<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:
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<TABLE>
<S> <C>
6301 Waterford Boulevard
P.O. Box 26647
[FLEMING COMPANIES, INC. 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 Thursday, May 14, 1998, 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 2001.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for 1998.
3. To consider a shareholder proposal relating to declassification of the
board of directors.
4. To transact other business as may properly come before the meeting or
any adjournment.
The accompanying proxy statement contains complete details on the proposals
and other matters. Shareholders of record as of March 16, 1998, are entitled to
notice of, and to vote at, the meeting. The company's annual report, including
financial statements for the year ended December 27, 1997, 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, PLEASE COMPLETE AND RETURN THE ENCLOSED BUSINESS
REPLY POSTCARD TO REQUEST AN ADMISSION TICKET, WHICH 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 73126-0647. 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 24, 1998
<PAGE> 3
[FLEMING COMPANIES, INC. LOGO]
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PROXY STATEMENT
This proxy statement, which is being mailed to shareholders on or about
March 24, 1998, is furnished in connection with the solicitation of proxies by
the board of directors for use at the annual meeting of shareholders on May 14,
1998, 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
16, 1998, are entitled to vote. As of that date, 38,258,464 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. Effective with its October 1997 meeting, the board of directors increased
its number from eight to nine and elected David A. Rismiller to fill the vacancy
created by such increase, designating him to be a member of the class of
directors whose terms expire at the annual meeting of shareholders in the year
2000. At the end of its October 1997 meeting, Howard H. Leach (a director since
1974) retired from the board, which then decreased its number from nine to
eight. Effective with the February 24, 1998 meeting,
2
<PAGE> 4
the board increased its number to nine and elected Alice M. Peterson to fill the
vacancy, designating her to be a member of the class of directors whose terms
expire at the 1999 annual meeting of shareholders. The current board is
comprised of three classes with three directors in each class with terms
expiring in 1998, 1999 and 2000.
The board of directors has nominated two persons for election as directors
to serve for three-year terms expiring in 2001 or until their successors are
elected and qualified. John A. McMillan, whose term expires in 1998, has elected
to retire and informed the board he would not stand for re-election after
serving as a board member for six years. Accordingly, the board of directors, at
its February meeting, decreased its number from nine to eight effective upon the
expiration of Mr. McMillan's term at the annual meeting. 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 of these nominees become
unavailable for election, the proxy will be voted for substitute nominees. If
the 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,
the appointment of the auditors and Proposal No. 3, 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 and 3. Broker non-votes will have
no effect on the outcome of any of the proposals.
3
<PAGE> 5
NOMINEES FOR DIRECTOR TERMS EXPIRING IN 2001
<TABLE>
<S> <C>
Name (age), year first became a director
[FLEMING DIR. ROBERT E. STAUTH (53), 1993
PHOTO/STAUTH] Chairman and chief executive officer. Mr. Stauth has been
associated with Fleming for a total of 25 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.; Food Distributors
International, for which he is 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
industry relations committee and the nominating committee;
the Oklahoma State Chamber of Commerce; the State Fair Board
of Oklahoma and the Oklahoma Business Roundtable.
Additionally, he is on the Advisory Board of the University
of Oklahoma's College of Business Administration.
[FLEMING DIR. ARCHIE R. DYKES (67), 1981
PHOTO/DYKES] Chairman and chief executive officer of Capital City
Holdings, Inc. (a venture capital organization). He is a
director of Whitman Corp., Hussman International
Corporation, Midas, Inc. 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 corporate governance committee and member of
the compensation and organization committee.
</TABLE>
4
<PAGE> 6
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<TABLE>
<S> <C>
Name (age), year first became a director
[FLEMING DIR. JACK W. BAKER (60), 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. He 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 nominating committee and the corporate
governance committee.
[FLEMING DIR. EDWARD C. JOULLIAN III (68), 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 nominating committee and member of the audit
and finance committee.
[FLEMING DIR. ALICE M. PETERSON (45), 1998
PHOTO/PETERSON] Vice President and treasurer of Sears, Roebuck and Co. (a
company providing apparel, home and automotive products and
services.) She joined that company in 1989 as corporate
director of finance, became managing director -- corporate
finance in 1992, and vice president -- treasurer in 1993.
Prior to joining Sears, Ms. Peterson served as assistant
treasurer of Kraft, Inc. from 1988 to 1989. From 1984 to
1988, Ms. Peterson served in a variety of financial
positions for PepsiCo, Inc., where her last position held
was director of capital markets. Ms. Peterson is a member of
the Conference Board's Council of Corporate Treasurers and
the Financial Executives Institute's Committee on Corporate
Finance. She serves on the Board of 360 Communications, the
Ravinia Festival Board of Trustees, and the Alumni Board of
Vanderbilt's Owen Graduate School of Management.
Member of the compensation and organization committee and
the nominating committee.
</TABLE>
5
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<TABLE>
<S> <C>
Name (age), year first became a director
[FLEMING DIR. CAROL B. HALLETT (60), 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.
Chairman of the audit and finance committee and member of
the corporate governance committee.
[FLEMING DIR. GUY A. OSBORN (62), 1992
PHOTO/OSBORN] Retired as chairman of Universal Foods Corp. in April 1997.
He joined that company in 1971, became president in 1984 and
chairman in 1990. He serves on the boards of Wisconsin Gas
Co., WICOR, Inc., Boys and Girls Club of Greater Milwaukee
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.
