 shares under options presently
exercisable, 9,000 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 1,100 shares owned directly by Mr. Winn for which he has sole
voting and investment power, 10,750 shares under options presently
exercisable, 350 shares owned by his wife and 100 shares owned by his son
as to which 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.
(10) Consists of 7,048 shares owned directly by Mr. Zaricki for which he has
sole voting and investment power, 4,750 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.
(11) Includes 460,414 shares for which directors and executive officers have
sole voting and investment power, 108,019 shares for which they share
voting and investment power with others, 174,150 shares under options
presently exercisable, and 93,600 shares awarded under the 1990 Stock
Incentive Plan, subject to forfeiture, for which they have sole voting
power.
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<PAGE> 12
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 18, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, New York 10153...................... 3,006,863(1) 7.95%
Goldman, Sachs & Co. and
The Goldman Sachs Group, L.P.
85 Broad Street
New York NY 10004............................. 2,766,294(2) 7.31%
Dodge & Cox
One Sansome St., 35th Floor
San Francisco, California 94104............... 2,298,900(3) 6.08%
Barclays Global Investors, N.A.
45 Fremont Street
San Francisco, California 94104............... 1,945,428(4) 5.14%
</TABLE>
- ---------------
(1) Based on a Schedule 13G dated January 30, 1997, Sanford C. Bernstein & Co.,
Inc. has shared power to vote 211,722 shares, sole power to vote 1,911,849
shares and sole power to dispose of all shares.
(2) Based on a Schedule 13G dated February 14, 1997, Goldman, Sachs & Co. and
The Goldman Sachs Group, L.P. share the power to vote and to dispose of
2,554,294 shares.
(3) Based on a Schedule 13G dated February 13, 1997, Dodge & Cox has shared
power to vote 257,100 shares, sole power to vote 2,041,800 shares and sole
power to dispose of all shares.
(4) Based on a Schedule 13G dated February 12, 1997, Barclays Global Investors,
N.A. has the sole power to vote 1,770,470 shares and the sole power to
dispose of 1,945,428 shares.
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<PAGE> 13
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 for services rendered in all capacities during
the fiscal years ended December 28, 1996, December 30, 1995 and December 31,
1994.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ------------------------
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 1996 600,567 -- 288 -- 60,000 --
Chairman and Chief 1995 588,462 -- 288 -- -- --
Executive Officer 1994 501,328 311,531 288 598,500 90,000 --
William J. Dowd(3) 1996 475,144 -- 288 -- 44,000 --
President and Chief 1995 223,781 -- 72 423,000 60,000 --
Operating Officer 1994 -- -- -- -- -- --
E. Stephen Davis 1996 301,140 -- 570 -- 30,000 --
Executive Vice
President 1995 283,846 -- 288 -- -- --
Operations 1994 242,135 118,013 288 199,500 30,000 --
Harry L. Winn, Jr.(4) 1996 294,576 -- 288 -- 30,000 --
Executive Vice
President 1995 291,846 -- 120 -- -- --
and Chief Financial 1994 177,692 85,206 -- 198,500 30,000 --
Officer
Thomas L. Zaricki 1996 257,345 -- 288 -- 10,000 --
Senior Vice President 1995 243,743 91,098 288 -- -- --
Retail Operations 1994 223,192 89,565 39,350 99,750 15,000 --
</TABLE>
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(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 amount shown opposite Mr. Zaricki's name in 1994 also reflects
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 awards for all listed officers
except for Mr. Dowd were made on February 16, 1994 and the market price per
share on the date of grant was $24.9375. Mr. Dowd's award was made on August
1, 1995 and the market price per share price on the date of grant was
$26.4375. 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 1996, there were held in escrow for Mr. Stauth 24,000
restricted shares with a value of $408,000, Mr. Dowd 16,000 restricted
shares with a value of $272,000, Mr. Davis 8,000 restricted shares with a
value of $136,000, Mr. Winn 8,000 restricted shares with a value of $136,000
and Mr. Zaricki 4,000 restricted shares with a value of $68,000.
(3) Mr. Dowd became an executive officer of the company in July 1995.
(4) Mr. Winn became an executive officer of the company in May 1994.
12
<PAGE> 14
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 to enhance the company's financial performance by
focusing attention on specific business objectives emphasizing company
profitability and teamwork among associates and to reward such executive
officers based on company 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 three 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 1996, the Committee relied on the
company's salary administration program, the objectives of which are to attract,
retain and motivate productive executive officers. 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, 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 establishes target salaries in
the middle of the assigned salary ranges. 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.
Bonuses. Bonus awards are determined, within the Committee's discretion,
with reference to the Economic Value Added Incentive Bonus Plan for Fleming
Companies and Its Subsidiaries (the "EVA Plan"). The EVA Plan replaced the
Fleming Companies, Inc. Incentive Compensation Program (the "FICP") for the
executive officers and other corporate officers (20 persons) currently
participating in the EVA Plan.
13
<PAGE> 15
The EVA 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 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 officers and other corporate officers, 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 officers from the Available Bonus
Bank Balance. During years one through four a participant is included in the EVA
Plan, the payout schedule will be: 67%, 50%, 40% and 33%, respectively, and will
remain 33% after year four. The Committee can amend the payout percentage for
future years. Although 1997 would technically represent year three under the
plan with a 40% payout, at its meeting in February 1997, the Committee amended
the plan to provide that, in the event bonuses are declared under the plan in
1997, 1997 will represent year one for all current participants in the plan and
the payout percentage will be 67%. 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 balance. Upon retirement, death or termination
without Cause, the Bonus Bank Balance will be paid to the participant or his
estate, as applicable.
14
<PAGE> 16
Pursuant to the terms of the EVA Plan, the Committee can reduce or
eliminate the payment of any bonus under the EVA Plan. In February 1996, the
Committee adopted the policy that regardless of the EVA Plan results, no bonuses
would be paid to any executive officers or other corporate officers unless the
company had earnings per share for fiscal 1996 of $1.20 or more. Since the
company fell short of this target for fiscal 1996, no bonuses were paid to any
executive officers or other corporate officers for services as an officer.
When the EVA Plan was originally adopted, it was the intention of the
Committee to use it to determine future bonuses for the executive officers and
other corporate officers and extend it to cover approximately 1,225 other
associates. The Committee is still evaluating the EVA Plan and has retained the
FICP in order to determine future bonuses for the other associates. The
Committee has set earnings from operations of $1.20 per share or more as a
benchmark for the awarding of bonuses to executive officers for fiscal 1997.
However, the Committee has reserved the right to award bonuses to executive
officers regardless of results under the EVA Plan or achievement of the
benchmark.
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
associates which vests upon the attainment of targeted profit and/or other
performance criteria. The Committee can also award restricted stock to executive
officers and other key associates pursuant to the 1996 Stock Incentive Plan. 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. At February 1, 1997,
there were 107,112 shares available for awards under the 1990 Stock Incentive
Plan and 360,000 shares available for awards under the 1996 Stock Incentive
Plan. No awards of restricted stock were made to any of the named executive
officers in fiscal 1996.
The Committee can also award stock options to key associates pursuant to
the 1990 Stock Option Plan and the 1996 Stock Incentive Plan. The Committee
believes that the granting of stock options helps to retain and motivate key
associates. At February 1, 1997, there were 57,500 options available for grants
under the 1990 Stock Option Plan and 152,000 options available for grants under
the 1996 Stock Incentive Plan to executive officers and other key associates.
See information under the heading Stock Option Information -- Option Grants for
information on option grants to the named executive officers in 1996.
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 view of the overall
poor results for fiscal 1996, the CEO received no salary increase in fiscal
1996. Furthermore, although he did not receive a bonus for fiscal 1996 since
earnings per share did not meet the target of $1.20 or more set by the
Committee, he did receive option grants for a total of 60,000 shares of company
stock. The option grants reflect the Committee's desire to align compensation
with performance.
15
<PAGE> 17
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Although no executive officer's salary for fiscal 1996 exceeded the
limitations on deductibility under Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended ("the Code"), 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. 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>
Guy A. Osborn, Chairman John A. McMillan
Howard H. Leach
</TABLE>
16
<PAGE> 18
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.
<TABLE>
<CAPTION>
Fleming
Measurement Period Companies,
(Fiscal Year Covered) Inc. S&P 500 Peer Group
<S> <C> <C> <C>
1991 100 100 100
1992 95 108 108
1993 78 118 120
1994 76 120 96
1995 71 165 121
1996 61 203 120
</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 1991.
Companies in the peer group are as follows: Fleming Companies, Inc.,
SUPERVALU, Inc., Nash Finch Company, Super Food Services, Inc., Richfood
Holdings, Inc., and Super Rite Corp. Super Rite Corp. was acquired by Richfood
Holdings, Inc. in 1995 and Super Food Services, Inc. was acquired by Nash Finch
Company in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The company's Compensation and Organization Committee consists of Guy A.
Osborn, chairman, Howard H. Leach and John A. McMillan. No executive officer of
the company has any relationship reportable under the Compensation Committee
Interlock regulations.
