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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8140
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FLEMING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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OKLAHOMA 48-0222760
(State or other jurisdiction of (I.R.S. Employer
Incorporation) or organization Identification No.)
6301 WATERFORD BOULEVARD, BOX 26647 73126
OKLAHOMA CITY, OKLAHOMA (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area (405) 840-7200
code:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $2.50 Par Value and New York Stock Exchange
Common Stock Purchase Rights Pacific Stock Exchange
Chicago Stock Exchange
9.5% Debentures New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. /X/
The aggregate market value of the common shares (based upon the closing
price on February 20, 1998 of these shares on the New York Stock Exchange) of
Fleming Companies, Inc. held by nonaffiliates was approximately $651 million.
As of February 20, 1998, 38,300,000 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
A portion of Part III has been incorporated by reference from the
registrant's proxy statement in connection with its annual meeting of
shareholders to be held on May 14, 1998.
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PART I
ITEM 1. BUSINESS
Fleming Companies, Inc. ("Fleming" or the "company") began operations in
1915 as a food wholesaler and today is a recognized leader in the food marketing
and distribution industry. Fleming's food distribution business is conducted by
its Food Distribution Segment, which is one of the largest food distributors in
the United States. Fleming's retail business is conducted by its Retail Food
Segment which owns 14 local chains and groups operating under separate banners.
The Retail Food Segment is one of the major food retailers in the United States
based on net sales. Fleming's businesses generated net earnings of $42 million,
$27 million and $25 million for fiscal 1995, 1996 and 1997, respectively.
Additionally, the company generated net cash flows from operations of $399
million, $328 million and $113 million for the same periods, respectively. The
combined businesses generated $448 million, $435 million and $454 million of
Adjusted EBITDA for fiscal 1995, 1996 and 1997, respectively. "Adjusted EBITDA"
is earnings before extraordinary items and accounting changes before taking into
consideration interest expense, income taxes, depreciation and amortization,
equity investment results and one-time adjustments.
Fleming is focused on achieving earnings growth in both its distribution and
retail food businesses. In its food distribution business, the company is (i)
increasing its sales efforts, particularly by emphasizing the company's
marketing plan alternatives and information technology systems, (ii)
streamlining and strengthening Fleming Brands and its offerings of Retail
Services and (iii) broadening its perishables and foodservice offerings. In its
retail food business, Fleming is making significant investments in new and
remodeled stores in its existing retail chains and will seek selective
acquisitions of supermarket groups or chains which can be integrated into
Fleming's distribution infrastructure. The company will continue to implement
cost reduction initiatives in both of its business segments and in its corporate
staff operations.
OPERATING SEGMENTS
FOOD DISTRIBUTION SEGMENT. At year-end 1997, Fleming's Food Distribution
Segment served as the principal source of supply for more than 3,000
supermarkets (including supermarkets owned by Fleming's Retail Food Segment),
which represented approximately 10% of all supermarkets in the United States.
Distribution operations are conducted through a network of 35 full-line food
product supply centers, six general merchandise (including health and beauty
care and specialty food products) distribution centers, and two centers focused
primarily on serving convenience stores. The Food Distribution Segment serves
stores of various sizes located in 42 states. Distribution customers operate in
a wide variety of formats including conventional full-service supermarkets,
supercenters, price impact stores, combination stores and convenience stores.
Net sales for the Food Distribution Segment were $13.9 billion, including $2.0
billion of net sales to the Retail Food Segment, for fiscal 1997.
The Food Distribution Segment offers a complete selection of national brands
and Fleming Brands, including groceries, meat, dairy and delicatessen products,
frozen foods, produce, bakery goods and a variety of general merchandise and
related items. Fleming Brands, which include both private label products and
controlled label products, offer consumers a quality alternative to national
brands at a reasonable price while generating improved margins (for both the
retailer and the Food Distribution Segment) and reinforcing the retailer's
marketing identity. The company is expanding its line of in-store foodservice
products to offer consumers more home meal solutions. The Food Distribution
Segment also offers an extensive menu of individually marketed and priced Retail
Services, which draw on Fleming's broad industry expertise and are designed to
enable both Fleming-owned and Fleming-served retailers to compete more
effectively.
The company is working to encourage independents and small chains to join
one of the Fleming Banner Groups to increase marketing strength and procurement
benefits from vendors. Fleming Banner Group stores are owned by customers, many
of which license their store banner from Fleming. Fleming
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Banner Groups are retail stores operating under the IGA-Registered Trademark- or
Piggly Wiggly-Registered Trademark- banner or under one of a number of banners
representing a price impact retail format.
In 1994, the Food Distribution Segment initiated a substantial cost
reduction effort. Through year-end 1997, the Food Distribution Segment has
consolidated 13 distribution centers into larger, more efficient facilities,
eliminated a substantial number of full and part-time positions (see
"--Employees"), eliminated over 3 million square feet of warehouse space and
consolidated information technology data centers. In addition, since 1994 the
Food Distribution Segment has developed the FlexPro-TM-, FlexStar-TM- and
FlexMate-TM- marketing plans for grocery, frozen and dairy products. See
"--Pricing."
RETAIL FOOD SEGMENT. The Fleming Retail Food Segment operates more than 275
supermarkets which are operated as 14 local chains and groups under 13 separate
banners. The Retail Food Segment's supermarkets vary in format from conventional
supermarkets to super warehouse stores and serve consumers in the Minneapolis,
Phoenix, Milwaukee, Omaha, Buffalo, Peoria, Oklahoma City and Salt Lake City
markets as well as important regional areas located in Pennsylvania, Florida,
Maryland, Kansas, Missouri, Arkansas and California. Each Retail Food Segment
supermarket is served by a product supply center operated by the Food
Distribution Segment.
In 1997, the Retail Food Segment improved its performance by:
- selling or closing 21 stores which were unprofitable or inconsistent with
Fleming's strategy,
- acquiring 6 stores, opening 14 new stores and remodeling 22 stores,
- implementing additional customer loyalty programs which have become key
marketing tools, and
- installing computer-based training in many Retail Food Segment
supermarkets.
Net sales of the Retail Food Segment were $3.5 billion for fiscal 1997
compared to $0.7 billion in fiscal 1992. This growth is attributable primarily
to acquisitions, but also to remodeled stores and newly constructed stores.
Additional information regarding the company's two operating segments is
contained in "Segment Information" in the notes to the consolidated financial
statements which are included in Item 8 of this report.
COMPETITIVE STRENGTHS
Fleming believes that its position as a leader in the food marketing and
distribution industry is attributable to a number of competitive strengths:
- Significant Customer Base: As one of the largest food marketing and
distribution companies in the United States, with 43 product supply
centers and more than 275 company-owned stores, the company has access to
millions of consumers who shop at Fleming-supported retail stores.
- Streamlined Operations: During the past three years, the Food Distribution
Segment has significantly enhanced the efficiency of its distribution
network as a result of facilities consolidations, staff reductions
resulting from reorganizations, warehouse space eliminations and
transportation outsourcing. In addition, 30 of the company's full-line
food product supply centers and five general merchandise distribution
centers operate under Fleming's on-line operating distribution system
("FOODS"), an internally developed information technology software system.
Fleming's non-converted general merchandise distribution center and each
of its remaining product supply centers (which were acquired by the
company in acquisitions of local and regional wholesale operations)
operate on its own unique information technology system. Conversion to
FOODS, which will require a separate approach for each such system, is
being undertaken and completed as resources permit and operations require.
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- Fleming Retail Food Segment: The Retail Food Segment's portfolio of 14
chains and groups operating under 13 distinct retail banners, each with
its own identity, local management and marketing capabilities, provides a
stable sales volume for the Food Distribution Segment and gives Fleming
important first-hand knowledge of consumer preferences and the retail
environment. Retail sales also offer Fleming the opportunity to earn
attractive margins relative to its distribution operations.
- High Quality Fleming Brands: Fleming Brands generally produce higher
margins than national brands for retailers and the Food Distribution
Segment, and increase consumer loyalty. Capitalizing on its substantial
purchasing power and efficient distribution system, the Food Distribution
Segment offers a wide range of high quality Fleming Brands which are being
marketed through a comprehensive campaign.
- Expertise in Perishables: The company has developed extensive expertise in
handling, marketing, distributing and retailing higher margin perishable
products. The company derived approximately 40% of product sales in 1997
from the sale of perishables.
- Diverse Operations: With customers in 42 states, Fleming is geographically
diverse. It also has broad experience in supplying and in operating retail
food stores across a full spectrum of formats and pricing strategies.
BUSINESS STRATEGY
Fleming's business strategy is to leverage its competitive strengths to
achieve earnings growth in its marketing and distribution business and in its
retail business. As principal elements of its business strategy, Fleming will:
- Focus on Distribution Earnings Growth: The Food Distribution Segment will
continue to pursue profitable sales and the expansion of its customer
base. The company pursues those customers and sales which can be
profitable for the long term, and will manage its costs in accordance with
sales performance. Fleming will strive to be the best-value supplier of
products and services. Our mission statement is "to excel at meeting the
needs of consumers who shop at each Fleming-supported retail store."
Renewed sales efforts are emphasizing regaining customers lost since 1994,
in part by highlighting the advantages of Fleming's marketing plan
alternatives. The company will continue to use activity-based pricing in
order to rationalize its pricing and direct its marketing efforts to
value-added services and products. Efforts to educate retailers about the
advantages of Fleming Retail Services in managing their businesses will
also be increased. Finally, investments in and loans to retailers will
continue to be made on a selective basis.
- Expand Retail Operations: Fleming will seek to increase its ownership of
retail food operations by increasing investments in new and remodeled
stores within the Retail Food Segment and by selective acquisitions of
additional groups and chains, primarily in the markets already served by
the Food Distribution Segment. Retail sales have the potential to generate
attractive gross margins relative to Fleming's food distribution business,
and management believes that its broad expertise in meeting consumer needs
can be leveraged through a larger retailing business. The company will
seek to improve the Retail Food Segment's profitability by increasing
administrative efficiencies and divesting unprofitable stores as needed.
- Aggressively Market Fleming Retail Services: The Food Distribution Segment
will exploit opportunities for growth in Fleming Retail Services. In
conjunction with the development of new marketing plans, Fleming
"unbundled" the Retail Services offered to its distribution customers,
giving them the opportunity to choose the services they wish to receive.
The company has also repriced its Retail Services based on market
analyses. The Retail Services group seeks to increase penetration with
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existing customers and to attract new customers. A major component of this
effort is VISIONET-Registered Trademark-, the company's proprietary
interactive electronic information network.
- Emphasize Perishables and Foodservice Offerings: Fleming is increasing its
emphasis on higher margin perishables as consumer demand grows for fresh
and prepared foods, in-store bakeries, delis, and expanded meat and
produce offerings. The company is also developing home meal solutions
under its Chef's Cupboard Concepts-TM- banner. Twenty-eight modular units
were installed in 1996 and 106 in 1997. Also in development is a total
store merchandising program for marketing convenient meal solutions that
can be prepared in 15 minutes or less.
- Streamline and Strengthen Fleming Brands: Fleming believes it has a
substantial opportunity to strengthen Fleming Brands, which currently
account for approximately 5% of Food Distribution Segment sales and
approximately 6% of Retail Food Segment sales. For the average
supermarket, store brand products comprise approximately 17% of sales.
Fleming Brands are targeted to three market segments: premium products,
national quality products and value products. The company is consolidating
its brands to focus on a limited portfolio of brands which include three
national quality brands (BestYet-Registered Trademark-, IGA-Registered
Trademark- and Piggly Wiggly-Registered Trademark-), at least one value
brand (Rainbow-Registered Trademark-), and a multiple-brand group of
premium, upscale products individually tailored to selected market niches.
The increase in purchasing power and marketing strength expected to result
from fewer brands should benefit Fleming's food distribution customers by
further increasing margins, brand recognition and consumer loyalty.
Additionally, the number of products offered in each brand will be
expanded, and Fleming will develop new logos, packaging and marketing
programs over the next two years to strengthen sales for Fleming Brands.
The costs to consolidate the company's brands are expected to be
immaterial. The consolidation program is being managed during the roll-out
to maintain or improve the company's historic earnings level in this area.
- Leverage Information Technology Systems: Fleming will continue to utilize
and to provide its customers with market-leading information technology
systems through retail services. Initiatives currently underway include an
integrated retail management system which will combine point-of-sale
systems, inventory management and shrinkage control systems, frequent
shopper programs and labor scheduling systems. The Food Distribution
Segment will continue to promote VISIONET-Registered Trademark- to attract
and retain retailers, to more efficiently network information exchanges
among vendors, Fleming and retailers. VISIONET-Registered Trademark- gives
retailers access to inventory information, financial data, vendor
promotions, retail support services and on-line ordering. Also, vendors
compensate the company for access to Fleming's customers through
VISIONET-Registered Trademark-. The network currently covers approximately
1,300 retail customer locations and is being upgraded with the
introduction of a third generation. With this new version,
VISIONET-Registered Trademark- will provide greater internet capabilities.
The company's scale allows it to leverage investments in information
technology more broadly than many of its competitors. Fleming will
continue to incorporate state-of-the-art information technology systems in
its own operations to advance its administrative efficiencies.
- Increase Cost Efficiencies: The company will continue to aggressively
exploit opportunities for further consolidation of its operating units and
support systems, capitalize on staff efficiency initiatives, primarily in
its administrative operations, and pursue additional outsourcing
opportunities in transportation to satisfy customer needs.
PRODUCTS
The Food Distribution Segment supplies its customers (including the Retail
Food Segment's supermarkets) with a full line of national brands and Fleming
Brands, including groceries, meat, dairy and delicatessen products, frozen
foods, produce, bakery goods and a variety of general merchandise, health and
beauty care and other related items. Full-line food product supply centers carry
approximately 14,000 stock keeping units (or SKUs), including approximately
4,500 perishable products. General merchandise
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and specialty food distribution centers offer more than 65,000 different items
throughout the year. Food and food-related product sales account for over 90
percent of the company's consolidated sales. During each of the last three
fiscal years, the company's product mix as a percentage of product sales was
approximately 55% groceries, 40% perishables and 5% general merchandise.
FLEMING BRANDS. Fleming Brands are store brands which include both private
labels and controlled labels. Private labels are offered only in stores
operating under specific banners (which may or may not be controlled by
Fleming). Controlled labels are Fleming-owned brands which are offered to all
food distribution customers. Fleming Brands are targeted to three market
segments: premium, national quality and value. Each Fleming Brand offers
consumers high quality products within each pricing tier. Fleming-controlled
labels include SuperTru-Registered Trademark- and Marquee-Registered Trademark-,
which are premium brands, BestYet-Registered Trademark-, which is a national
quality brand, and Rainbow-Registered Trademark-, Fleming's value brand. Fleming
offers two private labels, IGA-Registered Trademark- and Piggly
Wiggly-Registered Trademark-, which are national quality brands. Fleming shares
the benefit of reduced acquisition costs of store brand products with its
customers, permitting both the Food Distribution Segment and the retailer to
earn higher margins from the sale of Fleming Brands.
PERISHABLES. Certain categories of perishables offer both the Food
Distribution Segment and the retailers it serves (including the Retail Food
Segment) opportunities for improved margins as consumers are generally willing
to pay relatively higher prices for high quality produce, bakery goods and fresh
prepared foods. Fleming is encouraging its perishables providers to emphasize
more "ready-to-use" packaging alternatives to support consumer demands. The
company believes retailers compete for business by emphasizing perishables and
store brand products. The competitive emphasis is on fresh and prepared foods
through in-store bakeries, delis, expanded meat and produce offerings, in-store
home meal solutions, and ready-to-cook or heat-and-serve offerings.
The company is utilizing its perishables expertise to develop fresh food
in-store meal solutions concepts under its Chef's Cupboard Concepts-TM- banner.
Twenty-eight modular units were installed during 1996 and 106 in 1997. These
in-store shops are offered as turn-key operations and allow retailers to
effectively compete for the rapidly growing foodservice dollar. Five concepts
are currently being licensed under Chef's Cupboard Concepts-TM-:
- Captain Subman-TM-, which offers deli-style sandwiches, soups and salads;
- Baker's Blvd.-Registered Trademark-, with an assortment of premium baked
goods;
- Cinnamon Island-TM-, serving coffee and cinnamon rolls;
- Chicken Store and More-TM-, offering baked chicken and side dishes; and
- s'Italian Specialties-TM-, an Italian specialty food shop.
RETAIL SERVICES
Retail Services are being separately marketed, priced and delivered. Retail
Services marketing and sales personnel look for opportunities to cross-sell
additional Retail Services as well as other Food Distribution Segment products
to their customers. The company offers consulting, administrative and
information technology services to its Food Distribution Segment customers
(including Retail Food Segment supermarkets) and non-customers.
CONSULTING SERVICES: Retailers may call upon Fleming consultants to provide
professional advice regarding most facets of retail operations. Consulting
services include the following:
ADVERTISING. Fleming believes its advertising service group is one of the
largest retail food advertising agencies in the United States, offering full
service advertising production, media buying services, assistance in
promotional development and execution, and marketing consultation.
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STORE DEVELOPMENT. This Retail Service uses the latest technology in market
analysis, surveys and store development techniques to assist retailers in
finding new locations as well as gaining operations productivity in existing
physical plants.
PRICING. Fleming consultants involve retailers directly in pricing their own
products through pricing strategy development programs utilizing market
surveys and new technology.
STORE OPERATIONS. Consultants offer assistance in perishables quality
control and standards monitoring, audit training, general supermarket
management, store operations analysis, shrink control and supervision task
outsourcing.
FRANCHISING. Fleming assists retailers in selecting the most suitable
franchising operating format.
INSURANCE. Professional consultants are available for reviewing, pricing and
coordinating retail insurance portfolios.
ADMINISTRATIVE SERVICES: A retailer may use administrative services
provided by Fleming to outsource functions being performed internally or to
install new programs which are not feasible for the retailer to develop:
EDUCATION. Fleming operates retail food education facilities for both
hands-on and classroom training. Among the retail education services
provided are training for all levels of store managers and employees,
including selling skills, general management and perishables department
training, and strategic planning.
FINANCIAL. Fleming helps retailers track their financial performance by
providing full accounting services, operating statements, payroll and
accounts payable systems and tax return preparation. Additionally, it
assists retailers in establishing and managing money order programs,
pre-paid phone card programs and coupon redemption programs.
RETAIL INVENTORY MANAGEMENT (RIM). Inventory control programs are being used
to more effectively manage product selection, and to provide instant
planogram, perpetual inventory and computer-assisted ordering capability. A
simplified shelf-management version has been developed and is being
implemented.
PROMOTION. Numerous promotional tools are offered to assist retail operators
in improving store traffic, such as frequent shopper programs, kiosk use and
instant savings programs; continuity programs such as games, premium
catalogs, etc.; and controlled markdown programs.
INFORMATION TECHNOLOGY SYSTEMS: Fleming has invested heavily in creating
new information technology products that offer retailers a competitive systems
edge:
RETAIL MANAGEMENT SYSTEMS. These services include POS equipment purchasing
and leasing, including programs with the three largest vendors of scanning
equipment; electronic payment systems; credit/ debit/EBT; direct store
delivery and receiving systems; electronic shelf labels; in-store file
managers; and total store technology solutions.
VISIONET-REGISTERED TRADEMARK-. The company's proprietary interactive
electronic information network gives retailers access to inventory
information, financial data, vendor promotions, retail support services and
on-line ordering.
PRICING
The Food Distribution Segment uses market research and cost analyses as a
basis for pricing its products and services. In all locations, Retail Services
are individually and competitively priced.
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In approximately 55% of the Food Distribution Segment's sales base at
year-end 1997, all products are sold under various selling plans. Under these
selling plans, a distribution fee is added to the product price for various
product categories. Under some selling plans, freight charges are also added to
offset in whole or in part the cost of delivery services provided. Any cash
discounts, certain allowances, and service income earned from vendors may be
retained by the Food Distribution Segment. This has been referred to generally
as the "traditional pricing" method.
For the remaining 45% of its sales base at year-end 1997, the Food
Distribution Segment utilized two alternative marketing plans, FlexPro-TM- and
FlexStar-TM-, to market its grocery, frozen and dairy products. Under
FlexPro-TM-, grocery, frozen and dairy products are listed at a price generally
comparable to the net cash price paid by the Food Distribution Segment. Dealer
allowances and service income are passed through to the customer. Service
charges are established using the principles of activity-based pricing modified
by market research. Activity-based pricing attempts to identify Fleming's cost
of providing certain services in connection with the sale of products such as
transportation, storage, handling, etc. Based on these identified costs, and
with a view to market responses, Fleming establishes charges for these
activities designed to recover Fleming's cost and provide the company with a
reasonable profit. These charges are then added to aggregate product price. A
fee is also charged for administrative services provided to arrange and manage
certain allowances and service income offered by vendors and earned by the Food
Distribution Segment and its customers. In all locations, the traditional
pricing method is still applied for meat, produce, bakery goods, delicatessen
products, tobacco supplies, and general merchandise and health and beauty care
products.
FlexPro-TM-, the original flexible marketing plan implemented in 1995, has
been enhanced. FlexStar-TM- is very similar to FlexPro-TM- but generally uses a
less complex presentation for distribution service charges by using
customer-specific average charges. This averaging mechanism lessens the
volatility of charges to the retailer but does not permit the retailer to manage
his own product costs as fully as with FlexPro-TM-. In 1997 the Food
Distribution Segment began to introduce FlexMate-TM-, a marketing plan with a
presentation to customers comparable to the traditional pricing method but which
operates from the same information technology system and data base as
FlexPro-TM- and FlexStar-TM-.
Fleming uses activity-based pricing to support pricing decisions for all
locations using the FlexPro-TM-, FlexStar-TM- and FlexMate-TM- marketing plans.
The company expects that it will have offered its alternative marketing plans to
all customers in the 30 locations that operate under Fleming's on-line operating
distribution system by the end of 1998 for grocery, frozen and dairy products.
FACILITIES AND TRANSPORTATION
The Food Distribution Segment currently operates 35 full-line food product
supply centers which are responsible for the distribution of national brands and
Fleming Brands, including groceries, meat, dairy and delicatessen products,
frozen foods, produce, bakery goods and a variety of related food and non-food
items. Six general merchandise and specialty food distribution centers
distribute health and beauty care items and other items of general merchandise
and specialty foods. Two distribution centers serve convenience stores. Thirty
full-line food product supply centers and five general merchandise distribution
centers operate under Fleming's internally developed on-line operating
distribution system. All facilities are equipped with modern material handling
equipment for receiving, storing and shipping large quantities of merchandise.
The Food Distribution Segment's food and general merchandise distribution
facilities comprise more than 20 million square feet of warehouse space.
Additionally, the Food Distribution Segment rents, on a short-term basis,
approximately 5 million square feet of off-site temporary storage space.
Since the beginning of 1994, the company has closed 13 distribution centers
removing more than 3 million square feet of warehouse space from its
distribution system.
Transportation arrangements and operations vary by distribution center and
may vary by customer. Some customers prefer to handle product delivery
themselves, others prefer the company to deliver
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products, and still others ask the company to coordinate delivery with a third
party. Accordingly, many distribution centers operate a truck fleet to deliver
products to customers, and several centers also engage dedicated contract
carriers to deliver products. The company increases the utilization of its truck
fleet by backhauling products from suppliers and others, thereby reducing the
number of empty miles traveled. To further increase its fleet utilization, the
company has made its truck fleet available to other firms on a for-hire carriage
basis.
FOOD DISTRIBUTION SEGMENT CUSTOMERS
The Food Distribution Segment serves retail stores that vary in size,
format, organization, sales level and location.
The size of retail stores served ranges from small convenience outlets to
large supercenters. The company estimates the aggregate square feet of retail
stores served is in excess of 100 million.
The format of retail stores served is a function of size and marketing
approach. The Food Distribution Segment serves customers operating as
conventional supermarkets (averaging approximately 23,000 total square feet),
superstores (supermarkets of 30,000 square feet or more), supercenters (a
combination of a discount store and a supermarket encompassing 110,000 square
feet or more), warehouse stores ("no-frills" operations of various large sizes),
combination stores (which have a high percentage of non-food offerings) and
convenience stores (generally under 4,000 square feet and offering only a
limited assortment of products and sizes).
The retail stores served are organized as single stores, multiple store
independents and chain stores. At year-end 1997, the company served
approximately 925 supermarkets organized as chains, including more than 275
Retail Food Segment stores. In accordance with customary industry definitions,
11 or more stores are referred to as a "chain" and operations of 10 or fewer are
referred to as "independents."
The company supplies over 6,500 retail stores, 3,000 of which average more
than $2 million in sales per year and are considered "supermarkets" under
industry standards. Supermarkets generally carry a wide variety of grocery,
meat, produce, frozen food and dairy products and also handle an assortment of
non-food items, including health and beauty care products and general
merchandise such as housewares, soft goods and stationery. Most supermarkets
also operate one or more specialty departments such as in-store bakeries,
delicatessens, seafood departments or floral departments.
The location of Fleming-supported retail stores is national in perspective
with stores in 42 states.