[FLEMING DIR. DAVID A. RISMILLER (60), 1997
PHOTO/RISMILLER] Chairman, president, and chief executive officer of America
First Financial Institutions Management, L.L.C. (an
investment partnership), since 1997. He served as chairman
and chief executive officer of FirsTier Financial Inc. from
1989 until the company's merger with FirstBank in 1996. From
1988 to 1989, he served as president of FirsTier Financial
Inc. and from 1984 to 1988, he served as chairman and chief
executive officer of Commerce Bank of Kansas City, N.A. From
1992 to 1995, Mr. Rismiller served as the Federal Reserve
tenth district representative to the Federal Advisory
Council and from 1979 to 1997 he served as a member of the
Bankers Roundtable. He serves as an executive committee
member and director of the Omaha Chamber of Commerce;
director and executive committee member of Woodmen Accident
& Life Insurance Co.; governor, executive committee member,
treasurer and finance committee chairman of Joslyn Art
Museum; former governor, treasurer, and finance committee
chairman of the Knights of Ak-Sar-Ben; director of Omaha
Zoological Society; dean's council member, Ohio State
University College of Business; past president, director and
governor of American Royal Association; trustee of Midwest
Research Institute; and member of U.S.A.F. Strategic Command
Consultation Committee.
Member of the audit and finance committee and the corporate
governance committee.
</TABLE>
6
<PAGE> 8
THE BOARD OF DIRECTORS
Meetings of Directors. During the past year, the board of directors had
five regular and 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.
Compensation of Directors. Effective as of January 1, 1997, the company's
Directors' Stock Equivalent Plan was amended and renamed the Amended and
Restated Directors' Compensation and Stock Equivalent Unit Plan (the "Directors'
Plan"). Under the Directors' Plan for fiscal 1997, each nonmanagement director
received (i) an annual retainer of $16,000, plus a fee of $1,000 for each board
and committee meeting attended and an additional $250 for each committee meeting
chaired, and (ii) an award of 1,000 stock equivalent units. The stock equivalent
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. The cash
compensation paid under the Directors' Plan together with the value of the stock
equivalent units yielded actual annual compensation for 1997 of approximately
$40,000 for each nonmanagement director except for Mr. Rismiller and Ms.
Peterson, who joined the board in October 1997 and February 1998, respectively.
Effective January 1, 1998, the Directors' Plan was amended to increase the
number of stock equivalent units annually awarded to each nonmanagement director
by 500, and each nonmanagement director was awarded 1,500 stock equivalent units
under the Directors' Plan.
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 three times during 1997.
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<PAGE> 9
Compensation and Organization Committee. The committee oversees the
company's compensation and benefit policies and programs. The committee reviews
the objectives, structure, cost and administration of major compensation and
benefit policies and programs. It annually reviews officers' salaries, stock
options, and other management incentives, and administers the company's stock
option and management incentive plans. The stated policy of the committee is to
motivate the company's executive officers and other associates to enhance the
company's financial performance by focusing on specific business objectives. It
also makes recommendations regarding the selection of the chief executive
officer. The committee met five times during 1997.
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
six years, are attached to this proxy statement as Exhibits A-1 and A-2,
respectively. The committee met twice during 1997. 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 in 1997 and did not meet in 1997. Attached to
this proxy statement as Exhibit B 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 manages 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 24, 1998 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........................ 108,258(3) --
Jack W. Baker........................... 487,468(4) --
Archie R. Dykes......................... 4,157(5) 4,564
Carol B. Hallett........................ 1,845 3,706
Edward C. Joullian III.................. 6,000(6) 4,564
John A. McMillan........................ 3,000 4,564
Guy A. Osborn........................... 3,000 4,564
Alice M. Peterson....................... -- 1,500
David A. Rismiller...................... 1,000 1,500
William J. Dowd......................... 42,000(7) --
E. Stephen Davis........................ 59,714(8) --
Harry L. Winn, Jr....................... 30,200(9) --
Thomas L. Zaricki....................... 20,144(10) --
------- ------
All directors and executive officers as
a group (22).......................... 907,208(11) 24,962
======= ======
</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% of the total outstanding
shares for each person listed, except for Mr. Baker whose ownership
constitutes 1.27% of the total outstanding shares. The shares listed for all
directors and executive officers as a group constitute 2.37% of the total
outstanding shares.
(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 15,758 shares owned jointly by Mr. Stauth and his wife with whom
he shares voting and investment power, 68,500 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. Excludes 180,000
shares awarded under the 1996 Stock Incentive Plan which are held by the
trustee of the company's Executive Deferred Compensation Trust (the
"Deferred Trust") as to which Mr. Stauth has neither voting nor investment
power. See "Summary Compensation Table -- Restricted Stock Awards" and
"Long-Term Incentive Awards."
(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, 4,600
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 3,527 shares owned directly by Mr. Dykes for which he has sole
voting and investment power, and 630 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 other general
partners.
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<PAGE> 11
(7 )Consists of 26,000 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.
(8 )Consists of 7,214 shares owned directly by Mr. Davis for which he has sole
voting and investment power, 35,500 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. Excludes 100,000 shares awarded under the 1990 Stock
Incentive Plan which are held by the trustee of the Deferred Trust as to
which Mr. Davis has neither voting nor investment power. See "Summary
Compensation Table -- Restricted Stock Awards" and "Long-Term Incentive
Awards."
(9 )Consists of 1,100 shares owned directly by Mr. Winn for which he has sole
voting and investment power, 20,750 shares under options presently
exercisable, 350 shares owned by his wife 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. Excludes
60,000 shares awarded under the 1996 Stock Incentive Plan which are held by
the trustee of the Deferred Trust as to which Mr. Winn has neither voting
nor investment power. See "Summary Compensation Table -- Restricted Stock
Awards" and "Long-Term Incentive Awards."