17
<PAGE> 19
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 28, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS EMPLOYEES BASE GRANT DATE
GRANTED IN PRICE EXPIRATION PRESENT
NAME (#)(1,2) FISCAL YEAR ($/SH) DATE VALUE $(3)
---- ---------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert E. Stauth.................... 30,000 35.7 19.7500 02-26-06 131,400
30,000 3.3 16.3750 09-05-06 398,100
William J. Dowd..................... 24,000 28.5 19.7500 02-26-06 105,120
20,000 2.2 16.3750 09-05-06 265,400
E. Stephen Davis.................... 15,000 17.9 19.7500 02-26-06 65,700
15,000 1.7 16.3750 09-05-06 199,050
Harry L. Winn, Jr. ................. 15,000 17.9 19.7500 02-26-06 65,700
15,000 1.7 16.3750 09-05-06 199,050
Thomas L. Zaricki................... 10,000 1.1 16.3750 09-05-06 132,700
</TABLE>
- ---------------
(1) The listed options are exercisable in four twenty-five percent (25%)
increments on the first through fourth anniversaries of the date of grant.
The first line opposite the first four names in the table describes options
granted on February 26, 1996 (the "First Grants") and the second line
opposite the first four names in the table describes options granted on
September 6, 1996 (the "Second Grants"). Since Mr. Zaricki did not receive a
First Grant, only a Second Grant is listed for him.
(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: (a) for First Grants, the
options are assumed to be exercised at the end of a ten year term; yield
volatility of 34%; annual dividend yield of 6.15% and a risk free rate of
return of 7.28%; and (b) for Second Grants, the options are assumed to be
exercised at the end of a ten year term; yield volatility of 47%; annual
dividend yield of 0.5% and a risk free rate of return of 6.39%.
18
<PAGE> 20
Option Exercises. The following table sets forth information regarding the
value as of the fiscal year-end of any unexercised options. No stock options
were exercised by any of the named executive officers during the fiscal year
ended December 28, 1996.
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................ -- -- 48,000/186,000 0/510,000
William J. Dowd................. -- -- 11,000/120,000 0/340,000
E. Stephen Davis................ -- -- 36,250/91,000 0/255,000
Harry L. Winn, Jr............... -- -- 10,750/68,000 0/255,000
Thomas L. Zaricki............... -- -- 4,750/29,000 0/170,000
</TABLE>
- ---------------
(1) The market price of the company's common stock at 1996 fiscal year-end was
$17.00 per share.
19
<PAGE> 21
PENSION PLAN
The following table illustrates estimated annual benefits payable under the
company's defined benefit plan ("Pension Plan") to the named executive officers
upon retirement, assuming retirement at age 65, including amounts attributable
to the company's Supplemental Retirement Plan ("SRP"), which provides benefits
that would otherwise be denied participants due to certain limitations on
qualified benefit plans in 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, 20; Mr. Dowd, 2; Mr. Davis, 36;
Mr. Winn, 3; and Mr. Zaricki, 3.
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. Dowd
who does not participate in the plan, but is covered by a separate agreement
(the "Dowd Agreement"). 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 participant's total highest annual
compensation paid during the last three years of employment. The percentage
ranges from 50%
20
<PAGE> 22
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. Pursuant
to the Dowd Agreement, Mr. Dowd is to receive $162,000 per year as a
supplemental retirement benefit if he retires on or after July 24, 2007. If he
retires prior to July 24, 2007, but on or after July 24, 2000, he is entitled to
a reduced supplemental retirement benefit. Mr. Dowd is currently 54 years of
age. In addition, the company has agreed to pay him a severance payment equal to
one year's salary in the event he is terminated for any reason other than cause.
See "Termination of Employment and Change in Control Arrangements -- SRP and
Trust Agreement."
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements. In 1995, the company entered into employment
agreements with all of the named executives. 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 associates.
Pursuant to the terms of the employment agreements, in the event during the
three years 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 agreements), death or disability or he terminates his employment
for "good reason" (as such term is defined in the agreements), 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
21
<PAGE> 23
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, assuming a change of control on December 28, 1996, 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, $3,256,848; Mr. Dowd, $1,420,250; Mr.
Davis, $1,487,324; Mr. Winn, $1,343,782; and Mr. Zaricki, $1,234,524. Prior to
entering into the employment agreements, the foregoing officers, except for
Messrs. Winn and Dowd, had been parties to severance agreements with the
company, and 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, except for Mr. Dowd who is covered
by the Dowd Agreement, 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 28, 1996 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, $451,423; Mr. Davis, $154,898; and Mr. Winn $128,674.
Due to offsets of amounts payable under a retirement plan of a former employer,
Mr. Zaricki would receive no payment from the company under the SRP in the
circumstances described above. Under the Dowd Agreement, Mr. Dowd would be paid
$81,000 annually for life assuming a change of control on December 28, 1996, and
the termination of his employment within three years after the change of
control.
The company has entered into a Supplemental Income Trust (the "Trust"). The
Trust agreement provides that within 60 days following a change of control of
the company, the company shall make an irrevocable contribution to the Trust of
an amount sufficient to satisfy the company's obligations to the participants
under the SRP assuming such participants had been terminated other than for
"cause" (as defined in the SRP), death or disability or the participants had
terminated their employment for "good reason" (as defined in the SRP). In
addition, 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, the
Dowd Agreement 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.
22
<PAGE> 24
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 the
phases of this plan which cover 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 and
the 1996 Stock Incentive Plan, in the event of a change of control of the
company, all options outstanding under such plans will become automatically
fully 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.
PDM, Inc., an Omaha, Nebraska based real estate development firm in which
Jack W. Baker serves as president and chief executive officer and is a 50
percent owner, leases 10 supermarket sites and a storage facility in Omaha,
Nebraska to the company. The company paid PDM approximately $3.1 million for
rent, taxes, and common area maintenance charges in respect to the 10
supermarket sites and the storage facility in 1996. Management of the company
believes that the lease payments and other sums paid to PDM for the lease of the
10 Baker's supermarket sites and storage facility are competitive with other
grocery stores and storage space in the Omaha market. The company expects to pay
a similar amount in 1997.
PROPOSAL NO. 2
FLEMING COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN
The board of directors has adopted, subject to shareholder approval, the
Fleming Companies, Inc. Associate Stock Purchase Plan (the "Stock Purchase
Plan"). A description of the Stock Purchase Plan appears below. A copy of the
Stock Purchase 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 Stock Purchase Plan. Capitalized terms used below not
otherwise defined herein shall have the meaning ascribed to them in the Stock
Purchase Plan. The board of directors recommends a vote FOR this proposal.
BACKGROUND
The Stock Purchase Plan, which offers eligible associates the opportunity
to purchase common stock through payroll deductions, is intended to encourage
participation in the ownership and economic progress of the company. Eligible
associates are those employed by the company continuously for six months prior
to the applicable grant date and whose customary employment is more than 20
hours per week and more than five months in any
23
<PAGE> 25
calendar year. Substantially all salaried and hourly associates, totalling
approximately 40,000 associates, will be eligible to participate in the Stock
Purchase Plan. The Stock Purchase Plan is intended to qualify under Section 423
of the Code.
ADMINISTRATION
The Stock Purchase Plan is administered by the Committee. The board of
directors may from time to time adopt amendments to the Stock Purchase Plan
consistent with Sections 421 and 423 of the Code without the approval of the
company's stockholders; provided, unless stockholder approval is obtained, no
such amendment may increase the aggregate number of shares that may be issued
under the Stock Purchase Plan or change the class of associates eligible to
participate. The board of directors may terminate the Stock Purchase Plan at any
time and such action will result in a refund to the participants of the sums
credited to their accounts plus interest on the average balance in the Accounts
at the rate of 5% per annum. Unless sooner terminated, the Stock Purchase Plan
will terminate on June 30, 2002.
ISSUANCE OF OPTIONS
One million eight hundred thousand (1,800,000) shares of the company's
authorized but unissued common stock have been set aside for purchase under the
Stock Purchase Plan. An eligible associate may elect to participate in the Stock
Purchase Plan by executing an Option Agreement authorizing payroll deductions
from such participant's basic compensation in an amount equal to either 1%, 2%,
3%, 4%, 5% or 6% of such compensation. A participant's basic compensation, which
excludes any form of extraordinary compensation such as overtime, prizes,
bonuses, commissions, reimbursed relocation expenses and the like, is determined
as of the date which is one month prior to the applicable granting date and will
be annualized for purposes of the Stock Purchase Plan. Increases but not
decreases in a participant's basic compensation occurring after the date of
determination will be disregarded for the purchase period for which such
calculation was made. The Stock Purchase Plan limits purchases by a participant
during any Purchase Period to 1,000 shares of common stock.
If on any granting date there are insufficient uncommitted shares available
for stock options out of the shares reserved for the Stock Purchase Plan (as a
result of prior purchases under the Stock Purchase Plan), the contemplated next
purchase period or periods may be cancelled. If there is an over-subscription by
participants of the remaining shares set aside for the Stock Purchase Plan on
any granting date, a proportionate reduction will be made for that purchase
period.
EXERCISE OF OPTIONS
The Option Price of the common stock to be purchased under any purchase
period will be the lower of 85% of the fair market value of such stock on the
applicable Granting Date or 85% of the fair market value of such stock on the
applicable Exercise Date, provided, however, the Option Price will not be lower
than the par value of the common stock. The fair market value
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<PAGE> 26
of the common stock as of February 25, 1997, was $17.50 per share. The number of
shares purchased at the end of each purchase period will be determined under the
following formula:
Account Balance
------------ = Total Stock Entitlement
Option Price
Only whole shares of common stock will be issued. Stock issued under the
Stock Purchase Plan will not exceed 1,800,000 shares subject to certain
adjustments to prevent the possible dilution of participants' interests.