The company also licenses or grants franchises to retailers to use certain
registered trade names such as Piggly Wiggly-Registered Trademark-, Food 4
Less-Registered Trademark- (a registered servicemark of Food 4 Less
Supermarkets, Inc.), Sentry-Registered Trademark-Foods, Super 1 Foods-Registered
Trademark-, Festival Foods-Registered Trademark-, Jubilee Foods-Registered
Trademark-, Jamboree Foods-Registered Trademark-, MEGAMARKET-Registered
Trademark-, Shop 'N Kart-Registered Trademark-, American Family-Registered
Trademark-, Big Star-Registered Trademark-, Big T-Registered Trademark-, Buy for
Less-Registered Trademark-, County Pride Markets-Registered Trademark-, Buy
Way-Registered Trademark-, Pic-Pac-Registered Trademark-, Rainbow
Foods-Registered Trademark-, Shop N Bag-Registered Trademark-, Super
Save-Registered Trademark-, Super Duper-Registered Trademark-, Super Foods-TM-,
Super Thrift-Registered Trademark-, Thriftway-Registered Trademark-, and Value
King-Registered Trademark-. There are more than 1,600 food stores operating
under Fleming franchises or licenses, including approximately 150 operated by
the Retail Food Segment.
The company is working to encourage independents and small chains to join
one of the Fleming Banner Groups to receive many of the same marketing and
procurement efficiencies available to larger chains. The Fleming Banner Groups
are retail stores operating under the IGA-Registered Trademark- or Piggly
Wiggly-Registered Trademark- banner or under one of a number of banners
representing a price impact retail format. Fleming Banner Group stores are owned
by customers, many of which license their store banner from Fleming.
The company's three largest external customers accounted for 10.1%, and its
top 10 external customers accounted for 18.5%, of Food Distribution net sales
during 1997. No single customer represented more than 3.6% of Food Distribution
net sales. In October 1997, Furr's, the company's largest customer, and Fleming
entered into an agreement that requires Furr's board to offer Furr's for sale.
In July 1997, Randall's, the company's third largest customer, initiated
arbitration proceedings against the company alleging it had been overcharged for
products. See Item 3. Legal Proceedings.
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SUPPLY CONTRACTS
The company supplies goods and services to some of its customers
(particularly to its large customers and to customers in which the company has
made a significant investment) pursuant to supply contracts containing a
"competitiveness" clause. Under this clause, a customer may submit a "qualified
bid" from a third-party supplier to provide the customer with a range of goods
and services comparable to those goods and services offered by Fleming. If the
prices to be charged under the qualifying bid are lower than those charged by
the company by more than an agreed percentage, the company may lower its prices
to come within the agreed percentage or, if the company chooses not to lower its
prices, the customer may accept the competitor's bid. The competitiveness clause
is not exercised frequently and disputes regarding the clause must generally be
submitted to binding arbitration. Additionally, the company believes that most
of its supply contracts prohibit recovery of both punitive and consequential
damages if any dispute ever arises.
RETAIL FOOD SEGMENT
Retail Food Segment supermarkets are operated as 14 distinct local chains or
groups, under 13 banners, each with local management and localized marketing
skills. Retail Food Segment supermarkets also share certain common
administrative and support systems which are centrally monitored and
administered for increased efficiencies. At year-end 1997, the Retail Food
Segment owned and operated more than 275 supermarkets with an aggregate of
approximately 11 million square feet of retail space. The Retail Food Segment's
supermarkets are all served by Food Distribution Segment product supply centers.
Net sales of the Retail Food Segment were $3.5 billion in fiscal 1997 compared
to $0.7 billion in fiscal 1992. This growth is attributable primarily to
acquisitions, but also to remodels and new stores.
Formats of Retail Food Segment stores vary from price impact stores to
conventional supermarkets. All Retail Food Segment supermarkets are designed and
equipped to offer a broad selection of both national brands as well as Fleming
Brands at attractive prices while maintaining high levels of service. Most
supermarket formats have extensive produce sections and complete meat
departments, together with one or more specialty departments such as in-store
bakeries, delicatessens, seafood departments or floral departments. Specialty
departments generally produce higher gross margins per selling square foot than
general grocery sections.
The Retail Food Segment's supermarkets are operated through the following
local trade names:
ABCO FOODS-TM-. Located in Phoenix and Tucson, ABCO was acquired in January
1996. Previously, ABCO had been a Food Distribution Segment customer in which
Fleming held an equity position. ABCO operates 56 stores, of which a majority
are "Desert Market" format conventional supermarkets, averaging 35,600 square
feet.
BAKER'S-TM-. Located primarily in Omaha, Nebraska and Oklahoma City,
Oklahoma, Baker's-TM- operates 23 stores which are primarily superstores in
format with a value-pricing strategy. Baker's-TM- stores average 52,900 square
feet.
BOOGAARTS-REGISTERED TRADEMARK- FOOD STORES. There are 22 Boogaarts stores,
20 in Kansas and 2 in Nebraska, with an average size of 16,000 square feet. They
are conventional supermarkets with a competitive-pricing strategy.
CONSUMERS FOOD & DRUG-TM-. Headquartered in Springfield, Missouri,
Consumers operates 21 combination stores in Missouri, Arkansas and Kansas, with
an average of 42,800 square feet. Consumers employs a competitive-pricing
strategy.
HYDE PARK MARKET-TM-. Located in south Florida, primarily in Miami, there
are now 13 Hyde Park Market-TM- stores with an average size of 21,500 square
feet. The stores are operated as conventional supermarkets with a value-pricing
strategy.
NEW YORK RETAIL. The two groups consist of 16 Jubilee Foods-Registered
Trademark- stores and 17 Market Basket-TM- stores, operating in western New York
and Pennsylvania. These stores are conventional supermarkets with a
9
<PAGE>
competitive-pricing strategy. The Jubilee Foods-Registered Trademark- stores
average 30,300 square feet and the Market Basket-TM- stores average 14,600
square feet in size.
PENN RETAIL. This group is made up of 16 conventional supermarkets with a
competitive-pricing strategy. It includes Festival Foods-Registered Trademark-
and Jubilee Foods-Registered Trademark-operating primarily in Pennsylvania with
several located in Maryland. The average size is approximately 36,600 square
feet.
RAINBOW FOODS-REGISTERED TRADEMARK-. With 36 stores in Minnesota, primarily
Minneapolis/St. Paul, and Wisconsin, Rainbow Foods operates in a
large-combination format, with a price impact pricing strategy. "Price impact"
stores seek to minimize the retail price of goods by a reduced variety of
product offerings, lower levels of customer services and departments, low
overhead and minimal decor and advertising. The average store size for Rainbow
Foods is 58,400 square feet.
RICHMAR. Fleming owns a 90% equity interest in RichMar, which operates 6
Food 4 Less-Registered Trademark-supermarkets in California. They are operated
as price impact stores and average 54,000 square feet per store.
SENTRY-REGISTERED TRADEMARK- FOODS/SUPERSAVER-TM-. Located in Wisconsin,
these two groups include 13 Sentry-Registered Trademark- Foods stores, which are
conventional-format supermarkets with an average size of 36,600 square feet, and
21 SuPeRSaVeR-TM- stores, which are price impact stores with a
lowest-in-the-area pricing strategy. SuPeRSaVeR-TM- stores average over 62,000
square feet.
THOMPSON FOOD BASKET-REGISTERED TRADEMARK-. Located in Illinois and Iowa,
these 12 stores average 28,900 square feet and are operated as conventional
supermarkets with a competitive-pricing strategy.
UNIVERSITY FOODS. University Foods is a group of 5 Food 4 Less-Registered
Trademark- supermarkets in the Salt Lake City area, with an average size of
56,400 square feet. The supermarkets use a price impact pricing strategy.
Fleming owned a majority interest in this group for a number of years, and in
early 1997 acquired the remaining interest.
Fleming Retail Food Segment stores provide added purchasing power as they
enable Fleming to commit to certain promotional efforts at the retail level. The
company, through its owned stores, is able to retain many of the promotional
savings offered by vendors in exchange for volume increases.
SUPPLIERS
Fleming purchases its products from numerous vendors and growers. As the
largest single customer of many of its suppliers, Fleming is able to secure
favorable terms and volume discounts on many of its purchases, leading to lower
unit costs. In addition, the company's practice of passing through vendor
promotional fees and allowances under its new marketing plans enhances Fleming's
competitiveness and strengthens its retail customers. The company purchases
products from a diverse group of suppliers and believes it has adequate sources
of supply for substantially all of its products.
CAPITAL INVESTED IN CUSTOMERS
As part of its services to retailers, the company provides capital to
certain customers in several ways. In making credit and investment decisions,
Fleming considers many factors, including estimated return on capital, risk and
the benefits to be derived. Loans are approved by the company's business
development committee following written approval standards.
The company provides capital to certain customers by extending credit for
inventory purchases, by becoming primarily or secondarily liable for store
leases, by leasing equipment to retailers, by making secured loans and by making
equity investments in customers.
- EXTENSION OF CREDIT FOR INVENTORY PURCHASES: Customary trade credit terms
are usually the day following statement date for customers on FlexPro-TM-
or FlexStar-TM- and up to seven days for other marketing plan customers.
10
<PAGE>
- STORE AND EQUIPMENT LEASES: The company leases stores for sublease to
certain customers. At year-end 1997, the company was the primary lessee of
more than 700 retail store locations subleased to and operated by
customers. Fleming also leases a substantial amount of equipment to
retailers.
- SECURED LOANS AND LEASE GUARANTEES: The company makes loans to customers
primarily for store expansions or improvements. These loans are typically
secured by inventory and store fixtures, bear interest at rates above the
prime rate, and are for terms of up to 10 years. During fiscal years 1995,
1996 and 1997, the company sold, with limited recourse, $77 million, $35
million and $29 million, respectively, of notes evidencing such loans. The
company believes its loans to customers are illiquid and would not be
investment grade if rated. From time to time, the company also guarantees
the lease obligations of certain of its customers.
- EQUITY INVESTMENTS: The company has made equity investments in strategic
multi-store customers, which it refers to as Joint Ventures, and in
smaller operators, referred to as Equity Stores. Certain Equity Store
participants may retain the right to purchase the company's investment
over a five to ten year period. Many of the customers in which the company
has made equity investments are highly leveraged, and the company believes
its equity investments are highly illiquid.
At year-end 1997, Fleming had loans outstanding to customers totaling $121
million ($33 million of which were to retailers in which the company had an
equity investment) and equity investments in customers totaling $23 million. The
company also has investments in customers through direct financing leases, lease
guarantees, operating leases or credit extensions for inventory purchases. The
present value of the company's obligations under direct financing leases and
lease guarantees were $200 million and $62 million, respectively, at year-end
1997. Stricter credit policies and cost/benefit analyses applied to credit
extensions to and investments in customers have resulted in less exposure and a
decrease in credit losses. Fleming's credit loss expense from receivables as
well as from investments in customers was $31 million in 1995, $27 million in
1996 and $24 million in 1997. See notes to consolidated financial statements.
COMPETITION
The Food Distribution Segment faces intense competition. The company's
primary competitors are regional and local food distributors, national chains
which perform their own distribution (such as The Kroger Co. and Albertson's,
Inc.), and national food distributors (such as SUPERVALU Inc.). The principal
competitive factors include price, quality and assortment of product lines,
schedules and reliability of delivery, and the range and quality of customer
services.
The primary competitors of Retail Food Segment supermarkets and Food
Distribution Segment customers are national, regional and local grocery and drug
chains, as well as independent supermarkets, convenience stores, restaurants and
fast food outlets. Principal competitive factors include product price, quality
and assortment, store location and format, sales promotions, advertising,
availability of parking, hours of operation and store appeal.
EMPLOYEES
At year-end 1997, the company had approximately 39,700 full-time and
part-time associates, with approximately 12,700 employed by the Food
Distribution Segment, approximately 25,200 by the Retail Food Segment and
approximately 1,800 employed in corporate and other functions. Since year-end
1994, the company's total employment has been reduced by approximately 2,700 on
a net basis. The number of associates employed by the Food Distribution Segment
was reduced by 6,600, from approximately 19,300 at year-end 1994 to
approximately 12,700 at year-end 1997, through facilities consolidation,
elimination of management layers and outsourcing of transportation and other
functions and other cost-cutting measures. The Retail Food Segment employment
has increased on a net basis for the same time period by approximately 3,900
full and part-time associates, due primarily to acquisitions.
11
<PAGE>
Approximately half of the company's associates are covered by collective
bargaining agreements with the International Brotherhood of Teamsters;
Chauffeurs, Warehousemen and Helpers of America; the United Food and Commercial
Workers; the International Longshoremen's and Warehousemen's Union; and the
Retail Warehouse and Department Store Union. Most of such agreements expire at
various times throughout the next five years. The company believes it has
satisfactory relationships with its unions.
ITEM 2. PROPERTIES
The following table sets forth facilities information with respect to
Fleming's Food Distribution segment.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
LOCATION (IN 000'S) OWNED OR LEASED
- ------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
FOOD DISTRIBUTION (1)
Altoona, PA.................................................. 172 Owned
Buffalo, NY.................................................. 417 Leased
El Paso, TX (2).............................................. 477 Leased
Ewa Beach, HI................................................ 196 Leased
Fresno, CA (6)............................................... 326 Owned
Garland, TX.................................................. 1,180 Owned
Geneva, AL................................................... 345 Leased
Houston, TX.................................................. 662 Leased
Huntingdon, PA (7)........................................... 253 Owned
Johnson City, TN(3).......................................... 298 Owned
Kansas City, KS.............................................. 929 Leased
La Crosse, WI................................................ 907 Owned
Lafayette, LA................................................ 435 Owned
Laurens, IA.................................................. 368 Owned
Lincoln, NE.................................................. 304 Leased
Lubbock, TX (2).............................................. 378 Owned
Marshfield, WI............................................... 157 Owned
Massillon, OH (7)............................................ 808 Owned
Memphis, TN.................................................. 780 Owned
Miami, FL.................................................... 763 Owned
Milwaukee, WI................................................ 600 Owned
Minneapolis, MN (4).......................................... 480 Owned
Nashville, TN(3)............................................. 734 Leased
North East, MD (5)........................................... 109 Owned
Oklahoma City, OK (8)........................................ 454 Owned
Oklahoma City, OK (8)........................................ 410 Leased
Peoria, IL................................................... 325 Owned
Philadelphia, PA (5)......................................... 832 Leased
Phoenix, AZ.................................................. 912 Owned
Portland, OR................................................. 337 Owned
Sacramento, CA (6)........................................... 714 Owned
Salt Lake City, UT........................................... 433 Owned
San Antonio, TX.............................................. 514 Leased
Sikeston, MO................................................. 481 Owned
Superior, WI (4)............................................. 371 Owned
Warsaw, NC................................................... 334 Owned/Leased
York, PA..................................................... 450 Owned
------
18,645
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
LOCATION (IN 000'S) OWNED OR LEASED
- ------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
GENERAL MERCHANDISE GROUP
Dallas, TX................................................... 262 Owned/Leased
King of Prussia, PA.......................................... 377 Leased
La Crosse, WI................................................ 163 Owned
Memphis, TN.................................................. 339 Owned/Leased
Sacramento, CA............................................... 294 Leased
Topeka, KS................................................... 179 Leased
------
1,614
OUTSIDE STORAGE
Outside storage facilities--typically rented on a short-term
basis...................................................... 5,204
------
Total for Food Distribution.................................. 25,463
</TABLE>
- ------------------------
(1) Food distribution includes two convenience store divisions.
(2) Comprise the Lubbock distribution operation.
(3) Comprise the Nashville distribution operation.
(4) Comprise the Minneapolis distribution operation.
(5) Comprise the Philadelphia distribution operation.
(6) Comprise the Sacramento distribution operation.
(7) Comprise the Massillon distribution operation.
(8) The company operates two distribution operations in Oklahoma City. The
administrative functions of these two distribution operations are
consolidated.
The following table sets forth general information with respect to Fleming's
Retail Food segment. These retail stores are primarily leased.
<TABLE>
<CAPTION>
APPROXIMATE
COMBINED
LOCATION OF NUMBER OF SQUARE FEET
RETAIL CHAIN OR GROUP STORES STORES (IN 000'S)
- --------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
ABCO Foods......................................... AZ 56 1,995
Baker's............................................ NE, OK 23 1,216
Boogaarts.......................................... KS, NE 22 353
Jubilee Foods...................................... NY, PA 16 484
Market Basket...................................... NY, PA 17 249
Consumers.......................................... MO, AR, KS 21 898
Penn Retail........................................ PA, MD 16 585
Hyde Park Market................................... FL 13 279
Rainbow Foods...................................... MN, WI 36 2,103
Sentry Foods....................................... WI 13 476
SuPeRSaVeR......................................... WI 21 1,303
Thompson Food Basket............................... IL, IA 12 364
RichMar............................................ CA 6 324
University Foods................................... UT 5 282
--- ------
Total for Retail Foods............................. 277 10,911
</TABLE>
13
<PAGE>
Fleming's corporate offices are located in Oklahoma City, Oklahoma in leased
office space totaling approximately 326,000 square feet.
Fleming owns and leases other significant assets, such as inventories,
fixtures and equipment, capital leases, etc., which are reflected in the
company's consolidated balance sheets which are included in Item 8. of this
report.
For information regarding lease commitments and long-term debt relating to
properties or other assets, see "Lease Agreements" and "Long-term Debt" in the
notes to the consolidated financial statements which are included in Item 8. of
this report.
ITEM 3. LEGAL PROCEEDINGS
The following describes various pending legal proceedings to which Fleming
is subject. For additional information, see "Litigation and Contingencies" in
the notes to the consolidated financial statements which are included in Item 8.
of this report.
(1) RANDALL'S. In July 1997, Randall's Food Markets, Inc. ("Randall's")
initiated arbitration proceedings against Fleming before the American
Arbitration Association in Dallas, Texas. Randall's has been a Fleming customer
for over 30 years. In 1997 Randall's purchased approximately $450 million of
products from Fleming under an eight-year supply contract entered into in 1993
in connection with Fleming's purchase of certain distribution assets from
Randall's. Prior to initiating the arbitration proceeding, Randall's
unsuccessfully sought to terminate its supply contract.
Randall's alleges that Fleming conspired with a group of manufacturers and
vendors to defraud Randall's by inflating prices and that Fleming impermissibly
modified the pricing mechanism of its supply contract. Randall's claims it was
overcharged by approximately $54 million during a 4 1/2 year period. Randall's
alleges breach of contract, fraud and RICO violations, and seeks actual,
punitive and treble damages, termination of its supply contract, attorneys' fees
and costs. The contract on which Randall's bases its claim prohibits either
party from recovering any amount other than actual damages; recovery of
consequential damages, punitive damages and all similar forms of damages are
expressly prohibited. Randall's asserts that such provision is contrary to
public policy and therefore not binding on it.
(2) CLASS ACTION SUITS. In 1996 certain stockholders (Kenneth Steiner,
Lawrence B. Hollin, Ronald T. Goldstein, General Telcom Money Purchase Perscon
Plan & Trust, Bright Trading, Inc., City of Philadelphia, Gerald Pindus, Charles
Hinton and Lawrence M. Wells, among others) and one bondholder (Robert Mark)
filed purported class action lawsuits against the company and certain of its
present and former officers and directors [Robert E. Stauth, Harry L. Winn, Jr.,
Kevin J. Twomey, Donald N. Eyler (a former executive officer) and, as to the
stock cases only, R. Randolph Devening (a former executive officer and former
director)], each in the U.S. District Court for the Western District of
Oklahoma. In April 1997, the court consolidated the stockholder cases as City of
Philadelphia, et al. v. Fleming Companies, Inc., et al.; the noteholder case was
also consolidated, but only for pre-trial purposes. A complaint has been filed
in the consolidated cases asserting liability for the company's alleged failure
to properly account for and disclose the contingent liability created by the
litigation brought against the company by David's Supermarkets, Inc. ("David's")
and by the company's alleged "deceptive business practices." The plaintiffs
claim that these alleged failures and practices led to the David's litigation
and to other material contingent liabilities, caused the company to change its
manner of doing business at great cost and loss of profit, and materially
inflated the trading price of the company's common stock. The plaintiffs seek
undetermined but significant damages.
In November 1997, the company won a declaratory judgment against certain of
its insurance carriers regarding directors and officers ("D&O") insurance
policies issued to Fleming for the benefit of its officers and directors. On
motion for summary judgment, the U.S. District Court for the Western District of
Oklahoma ruled that the company's exposure, if any, under the class action suits
is covered by certain
14
<PAGE>
D&O policies written by the insurance carriers (aggregating $60 million) and
that the "larger settlement rule" will be applicable to the case. According to
the trial court, under the larger settlement rule a D&O insurer is liable for
the entire amount of coverage available under a policy even if there is some
overlap in the liability created by insured individuals and an uninsured
corporation. If a corporation's liability is increased by uninsured parties
beyond that of the insured individuals, then that portion of the liability is
the sole obligation of the corporation. The court also held that allocation is
not available to the insurance carriers as an affirmative defense. The insurance
carriers have appealed.
(3) DERIVATIVE SUITS. In October 1996, certain of the company's present
and former officers and directors [Robert E. Stauth, Harry L. Winn, Jr., Kevin
J. Twomey, Archie R. Dykes, Carol B. Hallett, Edward C. Joullian III, John A.
McMillan, Guy A. Osborn, Howard H. Leach (a former director), R.D. Harrison
(subsequently dismissed), Lawrence M. Jones (a former director), R. Randolph
Devening (a former executive officer and former director), Donald N. Eyler (a
former executive officer), E. Dean Werries (a former executive officer and
former director) and James E. Stuard (a former executive officer)], were named
as defendants in a purported shareholder's derivative suit in the U.S. District
Court for the Western District of Oklahoma (Cauley, et al. v. Stauth, et al.).
Plaintiffs' complaint contains allegations that the defendants breached their
respective fiduciary duties to the company and were variably responsible for
causing the company to (i) become "involved with" Premium Sales Corporation and
its illegal course of business resulting in a $20 million settlement paid by
Fleming; (ii) "systematically misrepresent and overstate" the cost of company
products, resulting in litigation by David's Supermarkets (which was settled by
the company for $20 million) and ultimately leading to the class action suits
discussed above; and (iii) fail to meet its disclosure obligations under the law
resulting in the class action lawsuits and increased borrowing costs, loss of
customers and loss of market value.
In another purported shareholder derivative action filed in October 1996 in
the U.S. District Court for the Western District of Oklahoma (Rosenburger v.
Stauth, et al.), the plaintiff sued the same and additional officers and
directors [E. Stephen Davis, Thomas L. Zaricki, Gerald G. Austin (a former
executive officer) and Glenn E. Mealman (a former executive officer)]. In this
case, the plaintiff alleged the defendants caused the company to (i) violate
certain sale agreements with David's Supermarkets resulting in the David's
litigation, (ii) fail to disclose to the investing public the risks associated
with the David's litigation, (iii) violate certain sale agreements with
Megafoods in a manner similar to that alleged by David's Supermarkets, and (iv)
defraud persons who invested in the Premium-related entities resulting in
litigation.
Plaintiffs' sought damages from the defendants on behalf of Fleming in
excess of $50,000, forfeiture by the defendants of their salaries and other
compensation for the period in which they allegedly breached their fiduciary
duties, retention of all monies held by the company as deferred compensation or
otherwise on behalf of the defendants as a constructive trust for the benefit of
the company, and attorney's fees and costs. On September 30, 1997, both
derivative suits were dismissed, without prejudice, for failure to make demand
on the company's Board of Directors prior to instigating the litigation.
Plaintiffs have filed a motion seeking leave to file an amended complaint.
(4) TOBACCO CASES. In August 1996, Richard E. Ieyoub, the Attorney General
of the State of Louisiana, brought an action in the 14th Judicial District Court
of Louisiana against The American Tobacco Company and numerous defendants
including the company. Since then 16 actions have been filed by individual
plaintiffs (Joseph Aezen, Najiyya El-Haddi, Victoria Lynn Katz, Robert R.