(10 )Consists of 7,644 shares owned directly by Mr. Zaricki for which he has
sole voting and investment power, 8,500 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. Excludes 20,000
shares awarded under the 1996 Stock Incentive Plan which are held by the
trustee of the Deferred Trust as to which Mr. Zaricki has neither voting
nor investment power. See "Summary Compensation Table -- Restricted Stock
Awards" and "Long-Term Incentive Awards."
(11 )Includes 453,910 shares for which directors and executive officers have
sole voting and investment power, 105,898 shares for which they share
voting and investment power with others, 253,800 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. Excludes 400,000 shares awarded under the 1990 and 1996 Stock
Incentive Plans held by the trustee of the Deferred Trust as to which they
have neither voting nor investment 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 15, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
Goldman, Sachs & Co. and
The Goldman Sachs Group, L.P.
85 Broad Street
New York NY 10004............................. 4,571,381(1) 11.95%
Crabbe Huson Group, Inc.
121 S.W. Morrison
Suite 1400
Portland, Oregon 97204........................ 3,642,300(2) 9.52%
Dodge & Cox
One Sansome St., 35th Floor
San Francisco, CA 94104....................... 2,079,066(3) 5.43%
</TABLE>
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(1) Based on a Schedule 13G dated February 14, 1998, Goldman, Sachs & Co. and
The Goldman Sachs Group, L.P. share the power to vote 4,229,481 shares and
to dispose of all shares.
(2 )Based on a Schedule 13G dated February 2, 1998, Crabbe Huson Group, Inc. has
shared power to vote and to dispose of all shares.
(3 )Based on a Schedule 13G dated February 12, 1998, Dodge & Cox has shared
power to vote 9,600 shares, sole power to vote 1,813,166 shares and sole
power to dispose of all shares.
11
<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 27, 1997, December 28, 1996 and December 30,
1995.
<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($) ($)(2) ($)(3) (#) ($)(4)
------------------ ---- --------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert E. Stauth 1997 600,000 684,612(1) 288 1,518,750 30,000 2,364,000
Chairman and Chief 1996 600,567 -- 288 -- 60,000 --
Executive Officer 1995 588,462 -- 288 -- -- --
William J. Dowd 1997 474,718 451,654(1) 570 -- 20,000 --
President and Chief 1996 475,144 -- 288 -- 44,000 --
Operating Officer 1995 223,781 -- 72 423,000 60,000 --
E. Stephen Davis 1997 310,153 357,571(1) 570 843,750 -- 1,000,333
Executive Vice 1996 301,140 -- 570 -- 30,000 --
President
Operations 1995 283,846 -- 288 -- -- --
Harry L. Winn, Jr. 1997 311,769 299,518(1) 288 506,250 15,000 243,671
Executive Vice 1996 294,576 -- 288 -- 30,000 --
President
and Chief Financial 1995 291,846 -- 120 -- -- --
Officer
Thomas L. Zaricki 1997 267,963 390,099(1) 288 168,750 -- 274,260
Senior Vice President 1996 257,345 -- 288 -- 10,000 --
Retail Operations 1995 243,743 91,098 288 -- -- --
</TABLE>
- ---------------
(1) Bonuses were awarded pursuant to the terms of the company's Economic Value
Added Incentive Bonus Plan (the "EVA(R) Plan"). Under the EVA(R) Plan, 67%
of the bonus awarded for fiscal 1997 was actually paid to the named
executive officer and 33% was credited to his Bonus Bank and will constitute
his Beginning Bonus Bank Balance for the payment of bonuses, if any, for
fiscal 1998. Such Bonus Bank Balances are subject to reduction or
elimination in future years if Target EVA(R) is not attained in accordance
with the terms of the EVA(R) Plan. In addition, such Bonus Bank Balances are
subject to forfeiture in the event the named executive officer voluntarily
resigns or his employment is terminated with cause. See "Report of
Compensation Committee -- Bonuses."
(2 )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.
(3 )The restricted stock awards reported in this column were made under the
company's 1990 Stock Incentive Plan and its 1996 Stock Incentive Plan. The
awards for Messrs. Stauth (90,000 shares), Davis (50,000 shares), Winn
(30,000 shares), and Zaricki (10,000 shares) were made on November 1, 1997
in connection with the termination of the company's Supplemental Retirement
Income Plan (the "SRP"). The market price per share of the company's common
stock on the date of grant was $16.8750. The shares awarded to Messrs.
Stauth, Winn and Zaricki vest over four years at the rate of 25% per year.
Mr. Davis' shares vest over three years at the rate of 33 1/3%
- ---------------
EVA(R) is a registered trademark of Stern Stewart & Co.
12
<PAGE> 14
per year. These shares of restricted stock are held by the trustee of the
Deferred Trust, who has voting and investment power with respect to the
shares. The executive officers have no attributes of ownership with respect
to such shares until they are distributed. Vested shares will not be
distributed until the executive officer terminates employment with the
company and all of the following conditions have been satisfied: (i) the
completion of at least two years of continuous employment from November 1,
1997, (ii) satisfaction of the "Rule of 70" where his age plus completed
years of employment service with the company equals 70 or more, and (iii)
the attainment of age 55 with at least ten years of service with the company
(collectively, the "Distribution Events"). The shares will also vest and
will be distributed upon termination of the executive officer's employment
due to death or disability or upon a change of control. Unearned restricted
stock will be forfeited after four years in the case of Messrs. Stauth, Winn
and Zaricki and three years in the case of Mr. Davis. See "Termination of
Employment and Change in Control Arrangements -- Other Arrangements" and
"Long-Term Incentive Awards."
Mr. Dowd's award was made on August 1, 1995 and the market price per share
on the date of grant was $26.4375. These restricted shares vest in 20%
increments over a ten-year period in the event the price of the company's
common stock reaches certain specified target prices. Unearned restricted
stock will be forfeited on July 31, 2005.