Participants are protected against dilution in the event of a recapitalization,
stock split, merger, consolidation, reorganization, combination, liquidation,
stock dividend or similar transaction by an appropriate adjustment being made to
the aggregate number of shares reserved for purchase under the Stock Purchase
Plan and to the Option Price per share, except that upon a dissolution or
liquidation of the company or a merger or consolidation in which the company is
not the surviving or the resulting corporation, the Stock Purchase Plan will
terminate. Any option granted pursuant to the Stock Purchase Plan will terminate
upon the effective date of such dissolution, liquidation, merger or
consolidation, and the balance of each participant's Account will be refunded.
TAX AND ACCOUNTING ASPECTS
The company has been advised by its counsel with respect to the federal
income tax aspects of options granted under the Stock Purchase Plans as follows:
Stock options granted under the Stock Purchase Plan will qualify as options
granted under an "employee stock purchase plan" as defined in Section 423
of the Code and will be taxed in accordance with Sections 421 and 423
thereof and the regulations issued thereunder. The grant of an option to an
associate pursuant to the terms of the Stock Purchase Plan will be without
federal income tax consequences to the company and the associate, and the
exercise of an option (options are deemed exercised if an associate is a
participant on any Exercise Date) would result in neither taxable income to
an associate nor a deduction to the company, provided the associate does
not dispose of the shares within two years after the date of the grant of
the option and within one year after the transfer to him of the shares of
common stock represented by the option. If a disposition occurs within
either of said periods, the associate may realize ordinary income on part
or all of the gain and the company will be entitled to a deduction for the
amount taxed to the associate as ordinary income. If an associate holds the
shares acquired under the option for the required time and a disposition or
the associate's death occurs thereafter, the associate will realize
ordinary income on the excess of (i) the lesser of the fair market value of
the shares on the associate's applicable granting date, the disposition
date, or the date of the associate's death, over (ii) his Option Price, and
the company will not be entitled to a deduction for such amount. In such
event, any additional gain realized as the result of the disposition will
be taxed to the associate as a capital gain under the Code.
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<PAGE> 27
Under generally accepted accounting principles, assuming an equal
proportionate number of shares of company common stock are sold each fiscal year
under the plan, and the value of the company common stock remains constant over
the life of the plan, the company will recognize a pre-tax charge to earnings
during each fiscal year of the plan approximating $800,000 to $950,000. In
addition, and further assuming no earnings change from 1996, there will be an
approximate $.01 dilution in earnings per share during each fiscal year of the
plan.
NEW PLAN BENEFITS
Since participation in the Stock Purchase Plan is at the election of the
associate, the dollar value and number of options granted are not determinable
with respect to the named executive officers, the executive group or the
non-executive officer employee group. The non-employee director group cannot
participate in the Stock Purchase Plan.
VOTE REQUIRED
To be adopted, the Stock Purchase Plan must be approved by the holders of a
majority of the shares of common stock present, or represented, and entitled to
vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE FLEMING
COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN.
PROPOSAL NO. 3
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 1997
and is requesting ratification by the shareholders. Deloitte & Touche LLP has
audited the consolidated financial statements since 1967.
Services performed by Deloitte & Touche LLP for the 1996 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 shares of common stock
present, or represented, and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP.
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PROPOSAL NO. 4
SHAREHOLDER PROPOSAL RELATING TO THE
COMPANY'S PREFERRED SHARE PURCHASE RIGHTS
The International Brotherhood of Teamsters General Fund, 25 Louisiana
Avenue, N.W., Washington, D.C., 20001, the beneficial owner of 65 shares of
company stock, has submitted the following proposal for action at this annual
meeting:
On May 1, 1996, shareholders holding 64% of the stock voted at the annual
meeting recommended that Fleming's shareholder rights plan, or "poison pill," be
redeemed. We believe this vote reflected investor opposition to devices that
insulate failed management plans and the desire for shareholder oversight of
"shareholder rights plans."
On June 19, 1996, Fleming announced its board had acted by itself to renew
its pill. It dismissed the 2-to-1 shareholder vote as "advisory of the desires
of certain shareholders." Fleming management had said of the Board's position on
the pill, "What they'll do is their business and when they do it is their
business," according to one press account.
We believe this dishonors shareholder rights, a view also expressed by the
Council of Institutional Investors in repeated letters to Fleming.
Fleming's stated reasons for its pill include preventing new owners from
changing the direction of the company "when the results of the [incumbent
management's] re-engineering plan have not been realized." Indeed, Fleming's
stock price has declined steadily for several years amidst skepticism about
management plans. Several shareholders, including Fleming founding family member
Jim Fleming, criticized management at last year's shareholder meeting. One Wall
Street analyst noted, "There is a pattern of a big sprawling company not under
tight controls."
Again, shareholders recommended termination of the company's pill out of
concern for management insulation and shareholder prerogatives. Fleming's
response to this vote, we believe, necessitates a further step. Therefore, we
recommend the following binding resolution permitting Fleming to institute a
"pill," but only with majority support of its shareholders.
Resolved, that the shareholders hereby exercise their right under 18 O.S.A.
Sec. 1013 to amend the bylaws of Fleming Companies, Inc. to add the following
Article:
Article X
Poison Pills (Shareholders Rights Plans)
A. The Corporation shall not adopt or maintain a poison pill, shareholder
rights plan, rights agreement or any other form of "poison pill" which is
designed to or has the effect of making acquisition of large holdings of the
Corporation's shares of stock more difficult or expensive (such as the 1986
"Rights Agreement"), unless such a plan is first approved by A
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<PAGE> 29
MAJORITY shareholder vote. The company shall redeem any such rights now in
effect. The affirmative vote of a majority of shares voted shall suffice to
approve such a plan.
B. This article shall be effective immediately and automatically as of the
date it is approved by the affirmative vote of the holders of a majority of the
shares, present in person or by proxy at a regular or special meeting of the
shareholders.
C. Notwithstanding any other provision of these bylaws, this Article may
not be amended, altered, deleted or modified in any way by the Board of
Directors without prior shareholder approval.
COMPANY'S STATEMENT IN OPPOSITION TO PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL FOR THE FOLLOWING
REASONS:
The 1996 Rights Plan was adopted by the board at its meeting on February
27, 1996 effective upon the expiration of the 1986 Rights Plan. In May 1996, the
shareholders approved a nonbinding proposal recommending that the board redeem
the rights. On July 6, 1996, the 1996 Rights Plan became effective. The board of
directors has amended the 1996 Rights Plan to accelerate its termination date to
5:00 p.m. central daylight time on April 30, 1997. As a result of this
amendment, the company will no longer have a rights plan after April 30, 1997.
Although the board still believes rights plans to be a valuable tool and in the
best interest of the shareholders, it voted to terminate the 1996 Rights Plan
(i) in view of the shareholder vote at the 1996 annual meeting where 64% of the
shareholders recommended that the rights be redeemed, (ii) because it believes
the proposal made by the International Brotherhood of Teamsters General Fund
(the "Teamsters"), if it becomes effective, would leave the company vulnerable
to a hostile takeover; and (iii) it believes that the Teamsters' proposal is
overly broad and unclear with respect to its intended effect on various company
agreements with change of control provisions.
Although the board has terminated the 1996 Rights Plan effective April 30,
1997, it has reserved the right to exercise its fiduciary duties in the future
and adopt a new rights plan in the event of a hostile takeover threat. In such a
case, the board's decision to adopt a new plan will be subjected to heightened
scrutiny, and the board must establish that adoption of a new plan is reasonable
in relation to the threat posed by the hostile raider.
The Teamsters' proposal not only requires redemption of the rights under
the 1996 Rights Plan, but also prevents the company from adopting any "rights
plan, rights agreement or any other form of "poison pill" which is designed to
or has the effect of making acquisition of large holdings of the Corporation's
shares of stock more difficult or expensive . . ., unless such a plan is first
approved by a majority shareholder vote."
The board believes that the Teamsters' proposal forces the board to
abdicate its duties to protect shareholders in the event of a hostile takeover
threat. Under the Teamsters' proposal, adoption of a new rights plan would
require approval of a majority shareholder vote, which
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<PAGE> 30
involves the calling of a special meeting and the circulation of a proxy
statement and which takes time -- time which is generally not available during a
hostile takeover attempt.
In addition to depriving the board of exercise of its fiduciary duties, the
board believes the Teamsters' proposal is overly broad. The company typically is
required to include change of control provisions in its loan agreements and
other debt instruments. These provisions by their very nature are designed to
have the effect of making acquisitions of large holdings of the company's stock
more difficult, because, in the event of a change of control, the loan is
typically accelerated and the entire amount becomes due and payable when the
change of control occurs. It is not clear under the language of the Teamsters'
proposal whether the company would have to submit such a provision to a
shareholder vote before it could be included in a loan document. Since most
lenders insist on a provision like this, it may affect the company's ability to
borrow funds in the future or to renegotiate existing loan agreements.
In September, 1996, the Teamsters filed an action for injunctive relief in
the United States District Court for the Western District of Oklahoma requiring
the company to include the above proposal in this proxy statement. The company
responded claiming that the proposal could be properly excluded since its
implementation was not a proper action for shareholders under Oklahoma law. In
January, 1997, the District Court Judge ruled that the proposal is a proper
action for shareholders under Oklahoma law and, therefore, the company must
include the Teamsters' proposal in this proxy statement. The company has
appealed, but does not expect a decision from the Tenth Circuit before the
annual meeting.
The board still believes rights plans are in the best interests of
shareholders and that the Teamsters' proposal violates Oklahoma law.