Applebaum, Carla Boyce, Robert J. Ruiz, Rosalind K. Orr, Florence Ferguson, Ella
Daly, Janet Anes, Kym Glasser, Welton Lee Upshur, Donald G. Teti, George
Thompson, Ronald Folkman, and Sandy and Howard Greenfield) against major tobacco
companies (R.J. Reynolds Tobacco Company, Phillip Morris Companies and Lorillard
Tobacco Company) and others including the company (or one of its predecessors)
in the Court of Common Pleas, Philadelphia County, Pennsylvania; two individuals
(Doyle Smith and Gloria Schultz) commenced separate actions in the Court of
Common Pleas, Dauphin County, Pennsylvania against Phillip Morris Companies and
others including the company; and one individual (Olanda Carter) commenced an
15
<PAGE>
action against R.J. Reynolds Tobacco Company and a predecessor of the company in
the Circuit Court for Shelby County, Tennessee. Each of these cases alleges
substantial monetary liability for Fleming's participation in the distribution
of tobacco products. The company is being indemnified and defended by
substantial third party co-defendants with respect to these cases. The
indemnifications are unconditional and unlimited.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the executive
officers of the company as of March 2, 1998:
<TABLE>
<CAPTION>
YEAR FIRST
BECAME AN
NAME (AGE) PRESENT POSITION OFFICER
- -------------------------------------------- -------------------------------------------- ---------------
<S> <C> <C>
Robert E. Stauth (53)....................... Chairman and Chief Executive Officer 1987
William J. Dowd (55)........................ President and Chief Operating Officer 1995
E. Stephen Davis (57)....................... Executive Vice President--Food Distribution 1981
Harry L. Winn, Jr. (53)..................... Executive Vice President and Chief Financial 1994
Officer
David R. Almond (57)........................ Senior Vice President--General Counsel and 1989
Secretary
Ronald C. Anderson (55)..................... Senior Vice President--General Merchandise 1993
Mark K. Batenic (49)........................ Senior Vice President--Sales and Business 1994
Development, Food Distribution
Craig A. Grant (50)......................... Senior Vice President--Organizational 1998
Strategies/Management Development
William M. Lawson, Jr. (47)................. Senior Vice President--Corporate Development 1994
Dixon E. Simpson (55)....................... Senior Vice President--Retail Services 1993
Larry A. Wagner (51)........................ Senior Vice President--Human Resources 1989
Thomas L. Zaricki (53)...................... Senior Vice President--Retail Operations 1993
Nancy E. Del Regno (45)..................... Vice President--Communications and Public 1995
Affairs
John M. Thompson (56)....................... Vice President--Treasurer and Assistant 1982
Secretary
Kevin J. Twomey (47)........................ Vice President--Controller 1995
</TABLE>
No family relationship exists among any of the executive officers listed
above.
Executive officers are elected by the board of directors for a term of one
year beginning with the annual meeting of shareholders held in April or May of
each year.
16
<PAGE>
Each of the executive officers has been employed by the company or its
subsidiaries for the preceding five years except for Messrs. Anderson, Dowd,
Grant, Lawson, Winn and Zaricki and Ms. Del Regno.
Mr. Anderson joined the company as Vice President--General Merchandise in
July 1993. In March 1995, he was named Senior Vice President--General
Merchandise. Since 1986, until joining the company, he was President of McKesson
Corporation, a distributor of pharmaceutical and related products, where he was
responsible for its service merchandising division.
Mr. Dowd joined the company in his present position in July 1995. From 1994
until joining the company, he was Senior Vice President--Operations at Cott
Corporation, a producer of retailer-branded soft drinks. From 1991 to 1994, Mr.
Dowd was Executive Vice President for Kraft General Foods' KGF Service Company.
Mr. Grant joined the company in his present position in March 1998. From
1991 to 1998, he was Vice President--Human Resources for Interlake Corporation
in Lisle, Illinois.
Mr. Lawson joined the company in his present position in June 1994. Prior to
that, Mr. Lawson was a practicing attorney in Phoenix for 18 years.
Mr. Winn joined the company in his present position in May 1994. He was with
UtiliCorp United in Kansas City, an energy company, where he was Managing Senior
Vice President and Chief Financial Officer from 1990 to 1993.
Mr. Zaricki joined the company in his present position in October 1993.
Since 1987, until joining the company, Mr. Zaricki was President of Arizona
Supermarkets, Inc., a regional supermarket chain headquartered in Phoenix.
Ms. Del Regno joined the company in her present position in February 1995.
She was with PepsiCo Food Systems where she was Senior Communications Manager
from 1988 to 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Fleming common stock is traded on the New York, Chicago and Pacific stock
exchanges. The ticker symbol is "FLM". As of February 20, 1998, the 38.3 million
outstanding shares were owned by 12,000 shareholders of record and approximately
11,000 beneficial owners whose shares are held in street name by brokerage firms
and financial institutions. According to the New York Stock Exchange Composite
Transactions tables, the high and low prices of Fleming common stock during each
calendar quarter of the past two years are shown below.
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
QUARTER HIGH LOW HIGH LOW
- ------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
First.................................................. $ 18.75 $ 15.75 $ 20.88 $ 13.63
Second................................................. 20.38 15.50 16.38 11.50
Third.................................................. 19.50 15.75 18.38 13.63
Fourth................................................. 18.94 13.38 18.25 15.63
</TABLE>
Cash dividends on Fleming common stock have been paid for 81 consecutive
years. Dividends are generally declared on a quarterly basis with holders as of
the record date being entitled to receive the cash dividend on the payment date.
Record and payment dates are normally as shown below:
<TABLE>
<CAPTION>
RECORD DATES: PAYMENT DATES:
- ---------------------------------- ----------------------------------
<S> <C>
February 20 March 10
May 20 June 10
August 20 September 10
November 20 December 10
</TABLE>
17
<PAGE>
Cash dividends of $.02 per share were paid on or near each of the above four
payment dates in 1997. The company paid a cash dividend of $.30 per share for
the first quarter, and $.02 per share, per quarter for quarters two through four
in 1996.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993(A) 1994(B) 1995(C) 1996(D) 1997(E)
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 13,096 $ 15,724 $ 17,502 $ 16,487 $ 15,373
Earnings before extraordinary charge... 37 56 42 27 39
Net Earnings........................... 35 56 42 27 25
Diluted net earnings per common share
before extraordinary charge(f)....... 1.02 1.51 1.12 .71 1.02
Diluted net earnings per share(f)...... .96 1.51 1.12 .71 .67
Total assets........................... 3,103 4,608 4,297 4,055 3,924
Long-term debt and capital leases...... 1,004 1,995 1,717 1,453 1,494
Cash dividends declared per common
share................................ 1.20 1.20 1.20 .36 .08
</TABLE>
- ------------------------
See Item 3. Legal Proceedings, notes to consolidated financial statements and
the financial review included in Items 7. and 8.
(a) The results in 1993 include a charge of approximately $108 million ($66
million after-tax or $1.79 per share) for additional facilities
consolidations, reengineering, impairment of retail-related assets and
elimination of regional operations. 1993 also reflected an extraordinary
charge of $4 million ($2 million after-tax or $.06 per share) for the early
retirement of debt.
(b) The results in 1994 reflect the July 1994 acquisition of Scrivner Inc.
(c) In 1995, management changed its estimates with respect to the general
merchandising portion of the reengineering plan and reversed $9 million ($4
million after-tax or $.12 per share) of the related provision. (See note "a"
above).
(d) Results in 1996 include a charge of $20 million ($10 million after-tax or
$.26 per share) related to the settlement of two related lawsuits against
the company.
(e) The results in 1997 reflect a charge of $19 million ($9 million after-tax or
$.24 per share) related to the settlement of a lawsuit against the company.
1997 also reflected an extraordinary charge of $22 million ($13 million
after-tax or $.35 per share) related to the recapitalization program.
(f) All earnings per share amounts have been restated and are reflected as
diluted as defined under SFAS No. 128-Earnings Per Share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Several events have shaped Fleming's results of operations and capital and
liquidity position during each of the past three fiscal years. Changes in the
food marketing and distribution industry have reduced sales and increased
competitive pressures for the company and many of its customers. In January
1994, the company announced a strategic plan to transform its operations to
better serve its customers and achieve higher profitability. As part of this
plan, the company consolidated food distribution facilities, reorganized its
management group and reengineered the way it prices and sells grocery, frozen
and dairy products and retail services. In July 1994, the company acquired
Scrivner Inc. ("Scrivner"), adding $6 billion in annual sales from food
distribution and more than 175 retail stores. The company also dealt with
business and
18
<PAGE>
litigation challenges during this period: the bankruptcy of a major customer in
1994, the addition by foreclosure in early 1996 of a 71-store customer in
Arizona and several litigation developments. Each of these events is discussed
in more detail below:
CHANGING INDUSTRY ENVIRONMENT. The food marketing and distribution
industry is undergoing accelerated change as producers, manufacturers,
distributors and retailers seek to lower costs and increase services in an
increasingly competitive environment of relatively static overall demand.
Alternative format food stores (such as warehouse stores and supercenters)
have gained retail food market share at the expense of traditional
supermarket operators, including independent grocers, many of whom are
Fleming customers. Vendors, seeking to ensure that more of their promotional
fees and allowances are used by retailers to increase sales volume,
increasingly direct promotional dollars to large self-distributing chains,
alternative formats and other channels of distribution. The company believes
that these changes have led to reduced sales, reduced margins and lower
profitability among many of its customers and at the company itself.
CONSOLIDATIONS, REORGANIZATION AND REENGINEERING. In the fourth quarter
of 1993, the company developed a comprehensive plan to consolidate five
wholesale food facilities, reorganize its operational and managerial
structure and reengineer the way it prices and markets certain goods and
retail services (the "1993 Plan"). The company's goals were: (i) to gain
operational efficiencies by closing certain facilities and consolidating
operations into larger, more efficient facilities; (ii) to reduce costs by
removing a layer of management and closing regional operations; and (iii) to
combat negative industry trends by offering a flexible marketing plan
designed to permit customers to reduce the cost of the goods and services
purchased from the company and thereby gain a competitive advantage for
Fleming. The estimated costs of significant actions believed necessary to
implement the 1993 Plan were identified (such as asset impairments and
severance costs) and a pre-tax charge totaling $108 million was recorded
along with related reserves. Certain additional costs (such as employee
training expenses and the costs of designing and implementing the flexible
marketing plan) were anticipated but were not included in the charge. These
additional costs are being expensed as incurred. By year-end 1993,
approximately $24 million of consolidation and severance costs were charged
to the 1993 reserve leaving a balance of approximately $81 million.
At inception, the company expected the 1993 Plan to be completed and the
reserve to be fully utilized by the end of 1996. The acquisition of Scrivner
in mid-1994 (which was not anticipated when the 1993 Plan was established)
and the subsequent integration of Scrivner into Fleming's operations delayed
implementation of many components of the 1993 Plan. During 1994, $28 million
was charged to the reserve as the company consolidated (or partially
consolidated) four facilities, recognized impairments related to asset
dispositions and made some planned reductions in work force.
During 1995, the company charged $21 million against the 1993 reserve as
continuing expenses were recognized in completing four of the planned five
facilities consolidations and the anticipated asset impairments relating to
retail store dispositions were recognized. During the year, the company
noted certain customer resistance to transferring operations to consolidated
facilities. To reduce these disruptive logistical changes, the company
targeted an alternative facility for consolidation. The closure of the
alternate site will be less expensive than initially estimated. Accordingly,
$9 million of the 1993 reserve was reversed in the third quarter of 1995 and
taken into income as a change in estimate.
Many of the 1993 Plan's components are interdependent and certain
actions could not begin until other actions were completed. For example,
full work force reductions and certain transportation initiatives could not
be implemented until the company's new marketing plan was available at the
respective product supply center. During 1995 and early 1996, the company
experienced unanticipated customer resistance to the changes required by the
new flexible marketing plan and the pace of implementing the 1993 Plan
slowed as the company developed alternatives to overcome this resistance.
Consequently, actions dependent on the implementation of the new marketing
plan were also
19
<PAGE>
slowed and, in some cases, rescheduled to 1997. During 1996, only $3 million
was charged against the reserve, but during 1997, $13 million was charged
against the reserve. Alternative marketing plans have been developed and
implementation of the 1993 Plan is expected to accelerate so as to be
substantially complete by the end of 1998.
While customer reaction to the initial implementation of the flexible
marketing plan (which is a critical component of reengineering) caused some
operational disruption and loss of sales, the company believes that the 1993
Plan will reduce costs throughout the company and strengthen the company's
overall competitive position.
SCRIVNER. In July 1994, Fleming purchased Scrivner, with annual sales
exceeding $6 billion, for approximately $390 million in cash and the
assumption of $670 million of indebtedness. During 1994 and 1995, the
company consolidated nine distribution centers acquired in the Scrivner
acquisition (in addition to the consolidations which were anticipated as
part of the 1993 Plan). The costs of these consolidations were charged to
separate purchase accounting reserves established at the time of the
acquisition. The acquisition of Scrivner and its integration into Fleming
caused significant delays in implementing the 1993 Plan.
MEGAFOODS. In August 1994, Megafoods, Inc. and certain of its
affiliates ("Megafoods" or the "debtor"), filed Chapter 11 bankruptcy
proceedings in Phoenix, Arizona. The company estimates that prior to
bankruptcy, annualized sales to Megafoods approximated $335 million. By
1995, sales to Megafoods were approximately $87 million and by 1996, there
were no sales. The company filed claims for indebtedness for goods sold on
open account, equipment leases and secured loans. Megafoods brought an
adversary proceeding seeking, among other things, damages against the
company. The company recorded losses resulting from deteriorating collateral
values of $6.5 million in 1994 and $3.5 million in 1995, and in 1996 and
1997 recorded $5.8 million and $.8 million, respectively, to reflect
continuing deterioration and the effects of the settlement of the company's
claim and the debtor's allegations. At year-end 1997, approximately $2
million in assets relating to Megafoods remained on the company's books.
ABCO. At year-end 1994, the company was the largest single shareholder
(approximately 48%), the major supplier and the second largest creditor of
ABCO Holding, Inc. ("ABCO"), a supermarket chain located in Arizona. By the
fall of 1995, the company's investments in, and loans to, ABCO totaled
approximately $39 million. In September 1995, ABCO defaulted on both its
bank debt and its debt to the company. The company exercised a warrant to
gain an additional 3% of ABCO's capital stock and purchased the bank's
preferred position for $21 million. In January 1996, the company foreclosed
and acquired all of ABCO's assets consisting of approximately 71 stores at
the time of foreclosure. Certain of ABCO's minority shareholders have
brought suit seeking rescission and/or damages.
LITIGATION. In March 1996, a jury in central Texas returned verdicts in
David's Supermarkets, Inc. v. Fleming ("David's") which resulted in a
judgment of $211 million against Fleming. In response, the company
established a reserve of $7.1 million and amended its former bank credit
agreement to facilitate posting a partially collateralized supersedeas bond.
Pursuant to the amendment, pricing for borrowing under the former credit
agreement was increased. The judgment was vacated in June 1996, and the
company's reserve was reduced to $650,000. During the first quarter of 1997,
the company recorded a charge of $19.2 million to reflect the settlement of
the David's case. During the third quarter of 1996, the company recorded a
charge of $20 million to reflect the settlement of two lawsuits involving a
failed grocery diverter, Premium Sales Corporation. During the fourth
quarter of 1997, the company reached a settlement of a business dispute with
its largest customer, Furr's, Inc. ("Furr's"). Pursuant to the settlement,
the company will refund $800,000 per month during the remaining life of its
supply contract with Furr's. See "--Litigation and Contingencies" below and
"Litigation and Contingencies" in the notes to the consolidated financial
statements for a further discussion of certain litigation and contingent
liability issues.
20
<PAGE>
COMPANY-OWNED STORE CLOSINGS. In the past two years, the company has
divested over 80 stores. The divestitures were based on the stores' poor
performance or inconsistency with the company's strategy.
CREDIT POLICIES. In 1995, Fleming began imposing stricter credit
policies and applying cost/ benefit analyses to loans to and investments
made in its distribution customers. Traditionally, food distributors have
used the availability of financial assistance as a competitive tool. Fleming
believes that its stricter credit policies have resulted in decreased sales.
Management believes that the combination of these events has negatively
affected the company's financial performance during the past three years.
However, management also believes that the company's ultimate success will
depend on its ability to continue to cut costs while expanding profitable
operations. The company has revised its marketing plans and is taking other
steps to reverse sales declines. These initiatives include increased marketing
emphasis and expanded offerings of Fleming Retail Services, streamlining and
expanding Fleming Brands, developing and marketing additional foodservice
products and growing retail food operations through remodels, new store
development and selective acquisitions. While the company believes considerable
progress has been made to date, no assurance can be given that the company will
be successful in continuing to cut costs, in reversing sales declines or in
increasing higher margin activities.
However, starting with the fourth quarter of 1995, a trend of improvement in
the company's adjusted earnings per share began to develop reflecting some
success in countering the negative impact of the events outlined above. After
adjusting for litigation charges, charges for the disposition of retail food
operations and other nonoperating items, adjusted earnings per share for the
past twelve quarters were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
First quarter.................................... $ .40 $ .25 $ .39
Second quarter................................... $ .39 $ .30 $ .35
Third quarter.................................... $ .10 $ .19 $ .23
Fourth quarter................................... $ .11 $ .27 $ .34
Year............................................. $ 1.00 $ 1.01 $ 1.32
</TABLE>
RESULTS OF OPERATIONS
Set forth in the following table is information regarding the company's net
sales and certain components of earnings expressed as a percent of sales which
are referred to in the accompanying discussion:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales........................................................................ 100.00% 100.00% 100.00%
Gross margin..................................................................... 8.06 8.99 9.31
Less:
Selling and administrative....................................................... 6.79 7.73 7.76
Interest expense................................................................. 1.00 .99 1.06
Interest income.................................................................. (.33) (.29) (.30)
Equity investment results........................................................ .16 .11 .11
Litigation charge................................................................ -- .12 .14
Facilities consolidation......................................................... (.05) -- --
--------- --------- ---------
Total............................................................................ 7.57 8.66 8.77
--------- --------- ---------
Earnings before taxes............................................................ .49 .33 .54
Taxes on income.................................................................. .25 .17 .29
--------- --------- ---------
Earnings before extraordinary charge............................................. .24 .16 .25
Extraordinary charge............................................................. -- -- .09
--------- --------- ---------
Net earnings..................................................................... .24% .16% .16%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Note: The consolidated results of ABCO are included beginning December 1995.
21
<PAGE>
1997 AND 1996
NET SALES. Sales for 1997 decreased by $1.1 billion, or 7%, to $15.37
billion from $16.49 billion for 1996. See "--General."
Retail segment sales generated by the same stores in 1997 compared to 1996
decreased by 3.4%. The decrease was attributable, in part to new stores opened
by competitors in some markets and aggressive marketing initiatives by certain
competitors.
The company measures inflation using data derived from the average cost of a
ton of product sold by the company. For 1997, food price inflation was 1.3%,
compared to 2.3% in 1996.
GROSS MARGIN. Gross margin for 1997 decreased by $51 million, or 3%, to
$1.43 billion from $1.48 billion for 1996, but increased as a percentage of net
sales to 9.31% from 8.99% for 1996. The decrease in dollars followed the decline
in sales. The increase in gross margin percentage was due to improved gross
margins in both segments of the business brought about by numerous margin
improvement initiatives. The company also achieved food distribution
productivity increases during 1997 of 3.9%.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
for 1997 decreased by $79 million, or 6%, to $1.19 billion from $1.27 billion
for 1996, but increased as a percentage of net sales to 7.76% for 1997 from
7.73% in 1996. The decrease in dollars was principally due to improvements in
operating efficiencies for company-owned stores and reductions in administrative
and support functions offset in part by an increase in incentive compensation
expense. The increase as a percentage of net sales is the result of the rate of
sales decline being greater than the rate of expense reduction.
The company has a significant amount of credit extended to certain customers
through various methods. These methods include customary and extended credit
terms for inventory purchases and equity investments in and secured and
unsecured loans to certain customers. Secured loans generally have terms up to
ten years.
Credit loss expense is included in selling and administrative expenses and
for 1997 decreased by approximately $3 million to $24 million from $27 million
for 1996. Tighter credit practices and reduced emphasis on credit extensions to
and investments in customers have resulted in less exposure and a decrease in
credit loss expense.
INTEREST EXPENSE. Interest expense remained unchanged for 1997 compared to
1996 at $163 million. Lower average debt levels in 1997 compared to 1996 caused
interest expense to decline, but this was offset in the last half of 1997 due to
interest rates on the new senior subordinated notes being higher than the rates
on the refinanced debt.
The company's derivative agreements have consisted of simple
"floating-to-fixed rate" interest rate caps and swaps. For 1997, interest rate
hedge agreements contributed $7.2 million of interest expense compared to $9.6
million in 1996, or $2.4 million lower, primarily due to a lower average amount
of notional principal of debt referenced by interest rate hedges. For a
description of these derivatives see "Long-term Debt" in the notes to the
consolidated financial statements.
INTEREST INCOME. Interest income for 1997 was $47 million compared to $49
million in 1996. The company's investment in direct financing leases decreased
from 1996 to 1997 thereby decreasing interest income. Further in 1997 and 1996
the company sold (with limited recourse) $29 million and $35 million
respectively, of notes receivable which also reduced interest income.
EQUITY INVESTMENT RESULTS. The company's portion of operating losses from
equity investments for 1997 decreased by approximately $1 million to $17 million
from $18 million for 1996. The reduction in losses is due to improved results of
operations in certain of the underlying equity investments.
LITIGATION CHARGE. In October 1997, the company began paying Furr's
$800,000 per month as part of a settlement agreement. Such payments may continue
for up to 19 months. In the first quarter of 1997, the company expensed $19.2
million ($9 million after-tax or $.24 per share) in settlement of the David's
litigation. In the first quarter of 1996, the company accrued $7.1 million as
the result of a jury verdict
22
<PAGE>
regarding the David's case. In the second quarter of 1996, the accrual was
reversed following the vacation of the judgment resulting from the jury verdict,
and a new accrual for $650,000 was established. In the third quarter of 1996,
the company accrued $20 million ($10 million after-tax or $.26 per share)
related to an agreement reached to settle the Premium lawsuits. See "Litigation
and Contingencies" in the notes to the consolidated financial statements.
TAXES ON INCOME. The effective tax rate for 1997 is 58.0% versus 51.1% for
1996. The presentation of the 1997 tax is split by reflecting a tax benefit at
the statutory rate of 40% for the extraordinary charge and reflecting the
balance of the tax amount on the taxes on income line. The 1996 effective rate
was lower than the 1997 rate due primarily to favorable resolutions of tax
assessments in 1996.
EXTRAORDINARY CHARGE FROM EARLY RETIREMENT OF DEBT. During 1997, the
company undertook a recapitalization program which culminated in an $850 million
senior secured credit facility and the sale of $500 million of senior
subordinated notes. The recapitalization program resulted in an extraordinary
charge of $13.3 million, after income tax benefits of $8.9 million, or $.35 per
share, in the company's third quarter ended October 4, 1997. Almost all of the
charge represents a non-cash write-off of unamortized financing costs related to
debt which was prepaid. See "--Liquidity and Capital Resources" for a further
discussion of the recapitalization program.
CERTAIN ACCOUNTING MATTERS. See notes to consolidated financial statements
for a discussion of new accounting standards adopted in 1997, none of which had
a material effect on disclosures, results of operations or financial position.
OTHER. Several factors negatively affecting earnings in 1997 are likely to
continue for the near term. Management believes that these factors include lower
sales and operating losses in certain company-owned stores. Additionally, the
continuing commitments under the Furr's agreement will negatively impact
earnings compared to 1997. See "--Litigation and Contingencies" below and
"Litigation and Contingencies" in the notes to the consolidated financial
statements.
1996 AND 1995
NET SALES. Sales for 1996 decreased by $1.0 billion, or 6%, to $16.49
billion from $17.50 billion for 1995. See "--General."
The company measures inflation using data derived from the average cost of a
ton of product sold by the company. For 1996, food price inflation was 2.3%,
compared to 1.3% in 1995.
GROSS MARGIN. Gross margin for 1996 increased by $71 million, or 5%, to
$1.48 billion from $1.41 billion for 1995 and increased as a percentage of net
sales to 8.99% from 8.06% for 1995. The increase in gross margin was principally
due to new retail operations, primarily the addition of ABCO. Retail operations
typically have a higher gross margin and higher selling and administrative
expenses than food distribution operations. During 1996, the company also
implemented increases in certain charges to its customers and vendors,
increasing gross margin comparisons to 1995. Product handling expenses,
consisting of warehouse, transportation and building expenses, were lower as a
percentage of net sales in 1996 compared to 1995, reflecting the cost controls
and the benefits of the company's facility consolidations and transportation
outsourcing efforts in 1995 and 1994. The company also achieved food
distribution productivity increases during 1996 of 2.6%. Food price inflation
resulted in a LIFO charge in 1996 of $6.0 million compared to a charge of $2.9
million for 1995.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
for 1996 increased by $85 million, or 7%, to $1.27 billion from $1.19 billion
for 1995 and increased as a percentage of net sales to 7.73% for 1996 from 6.79%
in 1995. The increase was principally due to: higher retail expenses resulting
from additional retail operations; a $12 million charge related to the
divestiture of retail stores; and higher legal expense in 1996 compared to 1995.
During 1996, a $1.6 million gain from the sale of certain notes receivable was
recorded; a similar gain of $3.9 million was recorded in 1995. The increase in
corporate expenses under Operating Earnings shown in "Segment Information" in
the notes to consolidated financial
23
<PAGE>
statements include the aforementioned increase in legal expense, a write-down of
certain international equity investments and increased incentive compensation
expense.
Credit loss expense is included in selling and administrative expenses and
for 1996 decreased by $4 million to $27 million from $31 million for 1995.
Tighter credit practices and reduced emphasis on credit extensions to and
investments in customers have resulted in less exposure and a decrease in credit
loss expense. Offsetting the decreases in 1996 from 1995 was $3.8 million of
credit losses related to the bankruptcy of Megafoods, reflecting the estimated
deterioration in the company's collateral. An additional $2.0 million was
recorded to selling and administrative expense, but not credit loss, during the
third quarter of 1996 for the expected loss on the proposed settlement.