Dividends on restricted stock awarded to Mr. Dowd are accrued and paid when
the vesting requirements are met. Dividends on the shares of restricted
stock awarded to the other named executive officers will be accrued but not
paid until the shares are distributed. As of the last day of fiscal 1997,
there were held in escrow for Mr. Stauth 204,000 restricted shares with a
value of $2,817,750, Mr. Dowd 16,000 restricted shares with a value of
$221,000, Mr. Davis 108,000 restricted shares with a value of $1,491,750,
Mr. Winn 68,000 restricted shares with a value of $939,250 and Mr. Zaricki
24,000 restricted shares with a value of $331,500 (based on the market price
per share of $13.8125 on December 26, 1997). See "Long-Term Incentive
Awards."
(4) Effective November 1, 1997, the Compensation and Organization Committee
terminated the SRP with respect to all currently employed participants
(including the named executive officers) and adopted the Executive Past
Service Benefit Plan (the "Past Service Plan"). Mr. Dowd is not a
participant in the SRP or the Past Service Plan. Amounts reported in this
column represent the value of accounts established for the benefit of
Messrs. Stauth, Davis, Winn and Zaricki pursuant to the Past Service Plan.
Such amounts were determined by calculating for each the present value of
the amount that would have been payable under the SRP, assuming that each
had retired as of November 1, 1997 and was fully vested. Payment to Messrs.
Stauth, Davis, Winn and Zaricki under the Past Service Plan will be made in
a method elected by the executive officer at the time he was selected for
participation in the plan and will commence upon the occurrence of the
Distribution Events or termination of employment due to death, disability,
or upon or in anticipation of a change of control of the company. See
"Termination of Employment and Change in Control Arrangements -- Past
Service Plan."
13
<PAGE> 15
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. Decisions regarding salary
for fiscal 1997, stock option grants and restricted stock awards were made at
meetings at which 1997 Committee members Osborn, Leach and McMillan were
present. Decisions regarding bonuses for fiscal 1997 were made by the Committee
at its meeting held in February 1998 at which 1998 Committee members Osborn and
Dykes were present. Mr. Leach retired as a director and as a member of the
Committee following the board meeting in October 1997. Ms. Peterson, who became
a member of the Committee after its meeting in February 1998, did not
participate in any decisions with respect to 1997 compensation.
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 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 1997, 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, after considering recommendations of an outside consultant, 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
14
<PAGE> 16
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 EVA(R) Plan. The EVA(R) Plan replaced the Fleming
Companies, Inc. Incentive Compensation Program (the "FICP") for the executive
officers and other corporate officers (21 persons) currently participating in
the EVA(R) Plan.
The EVA(R) Plan is structured around an economic value added ("EVA")
concept, a financial measurement system or tool, expressed as a formula. EVA(R)
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(R) 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(R) 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(R) and the prior year's Target EVA(R) 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(R) and the Target EVA(R) 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(R) and the
Target EVA(R) 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(R) Plan, the payout schedule will be: 67%, 50%, 40% and 33%, respectively,
of the Available Bonus Bank Balance and will remain 33% after year four. The
Committee can amend the payout percentage for future years. Although 1997 would
have technically represented 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 were
15
<PAGE> 17
declared under the plan for 1997, 1997 would represent year one for all current
participants in the plan and the payout percentage would be 67% of the Available
Bonus Bank Balance in light of the fact that a bonus has never been paid under
the EVA(R) Plan. A Final Declared Bonus may be negative when Target EVA(R) 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.
Bonus Bank Balances will be forfeited if the participant voluntarily resigns or
his employment is terminated with cause.
Pursuant to the terms of the EVA(R) Plan, the Committee can reduce or
eliminate the payment of any bonus under the EVA(R) Plan. The Committee 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. Adjusted earnings
from operations for fiscal 1997 were $1.32 per share.
Restricted Stock and Stock Options. As described in footnote three to the
Summary Compensation Table above, pursuant to the 1990 Stock Incentive Plan and
the 1996 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 or service related criteria. The
Committee believes that restricted stock awards build stock ownership and
provide a long-term focus since the stock is restricted from being sold,
transferred, or assigned and is forfeitable until vested. At February 1, 1998,
there were 7,112 shares available for awards of restricted stock under the 1990
Stock Incentive Plan and no shares were available for awards under the 1996
Stock Incentive Plan. Awards of restricted stock were made to the named
executive officers in fiscal 1997 in connection with termination of their
participation in the SRP. See "Summary Compensation Table -- Restricted Stock
Awards" and "Long-Term Incentive Awards."
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, 1998, there were 243,350 options available for grants
under the 1990 Stock Option Plan and 130,000 options available for grants under
the 1996 Stock Incentive Plan to executive officers and other key associates.
Stock option grants were made to four executive officers in 1997, including
three of the named executive officers. See "Stock Option Information -- Option
Grants."
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. The CEO's bonus was
determined in accordance with the EVA(R) Plan. His Target Bonus was $540,000 and
his Bonus Multiple was 1.268 yielding a $684,612 Initial Declared Bonus.
However, his actual bonus paid was $458,650 (67%) and $225,922 (33%) was
credited to his Bonus Bank and is subject to forfeiture. The CEO also received
an option to purchase 30,000 shares of company stock. This grant was made to
16
<PAGE> 18
increase his stock ownership in the company. His 180,000 share restricted stock
award was made in connection with the termination of his participation in the
SRP. The $2,364,000 amount reported with respect to the Past Service Plan has
not been paid to the CEO, but represents the value of an account established for
his benefit to which he will be entitled upon termination of his employment with
the company. See "Summary Compensation Table -- Footnote 4" and "Termination of
Employment and Change in Control Arrangements -- Past Service Plan."