Accordingly, the company will pursue its appeal to the Tenth Circuit of the
decision of the District Court that the Teamsters' proposal is a proper action
for shareholders under Oklahoma law. However, regardless of the outcome on
appeal, the 1996 Rights Plan will terminate on April 30, 1997, and the board
will not adopt a new rights plan unless faced with a hostile takeover threat.
Under those circumstances, in any court challenge to the plan, the board would
have to establish that adoption of a new plan is reasonable in relation to the
threat posed.
In 1994, the board and management embarked on an aggressive reengineering
plan which in part has caused the company's performance to lag, which the board
believes is one of the reasons for the Teamsters' proposal. The company and its
shareholders deserve the opportunity to see management's plan through to its
fruition. The board believes that rights plans are not tools for management's
insulation but are protective devices to assure that all shareholders receive
fair and equal treatment; prevent against partial tender offers, squeeze-outs
and other abusive tactics; and serve as "bargaining chips" that will assist the
board in obtaining a higher price for all of the company's stock in the event of
a hostile takeover.
In support of the board's position on the rights plan, the following
appeared in a recent article in the "Institutional Investor" by Lyn Perlmuth:
"A recent study by J.P. Morgan of the 245 $500 million -- plus
majority -- stake acquisitions from 1988 to 1995 found that the median
acquisition premium (the price paid
29
<PAGE> 31
over the stock price five days before the offer) was 16 percent higher when
a company had a poison pill [Share Rights Plan] in place. The premium on
the 139 deals in which the target company had a poison pill was 51.4
percent, versus 35.5 percent on the 106 deals without pills. The
differential was significant whether or not the deals were hostile or
friendly, whether or not the financing was all stock, all cash or a mixture
and whether or not the deal was for more or less than $1 billion."
Even though the board believes rights plans serve to protect shareholders
against certain abusive takeover practices and to ensure that all shareholders
are treated fairly and equally, it has voted to redeem the 1996 Rights Plan for
the reasons stated above. The board urges you to vote against the Teamsters'
proposal because (i) it deprives the board of its ability to exercise its
fiduciary duties and protect shareholders in the face of a hostile takeover
attempt, and (ii) it is overly broad and unclear with respect to its intended
effect on various company agreements with change of control provisions.
IT IS FOR THESE REASONS THE BOARD URGES THE SHAREHOLDERS TO VOTE AGAINST THE
PROPOSAL. IF NOT OTHERWISE SPECIFIED, PROPERLY EXECUTED PROXIES WILL BE VOTED
AGAINST THE PROPOSAL.
TEAMSTERS' RESPONSE TO COMPANY'S STATEMENT IN OPPOSITION TO PROPOSAL
The company gave the Teamsters an opportunity to respond to its Statement
in Opposition to the Teamsters' Proposal and received the following response:
Management's gesture to drop its shareholder rights plan lacks real
substance. Management can reinstate its "pill" at any time without
shareholder approval. Indeed, management admits that it may
reinstitute a poison pill at any time. Moreover, management's decision
to redeem its plan comes only after it failed to convince the federal
courts that the shareholders should not be allowed to vote on this
resolution. It is not a genuine change of heart but a purely tactical
move to defuse shareholder support for the resolution now that
management is required to let the shareholders vote. We respectfully
request that all shareholders support this initiative to insist on
shareholder rights over the "shareholder rights plan".
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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
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<PAGE> 32
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
1996 all Section 16(a) filing requirements were complied with except that a Form
3 for Jack W. Baker, a director of the company, was not timely filed. The report
was filed approximately two weeks late, and the delay was due to the company's
inadvertent failure to timely provide him with a copy of the proper form.
SHAREHOLDER PROPOSALS
Any proposals of shareholders intended to be presented at the 1998 annual
meeting must be received not later than November 17, 1997, to be considered for
inclusion in the proxy statement and form of proxy relating to the meeting.
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
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<PAGE> 33
EXHIBIT A
FLEMING COMPANIES, INC.
ASSOCIATE STOCK PURCHASE PLAN
Effective Date: July 1, 1997
<PAGE> 34
FLEMING COMPANIES, INC.
ASSOCIATE STOCK PURCHASE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I NAME AND PURPOSE OF PLAN................................. A-1
1.1 Name of Plan....................................... A-1
1.2 Purpose............................................ A-1
ARTICLE II DEFINITIONS.............................................. A-1
2.1 Definitions........................................ A-1
2.2 Construction....................................... A-3
ARTICLE III FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS................. A-4
3.1 Stock Purchase Accounts............................ A-4
3.2 Participant's Contributions........................ A-4
3.3 Continued Participation; Voluntary Withdrawal from
Plan............................................... A-5
3.4 Withdrawal by Terminating Participant.............. A-5
3.5 Reparticipation.................................... A-5
3.6 Interest Accrual................................... A-5
ARTICLE IV EXERCISE OF STOCK OPTION................................. A-6
4.1 Exercise........................................... A-6
4.2 Amount of Shares of Stock.......................... A-6
4.3 Distribution....................................... A-7
4.4 Issuance of Shares; Stock Certificates............. A-7
ARTICLE V MAXIMUM SHARES OF STOCK AVAILABLE........................ A-7
5.1 Maximum Number of Shares Available to
Participants....................................... A-7
5.2 Maximum Authorized Shares.......................... A-7
5.3 Termination of Offering for the Second and
Subsequent Purchase Periods........................ A-7
ARTICLE VI ADMINISTRATION........................................... A-8
6.1 Appointment of Committee........................... A-8
6.2 Committee Powers and Duties........................ A-8
6.3 Committee to Make Rules and Interpret Plan......... A-8
ARTICLE VII AMENDMENT OF THE PLAN.................................... A-8
ARTICLE VIII RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS......
A-8
8.1 Stock Adjustments.................................. A-8
8.2 Effect of Certain Transactions..................... A-9
8.3 Stockholder Approval............................... A-10
8.4 Regulatory Approval and Listings................... A-10
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE IX MISCELLANEOUS............................................ A-10
9.1 Notices............................................ A-10
9.2 Application of the Funds........................... A-10
9.3 Repurchase of Stock................................ A-10
9.4 Alternate Contribution Methods..................... A-10
9.5 Nonassignability................................... A-10
9.6 Government Regulation.............................. A-11
9.7 Effective Date of Plan............................. A-11
9.8 Termination of Plan................................ A-11
9.9 No Obligations to Exercise Stock Option............ A-11
9.10 Right to Continued Employment...................... A-11
9.11 Reliance on Reports................................ A-11
9.12 Applicable Law..................................... A-11
9.13 Construction....................................... A-11
</TABLE>
<PAGE> 36
FLEMING COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be known as: Fleming Companies, Inc.
Associate Stock Purchase Plan.
1.2 Purpose. The Fleming Companies, Inc. Associate Stock Purchase Plan, by
offering Associates the opportunity to purchase the Company's Stock through
payroll deductions, is intended to encourage participation in the ownership and
economic progress of the Company. Associates may only be granted Stock Options
to purchase Stock. Except as otherwise provided in the Plan, by reason of their
employment relationship with the Company and/or the Employer, all Associates of
all Employers will be eligible to participate in the Plan.
ARTICLE II
DEFINITIONS
2.1 Definitions. Where the following capitalized words and phrases appear
in either a singular or plural form in this instrument, they shall have the
respective meanings set forth below unless a different context is clearly
expressed herein.
(a) Account and Account Balance:
(i) The word "Account" shall mean the record established and
maintained to record the interest in the Plan of each Participant in
accordance with Article III.
(ii) The words "Account Balance" shall mean the credited balance
standing in a Participant's Account from time to time.
(b) Annual Compensation: The phrase "Annual Compensation" shall have
the meaning set forth in Section 3.2.
(c) Associate: The word "Associate" shall mean any person employed by
the Employer on the basis of an employer-employee relationship who receives
remuneration for personal services rendered to the Employer.
(d) Board: The word "Board" shall mean the Board of Directors of the
Company.
(e) Code: The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) Committee: The word "Committee" shall mean the Compensation and
Organization Committee of the Board referred to in Article VI.
(g) Company: The word "Company" shall mean Fleming Companies, Inc., an
Oklahoma corporation.
A-1
<PAGE> 37
(h) Employer: The word "Employer" shall mean the Company and any
Subsidiary of the Company.
(i) Exercise Date: The words "Exercise Date" shall mean June 30 of any
year during which the Plan is in existence, being June 30, 1998, 1999,
2000, 2001 and 2002.
(j) Fair Market Value: The words "Fair Market Value" shall mean (A)
during such time as the Stock is listed upon the New York Stock Exchange or
other exchanges or the NASDAQ/National Market System, the closing price of
the Stock on such stock exchange or exchanges or the NASDAQ/National Market
System on the day for which such value is to be determined, or if no sale
of the Stock shall have been made on any such stock exchange or the
NASDAQ/National Market System that day, on the next preceding day on which
there was a sale of such Stock or (B) during any such time as the Stock is
not listed upon an established stock exchange or the NASDAQ/National Market
System, the mean between dealer "bid" and "ask" prices of the Stock in the
over-the-counter market on the day for which such value is to be
determined, as reported by the National Association of Securities Dealers,
Inc.
(k) Granting Date: The words "Granting Date" shall mean the beginning
of each applicable Purchase Period, being July 1, 1997, 1998, 1999, 2000
and 2001.