INTEREST EXPENSE. Interest expense for 1996 decreased $12 million to $163
million from $175 million for 1995. Lower average borrowing levels offset in
part by higher borrowing costs for bank debt in 1996 compared to 1995 primarily
accounted for the improvement. In February and April 1996, the company amended
its bank credit agreement first to provide greater financing flexibility and
subsequently to increase the company's capacity for letters of credit in order
to partially secure a supersedeas bond in connection with the David's
litigation. These amendments effectively increased the company's bank debt
borrowing margin by almost .5%. In August 1996, Moody's Investors Service
("Moody's") lowered its credit ratings on the company's senior unsecured debt.
The downgrade resulted in a .25% increase in the company's bank debt borrowing
margin which increased interest expense on borrowing under the bank credit
agreement at an estimated annualized cost of $2 million. In September 1996,
Standard & Poor's Ratings Group ("S&P") lowered its credit ratings on the
company and on the company's senior unsecured debt. The downgrade did not result
in an additional increase in the company's bank debt borrowing margin.
The company's derivative agreements consisted of simple "floating-to-fixed
rate" interest rate caps and swaps. For 1996, interest rate hedge agreements
contributed $10 million of interest expense, compared to $7 million in 1995, due
to lower average floating interest rates. See "Long-term Debt" in the notes to
the consolidated financial statements for further discussion.
INTEREST INCOME. Interest income for 1996 was $49 million compared to $58
million in 1995. In 1996, the company sold (with limited recourse) $35 million
of notes receivable late in the third quarter. In 1995, $77 million of notes
receivable were sold (with limited recourse) in the second quarter. Both of
these sales reduced the amount of notes receivable available to produce interest
income.
EQUITY INVESTMENT RESULTS. The company's portion of operating losses from
equity investments for 1996 decreased by $9 million to $18 million from $27
million for 1995. The results of operations of ABCO, accounted for under the
equity method during most of 1995, are not included in 1996 equity investment
results due to the acquisition of ABCO. This resulted in an improvement in
equity investment results in 1996 compared to 1995. The remainder of the
improvement is due to improved results of operations in certain of the
underlying equity investment entities.
FACILITIES CONSOLIDATION. In the first quarter of 1995, management changed
its facilities consolidation estimates with respect to the general merchandising
operations portion of the consolidation, reorganization and reengineering plan.
The revised estimate reflected reduced expense and cash outflow. Accordingly,
during the first quarter of 1995, the company reversed $9 million of the
provision for facilities consolidation.
TAXES ON INCOME. The effective tax rate for both 1996 and 1995 was 51.1%.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Set forth below is certain information regarding the company's capital
structure at the end of fiscal years 1996 and 1997:
<TABLE>
<CAPTION>
CAPITAL STRUCTURE
----------------------------------------------
1996 1997
---------------------- ----------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Long-term debt........................................................... $ 1,216 45.5% $ 1,175 44.3%
Capital lease obligations................................................ 381 14.2 388 14.6
--------- ----- --------- -----
Total debt............................................................... 1,597 59.7 1,563 58.9
Shareholders' equity..................................................... 1,076 40.3 1,090 41.1
--------- ----- --------- -----
Total capital............................................................ $ 2,673 100.0% $ 2,653 100.0%
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>
Note: The above table includes current maturities of long-term debt and current
obligations under capital leases.
Long-term debt was $41 million lower at year-end 1997 compared to 1996
primarily because net cash provided from operations plus a reduction in the cash
balance exceeded net cash required for investing activities and payments on
capital leases. Capital lease obligations increased $7 million in 1997 because
leases added for new retail stores exceeded repayments.
The debt-to-capital ratio at year-end 1997 was 58.9%, down from 59.7% at
year-end 1996. The company's long-term target ratio is between 50% and 55%.
Operating activities generated $113 million of net cash flows for 1997
compared to $328 million in 1996. The difference was principally due to changes
in working capital: a lower reduction in inventories, a higher reduction in
accounts payable, and a higher increase in accounts receivable. Working capital
was $340 million at year-end 1997, an increase from $221 million at year-end
1996. The current ratio increased to 1.29 to 1, from 1.16 to 1 at year-end 1996.
Capital expenditures were $129 million for 1997 and 1996. Total capital
expenditures for 1998 are expected to be approximately $230 million. Completion
of the company's recapitalization program will permit the company to increase
its total spending for capital expenditures and acquisitions. The company
intends to increase its retail operations by increasing investments in new and
remodeled stores in the company's existing retail chains and by making selective
acquisitions of supermarket chains or groups as opportunities arise.
The company makes investments in and loans to certain retail customers. Net
investments and loans decreased $72 million, from $240 million to $168 million
due primarily to the sale of notes receivable and more restrictive credit
policies. In 1997 and 1996, the company sold $29 million and $35 million of
notes receivable, respectively.
The company's principal sources of liquidity and capital have been cash
flows from operating activities, borrowing under its credit facility, sale of
notes receivable and the public and private debt capital markets.
On July 25, 1997, the company entered into a new $850 million senior secured
credit facility and sold $500 million of senior subordinated notes. Proceeds
from the initial borrowings under the credit agreement and the sale of the
subordinated notes were used to repay all outstanding bank debt under the
previous credit facility and the balance, together with additional revolver
borrowings, was used to redeem the company's $200 million floating rate senior
notes due 2001. The recapitalization program provides the company with increased
flexibility to redeploy assets and pursue increased business investment, such as
the expansion of the company's retail food operations, strengthens Fleming's
capital structure by reducing senior secured bank loans and repaying the
floating rate senior notes, extends the average life of total debt outstanding,
and reduces annual scheduled debt maturities.
25
<PAGE>
The new $850 million senior secured credit facility consists of a $600
million revolving credit facility, with a final maturity of July 25, 2003, and a
$250 million amortizing term loan, with a maturity of July 25, 2004. Up to $300
million of the revolver may be used for issuing letters of credit. Borrowings
and letters of credit issued under the new credit facility may be used for
general corporate purposes and are secured by a first priority security interest
in the accounts receivable and inventories of the company and its subsidiaries
and in the capital stock or other equity interests owned by the company in its
subsidiaries. In addition, the new credit facility is guaranteed by
substantially all company subsidiaries (see "Long-term Debt" in the notes to the
consolidated financial statements). The stated interest rate on borrowings under
the credit agreement is equal to a referenced index rate, normally the London
interbank offered interest rate ("LIBOR"), plus a margin. The level of the
margin is dependent on credit ratings on the company's senior secured bank debt.
The $500 million of senior subordinated notes consists of two issues: $250
million of 10 1/2% Notes due December 1, 2004 and $250 million of 10 5/8% Notes
due July 31, 2007. The subordinated notes are general unsecured obligations of
the company, subordinated in right of payment to all existing and future senior
indebtedness of the company, and senior to or of equal rank with all future
subordinated indebtedness of the company. The company currently has no other
subordinated indebtedness outstanding.
The credit agreement and the indentures under which other company debt
instruments were issued contain customary covenants associated with similar
facilities. The credit agreement currently contains the following more
significant financial covenants: maintenance of a fixed charge coverage ratio of
at least 1.7 to 1, based on earnings before interest, taxes, depreciation and
amortization and net rent expense; maintenance of a ratio of
inventory-plus-accounts receivable to funded bank debt (including letters of
credit) of at least 1.4 to 1; and a limitation on restricted payments, including
dividends. Covenants contained in the company's indentures under which other
company debt instruments were issued are generally less restrictive than those
of the credit agreement. The company is in compliance with all financial
covenants under the credit agreement and its indentures.
In addition, the credit facility may be terminated in the event of a defined
change of control. Under the company's indentures, noteholders may require the
company to repurchase notes in the event of a defined change of control coupled
with a defined decline in credit ratings.
At year-end 1997, borrowings under the credit facility totaled $250 million
in term loans and $30 million of revolver borrowings, and $88 million of letters
of credit had been issued. Letters of credit are needed primarily for insurance
reserves associated with the company's normal risk management activities. To the
extent that any of these letters of credit would be drawn, payments would be
financed by borrowings under the credit agreement.
At year-end 1997, the company would have been allowed to borrow an
additional $482 million under the revolving credit facility contained in the
credit agreement based on the actual borrowings and letters of credit
outstanding. Under the company's most restrictive borrowing covenant, which is
the fixed charges coverage ratio contained in the credit agreement, $41 million
of additional fixed charges could have been incurred.
The composite interest rate for total debt (including capital lease
obligations) before the effect of interest rate hedges was 9.9% for 1997, versus
8.6% in 1996. Including the effect of interest rate hedges, the composite
interest rate of debt was 10.4% and 9.1% at the end of 1997 and 1996,
respectively.
At year-end 1997, the company employed interest rate swaps covering a total
of $250 million of floating rate indebtedness with three counterparty banks
possessing investment grade credit ratings. The swaps have an average fixed
interest rate of 7.22% and an average remaining term of 2.4 years. Net interest
payments made or received under interest rate swaps are included in interest
expense. See "--Results of Operations-Interest Expense" above and "Long-term
Debt" in the notes to the consolidated financial statements.
26
<PAGE>
On June 27, 1997, Moody's Investors Service ("Moody's") announced it had
revised its credit ratings for Fleming. Moody's downgraded its rating for the
company's senior secured credit facility to Ba3 from Ba2, senior unsecured notes
to B1 from Ba3, and counterparty ratings to B1 from Ba3. Moody's assigned a Ba3
rating to the company's new $850 million credit agreement, and a B3 rating for
the new $500 million of senior subordinated notes.
On June 30, 1997, Standard & Poor's Rating Group ("S&P") announced it had
revised its outlook on Fleming to stable from negative and had affirmed the
company's BB corporate credit rating. Additionally, S&P raised its rating on the
company's senior unsecured notes to BB- from B+. It also assigned a B+ rating to
the company's new $500 million senior subordinated notes. On July 2, 1997, S&P
announced it had assigned a BB+ rating to the company's new $850 million credit
facility.
Dividend payments in 1997 were $.08 per share or 12% of net earnings per
share, compared to $.36 per share or 50% of net earnings per share in 1996. The
credit agreement and the indentures for the $500 million of senior subordinated
notes limit restricted payments, including dividends, to $58 million at year-end
1997, based on a formula tied to net earnings and equity issuances.
For the foreseeable future, cash flows from operating activities and the
company's ability to borrow under its credit agreement are expected to be the
company's principal sources of liquidity and capital. In addition, lease
financing may be employed for new stores and certain equipment. Management
believes these sources will be adequate to meet working capital needs, capital
expenditures (including expenditures for acquisitions, if any) and other capital
needs for the next 12 months.
LITIGATION AND CONTINGENCIES
From time to time the company faces litigation or other contingent loss
situations resulting from owning and operating its assets, conducting its
business or complying (or allegedly failing to comply) with federal, state and
local laws, rules and regulations which may subject the company to material
contingent liabilities. In accordance with applicable accounting standards, the
company records as a liability amounts reflecting such exposure when a material
loss is deemed by management to be both "probable" and "quantifiable" or
"reasonably estimable." See ("--General").
On October 23, 1997, Fleming and Furr's entered into an agreement providing
for the settlement of their business dispute. Under the agreement, Furr's is
being offered for sale through a six-month auction process which began on
October 29, 1997. Fleming's El Paso product supply center (the "El Paso PSC"),
together with related equipment and inventory, will be offered for sale with
Furr's. Upon the sale of Furr's to a third party, Fleming would receive
approximately 30% of the net proceeds.
If the successful bidder does not purchase the El Paso PSC, Fleming will
receive payment of certain liquidation costs for the orderly liquidation of the
El Paso PSC. If Furr's is not sold during the six-month period, Furr's will have
30 days within which to elect to purchase the El Paso PSC or to pay the
liquidation costs (after a nine-month transition period).
Under the agreement, Fleming is paying Furr's $800,000 per month as a refund
of fees and charges. The payments will cease with the expiration of the supply
contract which will occur upon the earlier of (i) the sale of the El Paso PSC or
(ii) the completion of the orderly liquidation of the El Paso PSC on or before
June 1, 1999.
While Fleming and Furr's have agreed to cooperate in the sale of Furr's, the
ultimate outcome of their joint efforts cannot be predicted. However, Fleming
expects that on or before June 1, 1999, the company will cease to supply Furr's,
the El Paso PSC will be sold or liquidated and Fleming's substantial equity
investment in Furr's will be sold and a gain realized. The settlement agreement
did not cause an impairment in value of any recorded balances. While the
premature loss of Furr's business will be significant in the near term, Fleming
believes that the reinvestment of its employed capital in other profitable
operations will offset the lost business. However, if Furr's is not sold,
Fleming may experience an impairment of $8-$10 million. During 1997, Furr's
purchased approximately $500 million of products from Fleming.
27
<PAGE>
Furthermore, the company discloses material loss contingencies in the notes
to its financial statements when the likelihood of a material loss has been
determined to be greater than "remote" but less than "probable." These and other
such contingent matters are discussed in "Litigation and Contingencies" in the
notes to the consolidated financial statements, which appear elsewhere herein.
Also see Item 3. Legal Proceedings. An adverse outcome experienced in one or
more of such matters, or an increase in the likelihood of such an outcome, could
have a material adverse effect on the company's business, results of operations,
cash flow, capital, access to capital or financial condition.
Fleming has numerous computer systems which were developed employing six
digit date structures (i.e., two digits each for month, day and year). Where
date logic requires the year 2000 or beyond, such date structures may produce
inaccurate results. Management has implemented a program to comply with year
2000 requirements on a system-by-system basis. Fleming's plan includes extensive
systems testing and is expected to be substantially completed by the first
quarter of 1999. The solution for each system is potentially unique and may be
dependent on third-party software providers and developers. Failure to ensure
that the company's computer systems are year 2000 compliant could have a
material adverse effect on the company's operations. Additionally, failure of
the company's suppliers or its customers to become year 2000 compliant might
have a material adverse impact on the company's operations.
Program costs to comply with year 2000 requirements are being expensed as
incurred. Expenditures with third parties are not expected to exceed $10 million
over the next two years. To compensate for the dilutive effect on results of
operations, the company has delayed other non-critical development and support
initiatives. Accordingly, the company expects that annual information technology
expenses will not differ significantly from prior years.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements of expected future
developments. The company wishes to ensure that such statements are accompanied
by meaningful cautionary statements pursuant to the safe harbor established in
the Private Securities Litigation Reform Act of 1995. The forward-looking
statements in the annual report refer to, among other matters: the company's
ability to implement measures to reverse sales declines, cut costs and improve
earnings; the company's ability to expand portions of its business or enter new
facets of its business which it believes will be more profitable than its food
distribution business; the company's expectations regarding the adequacy of its
capital and liquidity; and the receptiveness of the company's customers to its
reengineered programs. These forward-looking statements reflect management's
expectations and are based upon currently available data; however, actual
results are subject to future events and uncertainties which could materially
impact actual performance. The company's future performance also involves a
number of risks and uncertainties. Among the factors that can cause actual
performance to differ materially are: continued competitive pressures with
respect to pricing and the implementation of the company's reengineering
programs, the inability to achieve cost savings due to unexpected developments,
changed plans regarding capital expenditures, adverse developments with respect
to litigation and contingency matters, world and national economic conditions,
and the impact of such conditions on consumer spending.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14(a) 1. Financial Statements.
28
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 14, 1998.
Information concerning Executive Officers of the company is included in Part I
herein which is incorporated in this Part III by reference.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 14, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 14, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 14, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
<TABLE>
<CAPTION>
PAGE NUMBER
-----------------
<S> <C>
- - Consolidated Statements of Earnings--For the years ended December 27, 1997, December
28, 1996, and December 30, 1995
- - Consolidated Balance Sheets--At December 27, 1997, and December 28, 1996
- - Consolidated Statements of Cash Flows--For the years ended December 27, 1997,
December 28, 1996, and December 30, 1995
- - Consolidated Statements of Shareholders' Equity--For the years ended December 27,
1997, December 28, 1996, and December 30, 1995
- - Notes to Consolidated Financial Statements--For the years ended December 27, 1997,
December 28, 1996, and December 30, 1995
- - Independent Auditors' Report
- - Quarterly Financial Information (Unaudited)
</TABLE>
29
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996,
AND DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net sales........................................................... $ 15,372,666 $ 16,486,739 $ 17,501,572
Costs and expenses (income):
Cost of sales..................................................... 13,941,838 15,004,715 16,091,039
Selling and administrative........................................ 1,194,570 1,273,999 1,189,199
Interest expense.................................................. 162,506 163,466 175,390
Interest income................................................... (46,638) (49,122) (58,206)
Equity investment results......................................... 16,746 18,458 27,240
Litigation charge................................................. 20,959 20,650 --
Facilities consolidation.......................................... -- -- (8,982)
------------- ------------- -------------
Total costs and expenses........................................ 15,289,981 16,432,166 17,415,680
------------- ------------- -------------
Earnings before taxes............................................... 82,685 54,573 85,892
Taxes on income..................................................... 43,963 27,887 43,891
------------- ------------- -------------
Earnings before extraordinary charge................................ 38,722 26,686 42,001
Extraordinary charge from early retirement of debt (net of
taxes).......................................................... 13,330 -- --
------------- ------------- -------------
Net earnings........................................................ $ 25,392 $ 26,686 $ 42,001
------------- ------------- -------------
------------- ------------- -------------
Earnings per share:
Basic and diluted before extraordinary charge..................... $1.02 $.71 $1.12
Extraordinary charge.............................................. .35 -- --
------------- ------------- -------------
Basic and diluted net earnings.................................... $ .67 $.71 $1.12
------------- ------------- -------------
------------- ------------- -------------
Weighted average shares outstanding:
Basic............................................................. 37,803 37,774 37,577
------------- ------------- -------------
------------- ------------- -------------
Diluted........................................................... 37,862 37,777 37,581
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Sales to customers accounted for under the equity method were approximately
$0.9 billion, $1.0 billion and $1.5 billion in 1997, 1996 and 1995,
respectively.
See notes to consolidated financial statements.
30
<PAGE>
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 27, 1997, AND DECEMBER 28, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................ $ 30,316 $ 63,667
Receivables, net..................................................................... 334,278 329,505
Inventories.......................................................................... 1,018,666 1,051,313
Other current assets................................................................. 111,730 119,123
----------- -----------
Total current assets............................................................. 1,494,990 1,563,608
Investments and notes receivable....................................................... 150,221 205,683
Investment in direct financing leases.................................................. 201,588 212,202
Property and equipment:
Land................................................................................. 57,746 60,867
Buildings............................................................................ 426,302 416,188
Fixtures and equipment............................................................... 652,039 661,654
Leasehold improvements............................................................... 234,805 220,182
Leased assets under capital leases................................................... 227,894 203,491
----------- -----------
1,598,786 1,562,382
Less accumulated depreciation and amortization..................................... (648,943) (603,241)
----------- -----------
Net property and equipment....................................................... 949,843 959,141
Other assets........................................................................... 164,295 118,096
Goodwill, net.......................................................................... 963,034 996,446
----------- -----------
Total assets........................................................................... $ 3,923,971 $ 4,055,176
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................... $ 831,339 $ 952,769
Current maturities of long-term debt................................................. 47,608 124,613
Current obligations under capital leases............................................. 21,196 19,715
Other current liabilities............................................................ 254,454 245,774
----------- -----------
Total current liabilities........................................................ 1,154,597 1,342,871
Long-term debt......................................................................... 1,127,311 1,091,606
Long-term obligations under capital leases............................................. 367,068 361,685
Deferred income taxes.................................................................. 61,425 37,729
Other liabilities...................................................................... 123,898 145,327
Commitments and contingencies
Shareholders' equity:
Common stock, $2.50 par value, authorized--100,000 shares, issued and
outstanding--38,264 and 37,798 shares.............................................. 95,660 94,494
Capital in excess of par value....................................................... 504,451 503,595
Reinvested earnings.................................................................. 536,792 514,408
Accumulated other comprehensive income:
Cumulative currency translation adjustment......................................... (4,922) (4,700)
Additional minimum pension liability............................................... (37,715) (24,897)
----------- -----------
Accumulated other comprehensive income........................................... (42,637) (29,597)
Less ESOP note....................................................................... (4,594) (6,942)
----------- -----------
Total shareholders' equity....................................................... 1,089,672 1,075,958
----------- -----------
Total liabilities and shareholders' equity............................................. $ 3,923,971 $ 4,055,176
----------- -----------
----------- -----------
</TABLE>
Receivables include $17 million and $27 million in 1997 and 1996, respectively,
due from customers accounted for under the equity method.
See notes to consolidated financial statements.
31
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996,
AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................................................... $ 25,392 $ 26,686 $ 42,001
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization........................................ 181,357 187,617 180,796
Credit losses........................................................ 24,484 26,921 30,513
Deferred income taxes................................................ 40,301 (5,451) 12,052
Equity investment results............................................ 16,746 18,458 27,240
Cost of early debt retirement........................................ 22,227 -- --
Consolidation and restructuring reserve activity..................... (12,724) (2,865) (33,062)
Change in assets and liabilities, excluding effect of acquisitions:
Receivables........................................................ (41,347) (13,955) 7,156
Inventories........................................................ 31,315 150,524 149,676
Accounts payable................................................... (117,219) (45,666) 6,390
Other assets and liabilities....................................... (53,116) (15,368) (18,807)
Other adjustments, net............................................... (4,448) 612 (4,956)
----------- ----------- -------------
Net cash provided by operating activities............................ 112,968 327,513 398,999
----------- ----------- -------------
Cash flows from investing activities:
Collections on notes receivable........................................ 59,011 64,028 88,441
Notes receivable funded................................................ (37,537) (66,298) (103,771)
Notes receivable sold.................................................. 29,272 34,980 77,063
Businesses acquired.................................................... (9,572) -- (10,654)
Proceeds from sale of businesses....................................... 13,093 13,300 --
Purchase of property and equipment..................................... (129,386) (128,552) (116,769)
Proceeds from sale of property and equipment........................... 15,845 15,796 29,907
Investments in customers............................................... (1,694) (365) (11,298)
Proceeds from sale of investments...................................... 4,970 15,020 17,649
Other investing activities............................................. 1,895 6,843 7,297
----------- ----------- -------------
Net cash used in investing activities................................ (54,103) (45,248) (22,135)
----------- ----------- -------------
Cash flows from financing activities:
Proceeds from long-term borrowings..................................... 914,477 171,000 93,000
Principal payments on long-term debt................................... (982,982) (356,685) (452,690)
Principal payments on capital lease obligations........................ (20,102) (19,622) (17,269)
Sale of common stock under incentive stock and stock ownership plans... 593 2,195 7,094
Dividends paid......................................................... (3,007) (13,447) (44,749)
Other financing activities............................................. (1,195) (6,465) 13,824
----------- ----------- -------------
Net cash used in financing activities................................ (92,216) (223,024) (400,790)
----------- ----------- -------------
Net increase (decrease) in cash and cash equivalents..................... (33,351) 59,241 (23,926)
Cash and cash equivalents, beginning of year............................. 63,667 4,426 28,352
----------- ----------- -------------
Cash and cash equivalents, end of year................................... $ 30,316 $ 63,667 $ 4,426
----------- ----------- -------------
----------- ----------- -------------
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996,
AND DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
-------------------- EXCESS OF REINVESTED COMPREHENSIVE
TOTAL SHARES AMOUNT PAR VALUE EARNINGS INCOME
----------- --------- --------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995..................... $ 1,078,555 37,480 $ 93,705 $ 494,966 $ 503,962
Comprehensive income
Net earnings................................. 42,001 42,001 $ 42,001
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (1,577) (1,577)
--------------
Comprehensive income......................... $ 40,424
--------------
--------------
Incentive stock and stock ownership plans...... 7,094 236 586 6,508
Cash dividends, $1.20 per share................ (44,749) (44,749)
ESOP note payments............................. 1,998
----------- --------- --------- ------------ -----------
Balance at December 30, 1995................... 1,083,322 37,716 94,291 501,474 501,214
Comprehensive income
Net earnings................................. 26,686 26,686 $ 26,686
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (151) (151)
Minimum pension liability adjustment (net
of $16,619 of taxes)..................... (24,897) (24,897)
--------------
Comprehensive income......................... $ 1,638
--------------
--------------
Incentive stock and stock ownership plans...... 2,324 82 203 2,121
Cash dividends, $.36 per share................. (13,492) (13,492)
ESOP note payments............................. 2,166
----------- --------- --------- ------------ -----------
Balance at December 28, 1996................... 1,075,958 37,798 94,494 503,595 514,408
Comprehensive income
Net earnings................................. 25,392 25,392 $ 25,392
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (222) (222)
Minimum pension liability adjustment (net
of $8,556 of taxes)...................... (12,818) (12,818)
--------------
Comprehensive income......................... $ 12,352
--------------
--------------
Incentive stock and stock ownership plans...... 2,022 466 1,166 856
Cash dividends, $0.08 per share................ (3,008) (3,008)
ESOP note payments............................. 2,348
----------- --------- --------- ------------ -----------
Balance at December 27, 1997................... $ 1,089,672 38,264 $ 95,660 $ 504,451 $ 536,792
----------- --------- --------- ------------ -----------
----------- --------- --------- ------------ -----------
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE ESOP
INCOME NOTE
-------------- ---------
<S> <C> <C>
Balance at January 1, 1995..................... $ (2,972) $ (11,106)
Comprehensive income
Net earnings.................................