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Although no executive officer's total compensation for fiscal 1997 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 Archie R. Dykes
Howard H. Leach John A. McMillan
</TABLE>
17
<PAGE> 19
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.
[FLEMING COMPANIES, INC. GRAPH]
<TABLE>
<CAPTION>
Fleming
Measurement Period Companies,
(Fiscal Year Covered) Inc. S&P 500 Peer Group
<S> <C> <C> <C>
1992 100 100 100
1993 82 110 111
1994 80 112 89
1995 75 153 111
1996 64 189 111
1997 50 252 140
</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 1992.
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
During fiscal 1997, Guy A. Osborn served as chairman, and Howard H. Leach
and John A. McMillan served as members of the Compensation and Organization
Committee. No executive officer of the company has any relationship reportable
under the Compensation Committee Interlock regulations.
18
<PAGE> 20
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 27, 1997. Messrs. Davis and Zaricki are omitted from the table
since they did not receive any option grants during the last fiscal year.
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 $(3)
---- ---------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert E. Stauth..................... 30,000 37.5 17.50 02-23-07 307,500
William J. Dowd...................... 20,000 25.0 17.50 02-23-07 205,000
Harry L. Winn, Jr.................... 15,000 18.8 17.50 02-23-07 153,750
</TABLE>
- ---------------
(1 )The listed options are exercisable in four twenty-five percent (25%)
increments on the first through fourth anniversaries of the date of grant.
(2 )The vesting of all listed options accelerates in the case of a change of
control of the company. See "Termination of Employment and Change in Control
Arrangements -- Other Arrangements."
(3 )Based on Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
assumptions as to variables such as risk free interest rate, stock price
volatility and future dividend yield as follows: the options are assumed to
be exercised at the end of a ten year term; yield volatility of 39%; annual
dividend yield of 0.5% and a risk free rate of return of 6.25%.
19
<PAGE> 21
Option Exercises. The following table sets forth information regarding the
value as of the fiscal year-end of any unexercised options held by the named
executive officers. No stock options were exercised by any of the named
executive officers during the fiscal year ended December 27, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(1)
-------------- -------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ -------------- -------------
<S> <C> <C> <C> <C>
Robert E. Stauth................ -- -- 68,500/121,500 0/0
William J. Dowd................. -- -- 26,000/ 98,000 0/0
E. Stephen Davis................ -- -- 35,500/ 40,500 0/0
Harry L. Winn, Jr............... -- -- 20,750/ 54,250 0/0
Thomas L. Zaricki............... -- -- 8,500/ 16,500 0/0
</TABLE>
- ---------------
(1) The market price of the company's common stock at 1997 fiscal year-end was
$13.8125 per share.
20
<PAGE> 22
LONG-TERM INCENTIVE AWARDS
The following table sets forth information concerning certain restricted
stock awards to the named executive officers during the fiscal year ended
December 27, 1997, which qualify as long-term incentive compensation due to
their performance vesting requirements. Mr. Dowd is omitted from the table since
he did not receive a restricted stock award during the last fiscal year.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR OTHER
SHARES, PERIOD UNTIL
UNITS OR OTHER MATURATION OR
NAME RIGHTS (#)(1) PAYOUT
---- ---------------- --------------------
<S> <C> <C>
Robert E. Stauth........................................ 90,000 (1)
E. Stephen Davis........................................ 50,000 (1)
Harry L. Winn, Jr....................................... 30,000 (1)
Thomas L. Zaricki....................................... 10,000 (1)
</TABLE>
- ---------------
(1) The awards reported are shares of restricted stock awarded under the 1990
Stock Incentive Plan and the 1996 Stock Incentive Plan. These awards were
made on November 1, 1997 in connection with the termination of the
recipient's participation in the SRP. They will vest in 25% increments in
the event the price of the company's common stock reaches certain specified
target prices over four years for Messrs. Stauth, Winn and Zaricki and in
33 1/3% increments over three years for Mr. Davis. Except for the
performance vesting component, these restricted stock awards have the same
terms as those reported in 1997 in the Summary Compensation Table. See
"Summary Compensation Table -- Footnote 3".
21
<PAGE> 23
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 Executive Deferred Compensation Plan (the "Excess Plan"), 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.......... $ 41,675 $ 62,500 $ 83,350 $104,188 $125,000 $137,500 $150,000
300,000.......... 50,010 75,000 100,020 125,025 150,000 165,000 180,000
350,000.......... 58,345 87,500 116,690 145,863 175,000 192,500 210,000
400,000.......... 66,680 100,000 133,360 166,700 200,000 220,000 240,000
450,000.......... 75,015 112,500 150,030 187,538 225,000 247,500 270,000
500,000.......... 83,350 125,000 166,700 208,375 250,000 275,000 300,000
550,000.......... 91,685 137,500 183,370 229,213 275,000 302,500 330,000
600,000.......... 100,020 150,000 200,040 250,050 300,000 330,000 360,000
650,000.......... 108,355 162,500 216,710 270,888 325,000 357,500 390,000
700,000.......... 116,690 175,000 233,380 291,725 350,000 385,000 420,000
750,000.......... 125,025 187,500 250,050 312,563 375,000 412,500 450,000
800,000.......... 133,360 200,000 266,720 333,400 400,000 440,000 480,000
850,000.......... 141,695 212,500 283,390 354,238 425,000 467,500 510,000
</TABLE>
The estimated number of years of credited service for each of the named
executive officers is as follows: Mr. Stauth, 21; Mr. Dowd, 3; Mr. Davis, 37;
Mr. Winn, 4; and Mr. Zaricki, 4.