(l) Option Agreement: The words "Option Agreement" shall mean an
agreement to be executed by the Participant and the Company, which shall
comply with the terms of the Plan and shall be in such form as the
Committee agrees upon from time to time.
(m) Option Price: The words "Option Price" shall mean the price which
shall be paid by the Participant from his Account for any Stock purchased
on an applicable Exercise Date pursuant to any Stock Option granted to such
Participant; provided, such option price shall be the lesser of:
(i) 85% of the per share Fair Market Value on the Granting Date of
the Purchase Period applicable to such Participant: or
(ii) 85% of the per share Fair Market Value on the Exercise Date
of the Purchase Period applicable to such Participant.
Provided, in no event shall the Option Price per share be less than the par
value of the Stock.
(n) Participant: The word "Participant" shall mean an Associate (i)
who executes with the Company an Option Agreement on or prior to a Granting
Date, (ii) who on such Granting Date has been continuously employed by the
Employer for at least six months, and (iii) whose customary employment is
more than 20 hours per week and more than five months in any calendar year.
Provided, for purposes of calculating the foregoing six month service
requirement for an Associate, all employment service with the Company and
its Subsidiaries will be recognized. The word "Participant" shall also
include the legal representative of a deceased Participant, and a
Participant who, within three months prior
A-2
<PAGE> 38
to the end of the applicable Purchase Period for which he is a Participant,
terminates his employment with the Employer on account of (i) retirement on
or after age 55, (ii) retirement because of disability, (iii) lay off by
the Employer, or (iv) an authorized leave of absence granted by the
Employer. "Disability" for purposes of this Subsection (n) shall mean a
physical or mental condition which, in the judgment of the Committee,
totally and permanently prevents a Participant from engaging in any
substantial gainful employment with the Employer. A determination that
disability exists shall be based upon independent medical evidence
satisfactory to the Committee. In the event that any Employer ceases to be
a Subsidiary of the Company, the Associates of such Employer will be deemed
to have terminated employment as of such date.
(o) Plan: The word "Plan" shall mean this Fleming Companies, Inc.
Associate Stock Purchase Plan, and any amendments thereto.
(p) Purchase Period: The words "Purchase Period" shall mean any one
year period commencing on July 1 and ending on June 30 of each year during
which the Plan is in existence, as follows:
(i) "First Purchase Period" -- July 1, 1997 through June 30, 1998.
(ii) "Second Purchase Period" -- July 1, 1998 through June 30,
1999.
(iii) "Third Purchase Period" -- July 1, 1999 through June 30,
2000.
(iv) "Fourth Purchase Period" -- July 1, 2000 through June 30,
2001.
(v) "Fifth Purchase Period" -- July 1, 2001 through June 30, 2002.
(q) Stock: The word "Stock" shall mean the common stock of the
Company, par value $2.50 per share, authorized for issuance pursuant to the
terms of the Plan, subject to Article VIII of the Plan.
(r) Stock Option: The words "Stock Option" shall mean the right of a
Participant on an applicable Exercise Date to purchase the number of whole
shares of Stock as provided in Article IV.
(s) Subsidiary: The word "Subsidiary" shall mean any present or future
subsidiary corporation of the Company as defined in Section 424 of the
Code.
(t) Terminating Participant: The words "Terminating Participant" shall
mean a Participant who terminates his employment for reasons other than
those set forth in Subsection 2.1(n).
2.2 Construction. The masculine gender, where appearing in the Plan, shall
be deemed to include the feminine gender, unless the context clearly indicates
to the contrary. Any word appearing herein in the plural shall include the
singular, where appropriate, and likewise the singular shall include the plural,
unless the context clearly indicates to the contrary.
A-3
<PAGE> 39
ARTICLE III
FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS
3.1 Stock Purchase Accounts. As of the applicable Granting Date, there
shall be established and maintained under the Plan in the name of each
Participant (who is a Participant with respect to the Purchase Period pertaining
to such Granting Date) an Account which shall be debited and credited in
accordance with the following Sections of this Article III.
3.2 Participant's Contributions. By becoming a Participant, authorization
shall be deemed to be automatically given by the Participant for his periodic
contributions which shall be credited to his Account calculated as follows:
FIRST: The Participant's basic compensation rate (excluding any form
of extraordinary compensation such as overtime, prizes, bonuses,
commissions, reimbursed relocation expenses and the like), as of the date
("Determination Date") which is one month prior to the applicable Granting
Date, shall be determined and annualized ("Annual Compensation"). Increases
in such basic compensation rate after such Determination Date shall be
disregarded for that Purchase Period. Decreases in such basic compensation
rate shall be adjusted as provided hereinafter.
SECOND: Prior to the applicable Granting Date, the Participant shall
elect in his Option Agreement filed with the Committee a percentage of
either 1%, 2%, 3%, 4%, 5%, or 6% ("Contribution Rate"); provided, an
election, once made with respect to any Purchase Period cannot be changed
after commencement of the Purchase Period; and provided further, a
Participant may elect to change his Contribution Rate for succeeding
Purchase Periods by notifying the Committee within 10 days of any
succeeding Granting Date. If a Participant receives a "hardship withdrawal"
from a cash or deferred arrangement established by the Employer under
Section 401(k) of the Code, he shall be prohibited from making
contributions to his Account under this Plan for a period of 12 months
after receipt of such hardship distribution.
THIRD: The Participant's Annual Compensation for the applicable
Purchase Period shall be multiplied by his Contribution Rate, and the
product thereof shall equal his aggregate maximum contributions ("Aggregate
Contributions") to be made under the Plan for the applicable Purchase
Period.
FOURTH: A Participant's Aggregate Contributions shall be divided by
the number of his payroll payment dates falling within the applicable
Purchase Period to determine the dollar amount of equal periodic
contributions which shall be withheld by the Employer by payroll deduction.
If a Participant's number of payroll payment dates thereafter shall be
changed, appropriate adjustment shall be made so that equal periodic
contributions shall be made. Provided, in the event that a Participant
incurs a decrease in his basic compensation during any Purchase Period, and
such Participant is not a Terminating Participant or has not voluntarily
withdrawn from the Plan, then, in such
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<PAGE> 40
event, and if requested by the Participant, appropriate adjustments will be
made by the Committee to reduce the maximum amount of periodic
contributions which such Participant would otherwise make pursuant to the
Plan to his Stock Purchase Account. The reduction shall occur by
determining the Participant's reduced basic compensation rate and then
multiplying such rate by the Contribution Rate which such Participant had
previously elected for that Purchase Period. This reduced amount thereafter
will be credited to the Stock Purchase Account of such Participant for the
balance of the applicable Purchase Period.
3.3 Continued Participation; Voluntary Withdrawal from Plan. Once a
Participant elects to participate in the Plan, he shall thereafter remain as a
Participant until expiration or termination of the Plan, unless he otherwise
withdraws from, or otherwise becomes ineligible to participate in the Plan. A
legal representative of a deceased Participant and a Participant who terminates
employment for any reasons specified in Subsection 2.1(n) within three months
prior to the end of the applicable Purchase Period will continue to be a
Participant in the Plan until the next succeeding Exercise Date unless such
Participant or his representative (in the event of the Participant's death)
elects to withdraw from the Plan pursuant to this Section 3.3. A Participant may
withdraw from the Plan at any time by filing a written notice with the Committee
of withdrawal prior to the next applicable Exercise Date. Upon a Participant's
withdrawal, his entire Account Balance, if any, on the date of withdrawal shall
be refunded to him.
3.4 Withdrawal by Terminating Participant. A Terminating Participant shall
be deemed to have made an election to withdraw from the Plan on the date his
employment terminates. Upon such withdrawal, his entire Account Balance, if any,
on the date of withdrawal, shall be refunded to him.
3.5 Reparticipation. A Participant who withdraws under Section 3.3 within
any Purchase Period shall not be eligible to reenter the Plan with respect to
the same Purchase Period; provided, a Participant who withdraws from the Plan
under Section 3.3 prior to the end of any Purchase Period shall not be precluded
from becoming a Participant with respect to any succeeding Purchase Period if he
has satisfied the eligibility requirements of the Plan.
3.6 Interest Accrual. With respect to the refund or distribution of an
Account Balance under either of Sections 3.3 or 3.4, no interest shall be paid
or payable. If the Plan is terminated under either of Sections 8.2 or 9.8, the
refund of an Account Balance shall be with interest at a per annum rate of 5%
and shall be computed upon the average balance in such Participant's Account for
the period of time following the Granting Date applicable to such Participant
and ending on the day of the withdrawal or distribution.
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<PAGE> 41
ARTICLE IV
EXERCISE OF STOCK OPTION
4.1 Exercise. If a Participant has not made an earlier election to withdraw
pursuant to either of Sections 3.3 or 3.4, he shall be deemed to have elected to
exercise his Stock Option as of each Exercise Date with respect to the
applicable Purchase Period.
4.2 Amount of Shares of Stock.
(a) Subject to the Subsection (b) following, the whole number of
shares of Stock to which a Participant shall be entitled ("Total Stock
Entitlement") upon the applicable Exercise Date shall be determined under
the following formula:
Account Balance
------------ = Total Stock Entitlement
Option Price
Provided, the Account Balance for purposes of this Section 4.2 shall be
determined without crediting any interest thereon.