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (1,577)
Comprehensive income.........................
Incentive stock and stock ownership plans......
Cash dividends, $1.20 per share................
ESOP note payments............................. 1,998
-------------- ---------
Balance at December 30, 1995................... (4,549) (9,108)
Comprehensive income
Net earnings.................................
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (151)
Minimum pension liability adjustment (net
of $16,619 of taxes)..................... (24,897)
Comprehensive income.........................
Incentive stock and stock ownership plans......
Cash dividends, $.36 per share.................
ESOP note payments............................. 2,166
-------------- ---------
Balance at December 28, 1996................... (29,597) (6,942)
Comprehensive income
Net earnings.................................
Other comprehensive income, net of tax:
Currency translation adjustment (net of $0
taxes)................................... (222)
Minimum pension liability adjustment (net
of $8,556 of taxes)...................... (12,818)
Comprehensive income.........................
Incentive stock and stock ownership plans......
Cash dividends, $0.08 per share................
ESOP note payments............................. 2,348
-------------- ---------
Balance at December 27, 1997................... $ (42,637) $ (4,594)
-------------- ---------
-------------- ---------
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS: The company markets food and related products and
offers retail services to supermarkets in 42 states. The company also operates
more than 275 company-owned stores in several geographic areas. The company's
activities encompass two major businesses: food distribution and company-owned
retail food operations. Food and food-related product sales account for over 90
percent of the company's consolidated sales. No one customer accounts for 10
percent or more of consolidated sales.
FISCAL YEAR: The company's fiscal year ends on the last Saturday in
December.
BASIS OF PRESENTATION: The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
all subsidiaries. Material intercompany items have been eliminated. The equity
method of accounting is usually used for investments in certain entities in
which the company has an investment in common stock of between 20% and 50% or
such investment is temporary. Under the equity method, original investments are
recorded at cost and adjusted by the company's share of earnings or losses of
these entities and for declines in estimated realizable values deemed to be
other than temporary.
RECLASSIFICATIONS: Certain reclassifications have been made to prior year
amounts to conform to current year classifications.
BASIC AND DILUTED NET EARNINGS PER SHARE: In 1997, the company adopted SFAS
No. 128-Earnings Per Share. Both basic and diluted earnings per share are
computed based on net earnings divided by weighted average shares as appropriate
for each calculation. As reflected in the Consolidated Statements of Earnings,
differences between basic and diluted earnings per share are immaterial.
TAXES ON INCOME: Deferred income taxes arise from temporary differences
between financial and tax bases of certain assets and liabilities.
CASH AND CASH EQUIVALENTS: Cash equivalents consist of liquid investments
readily convertible to cash with an original maturity of three months or less.
The carrying amount for cash equivalents is a reasonable estimate of fair value.
RECEIVABLES: Receivables include the current portion of customer notes
receivable of $18 million in 1997 and $34 million in 1996. Receivables are shown
net of allowance for doubtful accounts of $19 million in 1997 and $25 million in
1996. The company extends credit to its retail customers located over a broad
geographic base. Regional concentrations of credit risk are limited. Interest
income on impaired loans is recognized only when payments are received.
INVENTORIES: Inventories are valued at the lower of cost or market. Grocery
and certain perishable inventories, aggregating approximately 70% of total
inventories in 1997 and 1996 are valued on a last-in, first-out (LIFO) method.
The cost for the remaining inventories is determined by the first-in, first-out
(FIFO) method. Current replacement cost of LIFO inventories was greater than the
carrying amounts by approximately $36 million and $30 million at year-end 1997
and 1996, respectively.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost or, for
leased assets under capital leases, at the present value of minimum lease
payments. Depreciation, as well as amortization of assets under capital leases,
is based on the estimated useful asset lives using the straight-line method. The
estimated useful lives used in computing depreciation and amortization are:
buildings and major improvements--20 to 40 years; warehouse, transportation and
other equipment--3 to 10 years; and data processing equipment and software--5 to
7 years.
GOODWILL: The excess of purchase price over the value of net assets of
businesses acquired is amortized on the straight-line method over periods not
exceeding 40 years. Goodwill is shown net of accumulated amortization of $189
million and $159 million in 1997 and 1996, respectively.
IMPAIRMENT: Asset impairments are recorded when events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable. Impairment is assessed and measured, by asset type, as follows:
notes receivable--fair value of the collateral for each note; and, long-lived
assets, goodwill and other intangibles--estimate of the future cash flows
expected to result from the use of the asset and its eventual disposition
aggregated to a business unit level.
FINANCIAL INSTRUMENTS: Interest rate hedge transactions and other financial
instruments are utilized to manage interest rate exposure. The methods and
assumptions used to estimate the fair value of significant financial instruments
are discussed in the "Investments and Notes Receivable" and "Long-term Debt"
notes.
STOCK-BASED COMPENSATION: The company applies APB Opinion No.
25--Accounting for Stock Issued to Employees and related Interpretations in
accounting for its plans.
COMPREHENSIVE INCOME: In 1997, the company adopted SFAS No. 130-Reporting
Comprehensive Income. Comprehensive income is reflected in the Consolidated
Statements of Shareholders' Equity. Other comprehensive income is comprised of
foreign currency translation adjustments and minimum pension liability
adjustments. The cumulative affect of other comprehensive income is reflected in
the Shareholders' Equity section of the Consolidated Balance Sheets.
EXTRAORDINARY CHARGE
During 1997, the company undertook a recapitalization program which
culminated in an $850 million senior secured credit facility and the sale of
$500 million of senior subordinated notes on July 25, 1997. The recapitalization
program resulted in an extraordinary charge of $13.3 million, after income tax
benefits of $8.9 million, or $.35 per share, in the company's third quarter
ended October 4, 1997. Almost all of the charge represents a non-cash write-off
of unamortized financing costs related to debt which was prepaid. See the
"Long-term Debt" note for further discussion of the recapitalization program.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
EARNINGS PER SHARE
The following table sets forth the basic and diluted earnings per share
computation for income before extraordinary charge.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Numerator:
Basic and diluted earnings before extraordinary
charge.............................................. $ 38,722 $ 26,686 $ 42,001
--------- --------- ---------
--------- --------- ---------
Denominator:
Weighted average shares for basic earnings per
share............................................... 37,803 37,774 37,577
--------- --------- ---------
Effect of dilutive securities:
Employee stock options.............................. 21 3 4
Restricted stock compensation....................... 38 -- --
--------- --------- ---------
Dilutive potential common shares.................. 59 3 4
--------- --------- ---------
Weighted average shares for diluted earnings per
share............................................... 37,862 37,777 37,581
--------- --------- ---------
--------- --------- ---------
Basic and diluted earnings per share before
extraordinary charge................................ $1.02 $.71 $1.12
--------- --------- ---------
--------- --------- ---------
</TABLE>
Options to purchase 2,410,000 shares of common stock at a weighted average
exercise price of $22.81 per share were outstanding during 1997 but were not
included in the computation of diluted earnings per share because the options'
exercise price was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
SEGMENT INFORMATION
In 1997, the company adopted SFAS No. 131-Disclosures about Segments of an
Enterprise and Related Information.
The company derives over 90% of its net sales and operating profits from the
sale of food and food-related products to external customers. Further, over 90%
of the company's assets are based in and net sales derived from 42 states and no
single customer amounts to 10% or more of net sales. Considering the customer
types and the processes for meeting the needs of customers, senior management
manages the business as two segments: food distribution and company-owned retail
food operations.
The food distribution segment represents the aggregation of retail services
and the distribution and marketing of the following products: food, general
merchandise, health and beauty care, and Fleming Brands. The aggregation is
based primarily on the common customer base and the interdependent marketing and
distribution efforts.
The company's senior management utilizes more than one measurement and
multiple views of data to assess segment performance and to allocate resources
to the segments. However, the dominant measurements are consistent with the
company's consolidated financial statements and, accordingly, are reported on
the same basis herein. Interest expense, interest income, equity investments,
corporate expenses and
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
income taxes are managed separately by senior management and those items are not
allocated to the business segments. Intersegment transactions are reflected at
cost.
The following table sets forth the composition of the segment's and total
company's net sales, operating earnings, depreciation and amortization, capital
expenditures and identifiable assets.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Food distribution............................................ $ 13,864 $ 14,904 $ 16,665
Intersegment elimination..................................... (1,950) (2,123) (2,529)
--------- --------- ---------
Net food distribution........................................ 11,914 12,781 14,136
Retail food.................................................. 3,459 3,706 3,366
--------- --------- ---------
Total........................................................ $ 15,373 $ 16,487 $ 17,502
--------- --------- ---------
--------- --------- ---------
OPERATING EARNINGS
Food distribution............................................ $283 $302 $290
Retail food.................................................. 80 50 47
Corporate.................................................... (127) (144) (122)
--------- --------- ---------
Total operating earnings..................................... 236 208 215
Interest expense............................................. (162) (163) (175)
Interest income.............................................. 47 49 58
Equity investment results.................................... (17) (18) (21)
Litigation charge............................................ (21) (21) --
Facilities consolidation..................................... -- -- 9
--------- --------- ---------
Earnings before taxes........................................ $ 83 $ 55 $ 86
--------- --------- ---------
--------- --------- ---------
DEPRECIATION AND AMORTIZATION
Food distribution............................................ $105 $107 $117
Retail food.................................................. 55 56 43
Corporate.................................................... 21 25 21
--------- --------- ---------
Total........................................................ $181 $188 $181
--------- --------- ---------
--------- --------- ---------
CAPITAL EXPENDITURES
Food distribution............................................ $ 51 $ 59 $ 70
Retail food.................................................. 77 50 30
Corporate.................................................... 1 20 14
--------- --------- ---------
Total........................................................ $129 $129 $114
--------- --------- ---------
--------- --------- ---------
IDENTIFIABLE ASSETS
Food distribution............................................ $2,864 $3,048 $3,398
Retail food.................................................. 708 627 662
Corporate.................................................... 352 380 237
--------- --------- ---------
Total........................................................ $3,924 $4,055 $4,297
--------- --------- ---------
--------- --------- ---------
</TABLE>
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Equity investment results representing a joint venture in 1995 have been
reclassified to retail operating earnings to compare to the 1996 consolidation
of the joint venture.
TAXES ON INCOME
Components of taxes on income are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................................................... $ (4,761) $ 24,729 $ 24,817
State...................................................... (474) 8,609 7,022
--------- --------- ---------
Total current................................................ (5,235) 33,338 31,839
--------- --------- ---------
Deferred:
Federal.................................................... 32,519 (4,388) 9,850
State...................................................... 7,782 (1,063) 2,202
--------- --------- ---------
Total deferred............................................... 40,301 (5,451) 12,052
--------- --------- ---------
Taxes on income.............................................. $ 35,066 $ 27,887 $ 43,891
--------- --------- ---------
--------- --------- ---------
</TABLE>
Taxes on income in the above table includes a tax benefit of $8,897,000 in
1997 which is reported net in the extraordinary charge from the early retirement
of debt in the consolidated statement of earnings.
Deferred tax expense (benefit) relating to temporary differences includes
the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation and amortization.............................. $ (4,818) $ (12,561) $ (23,398)
Inventory.................................................. (6,228) (6,586) (2,113)
Capital losses............................................. (357) (2,494) (854)
Asset valuations and reserves.............................. 22,498 13,567 26,040
Equity investment results.................................. 821 526 (312)
Credit losses.............................................. 23,184 3,995 2,897
Lease transactions......................................... (757) (1,298) (1,170)
Associate benefits......................................... 2,727 (478) 2,249
Note sales................................................. (1,843) 315 (144)
Acquired loss carryforwards................................ -- 1,616 4,422
Other...................................................... 5,074 (2,053) 4,435
--------- ---------- ----------
Deferred tax expense (benefit)............................. $ 40,301 $ (5,451) $ 12,052
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Temporary differences that give rise to deferred tax assets and liabilities
as of year-end 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization......................................... $ 9,171 $ 9,187
Asset valuations and reserve activities............................... 39,126 60,008
Associate benefits.................................................... 93,454 83,408
Credit losses......................................................... 16,368 19,891
Equity investment results............................................. 8,440 9,202
Lease transactions.................................................... 14,067 13,308
Inventory............................................................. 22,168 16,013
Acquired loss carryforwards........................................... 4,987 4,581
Capital losses........................................................ 4,798 3,354
Other................................................................. 17,350 20,926
---------- ----------
Gross deferred tax assets............................................. 229,929 239,878
Less valuation allowance.............................................. (4,920) (4,514)
---------- ----------
Total deferred tax assets............................................. 225,009 235,364
---------- ----------
Deferred tax liabilities:
Depreciation and amortization......................................... 112,007 116,842
Equity investment results............................................. 2,514 2,455
Lease transactions.................................................... 1,996 1,995
Inventory............................................................. 52,513 52,586
Associate benefits.................................................... 25,385 20,931
Asset valuations and reserve activities............................... 2,151 535
Note sales............................................................ 3,412 3,754
Prepaid expenses...................................................... 3,887 3,162
Other................................................................. 38,429 18,644
---------- ----------
Total deferred tax liabilities........................................ 242,294 220,904
---------- ----------
Net deferred tax asset (liability).................................... $ (17,285) $ 14,460
---------- ----------
---------- ----------
</TABLE>
The change in net deferred asset/liability from 1996 to 1997 is allocated
$40.3 million to deferred income tax expense and $8.6 million benefit to
stockholders' equity.
The valuation allowance relates to $4.9 million of acquired loss
carryforwards that, if utilized, will be reversed to goodwill in future years.
Management believes it is more likely than not that all other deferred tax
assets will be realized.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
The effective income tax rates are different from the statutory federal
income tax rates for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate................................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit................. 7.9 9.0 7.0
Acquisition-related differences................................ 14.5 6.1 8.4
Other.......................................................... .6 1.0 .7
--------- --------- ---------
Effective rate................................................. 58.0% 51.1% 51.1%
--------- --------- ---------
--------- --------- ---------
</TABLE>
INVESTMENTS AND NOTES RECEIVABLE
Investments and notes receivable consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments in and advances to customers.............................. $ 52,019 $ 72,246
Notes receivable from customers....................................... 75,759 107,811
Other investments and receivables..................................... 22,443 25,626
---------- ----------
Investments and notes receivable...................................... $ 150,221 $ 205,683
---------- ----------
---------- ----------
</TABLE>
Investments and notes receivable are shown net of reserves of $25 million
and $24 million in 1997 and 1996, respectively.
The company extends long-term credit to certain retail customers. Loans are
primarily collateralized by inventory and fixtures. Interest rates are above
prime with terms up to 10 years. The carrying amount of notes receivable
approximates fair value because of the variable interest rates charged on the
notes.
The company's impaired notes receivable (including current portion) are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------- -----
(IN MILLIONS)
<S> <C> <C>
Impaired notes with related allowances....................................... $16 $ 9
Credit loss allowance on impaired notes...................................... (10) (6 )
Impaired notes with no related allowances.................................... 1 12
--- ---
Net impaired notes receivable................................................ $ 7 $15
--- ---
--- ---
</TABLE>
Average investments in impaired notes were as follows: 1997-$13 million;
1996-$21 million; and 1995-$30 million.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Activity in the allowance for credit losses is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year....................................... $50 $53 $49
Charged to costs and expenses.................................... 24 27 31
Uncollectible accounts written off, net of recoveries............ (32) (35) (27)
Asset impairment................................................. 2 5 --
--- --- ---
Balance, end of year............................................. $44 $50 $53
--- --- ---
--- --- ---
</TABLE>
The company has sold certain notes receivable at face value with limited
recourse. The outstanding balance at year-end 1997 on all notes sold is $84
million, of which the company is contingently liable for $15 million should all
the notes become uncollectible.
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
10.625% senior notes due 2001..................................... $ 300,000 $ 300,000
10.5% senior subordinated notes due 2004.......................... 250,000 --
10.625% senior subordinated notes due 2007........................ 250,000 --
Term loans, due 1998 to 2004, average interest rate of 7.3%....... 249,731 591,253
Medium-term notes, due 1998 to 2003, average interest rates of
7.3% and 7.1%................................................... 89,000 99,000
Revolving credit, average interest rates of 7.1% and 6.5%, due
2003............................................................ 30,000 20,000
Mortgaged real estate notes and other debt, net of asset sale
proceeds escrow, varying interest rates from 4% to 14.4%, due
1998 to 2003.................................................... 6,188 5,966
Floating rate senior notes due 2001, interest rate of 7.9%........ -- 200,000
------------ ------------
1,174,919 1,216,219
Less current maturities........................................... (47,608) (124,613)
------------ ------------
Long-term debt.................................................... $ 1,127,311 $ 1,091,606
------------ ------------
------------ ------------
</TABLE>
FIVE-YEAR MATURITIES: Aggregate maturities of long-term debt for the next
five years are as follows: 1998-$48 million; 1999-$42 million; 2000-$72 million;
2001-$338 million; and 2002-$51 million.
RECAPITALIZATION PROGRAM: On July 25, 1997, the company entered into a new
$850 million senior secured credit facility and sold $500 million of senior
subordinated notes. Proceeds from the initial borrowings under the credit
agreement and the sale of the subordinated notes were used to repay all
outstanding bank debt under the previous credit facility and the balance,
together with additional revolver borrowings, were used to redeem the company's
$200 million floating rate senior notes due in 2001. The recapitalization
program provides the company with increased flexibility to redeploy assets and
pursue increased business investment, such as the expansion of the company's
retail food operations, strengthens
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Fleming's capital structure by reducing senior secured bank loans and repaying
the floating rate senior notes, extends the average life of total debt
outstanding, and reduces annual scheduled debt maturities.
The new $850 million senior secured credit facility consists of a $600
million revolving credit facility, with a final maturity of July 25, 2003, and a
$250 million amortizing term loan, with a maturity of July 25, 2004. Up to $300
million of the revolver may be used for issuing letters of credit. Borrowings
and letters of credit issued under the new credit facility may be used for
general corporate purposes and are secured by a first priority security interest
in the accounts receivable and inventories of the company and its subsidiaries
and in the capital stock or other equity interests owned by the company in its
subsidiaries. In addition, the new credit facility is guaranteed by
substantially all company subsidiaries. The stated interest rate on borrowings
under the credit agreement is equal to a referenced index interest rate,
normally the London interbank offered interest rate ("LIBOR"), plus a margin.
The level of the margin is dependent on credit ratings on the company's senior
secured bank debt.
THE $500 MILLION OF SENIOR SUBORDINATED NOTES CONSISTS OF TWO ISSUES: $250
million of 10 1/22% Notes due December 1, 2004 and $250 million of 10 5/8% Notes
due July 31, 2007. The subordinated notes are general unsecured obligations of
the company, subordinated in right of payment to all existing and future senior
indebtedness of the company, and senior to or of equal rank with all future
subordinated indebtedness of the company. The company currently has no other
subordinated indebtedness outstanding.
The credit agreement and the indentures under which other company debt
instruments were issued contain customary covenants associated with similar
facilities. The credit agreement currently contains the following more
significant financial covenants: maintenance of a fixed charge coverage ratio of
at least 1.7 to 1, based on earnings before interest, taxes, depreciation and
amortization and net rent expense; maintenance of a ratio of
inventory-plus-accounts receivable to funded bank debt (including letters of
credit) of at least 1.4 to 1; and a limitation on restricted payments, including
dividends, up to $58 million at year-end 1997, based on a formula tied to net
earnings and equity issuances. Covenants contained in the company's indentures
under which other company debt instruments were issued are generally less
restrictive than those of the credit agreement. The company is in compliance
with all financial covenants under the credit agreement and its indentures.
In addition, the credit facility may be terminated in the event of a defined
change of control. Under the company's indentures, noteholders may require the
company to repurchase notes in the event of a defined change of control coupled
with a defined decline in credit ratings.
At year-end 1997, borrowings under the credit facility totaled $250 million
in term loans and $30 million of revolver borrowings, and $88 million of letters
of credit had been issued. Letters of credit are needed primarily for insurance
reserves associated with the company's normal risk management activities. To the
extent that any of these letters of credit would be drawn, payments would be
financed by borrowings under the credit agreement.
At year-end 1997, the company would have been allowed to borrow an
additional $482 million under the revolving credit facility contained in the
credit agreement based on the actual borrowings and letters of credit
outstanding. Under the company's most restrictive borrowing covenant, which is
the fixed charges coverage ratio contained in the credit agreement, $41 million
of additional fixed charges could have been incurred.
MEDIUM-TERM NOTES: Between 1990 and 1993, the company registered $565
million in medium-term notes. During that period, a total of $275 million was
issued. The company has no plans to issue additional medium-term notes at this
time. Under the credit agreement, new issues of certain kinds of debt must have
a maturity after January 2005.
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
CREDIT RATINGS: On June 27, 1997, Moody's Investors Service ("Moody's")
announced it had revised its credit ratings for Fleming. Moody's downgraded its
rating for the company's senior secured credit facility to Ba3 from Ba2, senior
unsecured notes to B1 from Ba3, and counterparty ratings to B1 from Ba3. Moody's
assigned a Ba3 rating to the company's new $850 million credit agreement, and a
B3 rating for the new $500 million of senior subordinated notes.
On June 30, 1997, Standard & Poor's Rating Group ("S&P") announced it had
revised its outlook on Fleming to stable from negative and had affirmed the
company's BB corporate credit rating. Additionally, S&P raised its rating on the
company's senior unsecured notes to BB- from B+. It also assigned a B+ rating to
the company's new $500 million senior subordinated notes. On July 2, 1997, S&P
announced it had assigned a BB+ rating to the company's new $850 million credit
facility.
AVERAGE INTEREST RATES: The composite interest rate for total debt
(including capital lease obligations) before the effect of interest rate hedges
was 9.9% for 1997, versus 8.6% in 1996. Including the effect of interest rate
hedges, the composite interest rate of debt was 10.4% and 9.1% at the end of
1997 and 1996, respectively.
INTEREST EXPENSE: Components of interest expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest costs incurred:
Long-term debt......................................... $ 121,356 $ 122,859 $ 135,254
Capital lease obligations.............................. 36,414 35,656 36,132
Other.................................................. 5,922 5,055 4,712
---------- ---------- ----------
Total incurred......................................... 163,692 163,570 176,098
Less interest capitalized................................ (1,186) (104) (708)
---------- ---------- ----------
Interest expense......................................... $ 162,506 $ 163,466 $ 175,390
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
DERIVATIVES: The company enters into interest rate hedge agreements with
the objective of managing interest costs and exposure to changing interest
rates. The classes of derivative financial instruments used have included
interest rate swaps and caps. The company's policy regarding derivatives is to
engage in a financial risk management process to manage its defined exposures to
uncertain future changes in interest rates which impact net earnings.
Strategies for achieving the company's objectives have resulted in the
company maintaining interest rate swaps covering $250 million aggregate
principal amount of floating rate indebtedness at year-end 1997, and interest
rate swaps and caps covering $850 million of floating rate indebtedness at year
end 1996. The agreements all mature in 2000. The counterparties to these
agreements are major U.S. and international financial institutions.
The interest rate applicable to most of the company's floating rate
indebtedness is equal to the London interbank offered rate ("LIBOR"), plus a
margin. The average fixed interest rate paid by the company on the interest rate
swaps at year-end 1997 was 7.22%, covering $250 million of floating rate
indebtedness. The interest rate swap agreements, which were implemented through
three counterparty banks, and which had an average remaining life of 2.4 years
at year-end 1997, provide for the company to receive substantially the same
LIBOR that the company pays on its floating rate indebtedness.
The notional amounts of interest rate swaps and caps did not represent
amounts exchanged by the parties and are not a measure of the company's exposure
to credit or market risks. The amounts exchanged
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
are calculated on the basis of the notional amounts and the other terms of the
hedge agreements. Notional amounts are not included in the consolidated balance
sheet.
The company believes its exposure to potential loss due to counterparty
nonperformance is minimized primarily due to the relatively strong credit
ratings of the counterparty banks for their unsecured long-term debt (AA- or
higher from S&P or AA3 or higher from Moody's) and the size and diversity of the
counterparty banks. The hedge agreements are subject to market risk to the
extent that market interest rates for similar instruments decrease and the
company terminates the hedges prior to maturity.
In 1997, interest rate hedge agreements for swaps and caps covering a total
of $600 million of indebtedness were terminated. Most ($400 million) of the
terminations were related to the floating-rate debt which was prepaid as part of
the recapitalization program. Termination costs of $2.1 million for hedges
covering debt permanently repaid were included in the extraordinary charge for
early debt retirement. The remaining terminations covered hedges which
management determined were no longer needed. The other termination costs are
being amortized over the remaining life of the hedges terminated.
Fleming's financial risk management policy requires that any interest rate
hedge agreement be matched to designated interest-bearing assets or debt
instruments. All of the company's hedge agreements have been matched to its
floating rate indebtedness. At year-end 1997, the company's floating rate
indebtedness consisted primarily of the term loans and revolver loans under the
credit agreement.