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. Since
Messrs. Stauth, Davis, Winn and Zaricki are participants in the Excess Plan as
well as the Pension Plan, amounts payable to them are calculated in accordance
with the Excess Plan, which provides for computation of benefits based on
"Annual Final Compensation," which is defined under the Excess Plan to be
average annual total compensation earned by the participant for the three
consecutive calendar years of his employment immediately prior to his retirement
date. Benefits under the Excess Plan are subject to offset for amounts payable
under the Pension
22
<PAGE> 24
Plan. As of December 27, 1997, Annual Final Compensation was as follows for the
named executive officers: Mr. Stauth $699,998; Mr. Davis $337,338; Mr. Winn
$327,607; and Mr. Zaricki $316,443. Mr. Dowd does not participate in the Excess
Plan; but he is a participant in the Pension Plan. As of December 27, 1997, his
covered compensation under the Pension Plan was $386,699.
Prior to November 1997, the named executive officers, except for Mr. Dowd
who is covered by a separate agreement (the "Dowd Agreement"), participated in
the SRP. In view of its concerns regarding the continuing expense associated
with the SRP, the Committee, effective November 1, 1997, terminated the SRP for
all currently employed participants (the "Active SRP Participants") and adopted
the Excess Plan. See "Summary Compensation Table -- Footnotes 3 and 4." Its
decision to terminate the SRP, freeze the amounts then attributable to the
Active SRP Participants, make the restricted stock grants and adopt the Past
Service Plan and the Excess Plan was based primarily on the fact that such
actions yielded an overall reduction in financial expense. Its decision was also
designed to cause the compensation of the Active SRP Participants to be aligned
as nearly as possible with the interests of the company's shareholders. See
"Summary Compensation Table -- Footnote 3." The Excess Plan is a defined benefit
supplementary plan which provides retirement income, offset by the executive's
Pension Plan benefit, equal to the existing pension formula under the Pension
Plan (currently 1.667% times the years of service up to 30 years and 1% times
the years of service thereafter) without considering the limitations of Sections
415 and 401(a)(17) of the Code, which limit the amounts of benefits and
includable compensation for an executive under the Pension Plan. The Excess Plan
covers all of the Active SRP Participants. Future executives may be added as
participants under the Excess Plan. Payments under the Excess Plan are made
following termination of employment due to retirement (age 55 or later), death,
disability or upon or in anticipation of a change of control of the company.
23
<PAGE> 25
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 annual bonus for the last full fiscal year prior to his
termination or, if higher, the annual bonus paid for the last full fiscal year
prior to the change of control (the "Recent Bonus"); (iii) the product obtained
by multiplying 2.99 times the sum of the Highest Base Salary and the Recent
Bonus; and (iv) any amounts previously deferred by the executive (plus any
accrued interest thereon) and any accrued vacation pay. In addition, for the
remainder of the employment period or such longer period as any plan or policy
may provide, the executive shall also be entitled to participate in all plans
and continue all benefits at least equal to those he would have received had he
not been terminated. Any such payments to be received by the executive shall be
"grossed up" to cover any excise tax, interest or penalties imposed under the
Code. The employment agreements also provide for indemnification from the
company to the executive and for officers' and directors' insurance coverage for
the executive for a period of five years following the termination date. For a
period of 30 days following the first year after a change of control, the
executive can terminate his employment for any reason and receive all the
benefits of the agreement as if he had terminated for good reason. Under the
employment agreements, assuming a change of control on December 27, 1997, 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, $3,840,990; Mr. Dowd, $2,770,695; Mr.
Davis, $2,002,017; Mr. Winn, $1,837,409; and Mr. Zaricki, $1,973,696. Prior to
entering into the employment agreements, the foregoing officers, except for
Messrs. Winn and Dowd,
24
<PAGE> 26
had been parties to severance agreements with the company, and the employment
agreements replaced the severance agreements.
Supplemental Trust. The company has entered into a Supplemental Income
Trust (the "Supplemental Trust"). The board of directors has empowered the
Committee in its sole discretion to fund the Supplemental Trust as it deems
appropriate from time to time in order to satisfy the company's obligations (i)
to former associates receiving SRP benefits, (ii) under the Dowd Agreement and
the employment agreements, and (iii) under the severance agreements and
employment agreements available to certain associates who are not named
executive officers. No later than sixty days following a change of control of
the company, the terms of the Supplemental Trust require the company to make an
irrevocable contribution to the Supplemental Trust in an amount sufficient to
pay to Mr. Dowd or his beneficiary the benefits he would be entitled to pursuant
to the Dowd Agreement as of the date the change of control occurred assuming Mr.
Dowd was terminated for other than "cause" (as such term is defined in the Dowd
Agreement) death or disability or Mr. Dowd terminated his employment for "good
reason" as such term is defined in the Dowd Agreement. The Supplemental 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 Supplemental Trust will have any right
to or security interest in any specific asset of the Supplemental Trust or any
right to assign any benefits or rights which he or she may expect to receive
from the Supplemental Trust.
Past Service Plan. The Past Service Plan was adopted by the Committee
effective November 1, 1997 in connection with its termination of the SRP for
Active SRP Participants. Pursuant to the terms of the Past Service Plan, the
company calculated the present value of the amount which would have been payable
to each Active SRP Participant assuming he had retired as of November 1, 1997
and was fully vested. In the event there is a change of control of the company,
each participant in the Past Service Plan will be fully vested in his benefit
thereunder. Payments will be made under the Past Service Plan to each of the
named executive officers, except for Mr. Dowd, in a method elected by the
executive officer at the time he was selected for participation in the plan and
payment will commence upon the occurrence of the Distribution Events or
termination of employment due to death, disability or upon or in anticipation of
a change of control of the company. Assuming (i) a change of control of the
company on December 27, 1997 and termination of employment of the following
persons and (ii) each of them elected a life only payment method, the company
would be required to pay the following amounts to the following persons annually
for life: Mr. Stauth, $206,130; Mr. Davis, $92,357; Mr. Winn, $21,302; and Mr.