(b) The Total Stock Entitlement computed for each Participant shall be
reduced to the extent that any of the following Subsections shall apply:
(i) No Participant shall be entitled to participate in the Plan to
a greater extent than that permitted under Section 423(b)(3) of the
Code. Thus, no Associate may be granted a Stock Option if such
Associate, immediately after the Stock Option is granted, owns stock
possessing five percent or more of the total combined voting power or
value of all classes of stock of the Company or of its parent or any
Subsidiary (if applicable). For purposes of this Subsection, the rules
of Section 424(d) of the Code shall apply in determining the stock
ownership of an individual, and stock which the Associate may purchase
under all outstanding stock options shall be treated as stock owned by
the Associate.
(ii) No Participant shall be entitled to participate in the Plan
to a greater extent than that permitted under Section 423(b)(8) of the
Code. Thus, no Associate may be granted a Stock Option which permits
his rights to purchase stock under all such "employee stock ownership
plans" of the Company and its parent or any Subsidiary (if applicable)
intended to qualify under Section 423 of the Code to accrue at a rate
which exceeds $25,000 of fair market value of such stock (determined at
the time such Stock Option is granted) for each calendar year in which
such Stock Option is outstanding at any time. For purposes of this
Subsection, (1) the right to purchase stock under an option accrues
when the option (or any portion thereof) first becomes exercisable
during the calendar year; (2) the right to purchase stock under an
option accrues at the rate provided in the option, but in no case may
such rate exceed $25,000 of fair market value of such stock (determined
at the time such stock option is granted) for any one calendar year;
and (3) a right to purchase stock which has
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<PAGE> 42
accrued under one option granted pursuant to any such plan may not be
carried over to any other such stock option.
4.3 Distribution. A Participant's Total Stock Entitlement as determined
under Section 4.2 shall be distributed to him pursuant to Section 4.4(b)
together with any cash which is not applied toward the purchase of whole shares
of Stock. No interest shall be payable upon such refunded Account Balance.
4.4 Issuance of Shares; Stock Certificates.
(a) The shares of Stock purchased by a Participant on the applicable
Exercise Date shall for all purposes, be deemed to have been issued and
sold at the close of business on such Exercise Date. Prior to that time,
none of the rights or privileges of a stockholder of the Company shall
exist with respect to such shares.
(b) As soon as practicable after each Exercise Date, the Company shall
issue and deliver a certificate, registered in the Participant's name, for
the number of shares of Stock purchased.
ARTICLE V
MAXIMUM SHARES OF STOCK AVAILABLE
5.1 Maximum Number of Shares Available to Participants. If on the Exercise
Date of any Purchase Period the Total Stock Entitlement for all Participants,
determined under Section 4.2 hereof exceeds the number of shares of Stock
available for issuance under the Plan, there shall be a proportionate reduction
for the ensuing applicable Purchase Period of each Participant's Total Stock
Entitlement in order to eliminate such excess. Notwithstanding any provision
herein to the contrary, the maximum number of shares a Participant will be
allowed to purchase during any Purchase Period is 1,000 shares of Stock.
5.2 Maximum Authorized Shares. Subject to adjustment under Article VIII,
the maximum number of shares of Stock which may be issued under the Plan shall
not in the aggregate exceed 1,800,000 shares of Stock whether it be authorized
but unissued shares of Stock or treasury shares of Stock.
5.3 Termination of Offering for the Second and Subsequent Purchase
Periods. If in the opinion of the Committee, there is insufficient Stock
available for Stock Options at any Granting Date after the July 1, 1997 Granting
Date, the Committee may terminate the offering contemplated for any or all
succeeding Purchase Periods.
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<PAGE> 43
ARTICLE VI
ADMINISTRATION
6.1 Appointment of Committee. The Plan shall be administered by the
Committee appointed by the Board and consisting of not less than two members
from the Board none of whom shall be Associates of the Company or a Subsidiary
while serving on the Committee. The members of the Committee shall serve at the
pleasure of the Board and shall be ineligible to participate under the Plan. Any
member may serve concurrently as a member of any other administrative committee
of any other plan of the Company or its affiliates entitling participants
therein to acquire stock, stock options or deferred compensation rights
including stock appreciation rights.
6.2 Committee Powers and Duties. The Committee shall have all the powers
and authorities which are reasonably appropriate and necessary to discharge its
duties under the Plan.
6.3 Committee to Make Rules and Interpret Plan. The Committee, in its sole
discretion, shall have the authority, subject to the provisions of the Plan, to
establish, adopt, or revise rules and regulations with respect to the
administration of the Plan and to make all such determinations relating to the
Plan as it may deem necessary or advisable for the administration of the Plan.
The Committee's interpretation of the Plan and all decisions and determinations
by the Committee with respect to the Plan shall be final, binding, and
conclusive on all parties unless otherwise determined by the Board.
ARTICLE VII
AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect consistent with Sections 421 and 423 of the Code, except that, without
approval of the stockholders, no amendment shall (i) increase the maximum number
of shares reserved under the Plan other than as provided in Article VIII, or
(ii) make the Plan available to any person who is not a Participant.
ARTICLE VIII
RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS
8.1 Stock Adjustments. In the event that the shares of Stock, as presently
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation
(whether by reason of merger, consolidation, recapitalization, reclassification,
stock split, combination of shares or otherwise), or if the number of such
shares of Stock shall be increased through the payment of a stock dividend, then
there shall be substituted for or added to each share available under and
subject to the
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<PAGE> 44
Plan as provided in Section 5.2 hereof, and each share theretofore appropriated
or thereafter subject or which may become subject to Stock Options under the
Plan, the number and kind of shares of stock or other securities into which each
outstanding share of Stock shall be so changed or for which each such share
shall be exchanged or to which each such share shall be entitled, as the case
may be, on a fair and equivalent basis in accordance with the applicable
provisions of Section 424 of the Code; provided, in no such event will such
adjustment result in a modification of any Stock Option as defined in Section
424(h) of the Code. In the event there shall be any other change in the number
or kind of the outstanding shares of Stock, or any stock or other securities
into which the Stock shall have been changed or for which it shall have been
exchanged, then, if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in the shares available under and
subject to the Plan, or in any Stock Option theretofore granted or which may be
granted under the Plan, such adjustments shall be made in accordance with such
determination, except that no adjustment of the number of shares of Stock
available under the Plan or to which any Stock Option relates that would
otherwise be required shall be made unless and until such adjustment either by
itself or with other adjustments not previously made would require an increase
or decrease of at least 1% in the number of shares of Stock available under the
Plan or to which a Stock Option relates immediately prior to the making of such
adjustment (the "Minimum Adjustment"). Any adjustment representing a change of
less than such minimum amount shall be carried forward and made as soon as such
adjustment together with other adjustments required by this Section 8.1 and not
previously made would result in a Minimum Adjustment. Notwithstanding the
foregoing, any adjustment required by this Section 8.1 which otherwise would not
result in a Minimum Adjustment shall be made with respect to shares of Stock
relating to any Stock Option immediately prior to exercise of such Stock Option.
No fractional shares of Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to the nearest
whole share. Any adjustments under this Section 8.1 shall be made according to
the sole discretion of the Company, and its decision shall be binding and
conclusive.
8.2 Effect of Certain Transactions. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting corporation in
any merger or consolidation, any Stock Option hereunder shall pertain to and
apply to the shares of stock of the Company, but a dissolution or liquidation of
the Company or merger or consolidation in which the Company is not the surviving
or the resulting corporation shall cause the Plan and any Stock Option hereunder
to terminate upon the effective date of such dissolution, liquidation, merger or
consolidation, and the Account Balance of each Participant shall be refunded to
him. Provided, that for the purpose of this Section 8.2, if any merger,
consolidation or combination occurs in which the Company is not the surviving
corporation and is the result of a mere change in the identity, form or place of
organization of the Company accomplished in accordance with Section 368(a)(1)(F)
of the Code, then, such event shall not cause a termination.
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<PAGE> 45
8.3 Stockholder Approval. The Plan shall be approved by the holders of a
majority of the outstanding shares of Stock, present, or represented, and
entitled to vote at a meeting called for such purposes, which approval must
occur within the period ending twelve (12) months after the date the Plan is
adopted by the Board. In the event stockholder approval is not obtained within
such twelve-month period, the Plan and all such Stock Options and such Stock
shall be void.
8.4 Regulatory Approval and Listings. The Company shall use its best
efforts to file with the Securities and Exchange Commission as soon as
practicable following stockholder approval pursuant to Section 8.3, and keep
continuously effectively and usable, a Registration Statement on Form S-8 with
respect to shares of Stock subject to Stock Options hereunder. Notwithstanding
anything contained in this Plan to the contrary, the Company shall have no
obligation to issue or deliver certificates representing shares of Stock
evidencing Stock Options prior to:
(a) the obtaining of any approval from, or satisfaction of any waiting
period or other condition imposed by, any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or
advisable;
(b) the admission of such shares to listing on the stock exchange on
which the Stock may be listed; and
(c) the completion of any registration or other qualification of such
shares under any state or federal law or ruling of any governmental body
which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice which a Participant files pursuant to the Plan
shall be on the form prescribed by the Committee and shall be effective when
received by the Committee.
9.2 Application of the Funds. All funds received by the Company under the
Plan may be used for any corporate purpose.
9.3 Repurchase of Stock. The Company shall not be required to repurchase
from any Participant shares of Stock which he acquired under the Plan.
9.4 Alternate Contribution Methods. If authorized payroll deductions of a
Participant's periodic contributions under Section 3.2 are not permitted by
reason of the provisions of any law applicable to an Employer, the Committee
shall adopt an appropriate alternative method under which affected Participants
may make payment for shares of Stock purchased hereunder which would otherwise
have been made pursuant to Section 3.2.