Accordingly, all outstanding swaps are matched swaps and the settlement
accounting method is employed. Derivative financial instruments are reported in
the balance sheet where the company has made or received a cash payment upon
entering into or terminating the transaction. The carrying amount is amortized
over the shorter of the initial life of the hedge agreement or the maturity of
the hedged item. The company had a financial basis of $.3 million and $3 million
at year-end 1997 and 1996, respectively. In addition, accrued interest payable
or receivable for the interest rate agreements is included in the balance sheet.
Payments made or received under interest rate swap or cap agreements are
included in interest expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of long-term debt was
determined using valuation techniques that considered market prices for actively
traded debt, and cash flows discounted at current market rates for management's
best estimate for instruments without quoted market prices. At year-end 1997,
the carrying value of debt was lower than the fair value by $44 million, or 3.7%
of the carrying value. At year-end 1996, the carrying value of debt exceeded the
fair value by $30 million, or 2.4% of the carrying value.
For derivatives, the fair value was estimated using termination cash values.
At year-end 1997, interest rate hedge agreement values would represent an
obligation of $9 million, and at year-end 1996, an obligation of $20 million.
Subsidiary Guarantee of Senior Notes: The senior notes are guaranteed by all
direct and indirect subsidiaries of the company (except for certain
inconsequential subsidiaries), all of which are wholly-owned. The guarantees are
joint and several, full, complete and unconditional. There are currently no
restrictions on the ability of the subsidiary guarantors to transfer funds to
the company in the form of cash dividends, loans or advances. Financial
statements for the subsidiary guarantors are not presented herein because the
operations and financial position of such subsidiaries are not material.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
The summarized financial information, which includes allocations of material
corporate-related expenses, for the combined subsidiary guarantors may not
necessarily be indicative of the results of operations or financial position had
the subsidiary guarantors been operated as independent entities.
<TABLE>
<CAPTION>
1997 1996
----- -----
(IN MILLIONS)
<S> <C> <C>
Current assets............................................................... $ 33 $ 25
Noncurrent assets............................................................ $ 80 $ 57
Current liabilities.......................................................... $14 $8
Noncurrent liabilities....................................................... $6 $1
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales............................................................ $ 379 $ 298 $ 2,842
Costs and expenses................................................... $ 388 $ 314 $ 2,787
Net earnings (loss).................................................. $(4) $(8) $27
</TABLE>
A significant number of subsidiaries have been merged into the parent
company beginning in 1994, resulting in a substantial reduction in the amounts
appearing in the summarized financial information.
LEASE AGREEMENTS
CAPITAL AND OPERATING LEASES: The company leases certain distribution
facilities with terms generally ranging from 20 to 35 years, while lease terms
for other operating facilities range from 1 to 15 years. The leases normally
provide for minimum annual rentals plus executory costs and usually include
provisions for one to five renewal options of five years each.
The company leases company-owned store facilities with terms generally
ranging from 15 to 20 years. These agreements normally provide for contingent
rentals based on sales performance in excess of specified minimums. The leases
usually include provisions for one to four renewal options of two to five years
each. Certain equipment is leased under agreements ranging from two to eight
years with no renewal options.
Accumulated amortization related to leased assets under capital leases was
$71 million and $64 million at year-end 1997 and 1996, respectively.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Future minimum lease payment obligations for leased assets under capital
leases as of year-end 1997 are set forth below:
<TABLE>
<CAPTION>
YEARS
- ------------------------------------------------------------------------------ LEASE
OBLIGATIONS
--------------
(IN THOUSANDS)
<S> <C>
1998.......................................................................... $ 28,261
1999.......................................................................... 28,153
2000.......................................................................... 27,071
2001.......................................................................... 26,467
2002.......................................................................... 25,236
Later......................................................................... 220,159
--------------
Total minimum lease payments.................................................. 355,347
Less estimated executory costs................................................ (132)
--------------
Net minimum lease payments.................................................... 355,215
Less interest................................................................. (167,027)
--------------
Present value of net minimum lease payments................................... 188,188
Less current obligations...................................................... (9,571)
--------------
Long-term obligations......................................................... $178,617
--------------
--------------
</TABLE>
Future minimum lease payments required at year-end 1997 under operating
leases that have initial noncancelable lease terms exceeding one year are
presented in the following table:
<TABLE>
<CAPTION>
FACILITY FACILITIES EQUIPMENT EQUIPMENT NET
YEARS RENTALS SUBLEASED RENTALS SUBLEASED RENTALS
- ----------------------------- ------------ ----------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1998......................... $ 155,414 $ (67,606) $ 24,291 $ (1,546) $ 110,553
1999......................... 139,353 (57,006) 16,487 (839) 97,995
2000......................... 125,489 (46,750) 7,941 (570) 86,110
2001......................... 115,222 (39,055) 2,870 (62) 78,975
2002......................... 107,637 (33,274) 1,459 -- 75,822
Later........................ 607,083 (127,757) 34 -- 479,360
------------ ----------- ----------- ----------- ----------
Total lease payments......... $ 1,250,198 $ (371,448) $ 53,082 $ (3,017) $ 928,815
------------ ----------- ----------- ----------- ----------
------------ ----------- ----------- ----------- ----------
</TABLE>
The following table shows the composition of total annual rental expense
under noncancelable operating leases and subleases with initial terms of one
year or greater:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rentals.......................................... $ 192,698 $ 208,250 $ 199,834
Contingent rentals....................................... 2,002 1,874 1,654
Less sublease income..................................... (75,592) (88,014) (92,108)
---------- ---------- ----------
Rental expense........................................... $ 119,108 $ 122,110 $ 109,380
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
DIRECT FINANCING LEASES: The company leases retail store facilities for
sublease to customers with terms generally ranging from 15 to 20 years. Most
leases provide for a contingent rental based on sales
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
performance in excess of specified minimums. The leases and subleases usually
contain provisions for one to four renewal options of two to five years each.
The following table shows the future minimum rentals receivable under direct
financing leases and future minimum lease payment obligations under capital
leases in effect at year-end 1997:
<TABLE>
<CAPTION>
LEASE RENTALS LEASE
YEARS RECEIVABLE OBLIGATIONS
- ------------------------------------------------------------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C>
1998.............................................................. $ 39,310 $ 30,325
1999.............................................................. 36,856 30,263
2000.............................................................. 33,817 29,029
2001.............................................................. 31,690 27,855
2002.............................................................. 29,786 27,720
Later............................................................. 202,520 190,544
------------- -----------
Total minimum lease payments...................................... 373,979 335,736
Less estimated executory costs.................................... (1,145 ) (1,140)
------------- -----------
Net minimum lease payments........................................ 372,834 334,596
Less interest..................................................... (153,455 ) (134,520)
------------- -----------
Present value of net minimum lease payments....................... 219,379 200,076
Less current portion.............................................. (17,791 ) (11,625)
------------- -----------
Long-term portion................................................. $201,588 $188,451
------------- -----------
------------- -----------
</TABLE>
Contingent rental income and contingent rental expense are not material.
SHAREHOLDERS' EQUITY
The company offers a Dividend Reinvestment and Stock Purchase Plan which
provides shareholders the opportunity to automatically reinvest their dividends
in common stock at a 5% discount from market value. Shareholders also may
purchase shares at market value by making cash payments up to $5,000 per
calendar quarter. Such programs resulted in issuing 29,000 and 125,000 new
shares in 1997 and 1996, respectively.
The company's employee stock ownership plan (ESOP) established in 1990
allows substantially all associates to participate. In 1990, the ESOP entered
into a note with a bank to finance the purchase of the shares. In 1994, the
company paid off the note and received a note from the ESOP. The ESOP will repay
to the company the remaining loan balance with proceeds from company
contributions. The receivable from the ESOP is presented as a reduction of
shareholders' equity.
The company makes contributions to the ESOP based on fixed debt service
requirements of the ESOP note. Such contributions were approximately $2 million
per year in 1997, 1996 and 1995. Dividends used by the ESOP for debt service and
interest and compensation expense recognized by the company were not material.
The company issues shares of restricted stock to key employees under plans
approved by the stockholders. Performance goals and periods of restriction are
established for each award.
The fair value of the restricted stock at the time of the grant is recorded
as unearned compensation-- restricted stock which is netted against capital in
excess of par within shareholders' equity. Compensation
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
is amortized to expense when earned. At year-end 1997, 7,000 shares remained
available for award under all plans.
Information regarding restricted stock balances is as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Awarded restricted shares outstanding................................. 638 217
--------- ---------
--------- ---------
Unearned compensation--restricted stock............................... $ 11,052 $ 5,474
--------- ---------
--------- ---------
</TABLE>
The company may grant stock options to key employees through unrestricted
non-qualified stock option plans. In 1997, there were no exercisable outstanding
options with stock appreciation rights and in 1996 there were 7,000 shares. At
year-end 1997, there were 373,000 shares available for grant under the
unrestricted stock option plans. Stock option transactions are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE PRICE RANGE
----------- ----------------- --------------
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
Outstanding, year-end 1994......................... 2,206 $ 28.56 $ 10.29-42.13
Granted.......................................... 99 $ 25.52 $ 19.44-26.44
Exercised........................................ (10) $ 18.09 $ 10.29-24.94
Canceled and forfeited........................... (408) $ 30.31 $ 24.81-42.13
----- ------ --------------
Outstanding, year-end 1995......................... 1,887 $ 28.06 $ 19.44-42.13
Granted.......................................... 1,005 $ 16.67 $ 16.38-19.75
Canceled and forfeited........................... (261) $ 29.07 $ 24.81-42.13
----- ------ --------------
Outstanding, year-end 1996......................... 2,631 $ 23.93 $ 16.38-42.13
Granted.......................................... 80 $ 17.58 $ 17.50-18.13
Exercised........................................ (8) $ 16.38 $ 16.38-16.38
Canceled and forfeited........................... (437) $ 28.48 $ 16.38-42.13
----- ------ --------------
Outstanding, year-end 1997......................... 2,266 $ 22.65 $ 16.38-38.38
----- ------ --------------
----- ------ --------------
</TABLE>
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
Information regarding options outstanding at year-end 1997 is as follows:
<TABLE>
<CAPTION>
ALL OUTSTANDING OPTIONS CURRENTLY
OPTIONS EXERCISABLE
--------------- -----------------
(SHARES IN THOUSANDS)
<S> <C> <C>
Option price $37.06--$38.38:
Number of options....................................... 178 178
Weighted average exercise price......................... $ 37.07 $ 37.07
Weighted average remaining life in years................ 2 --
------ ------
------ ------
Option price $24.81--$29.81:
Number of options....................................... 1,082 400
Weighted average exercise price......................... $ 25.71 $ 26.27
Weighted average remaining life in years................ 6 --
------ ------
------ ------
Option price $16.38--$19.75:
Number of options....................................... 1,006 230
Weighted average exercise price......................... $ 16.81 $ 16.73
Weighted average remaining life in years................ 9 --
------ ------
------ ------
</TABLE>
In the event of a change of control, the company may accelerate the vesting
and payment of any award or make a payment in lieu of an award.
The company applies APB Opinion No. 25--Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for the plans. If compensation cost had
been recognized for the stock-based compensation plans based on fair values of
the awards at the grant dates consistent with the method of SFAS No.
123--Accounting for Stock-Based Compensation, reported net earnings and earnings
per share, both before extraordinary charge, would have been $37.9 million and
$1.00 for 1997, $26.5 million and $.70 for 1996 and $42.0 million and $1.12 for
1995, respectively.
Significant assumptions used to estimate the fair values of awards using the
Black-Scholes option-pricing model with the following weighted average
assumptions for 1997, 1996 and 1995 are: risk-free interest rate--6.25% to
7.00%; expected lives of options--10 years; expected volatility--30% to 50%; and
expected dividend yield of 0.5% (6% for 1995 only).
ASSOCIATE RETIREMENT PLANS
The company sponsors retirement and profit sharing plans for substantially
all non-union and some union associates.
Benefit calculations for the company's defined benefit retirement plans are
primarily a function of years of service and final average earnings at the time
of retirement. Final average earnings are the average of the highest five years
of compensation during the last 10 years of employment. The company funds these
plans by contributing the actuarially computed amounts that meet funding
requirements.
The following table sets forth the company's major qualified defined benefit
retirement plans' funded status and the amounts recognized in the statements of
earnings. Substantially all the plans' assets are invested in listed securities,
short-term investments and bonds. The significant actuarial assumptions used
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
in the calculation of funded status for 1997 and 1996, respectively are:
discount rate--7.00% and 7.75%; compensation increases--4.0% and 4.5%; and
return on assets--9.5% for both years.
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested.................................... $6,040 $275,199 $5,440 $238,154
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Total..................................... $6,150 $286,619 $5,590 $245,014
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligations............... $ 6,150 $ 316,271 $ 5,590 $ 274,494
Plan assets at fair value................... 10,297 252,187 8,457 228,679
------------- ------------- ------------- -------------
Projected benefit obligation in excess of
(less than) plan assets................... (4,147 ) 64,084 (2,867 ) 45,815
Unrecognized net loss....................... (25 ) (83,257 ) (282 ) (63,583 )
Unrecognized prior service cost............. (1 ) (37 ) (2 ) (434 )
Unrecognized net asset...................... 44 811 83 1,041
Additional liability........................ -- 52,830 -- 33,497
------------- ------------- ------------- -------------
Accrued (prepaid) pension cost.............. $ (4,129 ) $ 34,431 $ (3,068 ) $ 16,336
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
Net pension expense includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................................ $10,835 $10,802 $11,348
Interest cost....................................................... 21,551 19,764 16,367
Actual return on plan assets........................................ (28,008) (22,986) (45,217)
Net amortization and deferral....................................... 10,595 10,265 29,807
---------- ---------- ----------
Net pension expense................................................. $14,973 $17,845 $12,305
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The company also has nonqualified supplemental retirement plans for selected
associates. These plans are unfunded with a projected benefit obligation of $29
million and $24 million, and unrecognized prior service and actuarial losses of
$11 million and $9 million, at year-end 1997 and 1996, respectively, based on
actuarial assumptions consistent with the funded plans. The net pension expense
for the unfunded plans was $4 million for 1997 and $3 million for both 1996 and
1995.
At year-end 1997, the consolidated balance sheet reflects a $63 million
additional minimum liability relating to unfunded accumulated benefit
obligations for all of the company's defined benefit plans, a $.4 million
related intangible asset, and a $38 million reduction of shareholders' equity,
net of future tax benefits. At year-end 1996, the additional minimum liability
relating to unfunded accumulated benefit obligations was $42 million with a $.9
million related intangible asset and a $25 million reduction of shareholders'
equity, net of future tax benefits.
Contributory profit sharing plans maintained by the company are for
associates who meet certain types of employment and length of service
requirements. Company contributions under these defined
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
contribution plans are made at the discretion of the board of directors.
Expenses for these plans were $6 million in 1997 and $3 million in both 1996 and
1995.
Certain associates have pension and health care benefits provided under
collectively bargained multiemployer agreements. Expenses for these benefits
were $72 million, $84 million and $75 million for 1997, 1996 and 1995,
respectively.
In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132-- Employers' Disclosures about Pensions and Other Postretirement
Benefits. SFAS No. 132 revises the disclosure requirements for pensions and
other postretirement benefits. The company will adopt SFAS No. 132 for the
fiscal year ending December 26, 1998 and expects the future disclosures to be
less comprehensive.
ASSOCIATE POSTRETIREMENT HEALTH CARE BENEFITS
The company offers a comprehensive major medical plan to eligible retired
associates who meet certain age and years of service requirements. This unfunded
defined benefit plan generally provides medical benefits until Medicare
insurance commences.
Components of postretirement benefits expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................................... $ 137 $ 147 $ 137
Interest cost.................................................... 1,185 1,443 1,642
Amortization of net loss (gain).................................. (44) -- 141
--------- --------- ---------
Postretirement expense........................................... $ 1,278 $ 1,590 $ 1,920
--------- --------- ---------
--------- --------- ---------
</TABLE>
The composition of the accumulated postretirement benefit obligation (APBO)
and the amounts recognized in the balance sheets are presented below.
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Retirees................................................................ $ 13,480 $ 15,843
Fully eligible actives.................................................. 785 689
Others.................................................................. 2,176 1,767
APBO.................................................................... 16,441 18,299
Unrecognized net gain (loss)............................................ (848) 100
--------- ---------
Accrued postretirement benefit cost..................................... $ 15,593 $ 18,399
--------- ---------
--------- ---------
</TABLE>
The weighted average discount rate used in determining the APBO was 7% and
7.75% for 1997 and 1996, respectively. For measurement purposes in 1997 and
1996, a 9% annual rate of increase in the per capita cost of covered medical
care benefits was assumed. The rate was assumed to decrease to 5% in both 1997
and 1996 by the year 2005 and 2003, respectively, then remain level. An increase
of 1% in the health care cost trend would increase the APBO as of December 27,
1997 by 11% and the service and interest cost components of the postretirement
expense by 8%.
The company also provides other benefits for certain inactive associates.
Expenses related to these benefits are immaterial.
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
See "Associate Retirement Plans" note for timing of company adoption of SFAS
No. 132--Employers' Disclosures about Pensions and Other Postretirement
Benefits.
FACILITIES CONSOLIDATION AND RESTRUCTURING
In 1993, the company recorded a charge of $108 million for facilities
consolidations, reengineering, impairment of retail-related assets and
elimination of regional operations. Components of the charge provided for
severance costs, impaired property and equipment, product handling and damage,
and impaired other assets. Four distribution centers have been closed and one
additional facility will be closed as part of the facilities consolidation plan.
Most impaired retail-related assets have been disposed or subleased. Regional
operations have been eliminated. In 1995, management changed its estimates with
respect to the general merchandising operations portion of the reengineering
plan and reversed $9 million of the related reserve.
Although there have been no changes to the plans for consolidation and
restructuring as contemplated at the end of 1993, there have been significant
delays, primarily due to the integration of Scrivner, acceptance of the changes
by customers and management of labor relations. Customer acceptance and labor
relations continue to be important and unpredictable. The company believes that
the remaining accruals are still required and estimates that the majority of the
remaining balance will be utilized in 1998.
Facilities consolidation and restructuring reserve activities are:
<TABLE>
<CAPTION>
REENGINEERING/ CONSOLIDATION
SEVERANCE COSTS/ASSET
TOTAL COSTS IMPAIRMENTS
---------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, year-end 1993............................. $85,521 $25,136 $60,385
Expenditures and write-offs........................ (31,142) (2,686 ) (28,456 )
---------- ------------- -------------
Balance, year-end 1994............................. 54,379 22,450 31,929
Credited to income................................. (8,982) -- (8,982 )
Expenditures and write-offs........................ (24,080) (6,690 ) (17,390 )
---------- ------------- -------------
Balance, year-end 1995............................. 21,317 15,760 5,557
Expenditures and write-offs........................ (2,865) (2,642 ) (223 )
---------- ------------- -------------
Balance, year-end 1996............................. 18,452 13,118 5,334
Expenditures and write-offs........................ (12,724) (10,846 ) (1,878 )
---------- ------------- -------------
Balance, year-end 1997............................. $ 5,728 $ 2,272 $ 3,456
---------- ------------- -------------
---------- ------------- -------------
</TABLE>
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisitions:
Fair value of assets acquired.......................... $9,572 $142,458
Less:
Liabilities assumed or created......................... -- (63,873)
Existing company investment.......................... -- (51,126)
Cash acquired........................................ -- (16,805)
---------- ---------- ----------
Cash paid, net of cash acquired...................... $9,572 -- $ 10,654
---------- ---------- ----------
---------- ---------- ----------
Cash paid during the year for:
Interest, net of amounts capitalized................... $ 179,180 $ 152,846 $ 171,141
---------- ---------- ----------
---------- ---------- ----------
Income taxes, net of refunds........................... $30,664 $32,291 $(9,593)
---------- ---------- ----------
---------- ---------- ----------
Direct financing leases and related obligations.......... $5,092 $17,062 $28,568
---------- ---------- ----------
---------- ---------- ----------
Property and equipment additions by capital leases....... $28,990 $11,111 $8,840
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
LITIGATION AND CONTINGENCIES
In accordance with applicable accounting standards, the company records a
charge reflecting contingent liabilities (including those associated with
litigation matters) when management determines that a material loss is
"probable" and either "quantifiable" or "reasonably estimable". Additionally,
the company discloses material loss contingencies when the likelihood of a
material loss is deemed to be greater than "remote" but less than "probable".
Set forth below is information regarding certain material loss contingencies and
charges related to litigation matters:
PREMIUM. In 1996, the company recorded a charge of $20 million ($10 million
after-tax or $.26 per share) for the settlement of two related lawsuits
involving an allegedly fraudulent scheme conducted by a failed grocery diverter,
Premium Sales Corporation. The settlement was consummated in 1997.
DAVID'S. The company was sued by David's Supermarkets, Inc. ("David's") in
1993 for allegedly overcharging for products during a three-year period. In
April 1996, judgment of $211 million was entered against the company and the
company recorded a $7.1 million liability. During the second quarter of 1996,
the judgment was vacated, a new trial was granted and the accrual was reduced to
$650,000. The company denied the plaintiff's allegations; however, to eliminate
the uncertainty and expense of protracted litigation, the company paid $19.9
million to the plaintiff in April 1997 in exchange for dismissal, with
prejudice, of all plaintiff's claims against the company, resulting in a charge
to first quarter 1997 earnings of $19.2 million($9 million after-tax or $.24 per
share).
MEGAFOODS. In 1994, a former customer, Megafoods Stores, Inc. and certain
of its affiliates ("Megafoods" or the "debtor") filed Chapter 11 bankruptcy
proceedings. The debtor objected to the company's claims and brought adversary
proceedings against the company seeking subordination of the company's claims
and damages for alleged overcharges. In August 1996, the court approved a
settlement of both the debtor's allegations against the company and the
company's disputed claims in the bankruptcy. The debtor's plan of liquidation
became effective and the settlement agreement was consummated in January 1998.
The company recorded charges of approximately $3.5 million in 1995, $5.8 million
in 1996
53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
and $.8 million in 1997 relating to the bankruptcy. Approximately $2 million of
net assets relating to Megafoods (consisting of equipment leased to the debtor's
successor) remain on the company's books.
FURR'S. Furr's Supermarkets, Inc. ("Furr's"), which purchased approximately
$500 million of products from the company in 1997 under a supply contract
originally set to expire in 2001, filed a lawsuit against the company in
February 1997 claiming it was overcharged for products. Fleming denied Furr's
allegations.
In October 1997, Fleming and Furr's reached an agreement dismissing all
litigation between the parties. Pursuant to the agreement, Furr's is being
offered for sale through a six-month auction process which began on October 29,
1997. Fleming's El Paso product supply center (the "El Paso PSC"), together with
related equipment and inventory, is being offered for sale with Furr's. Upon the
sale of Furr's to a third party, Fleming would receive approximately 30% of the
net proceeds.
Under the agreement, Fleming is paying Furr's $800,000 per month as a refund
of fees and charges. The payments will cease upon the expiration of the supply
contract which will occur upon the earlier of (i) the sale of the El Paso PSC or
(ii) the completion of the orderly liquidation of the El Paso PSC on or before
June 1, 1999. The settlement did not cause an impairment in value of any
recorded balances. However, if Furr's is not sold, Fleming will experience an
impairment of $8-$10 million.
RANDALL'S. In July 1997, Randall's Food Markets, Inc. ("Randall's"),
initiated arbitration proceedings against Fleming. Randall's has been a Fleming
customer for over 30 years. In 1997, Randall's purchased approximately $450
million of products from Fleming under an eight-year supply contract entered
into in 1993 in connection with Fleming's purchase of certain distribution
assets from Randall's. Prior to initiating the arbitration proceeding, Randall's
unsuccessfully sought to terminate the supply contract.
Randall's alleges that Fleming conspired with a group of manufacturers and
vendors to defraud Randall's by inflating prices. Randall's also alleges that
Fleming impermissibly modified the pricing mechanism of its supply contract.
Randall's claims it was overcharged by approximately $54 million during a 4 1/2
year period. Randall's alleges breach of contract, fraud and RICO violations,
and seeks actual, punitive and treble damages, termination of its supply
contract, attorneys' fees and costs. The contract on which Randall's bases its
claim prohibits either party from recovering any amount other than actual
damages; recovery of consequential damages, punitive damages and all similar
forms of damages are expressly prohibited. Randall's asserts that such provision
is contrary to public policy and therefore not binding on it.
The company believes it has complied with its obligations to Randall's in
good faith and that punitive and consequential damages are not recoverable under
the supply contract. The company will vigorously defend its interests. While
management is unable to predict the potential range of monetary exposure to
Randall's, if any, the effect of an unfavorable outcome in the arbitration or
the premature loss of Randall's business could have a material adverse effect on
the company.
CLASS ACTION SUITS. In 1996, the company and certain of its present and
former officers and directors were named as defendants in nine purported class
action lawsuits filed by certain stockholders and one purported class action
lawsuit filed by a noteholder. In April 1997, the court consolidated the
stockholder cases as City of Philadelphia, et al. v. Fleming Companies, Inc., et
al.; the noteholder case was also consolidated, but only for pre-trial purposes.