Zaricki, $24,060.
Excess Plan and Dowd Agreement. The Excess Plan provides for payments to be
made to each of the named executive officers, except for Mr. Dowd, upon
retirement or in the event his employment is terminated by reason of death or
disability or upon or in anticipation of a change of control of the company.
Payments are to be made in a method elected by the executive officer. Pursuant
to the terms of the Excess Plan, in the event there is a change of control of
the company, each participant therein is fully vested in his benefit earned
under such
25
<PAGE> 27
plan and they shall be paid beginning immediately following their termination of
employment and no reduction shall be made for any early retirement adjustment
factors provided for in the Excess Plan. Assuming (i) a change of control of the
company on December 27, 1997 and termination of employment of the following
persons and (ii) each of them elected a life only payment method, the company
would be required under the Excess Plan to pay the following amounts to the
following persons annually for life: Mr. Stauth, $245,458; Mr. Davis, $102,700;
Mr. Winn, $51,859; and Mr. Zaricki, $49,998.
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 55 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.
Mr. Dowd would be paid $81,000 annually for life under the Dowd Agreement
assuming a change of control on December 27, 1997, and the termination of his
employment within three years after the change of control.
Deferred Trust. Effective November 1, 1997, the company entered into the
Deferred Trust. See "Summary Compensation Table -- Footnote 3." The shares of
restricted stock awarded to the named executive officers in 1997 are held by the
trustee of the Deferred Trust who has sole voting and investment power with
respect to such shares until the holder terminates employment with the company
and satisfies the vesting and payment conditions of his restricted stock award
agreement. The board of directors has empowered the Committee in its sole
discretion to fund the Deferred Trust as it deems appropriate from time to time
in order to satisfy the company's obligations to associates with respect to the
restricted stock awards made November 1, 1997, the Excess Plan and the Past
Service Plan. No later than sixty days following a change of control of the
company, the terms of the Deferred Trust require the company to make an
irrevocable contribution to the Deferred Trust in an amount sufficient to pay
the holders of the restricted stock awards and participants in the Excess Plan
and the Past Service Plan or their beneficiaries the benefits to which they
would have been entitled pursuant to the terms of the restricted stock
agreements, the Excess Plan and the Past Service Plan as of the date on which
the change of control occurred. The Deferred 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 Deferred Trust will have any right to or security interest in
any specific asset of the Deferred Trust or any right to assign any benefits or
rights which he or she may expect to receive from the Deferred Trust.
Other Arrangements. Pursuant to the provisions of the EVA(R) Plan, in the
event of a change of control of the company, the Committee, in its sole
discretion, may (i) accelerate the vesting of all Bonus Banks and the prorated
amount of the bonus for the year in which the change of control occurs,
provided, however, no negative amounts will be applied to determine the final
amount of Bonus Bank payments, or (ii) determine that a payment in lieu of such
amounts shall be made. See "Report of Compensation Committee."
26
<PAGE> 28
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.
Pursuant to the restricted stock awards made to the named executive
officers, except for Mr. Dowd, in connection with the termination of the SRP
Plan, the shares subject to the awards together with any dividends which have
accrued with respect thereto shall be payable only upon termination of
employment and occurrence of the Distribution Events. In the event the
participant dies, incurs a disability or a change of control of the company
occurs, the restricted stock award will become automatically fully vested and
nonforfeitable. All shares of restricted stock plus dividends attributable
thereto will be distributed to the participant within thirty days following
termination of his employment due to death, disability or a change of control of
the company. See "Summary Compensation Table -- Footnote 3" for information
regarding the dollar value of such awards as of December 27, 1997.
Mr. Dowd holds a restricted stock award made in 1995 under the 1990 Stock
Incentive Plan. Pursuant to the terms of this award, he is entitled to receive a
cash payment equal to one-third of his annual base salary if a change of control
of the company occurs prior to August 1, 1998. If such a payment is made, he is
also entitled to receive a "gross up" payment to cover any applicable excise
tax, interest or penalties imposed under the Code.
The company leases 10 Baker's supermarket sites and a storage facility in
Omaha, Nebraska from four separate affiliates (the "Baker Affiliates") of Jack
W. Baker, a director of the company. In fiscal 1997, the company paid the Baker
Affiliates approximately $3.4 million for rent, taxes and common area
maintenance with respect to the grocery stores and storage facility sites.
Management believes that the lease payments and other sums paid to the Baker
Affiliates for the lease of the 10 supermarket sites and storage facility are
competitive with other grocery stores and storage space in the Omaha market. The
company expects to pay similar amounts in fiscal 1998. In his capacity as an
associate of the company, Mr. Baker is also a party to a severance agreement
with the company. The agreement is the same type held by a total of 187 company
associates, and it provides for a severance payment to Mr. Baker of two times
his annual base salary in the event his employment is terminated for any reason
other than for cause or death within a period of two years following a change of
control of the company.
PROPOSAL NO. 2
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 1998
and is requesting ratification by the shareholders. Deloitte & Touche LLP has
audited the consolidated financial statements since 1967.
27
<PAGE> 29
Services performed by Deloitte & Touche LLP for the 1997 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.