9.5 Nonassignability. Stock Options are exercisable only by the Participant
during his lifetime, or by his estate or the person who acquires the right to
exercise such Stock Option upon his death by bequest or inheritance, and are not
transferable by him other than by will or
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<PAGE> 46
the laws of descent and distribution. No Stock Option shall be subject in any
manner to alienation, anticipation, sale, transfer, assignment, pledge, or
encumbrance, except for transfer by will or the laws of descent and
distribution. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of, or to subject to execution, attachment or similar process, any Stock
Option contrary to the provisions hereof, shall be void and ineffective, shall
give no right to any purported transferee, and may, at the sole discretion of
the Committee, result in forfeiture of the Stock Option involved in such
attempt.
9.6 Government Regulation. The Company's obligation to sell and deliver the
Stock under the Plan is at all times subject to any and all approvals, rules and
regulations of any governmental authority required in connection with the
authorization, issuance, sale or delivery of such Stock.
9.7 Effective Date of Plan. The Plan shall become effective on July 1,
1997, if prior to that date the Plan has been approved by the holders of a
majority of the common stock of the Company present, or represented, and
entitled to vote at a meeting called for such purposes.
9.8 Termination of Plan. The Plan shall continue in effect through June 30,
2002, unless terminated pursuant to Section 8.2 or by the Board, which shall
have the right to terminate the Plan at any time. Upon the termination of the
Plan pursuant to this Section 9.8 or Section 8.2, the Account Balance of each
Participant shall be refunded to the Participant.
9.9 No Obligations to Exercise Stock Option. The granting of a Stock Option
shall impose no obligation upon the Participant to exercise his Stock Option.
9.10 Right to Continued Employment. Participation in the Plan shall not
give any Participant any right to remain in the employ of the Employer. The
Employer reserves the right to terminate any Participant at any time.
9.11 Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and upon any
other information furnished in connection with the Plan by any person or persons
other than himself. In no event shall any person who is or shall have been a
member of the Committee or of the Board be liable for any determination made or
other action taken or any omission to act in reliance upon any such report or
information or for any action taken, including the furnishing of information, or
failure to act, if in good faith.
9.12 Applicable Law. This Plan shall be governed by and interpreted in
accordance with the laws of the State of Oklahoma.
9.13 Construction. It is intended that this Plan shall qualify in
accordance with Sections 421 and 423 of the Code, and the provisions of this
Plan shall be interpreted and applied in a manner consistent with such intent.
Pursuant to the terms of the Plan and the applicable provisions of the Code, all
Participants in the Plan will have the same rights and privileges and all such
Participants will be treated in an equal, uniform and nondiscriminatory manner.
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<PAGE> 47
EXHIBIT B-1
GUIDELINES FOR BOARD COMPOSITION
Size: Between 3 and 20 members (as set by Restated
Certificate of Incorporation). Board chooses
within those parameters.
Classes: 3 staggered classes of 3 years each (as set by
Restated Certificate of Incorporation).
Mix: Maximum of 3 inside directors; must always be a
majority of independent directors.
Independent Director: Must offer to stand down at end of term following
change in occupation or profession that would
diminish director's ability to contribute as a
board member.
Inside Director:
(Non-CEO)
Must offer to resign from board upon the earlier
of either reaching age 65 or retirement,
resignation, other termination from company, or
downward revision of status in company.
Disability: Must stand down if suffering from disability or
ill health sufficiently serious to prevent active
participation in board affairs over a sustained
period.
Retirement from Board: A director must retire from the board during the
month following his or her 70th birthday.
Attendance: If cumulative attendance at board and committee
meetings over two successive years falls below
60%, director must offer to stand down.
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<PAGE> 48
EXHIBIT B-2
GUIDELINES FOR BOARD CANDIDATES
1. A director should have the ability to apply good independent judgment to a
business situation and should be able to represent broadly the interests of
all the company's shareholders and constituencies. Board members should be
recommended primarily on the basis of their qualification to meet these
fundamental criteria.
2. A director must be free of any conflicts of interest which would interfere
with his or her loyalty to the company and its shareholders. Those who have
positions with or significant interests in competitors of the company may
not be considered. To avoid even the appearance of a conflict of interest,
members of legal firms which provide legal counsel to the company and
representatives of investment banking houses, commercial banks or management
consulting firms which have or are anticipated to have business relations
with the company should not be considered.
3. In addition, the following criteria should be considered in recommending
candidates for board membership, although these should not be applied
rigidly:
a. Maturity and Experience
A director should be mature and have practical or academic experience
in business, economics, government or the sciences. Ideally, a director
would have 15 or more years of experience including management
responsibilities.
b. Geography
Since the company's operations are primarily mainland United States in
scope, it is desirable to have a balanced geographic representation
with major geographic areas of the company's business being reflected
on the board to the extent practicable.
c. Past Experience in Order of Preference
(1) Chief executive officer, chief operating officer or senior
executive officer of a public or substantial private company,
preferably of an industrial, distribution or retailing company,
with sales in excess of $500,000,000.
(2) An educator from fields of business, economics or the sciences
with management experience.
d. Women, Minorities and Special Interests
Since a director represents broadly the interests of all the company's
shareholders and constituencies, he or she should be chosen for his or
her individual abilities and not be recommended based upon gender,
minority group status or as a representative of any special interest
group. However, it is desirable to have a cross section of backgrounds,
and candidates otherwise qualified may be recommended with due
consideration given to their gender, minority status or special
interests.
B-2
<PAGE> 49
EXHIBIT C
FLEMING COMPANIES, INC.
CORPORATE GOVERNANCE
STATEMENT OF POLICY
FEBRUARY 1997
<PAGE> 50
FLEMING COMPANIES, INC. FEBRUARY 1997
CORPORATE GOVERNANCE
STATEMENT OF POLICY
Corporate Governance Committee (the "Governance Committee").
The board of directors (the "Board") of Fleming Companies, Inc. (the
"Company" or "Fleming") has renamed and reconstituted the "Nominating/Governance
Committee" as the "Nominating Committee" and established the "Corporate
Governance Committee" (the "Governance Committee") with the following stated
responsibilities and corporate governance standards under which the Board will
manage the Company.
RESPONSIBILITIES.
The Nominating 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 Governance Committee considers matters relating to corporate governance
and establishes standards which are reviewed annually for governing the
operation of the Company by the Board through management. The committee will
also annually assess Board and committee effectiveness.
Corporate Governance -- Philosophy and Standards
THE PHILOSOPHY.
The Company will operate pursuant to the highest possible ethical standards
with integrity, propriety, and fairness, and in full compliance with the law.
Each director and management associate is expected to conduct himself or herself
at all times in accordance with these tenets. Every action by each director and
management associate will be taken with full consideration for the interests and
well-being, first, of all Company stockholders and, second, of all other Company
stakeholders. Equal opportunity without qualification is the Company's policy in
employment practices, in its daily management, and in its procurement and sale
of goods and services. Discrimination will not be permitted based on race,
color, religion, sex, age, disability status, national origin, citizenship, or
Vietnam veteran status.
THE STANDARDS.
The Governance Committee of the Board has adopted and will administer the
following Corporate Governance Standards for the guidance of the Company:
1. The Board will operate in accordance with a statement of Requirements of
Management and Directors attached hereto as Attachment I.
2. The Chairman of the Compensation and Organization Committee (the
"Compensation Committee") shall conduct a performance appraisal review with
the CEO at least
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<PAGE> 51
annually. In connection with the annual review the Chairman shall seek
consultation with, and request information from, the other members of the
Compensation Committee and other independent directors.
3. The Board will annually review and approve a three-year strategic plan and a
one-year operating plan for the Company.
4. All directors will stand for election for three-year terms.
5. The Board believes that as a general rule, former Company associates should
not serve on the Board; provided, however, this standard shall not apply to
former Company associates five years after he/she has no longer been an
associate.
6. The Audit and Finance Committee ("Audit Committee")and the Compensation
Committee shall consist entirely of independent directors.
7. The Board will appoint all committee members of the designated standing
committees of the Board (Audit Committee, Compensation Committee, Nominating
Committee and the Governance Committee) upon the recommendation of the
Governance Committee. The intent will be to rotate various members of the
Board through various Committees so that each independent member of the
Board has an opportunity to become more experienced about the internal
operations and affairs of the Company.
8. The Governance Committee will annually assess Board and committee
effectiveness through the use of the "Board Evaluation" questionnaire
attached hereto as Attachment II. Each independent member of the Board will
be required to complete the questionnaire annually. The questionnaires shall
become a part of the permanent records of the Company and maintained by the
Company's corporate secretary.
9. Whenever feasible, directors will receive materials well in advance of
meetings for items to be acted upon. In addition, independent directors
shall meet outside of the presence of non-independent directors from time to
time as deemed appropriate.
10. Interlocking directorships will not be allowed. (An interlocking
directorship would occur if a Fleming director or officer served on the
board of company X and a director or an officer of company X served on the
Fleming Board, or if a major supplier or customer served on Fleming's
Board.) Joint ventures will be permitted between the Company and independent
Board members subject to approval by the Board and Securities and Exchange
Commission disclosure rules.
11. Directors are required to own at least 1,000 shares of Fleming common stock
within one year of election (by the Board or the Stockholders) and 2,000
shares within three years of such election. A substantial portion of each
independent director's annual compensation shall be paid in Fleming common
stock or its equivalent.