A complaint has been filed in the consolidated cases asserting liability for the
company's alleged failure to properly account for and disclose the contingent
liability created by the David's litigation and by the company's alleged
"deceptive business practices." The plaintiffs claim that these alleged failures
and practices led to the David's litigation and to other material contingent
liabilities, caused the company to change its manner of doing business at great
cost and loss of
54
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
profit, and materially inflated the trading price of the company's common stock.
The company denies each of these allegations.
The plaintiffs seek undetermined but significant damages and management is
unable to predict the ultimate outcome of these cases. However, while management
believes that the cases could have a material adverse impact on interim or
annual results of operations, based upon the ruling of the U.S. District Court
for the Western District of Oklahoma described below, Fleming believes the cases
will not have a material adverse effect on the company's liquidity or
consolidated financial position.
In November 1997, the company won a declaratory judgment against certain of
its insurance carriers regarding directors and officers ("D&O") insurance
policies issued to Fleming for the benefit of its officers and directors. On
motion for summary judgment, the court ruled that the company's exposure, if
any, under the class action suits is covered by certain D&O policies written by
the insurance carriers (aggregating $60 million) and that the "larger settlement
rule" will be applicable to the case. According to the trial court, under the
larger settlement rule a D&O insurer is liable for the entire amount of coverage
available under a policy even if there is some overlap in the liability created
by the insured individuals and the uninsured corporation. If a corporation's
liability is increased by uninsured parties beyond that of the insured
individuals, then that portion of the liability is the sole obligation of the
corporation. The court also held that allocation is not available to the
insurance carriers as an affirmative defense. The insurance carriers have
appealed.
CENTURY. Century Shopping Center Fund I ("Century Fund I") commenced an
action in November 1988 in the Milwaukee County Circuit Court, State of
Wisconsin, seeking injunctive relief and monetary damages of an unspecified
amount. The plaintiff originally obtained a temporary restraining order
preventing the defendant from closing a store at the Howell Plaza Shopping
Center, for which the plaintiff was the landlord, and from opening a new store
at a competing shopping center located nearby. Shortly thereafter, the order was
dissolved by the court and the stores opened and closed as scheduled. Following
the closure of the store, a number of shopping center tenants and Century Fund I
experienced financial difficulty ultimately resulting in bankruptcy.
In June 1993, three former tenants of the Howell Plaza Shopping Center filed
another case in the same court and in September 1993, the trustee in bankruptcy
for Howell Plaza, Inc. (the predecessor to Century Fund I and its successor as
defendant's landlord) filed a third case. The allegations of these cases are
very similar to the allegations made in the Century Fund I case.
In November 1993, Century Fund I amended its complaint to allege breach of
contract, tortious interference with contract, tortious interference to
business, defamation, attempted monopolization, conspiracy to monopolize,
conspiracy to restrain trade and monopolization. Plaintiff claims that defendant
and defendant's new landlord conspired to force the Howell Plaza Shopping Center
out of business. The cases have been consolidated and are set for trial in
October 1998.
Plaintiffs seek actual, consequential, treble and punitive damages,
attorneys' fees, court costs and other relief. In March 1997, plaintiffs
supplied the company with an analysis of damages alleging actual damages, after
trebling but excluding any estimated punitive damages, of approximately $18
million.
In July 1997, the trial court granted plaintiffs' motion for summary
judgment with respect to their breach of contract claim against Fleming (as to
liability only, not as to damages). Plaintiffs have alleged $1.7 million of
actual damages resulted from the breach of contract. Management is unable to
predict the ultimate outcome of this matter. However, an unfavorable outcome in
the litigation could have a material adverse effect on the company.
55
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
TRU DISCOUNT FOODS. Fleming initially brought suit on a note and an open
account against its former customer, Tru Discount Foods. In December 1997, the
defendant amended its counter claim against the company alleging fraud,
overcharges for products and violations of the Oklahoma Deceptive Trade
Practices Act. Although Tru Discount Foods has not quantified damages, it has
made demand in the amount of $8 million. Management is unable to predict the
ultimate outcome of this matter. However, an unfavorable outcome in the
litigation could have a material adverse effect on the company.
OTHER. The company utilizes numerous computer systems which were developed
employing six digit date structures (i.e., two digits each for the month, day
and year). Where date logic requires the year 2000 or beyond, such date
structures may produce inaccurate results. Management has implemented a program
to comply with year 2000 requirements on a system-by-system basis. Fleming's
plan includes extensive systems testing and is expected to be substantially
completed by the first quarter of 1999. The solution for each system is
potentially unique and may be dependent on third-party software providers and
developers. Failure to ensure that the company's computer systems are year 2000
compliant could have a material adverse effect on the company's operations.
Additionally, failure of the company's suppliers or its customers to become year
2000 compliant might also have a material adverse impact on the company's
operations.
The company's facilities and operations are subject to various laws,
regulations and judicial and administrative orders concerning protection of the
environment and human health, including provisions regarding the transportation,
storage, distribution, disposal or discharge of certain materials. In conformity
with these provisions, the company has a comprehensive program for testing and
removal, replacement or repair of its underground fuel storage tanks and for
site remediation where necessary. The company has established reserves that it
believes will be sufficient to satisfy the anticipated costs of all known
remediation requirements.
The company and others have been designated by the U.S. Environmental
Protection Agency ("EPA") and by similar state agencies as potentially
responsible parties under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or similar state laws, as applicable, with respect
to EPA-designated Superfund sites. While liability under CERCLA for remediation
at such sites is generally joint and several with other responsible parties, the
company believes that, to the extent it is ultimately determined to be liable
for the expense of remediation at any site, such liability will not result in a
material adverse effect on its consolidated financial position or results of
operations. The company is committed to maintaining the environment and
protecting natural resources and human health and to achieving full compliance
with all applicable laws, regulations and orders.
The company has severance agreements with certain management associates. The
agreements generally provide two years' salary to these associates if the
associate's employment terminates within two years after a change of control. In
the event of a change of control, a supplemental trust will be funded to provide
for these salary obligations.
At year-end 1997, the company has aggregate contingent liabilities for
future minimum rental commitments made on behalf of customers with a present
value of approximately $62 million.
The company is a party to various other litigation and contingent loss
situations arising in the ordinary course of its business including: disputes
with customers and former customers; disputes with owners and former owners of
financially troubled or failed customers; disputes with employees regarding
labor conditions, wages, workers' compensation matters and alleged
discriminatory practices; tax assessments and other matters, some of which are
for substantial amounts. However, the company does not believe any such action
will result in a material adverse effect on the company.
56
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Fleming Companies, Inc.
We have audited the accompanying consolidated balance sheets of Fleming
Companies, Inc. and subsidiaries as of December 27, 1997, and December 28, 1996,
and the related consolidated statements of earnings, cash flows, and
shareholders' equity for each of the three years in the period ended December
27, 1997. Our audits also included the financial statement schedule listed in
the index at item 14. These financial statements and financial statement
schedule are the responsibility of the company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Fleming Companies,
Inc. and subsidiaries at December 27, 1997, and December 28, 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 27, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
February 19, 1998
57
<PAGE>
QUARTERLY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 FIRST SECOND THIRD FOURTH YEAR
- -------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $ 4,752,031 $ 3,550,654 $ 3,453,261 $ 3,616,720 $ 15,372,666
Costs and expenses (income):
Cost of sales............................. 4,319,349 3,219,989 3,131,023 3,271,477 13,941,838
Selling and administrative................ 363,716 274,878 272,826 283,150 1,194,570
Interest expense.......................... 48,822 36,223 39,084 38,377 162,506
Interest income........................... (14,354) (10,940) (11,116) (10,228) (46,638)
Equity investment results................. 4,078 3,239 3,710 5,719 16,746
Litigation charge......................... 19,218 -- -- 1,741 20,959
----------- ----------- ----------- ----------- -------------
Total costs and expenses................ 4,740,829 3,523,389 3,435,527 3,590,236 15,289,981
----------- ----------- ----------- ----------- -------------
Earnings before taxes....................... 11,202 27,265 17,734 26,484 82,685
Taxes on income............................. 5,938 14,450 8,214 15,361 43,963
----------- ----------- ----------- ----------- -------------
Earnings before extraordinary charge........ 5,264 12,815 9,520 11,123 38,722
Extraordinary charge........................ -- -- 13,330 -- 13,330
----------- ----------- ----------- ----------- -------------
Net earnings................................ $ 5,264 $ 12,815 $ (3,810) $ 11,123 $ 25,392
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Earnings per share:
Basic and diluted before extraordinary
charge.................................. $.14 $.34 $ .25 $.29 $1.02
Extraordinary charge...................... .35 .35
----------- ----------- ----------- ----------- -------------
Basic and diluted net earnings............ $.14 $.34 $(.10) $.29 $ .67
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Dividends paid per share.................... $.02 $.02 $.02 $.02 $.08
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Weighted average shares outstanding:
Basic..................................... 37,801 37,804 37,804 37,804 37,803
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Diluted................................... 37,810 37,829 37,840 37,970 37,862
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
<CAPTION>
1996 FIRST SECOND THIRD FOURTH YEAR
- -------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $ 5,168,234 $ 3,742,331 $ 3,705,970 $ 3,870,204 $ 16,486,739
Costs and expenses (income):
Cost of sales............................. 4,711,114 3,397,509 3,373,525 3,522,567 15,004,715
Selling and administrative................ 397,743 301,532 281,316 293,408 1,273,999
Interest expense.......................... 52,430 37,660 34,955 38,421 163,466
Interest income........................... (15,424) (11,301) (11,610) (10,787) (49,122)
Equity investment results................. 3,165 4,099 5,708 5,486 18,458
Litigation charge......................... 7,110 (6,460) 20,000 -- 20,650
----------- ----------- ----------- ----------- -------------
Total costs and expenses................ 5,156,138 3,723,039 3,703,894 3,849,095 16,432,166
----------- ----------- ----------- ----------- -------------
Earnings before taxes....................... 12,096 19,292 2,076 21,109 54,573
Taxes on income............................. 6,181 9,858 1,061 10,787 27,887
----------- ----------- ----------- ----------- -------------
Net earnings................................ $ 5,915 $ 9,434 $ 1,015 $ 10,322 $ 26,686
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Basic and diluted net earnings per share.... $.16 $.25 $.03 $.27 $.71
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Dividends paid per share.................... $.30 $.02 $.02 $.02 $.36
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Weighted average shares outstanding:
Basic..................................... 37,739 37,788 37,788 37,794 37,774
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
Diluted................................... 37,739 37,788 37,794 37,800 37,777
----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- -------------
</TABLE>
58
<PAGE>
The first quarter of 1997 includes a charge of $19 million ($9 million after
income tax benefits or $.24 per share) reflecting the settlement of the David's
litigation. See "Litigation and Contingencies" in the notes to the consolidated
financial statements. The third quarter of 1997 reflects an extraordinary charge
of $22 million ($13 million after income tax benefits or $.35 per share) related
to the recapitalization program.
The first quarter of 1996 includes a charge of $7 million ($3 million after
income tax benefits or $.09 per share) related to a judgment in the David's
litigation. During the second quarter of 1996, this judgment was set aside and
vacated, and the charge was reversed. A new charge of $650,000 ($318,000 after
income tax benefits or $.01 per share) was recorded. The third quarter of 1996
includes a charge of $20 million ($10 million after income tax benefits or $.26
per share) related to a settlement agreement involving Premium Sales
Corporation. See "Litigation and Contingencies" in the notes to the consolidated
financial statements. The fourth quarter of 1996 includes an impairment charge
of $5 million ($2 million after income tax benefits or $.06 per share)
classified as selling and administrative expense, related to an international
investment.
The first quarter of both years consists of 16 weeks; all other quarters are
12 weeks.
59
<PAGE>
(a) 2. Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
(a) 3. (c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR INCORPORATION
NUMBER BY REFERENCE TO
- ---------- ------------------------------
<C> <S> <C>
3.1 Certificate of Incorporation Exhibit 4.1 to Form S-8 dated
September 3, 1996
3.2 By-Laws
4.0 Credit Agreement, dated as of July 25, 1997, among Fleming Exhibit 4.16 to Form 10-Q for
Companies, Inc., the Lenders party thereto, BancAmerica quarter ended July 12, 1997
Securities, Inc., as syndication agent, Societe Generale, as
documentation agent and The Chase Manhattan Bank, as
administrative agent
4.1 Security Agreement dated as of July 25, 1997, between Exhibit 4.17 to Form 10-Q for
Fleming Companies, Inc., the company subsidiaries party quarter ended July 12, 1997
thereto and The Chase Manhattan Bank, as collateral agent
4.2 Pledge Agreement, dated as of July 25, 1997, among Fleming Exhibit 4.18 to Form 10-Q for
Companies, Inc., the company subsidiaries party thereto and quarter ended July 12, 1997
The Chase Manhattan Bank, as collateral agent
4.3 Guarantee Agreement among the company subsidiaries party Exhibit 4.19 to Form 10-Q for
thereto and The Chase Manhattan Bank, as collateral agent quarter ended July 12, 1997
4.4 Indenture dated as of December 15, 1994, among Fleming, the Exhibit 4.9 to Form 10-K for
Subsidiary Guarantors named therein and Texas Commerce Bank year ended December 31, 1994
National Association, as Trustee, Regarding $300 million of
10 5/8% Senior Notes
4.5 Indenture, dated as of July 25, 1997, among Fleming Exhibit 4.20 to Form 10-Q for
Companies, Inc., the Subsidiary Guarantors named therein and quarter ended July 12, 1997
Manufacturers and Traders Trust Company, as Trustee,
regarding 10 5/8% Senior Subordinated Notes due 2007
4.6 Indenture, dated as of July 25, 1997, among Fleming Exhibit 4.21 to Form 10-Q for
Companies, Inc., the Subsidiary Guarantors named therein and quarter ended July 12, 1997
Manufacturers and Traders Trust Company regarding 10 1/2%
Senior Subordinated Notes due 2004
4.7 Agreement to furnish copies of other long-term debt
instruments
10.0 Dividend Reinvestment and Stock Purchase Plan, as amended Exhibit 28.1 to Registration
Statement No. 33-26648 and
Exhibit 28.3 to Registration
Statement No. 33-45190
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR INCORPORATION
NUMBER BY REFERENCE TO
- ---------- ------------------------------
10.1* 1985 Stock Option Plan Exhibit 28(a) to Registration
Statement No. 2-98602
<C> <S> <C>
10.2* Form of Award Agreement for 1985 Stock Option Plan (1994) Exhibit 10.6 to Form 10-K for
year ended December 25, 1993
10.3* 1990 Stock Option Plan Exhibit 28.2 to Registration
Statement No. 33-36586
10.4* Form of Award Agreement for 1990 Stock Option Plan (1994) Exhibit 10.8 to Form 10-K for
year ended December 25, 1993
10.5* Form of Restricted Stock Award Agreement for 1990 Stock
Option Plan (1997)
10.6* Fleming Management Incentive Compensation Plan Exhibit 10.4 to Registration
Statement No. 33-51312
10.7* Amended and Restated Supplemental Retirement Plan Exhibit 10.10 to Form 10-K for
year ended December 31, 1994
10.8* Form of Amended and Restated Supplemental Retirement Income Exhibit 10.11 to Form 10-K for
Agreement year ended December 31, 1994
10.9* Form of Amended and Restated Severance Agreement between the Exhibit 10.13 to Form 10-K for
Registrant and certain of its officers year ended December 31, 1994
10.10* Fleming Companies, Inc. 1990 Stock Incentive Plan dated Exhibit B to Proxy Statement
February 20, 1990 for year ended December 30,
1989
10.11* Fleming Companies, Inc. 1996 Stock Incentive Plan dated Exhibit A to Proxy Statement
February 27, 1996 for year ended December 30,
1995
10.12* Form of Restricted Award Agreement for 1996 Stock Incentive
Plan (1997)
10.13* Phase III of Fleming Companies, Inc. Stock Incentive Plan Exhibit 10.17 to Form 10-K for
year ended December 25, 1993
10.14* Amendment No. 1 to the Fleming Companies, Inc. 1996 Stock Exhibit 10.16 to Form 10-K for
Incentive Plan 1996 year ended December 28,
10.15* Fleming Companies, Inc. Directors' Stock Equivalent Plan Exhibit 10.14 to Form 10-K for
year ended December 28, 1991
10.16* Supplemental Income Trust Exhibit 10.20 to Form 10-K for
year ended December 31, 1994
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR INCORPORATION
NUMBER BY REFERENCE TO
- ---------- ------------------------------
10.17* First Amendment to Fleming Companies, Inc. Supplemental Exhibit 10.19 to Form 10-K for
Income Trust year ended December 28, 1996
<C> <S> <C>
10.18* Form of Employment Agreement between Registrant and certain Exhibit 10.20 to Form 10-K for
of the employees year ended December 31, 1994
10.19* Economic Value Added Incentive Bonus Plan Exhibit A to Proxy Statement
for year ended December 31,
1994
10.20* Agreement between the Registrant and William J. Dowd Exhibit 10.24 to Form 10-K for
year ended December 30, 1995
10.21* Amended and Restated Supplemental Retirement Income Exhibit 10.23 to Form 10-K for
Agreement for Robert E. Stauth 1996 year ended December 28, 1996
10.22* Supplemental Retirement Income Agreement of Fleming Exhibit 10.24 to Form 10-K for
Companies, Inc. And William J. Dowd year ended December 28, 1996
10.23* Executive Past Service Benefit Plan (November 1997)
10.24* Form of Agreement for Executive Past Service Benefit Plan
(November 1997)
10.25* Executive Deferred Compensation Plan (November 1997)
10.26* Executive Deferred Compensation Trust (November 1997)
10.27* Form of Agreement for Executive Deferred Compensation Plan
(November 1997)
10.28 Fleming Companies, Inc. Associate Stock Purchase Plan
10.29 Settlement Agreement between Fleming Companies, Inc. and Exhibit 10.25 to Form 10-Q for
Furr's Supermarkets, Inc. dated October 23, 1997 quarter ended October 4, 1997
12 Computation of ratio of earnings to fixed charges
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
24 Power of Attorney
27 Financial Data Schedule
</TABLE>
*Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
None
62
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Fleming has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 11th day of March
1998.
<TABLE>
<S> <C> <C>
FLEMING COMPANIES, INC.
By: /s/ ROBERT E. STAUTH
-----------------------------------------
Robert E. Stauth
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
By: /s/ HARRY L. WINN, JR.
-----------------------------------------
Harry L. Winn, Jr.
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
By: /s/ KEVIN J. TWOMEY
-----------------------------------------
Kevin J. Twomey
VICE PRESIDENT--CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
</TABLE>
63
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 11th day of March 1998.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ ---------------------------------
<C> <S> <C>
/s/ ROBERT E. STAUTH
------------------------------------------- (Chairman of the Board)
Robert E. Stauth
/s/ JACK W. BAKER*
------------------------------------------- (Director)
Jack W. Baker
/s/ ARCHIE R. DYKES*
------------------------------------------- (Director)
Archie R. Dykes
/s/ CAROL B. HALLETT*
------------------------------------------- (Director)
Carol B. Hallett
/s/ EDWARD C. JOULLIAN III*
------------------------------------------- (Director)
Edward C. Joullian III
/s/ JOHN A. MCMILLAN*
------------------------------------------- (Director)
John A. McMillan
/s/ GUY A. OSBORN*
------------------------------------------- (Director)
Guy A. Osborn
------------------------------------------- (Director)
Alice M. Peterson
/s/ DAVID A. RISMILLER
------------------------------------------- (Director)
David A. Rismiller
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ HARRY L. WINN, JR.
--------------------------------------
Harry L. Winn, Jr.
ATTORNEY-IN-FACT
</TABLE>
- ------------------------
* A Power of Attorney authorizing Harry L. Winn, Jr. to sign the Annual Report
on Form 10-K on behalf of each of the indicated directors of Fleming
Companies, Inc. has been filed herein as Exhibit 24.
64
<PAGE>
SCHEDULE II
FLEMING COMPANIES, INC.
AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 27, 1997 DECEMBER 28, 1996,
AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ALLOWANCE
FOR CREDIT
LOSSES CURRENT NONCURRENT
------------ ---------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1994................................................ $48,567 $39,506 $ 9,061
Charged to costs and expenses............................................. 30,513 21,611 8,902
Uncollectible accounts written-off, less recoveries....................... (25,676 ) (25,981) 305
------------ ---------- -----------
BALANCE, December 30, 1995................................................ 53,404 35,136 18,268
Charged to costs and expenses............................................. 26,921 19,406 7,515
Uncollectible accounts written-off, less recoveries....................... (35,693 ) (29,883) (5,810 )
Asset Impairment.......................................................... 5,000 -- 5,000
------------ ---------- -----------
BALANCE, December 28, 1996................................................ 49,632 24,659 24,973
Charged to cost and expenses.............................................. 24,484 11,989 12,495
Uncollectible accounts written-off, less recoveries....................... (32,655 ) (17,636) (15,019 )
Asset impairment.......................................................... 2,387 -- 2,387
------------ ---------- -----------
BALANCE, December 27, 1997................................................ $43,848 $19,012 $24,836
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
<PAGE>
Adopted 04/29/81
Amended 04/26/83
Amended 04/29/87
Amended 11/03/87
Amended 08/22/89
Amended 04/30/97*
Amended 01/20/98
BYLAWS
OF
FLEMING COMPANIES, INC.
ARTICLE I
OFFICES
Section 1.1. PRINCIPAL OFFICE. The principal office of Fleming Companies,
Inc. (the "Corporation") shall be located at 6301 Waterford Boulevard,
Oklahoma City, Oklahoma.
Section 1.2. OTHER OFFICES. The Corporation may also have offices at such
other places both within or without the State of Oklahoma as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held on a date designated by the Board of Directors, which shall be within
six months next following the end of the fiscal year of the Corporation, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting.
Section 2.2. SPECIAL MEETINGS. Except as otherwise prescribed by statute,
special meetings of the shareholders for any purpose, may be called by the
Chairman and shall be called by the Secretary at the request in writing of a
majority of the Board of Directors. Business transacted at any special
meeting shall be limited to the general objects stated in the call.
Section 2.3. PLACE OF MEETING. Each annual meeting of the shareholders for
the election of directors shall be held at the principal office of the
Corporation in Oklahoma City, Oklahoma unless the Board of Directors shall by
resolution, adopted at least 60 days prior to the date of such meeting,
designate any other place, within or without the State of Oklahoma, as the
place of such meeting. Meetings of shareholders for any other purpose may be
held at such place, within or without the State of Oklahoma, and at such time
as shall be determined by the Board
<PAGE>
of Directors or the Chairman, such time to be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2.4. NOTICE OF MEETING. Written or printed notice stating the place
and time of each annual or special meeting of the shareholders entitled to
vote and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given not less than 10 days nor more than 60
days before the date of the meeting. (See also Article IV).
Section 2.5. SHAREHOLDER LIST. A share ledger in which the names of the
shareholders are arranged alphabetically by classes of shares, if any, shall
be maintained and open for inspection at the office of the Corporation in
Oklahoma City if the meeting is to be held in Oklahoma City, or at the place
of the meeting if the meeting is to be held outside of Oklahoma City, during
ordinary business hours, for a period of at least 10 days prior to the
meeting. The list shall also be available at the time and place of the
meeting, during the whole time of the meeting, and may be inspected by any
shareholder who is present. Such access to the shareholder list shall be
restricted to those shareholders whose purpose in viewing the list is germane
to the meeting.
Section 2.6. QUORUM. The holders of voting stock of the Corporation having
a majority of the voting power thereat, present in person or represented by
proxy, shall be requisite for, and shall constitute, a quorum at all meetings
of the shareholders of the Corporation for the transaction of business,
except as otherwise provided by statute or the Corporation's Certificate of
Incorporation or these Bylaws.
Section 2.7. PROXIES. At every meeting of the shareholders, each
shareholder having the right to vote thereat shall be entitled to vote in
person or by proxy. Such proxy shall be appointed by an instrument in
writing subscribed by such shareholder and bearing a date not more than
three years prior to such meeting, unless such proxy provides for a longer
period; and it shall be filed with the Secretary of the Corporation before,
or at the time of, the meeting.
Section 2.8. VOTING. At every meeting of shareholders, except as otherwise
provided by law, each shareholder shall be entitled to one vote for each
share of stock of the Corporation entitled to vote thereat and registered in
the name of such shareholder on the books of the Corporation on the pertinent
record date. When a quorum is present at any meeting of the shareholders,
the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which, due to a
provision of the statutes or the Corporation's Certificate of Incorporation
or these Bylaws, a different vote is required, in which case such provision
shall govern and control the decision at such question.
Section 2.9. RECORD DATE. (a) In order that the Corporation may determine
the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment or any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for
2
<PAGE>
the purpose of any other lawful action other than shareholder action by
written consent, the Board of Directors may fix a record date, which shall
not precede the date such record date is fixed and shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any such other action. If no record date is fixed, the record date
for determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the
day on which notice is given. The record date for any other purpose other
than shareholder action by written consent shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the shareholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than 10 days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. Any shareholder of record seeking to have the shareholders
authorize or take corporate action by written consent shall, by written
notice to the Secretary, request the Board of Directors to fix a record date.