28
<PAGE> 30
PROPOSAL NO. 3
SHAREHOLDER PROPOSAL RELATING TO THE
DECLASSIFICATION OF THE BOARD OF DIRECTORS
The New York City Fire Department Pension Fund, 1 Centre Street, New York,
New York 10007-2341, the beneficial owner of 7,400 shares of company stock, has
submitted the following proposal for action at this annual meeting:
REPEAL CLASSIFIED BOARD
Submitted on behalf of the New York City Fire Department Pension Fund by
Alan G. Hevesi, Comptroller of the City of New York.
BE IT RESOLVED, that the stockholders of Fleming Companies request that the
Board of Directors take the necessary steps to declassify the Board of Directors
and establish annual elections of directors, whereby directors would be elected
annually and not by classes. This policy would take effect immediately, and be
applicable to the re-election of any incumbent director whose term, under the
current classified system, subsequently expires.
SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interest, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest.
We urge your support for the proposal which requests the Board of Directors
to take the necessary steps to repeal the classified board and establish that
all directors be elected annually.
COMPANY'S STATEMENT IN OPPOSITION TO PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL FOR THE
FOLLOWING REASONS:
The board believes that classification of the board of directors, which the
stockholders approved in 1983, is beneficial because it helps to maintain
stability and continuity in the work of the board and in the management of the
affairs of the company, since a majority of directors
29
<PAGE> 31
at any given time will have experience with the business affairs and operations
of the company. This permits more effective long-term strategic planning in use
of company resources.
A classified board also serves to reduce the possibility of a sudden and
surprise change in majority control of the board and thus has the effect of
impeding certain types of hostile, disruptive takeover tactics. In the event of
a hostile takeover attempt, the fact that approximately two-thirds of the board
members have tenure for at least a year would encourage a person seeking to gain
control of the company to initiate arms-length discussions with management and
the board, who are in the best position to negotiate a transaction that is most
favorable to all of the company's shareholders. If a transaction is consummated,
the board believes that negotiations with the board ultimately will lead to
enhanced shareholder return.
The board is not an entrenched group. It is constantly being stimulated
with fresh perspectives and ideas. Over the last five years, while maintaining
the desired continuity and stability, the board has ranged in size between eight
and twelve members, with five directors joining the board and seven leaving,
including two joining and two leaving in the last year alone. The average age of
the board is 60 and it includes two female directors, one who joined five years
ago and one who joined this year.
In its supporting statement, the proponent expresses concerns regarding the
accountability of directors. Due to its appreciation of shareholder concerns
with respect to accountability, the company's board of directors in February
1997 established the corporate governance committee and adopted a policy
statement, the text of which is set forth in Exhibit B to this proxy statement.
The board believes that maintaining a classified board with a corporate
governance committee and policy helps to ensure continuity and stability, impede
disruptive takeover practices, and promote accountability of the board and
management.
For these reasons, the board continues to believe that the company's
classified board promotes the best interest of the shareholders.
Unless a proxy is marked to the contrary, the shares represented by the
enclosed proxy will be voted AGAINST Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY SHAREHOLDERS VOTE
AGAINST PROPOSAL NO. 3.
30
<PAGE> 32
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 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 1997 all
Section 16(a) filing requirements were met.
SHAREHOLDER PROPOSALS
Any proposals of shareholders intended to be presented at the 1999 annual
meeting must be received not later than November 24, 1998, 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
31
<PAGE> 33
EXHIBIT A-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.
A-1
<PAGE> 34
EXHIBIT A-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.
A-2
<PAGE> 35
EXHIBIT B
FLEMING COMPANIES, INC. FEBRUARY 1997
CORPORATE GOVERNANCE
STATEMENT OF POLICY
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 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.
B-1
<PAGE> 36
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.
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).
B-2
<PAGE> 37
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.
B-3
<PAGE> 38
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>
B-4
<PAGE> 39
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
re-election 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>
B-5
<PAGE> 40
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.
B-6
<PAGE> 41
FLEMING COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDER
MAY 14, 1998
10:00 a.m.
P
R
O
X
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 May 14, 1998 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> 42
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[X] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors FOR WITHHOLD
ALL NOMINEES AUTHORITY TO VOTE
LISTED BELOW FOR ALL NOMINEES
LISTED BELOW.
[ ] [ ]
Nominees: Robert E. Strauth and Archie R. Dykes (for three-year terms)
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. Ratification of Deloitte & Touche LLP as independent auditors for 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 3.
3. Approval of Shareholder Proposal relating to the declassification of the
Board of Directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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" Proposal 2 and "AGAINST" Proposal 3. The board of
directors recommends a vote "FOR" each of Proposals 1 and 2.
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.
<PAGE> 43
================================================================================
FLEMING COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 14, 1998
P SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O
X TO: BANK OF OKLAHOMA, NA, TRUSTEE FOR THE FLEMING COMPANIES, INC.,
Y 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 May 14,
1998 at 10:00 a.m. and any adjournments thereof.
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> 44
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Please mark your
votes as in this THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[X] example.
- --------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 AND 2.
FOR WITHHOLD
all nominees authority to vote
listed below for all nominees
listed below FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification of Deloitte [ ] [ ] [ ]
Directors. & Touche LLP as indepen-
dent auditors for 1998.
Nominees: Robert E. Stauth and Archie R. Dykes
(for three-year terms)
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write the nominee's name in the
space provided below.)
- ---------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
PROPOSAL 3.
3. Approval of Shareholder FOR AGAINST ABSTAIN
Proposal relating to the
declassification of the [ ] [ ] [ ]
Board of Directors.
- --------------------------------------------------------------------------------------------------------------------
THE PROXY WILL VOTE IN HIS DISCRETION, ON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
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.
</TABLE>