12. Each director will retire upon the earlier of 30 days after reaching age 70
or upon his/her 15th anniversary as a director; provided, however, the 15
year limitation shall not apply to directors holding office upon the
adoption by the Board of these standards.
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<PAGE> 52
13. Succession planning and management development will be reported annually to
the independent directors by the CEO.
14. All corporate officers will be expected to own Fleming common stock. Such
ownership will be reviewed by the Compensation Committee annually.
15. Generally, management's incentive compensation will be linked directly and
objectively to measured financial goals set in advance by the Compensation
Committee; however, the Board recognizes that flexibility is important in
determining compensation and that all management compensation may not be so
linked.
16. Stock options will not be repriced (the exercise price for options will not
be lowered even if the current market price of the stock is below the
exercise price).
17. All stockholders have equal voting rights except as may be provided by law,
the Certificate of Incorporation or,if applicable, under a share rights plan
adopted by the Company.
18. These Corporate Governance standards have been developed and approved by the
Board and will be reviewed by the Board and published at least annually and
revised where appropriate.
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<PAGE> 53
ATTACHMENT I
REQUIREMENTS OF MANAGEMENT AND DIRECTORS
The Governance Committee shall direct the operation of the Company through
management in accordance with the following Requirements of Management and
Directors in order to enhance Board effectiveness:
<TABLE>
<CAPTION>
BOARD REQUIREMENTS FLEMING REQUIREMENTS
OF MANAGEMENT OF DIRECTORS
------------------ --------------------
<S> <C>
- - Strong principled and ethical - Represent and act in the best
leadership. interests of the stockholders.
- - Develop strategies to deliver strong - Critique and approve strategic and
market franchises and build operating plans.
stockholder wealth over the long term.
- - Recommend appropriate strategic and - Select, motivate, evaluate, and
operating plans. compensate the CEO and all senior
officers.
- - Maintain effective control of - Good understanding of strategies and
operations. the business.
- - Measure performance against peers. - Review succession planning and
management development. (For
independent directors only.)
- - Assure sound succession planning and - Advise and consult on key
management development. organizational changes.
- - Sound organizational structure. - Careful study of Board materials and
issues.
- - Inform the Board regularly regarding - Active, objective and constructive
the status of key initiatives. participation at meetings of Board
and Committees.
- - No surprises. - Assistance in representing Fleming to
the outside world.
- - Board meetings which are well-planned, - Counsel on corporate issues.
allow meaningful participating, and
provide for timely resolution of
issues.
- - Advance Board materials which contain - Good understanding of general
the right amount of information and economic trends and corporate
are received sufficiently in advance governance.
of meetings.
</TABLE>
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<PAGE> 54
ATTACHMENT II
BOARD EVALUATION QUESTIONNAIRE
This questionnaire shall be provided to each independent director on or
about January 1 of each year and such directors shall complete the questionnaire
by entering a number grade from 1 to 5 (where 1 is considered "poor" and 5 is
considered "excellent") and written comments, where appropriate, as to each of
the following 14 standards.
<TABLE>
<CAPTION>
QUESTION POINTS
-------- ------
<C> <S> <C>
1. The Board knows and understands the
Company's vision, strategic precepts,
strategic plan and operating plan.
------
2. The Board reflects its understanding of
the Company's vision, strategic
precepts, strategic plan, and operating
plan in its discussions and actions on
key issues throughout the year.
------
3. Board meetings are conducted in a manner
which ensures open communication,
meaningful participation, and timely
resolution of issues.
------
4. Board materials contain the right amount
of information, and Board members
receive their materials sufficiently in
advance of meetings.
------
5. Board members are diligent in preparing
for meetings.
------
6. The Board reviews and adopts an annual
operating budget and regularly monitors
performance against it throughout the
year.
------
7. The Board monitors the Company's income
statement, balance sheet, and cash flow.
------
8. The Board reviews and adopts an annual
capital budget and receives regular
written or oral reports of performance
against it throughout the year.
------
9. In tracking Company performance, the
Board regularly considers the
performance of peer companies.
------
10. The Board reviews on at least an annual
basis the performance of the CEO through
the Compensation Committee.
------
11. On an annual basis, the Board and/or the
Compensation Committee will review the
performance and ethics of the senior
officers.
------
12. The correlation between executive pay
and Company performance will be reviewed
on an annual basis by the Board and/or
the Compensation Committee.
------
13. On an annual basis, the independent
directors shall review the succession
plans for the CEO and key senior
management.
------
14. Each individual director standing for
reelection will receive a performance
review prior to his/her nomination from
those members of the Governance
Committee who are not standing for
re-election. This assures that on at
least an every three-year basis each
director receives feedback from his
fellow directors on his/her performance
as a director.
------
</TABLE>
C-5
<PAGE> 55
The Governance Committee will analyze the numerical ratings and comments in
detail and develop recommendations to enhance Board effectiveness. The Chairman
of the Governance Committee shall present the assessments and recommendations to
the full Board annually at its meeting immediately prior to the mailing of the
proxy materials. The Governance Committee will oversee the process of
implementing recommendations.
C-6
<PAGE> 56
P FLEMING COMPANIES, INC.
R ANNUAL MEETING OF SHAREHOLDERS
O APRIL 30, 1997
X 10:00 A.M.
Y
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., to be held at the National Cowboy Hall
of Fame, 1700 N.E. 63rd Street, Oklahoma City, Oklahoma, on April 30, 1997 at
10:00 a.m., or at any adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK
THE APPROPRIATE BOXES, SIGN, DATE, AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
<PAGE> 57
Please mark your
[ x ] votes as in this
example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3.
FOR WITHHOLD
all nominees authority to vote
listed below for all nominees
listed below
1. Election of [ ] [ ]
Directors
Nominees: Carol B. Hallett and Guy A. Osborn
(for three-year terms)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.)
- -----------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the Fleming Companies, Inc.
Associate Stock Purchase Plan [ ] [ ] [ ]
3. Ratification of Deloitte & Touche LLP [ ] [ ] [ ]
as independent auditors for 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 4.
4. Approval of Shareholder Proposal FOR AGAINST ABSTAIN
relating to the Company's Preferred
Share Purchase Rights.
[ ] [ ] [ ]
THE PROXY WILL VOTE IN HIS 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, "FOR" Proposals 2 and 3 and "AGAINST" Proposal 4. The
board of directors recommends a vote "FOR" each of Proposals 1, 2, and 3.
I RESERVE THE RIGHT TO REVOKE THIS PROXY AT ANY TIME BEFORE THE EXERCISE
THEREOF.
SIGNATURE(S) DATE
-------------------------------------------- -----------
SIGNATURE(S) DATE
-------------------------------------------- -----------
Please sign exactly as name appears above, indicating official position or
representative capacity. FOR JOINT ACCOUNTS EACH OWNER SHOULD SIGN.
[ ] MARK HERE IF YOU
PLAN TO ATTEND THE
MEETING.
<PAGE> 58
P FLEMING COMPANIES, INC.
R ANNUAL MEETING OF SHAREHOLDERS, APRIL 30, 1997
O SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
Y
TO: BANCOKLAHOMA TRUST CO., TRUSTEE FOR THE FLEMING COMPANIES, INC., EMPLOYER
STOCK OWNERSHIP PLAN AND FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE FOR THE
FLEMING COMPANIES, INC. CONSOLIDATED SAVINGS PLUS PLAN.
I hereby instruct the Trustees to vote all shares of Fleming Companies, Inc.
Common Stock, which are credited to my account at the Annual Meeting of
Shareholders of said Corporation to be held April 30, 1997 and any adjournments
thereof, on the matters specified below and on the reverse side of this form,
as indicated thereon.
The FSOP Trustee shall in its sole discretion vote shares of company stock for
which it has received no directions from the participant. The Consolidated
Savings Plus Trustee shall not vote shares of company stock for which no
direction has been received from the participant. Your instructions to the
Trustees will not be divulged or revealed to anyone at Fleming Companies, Inc.
PLEASE MARK, DATE, SIGN AND RETURN THE FORM IN THE ENCLOSED BUSINESS REPLY
ENVELOPE.
SEE REVERSE
SIDE
<PAGE> 59
Please mark your
[ x ] votes as in this
example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, AND 3.
FOR WITHHOLD
all nominees authority to vote
listed below for all nominees
listed below
1. Election of [ ] [ ]
Directors
Nominees: Carol B. Hallett and Guy A. Osborn
(for three-year terms)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.)
- -----------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the Fleming Companies, Inc.
Associate Stock Purchase Plan [ ] [ ] [ ]
3. Ratification of Deloitte & Touche LLP [ ] [ ] [ ]
as independent auditors for 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 4.
4. Approval of Shareholder Proposal FOR AGAINST ABSTAIN
relating to the Company's Preferred
Share Purchase Rights.
[ ] [ ] [ ]
THE PROXY WILL VOTE IN HIS 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, "FOR" Proposals 2 and 3 and "AGAINST" Proposal 4. The
board of directors recommends a vote "FOR" each of Proposals 1, 2, and 3.
I RESERVE THE RIGHT TO REVOKE THIS PROXY AT ANY TIME BEFORE THE EXERCISE
THEREOF.
SIGNATURE(S) DATE
-------------------------------------------- -----------
SIGNATURE(S) DATE
-------------------------------------------- -----------
Please sign exactly as name appears above, indicating official position or
representative capacity. FOR JOINT ACCOUNTS EACH OWNER SHOULD SIGN.
[ ] MARK HERE IF YOU
PLAN TO ATTEND THE
MEETING.