The Board of Directors shall promptly, but in all events within 10 days
after the date on which such a request is received, adopt a resolution fixing
the record date. If no record date has been fixed by the Board of Directors
within 10 days of the date on which such a request is received, the record
date for determining shareholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered
to the Corporation by delivery to its registered office in the State of
Oklahoma, its principal place of business, or any officer or agent of the
corporation having custody of the book in which proceedings of meetings of
shareholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by applicable law, the
record date for determining shareholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
date on which the Board of Directors adopts the resolution taking such prior
action.
Section 2.10. NOMINATIONS OF DIRECTORS. Only persons who are nominated in
accordance with the procedures set forth in the Bylaws shall be eligible to
serve as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of shareholders (a) by
or at the direction of the Board of Directors or (b) by any shareholder of
the Corporation who is a shareholder of record at the time of giving of
notice provided for in this Section 2.10, who shall be entitled to vote for
the election of directors at the meeting and who complies with the notice
procedures set forth in this Section 2.10. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice shall
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be delivered to or mailed and received at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which
such notice of the date of the meeting or such public disclosure was made.
Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected);
and (b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such shareholder and (ii) the
class and number of shares of the Corporation which are beneficially owned by
such shareholder. At the request of the Board of Directors, any person
nominated by the Board of Directors for election as a director shall furnish
to the Secretary of the Corporation that information required to be set forth
in a shareholder's notice of nomination which pertains to the nominee. No
person shall be eligible to serve as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 2.10.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 2.10, a shareholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section.
Section 2.11. BUSINESS. At any meeting of the shareholders, only such
business shall be conducted as shall have been brought before the meeting (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Corporation who is a shareholder of record at the time of giving of the
notice provided for in this Section 2.11, who shall be entitled to vote at
such meeting and who complies with the notice procedures set forth in this
section 2.11. For business to be properly brought before a shareholder
meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be
timely must be received no later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. A shareholder's notice to the Secretary
shall set forth as to each matter the shareholder proposes to bring before
the meeting (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the
meeting, (b) the name and address, as they appear on the Corporation's books,
of the shareholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned
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by the shareholder and (d) any material interest of the shareholder in such
business. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at a shareholder meeting except in accordance with the
procedures set forth in this Section 2.11. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with
the provisions of the Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 2.11, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder with respect to the matters set forth in
this Section.
ARTICLE III
DIRECTORS
Section 3.1. NUMBER AND ELECTION. The property and business of the
Corporation shall be managed by its Board of Directors. The number of
directors which shall constitute the whole Board shall be not more than 20
and not less than three. The Board of Directors shall from time to time by a
vote of a majority of the directors then in office fix within the maximum and
minimum the number of directors to constitute the Board. Except as provided
in Section 3.2 of these Bylaws, the directors shall be elected at the annual
meeting of shareholders, or at any adjournment thereof, and each director
shall be elected and shall hold office in the manner described in Section
3.12 hereof. Directors need not be shareholders of the Corporation.
Section 3.2. RESIGNATIONS AND VACANCIES. Any director may resign at any
time by giving written notice to the Chairman or Secretary of the
Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. If, at any time other than the annual meeting
of shareholders, any vacancy occurs in the Board of Directors caused by
resignation, death, retirement, disqualification or removal from office of
any director or otherwise, or any new directorship is created by an increase
in the number of directors pursuant to Section 3.1 of the Bylaws, a majority
of the directors then in office, though less than a quorum, may choose a
successor, or fill the newly created directorship, and the director so chosen
shall hold office until the expiration of the term of office of the class of
directors to which such director is appointed and until a successor shall be
duly elected and qualified.
Section 3.3. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at such place or places, within or without the State of Oklahoma, as may
be designated by the person or persons calling such meetings.
Section 3.4. ANNUAL MEETING. A meeting of the Board of Directors, to be
known as the annual meeting, shall be held following and on the same day as
the meeting of shareholders at which
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such Board of Directors is elected. This meeting shall be held for the
purpose of electing the officers of the Corporation and for transacting any
other business that may properly come before the meeting. No notice of this
annual meeting other than these Bylaws shall be necessary in order to legally
constitute the meeting, provided a quorum shall be present.
Section 3.5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times as the Chairman or the Board of Directors may
from time to time determine.
Section 3.6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman and shall be called by the Secretary at the
request of any two directors, to be held at such time and place, either
within or without the State of Oklahoma, as shall be designated by the call
and specified in the notice of such meeting; and notice thereof shall be
given as provided in Section 3.7 of these Bylaws.
Section 3.7. NOTICE. Except as otherwise prescribed by statute, written
notice of the time and place of each regular or special meeting of the Board
of Directors shall be given at least two days prior to the time of holding
the meeting. Any director may waive notice of any meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director expressly objects to the transaction of any
business because the meeting is not lawfully called or convened and such
objection is made prior to the transaction of such business. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in any notice, or waiver of notice, of
such special meeting except that notice shall be given of any proposed
amendment by these Bylaws or with respect to any other matter where notice is
required by statute. (See also Article IV).
Section 3.8. QUORUM. At each meeting of the Board of Directors, the
presence of not less than a majority of the whole board shall be necessary
and sufficient to constitute a quorum for the transaction of business, and
the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or the Corporation's Certificate
of Incorporation or these Bylaws. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section 3.9. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more directors of the
Corporation, which, to the extent provided in the resolution, shall have and
may exercise the powers of the Board of Directors in the management of the
business or affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. The Board of Directors
may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member thereof. Each
committee shall
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keep regular minutes of its meetings and report the same to the Board of
Directors when required by the Board.
Section 3.10. FEES AND COMPENSATION OF DIRECTORS. Directors may receive
stated salary for their services as such; or, by resolution of the Board of
Directors, a fixed fee, with or without expenses of attendance, may be
allowed for attendance at each regular or special meeting of the Board.
Members of the board shall be allowed their reasonable traveling expenses
when actually engaged in the business of the Corporation, to be audited and
allowed as in other cases of demands against the Corporation. Members of
standing or special committees may be allowed like fees and expenses for
attending committee meetings. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 3.11. ACTION WITHOUT A MEETING. Any action which might be taken at
a meeting of the Board of Directors may be taken without a meeting if a
record or memorandum thereof be made in writing and signed by all the members
of the board, and such writing is filed with the minutes of the proceedings
of the board.
Section 3.12. CLASSES OF DIRECTORS, AND TERMS OF OFFICE. The Board of
Directors shall be divided into three classes as nearly as equal in number as
possible with the term of office of one class expiring each year. Directors
shall be chosen by a plurality of votes cast in an election for directors.
The class of directors elected at the annual meeting of shareholders shall be
elected for three-year terms. When the number of directors is changed, any
newly created directorship or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as possible. Subject to the foregoing, at each annual meeting of
shareholders, the successors to the class of directors whose terms shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
ARTICLE IV
NOTICES
Section 4.1. MANNER OF NOTICE. Whenever under the provisions of the
statutes or the Corporation's Certificate of Incorporation or these Bylaws
notice is required to be given to any director, member of any committee
designated by the Board of Directors pursuant to authority conferred by
Section 3.9 of these Bylaws, or shareholder, it shall be given in writing by
depositing it, in a sealed envelope, in the mails, postage prepaid, addressed
(or by delivering it to a telegraph company, charges prepaid, for
transmission) to such director, member or shareholder either at the address
of such director, member or shareholder as it appears on the books of the
Corporation or, in the case of such a director or member, at his business
address; and such notice shall be deemed to be given at the time when it is
thus deposited in the mails (or delivered to the telegraph company).
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Section 4.2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or the Corporation's Certificate of
Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Any shareholder or
director who attends any meeting, annual, regular or special, shall be
conclusively presumed to have waived notice thereof, except where such
shareholder or director expressly objects to the transaction of any business
because the meeting is not lawfully called or convened and such objection is
made prior to the transaction of such business.
ARTICLE V
OFFICERS
Section 5.1. OFFICERS AND OFFICIAL POSITIONS. The Board of Directors may
elect a Chairman of the Board. The office of Chairman of the Board may be
named Chairman if so designated by the Board of Directors. The Board may
elect a President, one or more Vice Presidents, a Secretary, a Treasurer, a
Controller, such Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers and such other officers as the Board of Directors shall
determine. Any two or more offices may be held by the same person. None of
the officers need be a director or a shareholder of the Corporation or a
resident of the State of Oklahoma.
Section 5.2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the annual meeting of
the Board. If the election of officers shall not be held at such meeting of
the board, such election shall be held at a regular or special meeting of the
Board of Directors as soon thereafter as may be convenient. Each officer
shall hold office until a successor is chosen and qualified or until death,
or until such officer shall resign, or shall have been removed in the manner
hereinafter provided.
Section 5.3. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office
at any regular or special meeting of the Board; but such removal shall be
without prejudice to the contract rights, if any, of such person so removed.
Any officer may resign at any time by giving written notice to the Chairman
or Secretary of the Corporation. Any such resignation shall take effect at
the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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Section 5.4. VACANCIES. A vacancy in any office because of death,
resignation, removal, or any other cause may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special
meeting of the Board.
Section 5.5. CHIEF EXECUTIVE OFFICER. If the Board of Directors has elected
a Chairman, it may designate the Chairman as the Chief Executive Officer of
the Corporation. If no Chairman has been elected, or in the Chairman's
absence or inability to act or if no such designation has been made by the
Board of Directors, the President or such other designee as the Board of
Directors shall determine shall act as the Chief Executive Officer of the
Corporation. The Chief Executive Officer shall (i) have the overall
supervision of the business of the Corporation and shall direct the affairs
and policies of the Corporation, subject to any directions which may be given
by the Board of Directors, (ii) shall have authority to delegate special
powers and duties to specified officers, so long as such designations shall
not be inconsistent with the statutes or the Corporation's Certificate of
Incorporation or these Bylaws or action of the Board of Directors and (iii)
shall in general have all other powers and shall perform all other duties
incident to the chief executive officer of a corporation and such other
powers and duties as may be prescribed by the Board of Directors from time to
time.
The Chairman, if one has been elected, shall preside at all meetings of the
shareholders, and of the Board of Directors. The Chairman may sign with the
Secretary or an Assistant Secretary, certificates for shares of stock of the
Corporation, the issuance of which shall have been duly authorized by the
Board of Directors.
Section 5.6. PRESIDENT. (a) If the Board of Directors has elected a
Chairman and designated such officer as the Chief Executive Officer of the
Corporation, the President shall be subject to the control of the Board of
Directors and the Chairman, and shall have such powers and perform such
duties as from time to time may be assigned by the Board of Directors or the
Chairman.
(b) If the Board of Directors has not elected a Chairman, or, if
one has been elected and has not been designated the Chief Executive Officer
of the Corporation, then the President or such other person as may be
designated by the Board of Directors shall be the Chief Executive Officer of
the Corporation with the powers and duties provided in Section 5.5 of these
Bylaws.
(c) In any event, the President shall have power to execute, and
shall execute, deeds, mortgages, bonds, contracts or other instruments of the
corporation except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent
of the Corporation. The President may sign with the Secretary or an
Assistant Secretary, certificates for shares of stock of the Corporation, the
issuance of which shall have been duly authorized by the Board of Directors,
and shall vote, or give a proxy to any other person to vote, all shares of
stock of any other corporation standing in the name of the Corporation.
Section 5.7. VICE PRESIDENTS. In the absence of the President, or in the
event of his inability or refusal to act, the Vice President designated by
the Board of Directors or the Chief Executive
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Officer, shall perform all duties of the President and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties, not inconsistent with the statutes or the Corporation's
Certificate of Incorporation or these Bylaws or action of the Board of
Directors, as from time to time may be prescribed for them, respectively, by
the Chief Executive Officer. The Board of Directors may, from time to time,
designate certain of the Vice Presidents as Executive Vice Presidents, Senior
Vice Presidents, Vice Presidents, Assistant Vice Presidents or such other
designation as the Board of Directors deems appropriate. The duties and
areas of responsibility of the various Vice Presidents shall be determined by
the Chairman and the Board of Directors, to the extent not inconsistent with
applicable statutes or these Bylaws.
Section 5.8. SECRETARY. The Secretary shall: (a) keep the minutes of the
meetings of the shareholders, the Board of Directors and committees of
directors, in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) have charge of the corporate records and of the seal
of the Corporation; (d) affix the seal of the Corporation or a facsimile
thereof, or cause it to be affixed, to all certificates for shares prior to
the issuance thereof and to all documents the execution of which on behalf of
the Corporation under its seal is duly authorized by the Board of Directors
or otherwise in accordance with the provisions of these Bylaws; (e) keep a
register of the post office address of each shareholder, director and
committee member, which shall from time to time be furnished to the Secretary
by such shareholder, director or member; (f) sign with the Chairman or
President certificates for shares of stock of the Corporation, the issuance
of which shall have been duly authorized by resolution of the Board of
Directors; (g) have general charge of the stock transfer books of the
Corporation; and (h) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
Chairman, the President or by the Board of Directors. The Secretary may
delegate such details of the performance of duties of the office of Secretary
as may be appropriate in the exercise of reasonable care to one or more
persons, but shall not thereby be relieved of responsibility for the
performance of such duties.
Section 5.9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
a Vice President, elected and designated as Chief Financial Officer, who
shall: (a) be responsible to the Board of Directors for the receipt, custody
and disbursement of all funds and securities of the Corporation; (b) receive
and give receipts for moneys due and payable to the Corporation from any
source whatsoever and deposit all such moneys in the name of the Corporation
in such banks, trust companies or other depositories as shall from time to
time be selected in accordance with the provisions of Section 6.4 of these
Bylaws; (c) disburse the funds of the Corporation as ordered by the Board of
Directors or the Chief Executive Officer or as required in the ordinary
conduct of the business of the Corporation; (d) render to the Chief
Executive Officer or the Board of Directors, upon request, an account of all
transactions as Chief Financial Officer and on the financial condition of the
Corporation; and (e) in general, perform all the duties incident to the
office of Chief Financial Officer and such other duties as from time to time
may be assigned by the Chairman, the President, the Board of Directors or
these Bylaws. In the
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event there be no Chief Financial Officer, the Board of Directors may
designate any officer to perform the duties of the Chief Financial Officer.
Section 5.10. TREASURER. The Treasurer shall have such duties and
responsibilities as may, from time to time, be designated by the Board of
Directors, the Chairman and the Chief Financial Officer.
Section 5.11. CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation, and shall be responsible to the Board of
Directors and the Chief Financial Officer for internal accounting and control
of the books and records of the Corporation. Such responsibility includes
preparation of all financial reports, tax returns and such other duties as
may be assigned by the Board of Directors or the Chief Financial Officer.
ARTICLE VI
CONTRACTS, BORROWINGS, CHECKS AND DEPOSITS
Section 6.1. CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors may
authorize any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances.
Section 6.2. BORROWINGS. No borrowings shall be contracted on behalf of the
corporation, or any division thereof, and no evidence of indebtedness shall
be issued in the name of the Corporation, unless authorized by a resolution
of the Board of Directors. Such authority may be general or confined to
specific instances.
Section 6.3. CHECKS, DRAFTS, ETC. All checks, demands, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation, shall be signed by such officer or
officers, agent or agents of the Corporation, and in such manner, as shall
from time to time be determined by the Board of Directors.
Section 6.4. DEPOSITS. All funds of the Corporation, not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Chief Financial Officer
or Treasurer may select.
Section 6.5. INVESTMENTS. The Board of Directors may authorize any officer
or officers, agent or agents of the Corporation, to invest the funds of the
Corporation in obligations of the Federal government or any agency thereof or
of any state government or any agency thereof, commercial paper, real estate,
equity securities or debt obligations of any other corporation and such other
investments as the Board of Directors may approve, and such authority may be
general or confined to specific instances.
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ARTICLE VII
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 7.1. CERTIFICATES OF STOCK. The certificates of stock of the
Corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the name of the
Corporation, the state of incorporation, the name of the registered holder,
the number of shares and the par value thereof and shall be signed by the
Chairman or President and by the Secretary or an Assistant Secretary. The
signature of any such officer may be facsimile. In case any such officer who
shall have signed or whose facsimile signature has thus been used on any such
certificate shall cease to be such officer, whether because of death,
resignation or otherwise, before such certificate has been delivered by the
Corporation, such certificate may nevertheless be delivered by the
Corporation, as though the person whose facsimile signature has been used
thereon had not ceased to be such officer. All certificates properly
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued to evidence transferred shares until the former
certificate for at least a like number of shares shall have been surrendered
and cancelled and the Corporation reimbursed for any applicable taxes on the
transfer, except that in the case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms, and with such
indemnity (if any) to the Corporation, as the Board of Directors may
prescribe specifically or in general terms or by delegation to a transfer
agent for the Corporation. (See Section 7.2.)
Section 7.2. LOST OR DESTROYED CERTIFICATES. The Board of Directors in
individual cases, or by general resolution or by delegation to a transfer
agent, may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged
to have been lost or destroyed, upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificates,
or his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 7.3. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, and upon payment of applicable taxes with respect to such transfer,
it shall be the duty of the Corporation, subject to such rules and
regulations as the Board of Directors may from time to time deem advisable
concerning the transfer and registration of certificates for shares of stock
of the Corporation, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its
books. Transfers of shares shall be made only on the books of the
Corporation on
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behalf of the registered holder thereof or by his attorney or successor duly
authorized as evidenced by documents filed with the Secretary or transfer
agent of the Corporation.
Section 7.4. STOCKHOLDERS OF RECORD. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares notwithstanding any
express or other notice thereof, except as otherwise provided by the laws of
Oklahoma.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. FISCAL YEAR. The fiscal year of the Corporation shall be the
52 or 53 week period ending on the last Saturday in December in each year and
beginning on the following Sunday.
Section 8.2. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, and the words "Corporate Seal" and "Oklahoma" or an
abbreviation thereof; and it shall otherwise be in the form approved by the
Board of Directors. Such seal may be used by causing it, or a facsimile
thereof, to be impressed or affixed or otherwise reproduced.
Section 8.3. INDEMNIFICATION. (a) The Corporation shall indemnify any
director or officer of the Corporation who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that such person is or was a director or officer of the Corporation or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the director or officer acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interest of
the Corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe that such conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in
a manner reasonably believed to be in or not opposed to the best interest of
the Corporation and with respect to any criminal action or proceeding have
reasonable cause to believe that such conduct was unlawful.
(b) The Corporation shall indemnify any director or officer of
the Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint
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venture, trust or other enterprise against expenses (including attorney's
fees) actually and reasonably incurred in connection with the defense or
settlement of such action or suit if the director or officer acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interest of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in performance of duty to
the Corporation unless and only to the extent that the court in which such
action or suit was brought shall determine, upon application, that despite
the adjudication of liability, but in the view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
(c) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified
by the Corporation as authorized herein.
(d) The Corporation may purchase (upon resolution duly adopted by
the Board of Directors) and maintain insurance on behalf of any person who is
or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity, or arising
out of the status as such, whether or not the Corporation would have the
power to indemnify the director or officer against such liability.
(e) To the extent that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to herein or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith.
(f) Every director or officer shall be entitled, without demand
upon the Corporation or any action by the Corporation, to enforce such
person's right to such indemnity in an action at law against the Corporation.
The right of indemnification hereinabove provided shall not be deemed
exclusive of any rights to which any such person may now or hereafter be
otherwise entitled and specifically, without limiting the generality of the
foregoing, shall not be deemed exclusive of any rights pursuant to statute or
otherwise, of any such person in any such action, suit or proceeding to have
assessed or allowed against the Corporation or otherwise, costs and expenses
incurred therein or in connection therewith or any part thereof.
(g) Any indemnification hereinabove provided, unless ordered by a
court, shall be made by the Corporation only as authorized in a specific case
because the Corporation has determined that the indemnitee has met the
requisite standards of conduct as set forth in sub-sections (a) and (b)
above. Such determination is to be made by the Board of Directors by
majority vote of a quorum consisting of directors who are not parties to such
action, suit or
14
<PAGE>
proceeding; or if such a quorum is not obtainable, or even if obtainable
should a quorum of disinterested directors so direct, by independent legal
counsel in a written opinion; or by the shareholders.
ARTICLE IX
AMENDMENTS
Section 9.1. IN GENERAL. Any provision of these Bylaws may be altered, amended
or repealed from time to time by the affirmative vote of a majority of the stock
having voting power present in person or by proxy at any annual or special
meeting of shareholders at which a quorum is present, if notice of the proposed
alteration, amendment or repeal is contained in the notice of such meeting, or
by the affirmative vote of a majority of the directors then qualified and acting
at any meeting of the Board at which a quorum is present, if notice of the
proposed alteration, amendment or repeal has been given to each director.
ARTICLE X
SHAREHOLDERS' RIGHTS PLAN*
Section 10.1 MINIMUM REQUIREMENTS. The Corporation shall not adopt or
maintain a poison pill, shareholder rights plan, rights agreement or any
other form of "poison pill" which is designed to or has the effect of making
acquisition of large holdings of the Corporations's shares of stock more
difficult or expensive (such as the 1986 "Rights Agreement"), unless such a
plan is first approved by A MAJORITY shareholder vote. The company shall
redeem any such rights now in effect. The affirmative vote of a majority of
shares voted shall suffice to approve such a plan.
Section 10.2 EFFECTIVE IMMEDIATELY. The article shall be effective
immediately and automatically as of the date it is approved by the
affirmative vote of the holders of a majority of the shares, present in
person or by proxy at a regular or special meeting of the shareholders.
Section 10.3 AMENDMENT. Notwithstanding any other provision of these
bylaws, this Article may not be amended, altered, deleted or modified in any
way by the Board of Directors without prior shareholder approval.
* Article X, adopted by stockholders on April 30, 1997, is subject to repeal
if the Corporation's appeal to the United States Court of Appeals for the
Tenth Circuit in the case of Fleming Companies, Appellant, v. International
Brotherhood of Teamsters, Appellee, is successful.
15
<PAGE>
Exhibit 4.7
INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING INDENTURES
The Registrant has various long-term debt agreements which define the rights
of the holders of the related debt securities of the Registrant. The
Registrant agrees to furnish copies of any unfiled debt agreements to the
Commission upon request.
FLEMING COMPANIES, INC.
(Registrant)
Date March 11, 1998 By Kevin J. Twomey
Vice President-Controller
(Principal Accounting Officer)
<PAGE>
1997 AWARD NO. _
FLEMING COMPANIES, INC.
1990 STOCK INCENTIVE PLAN
_________________________
FORM OF
RESTRICTED STOCK AWARD AGREEMENT
1990 PLAN
Participant
Name: ____________________ Grant Date: _____________
Shares Subject to Restricted
Stock Award: ___________
Expiration Date: _________________
<PAGE>
RESTRICTED STOCK AWARD AGREEMENT FOR
THE FLEMING COMPANIES, INC.
1990 STOCK INCENTIVE PLAN
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") entered into
as of the ___ day of ________, ____, by and between Fleming Companies, Inc., an
Oklahoma corporation (the "Company"), and _________________ (herein referred to
as the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant is a key management employee of the Company;
and
WHEREAS, the Company desires to encourage the Participant to remain
in the employ of the Company in the future; and
WHEREAS, the Company has previously adopted the Fleming Companies,
Inc. 1990 Stock Incentive Plan (the "Plan"); and
WHEREAS, in consideration of the premises and the mutual promises and
covenants herein contained, the Company desires to provide the Participant the
opportunity to acquire shares of voting common stock of the Company in exchange
for the Participant's performing future services for the Company; and
WHEREAS, the Company has established a trust entitled "Fleming
Companies, Inc. Executive Deferred Compensation Trust" (the "Trust") as a
device for assisting the Company to meet its obligations under the Plan and
other employee benefit plans sponsored by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, the Participant and the Company agree
as follows (all capitalized terms used herein, unless otherwise defined, have
the meaning ascribed to such terms as set forth in the Plan):
1. THE PLAN. The Plan, a copy of which is attached hereto as
Exhibit "A", is hereby incorporated by reference herein and made a part hereof
for all purposes, and when taken with this Agreement shall govern the rights of
the Participant and the Company with respect to the Award (as herein defined).
2. GRANT OF AWARD. The Company hereby grants to the Participant an
award (the "Award") of One Hundred Thousand (100,000) shares of Company common
stock, par value $2.50 (the "Stock"), on the terms and conditions set forth
herein and in the Plan.
<PAGE>
3. TERMS OF AWARD.
(a) VESTING. Certificates representing the shares of Stock
subject to the Award shall be issued in the name of and delivered to Liberty
Bank and Trust Company of Oklahoma City, N.A., the trustee of the Trust (the
"Trustee"). Subject to the terms of the Plan, the Participant shall become
vested in the number of the shares of Stock within the Award in accordance with
the vesting schedule attached hereto as Exhibit "B" and incorporated by
reference, provided that such Participant has at all times remained in the full-
time and continuous employment of the Company through the date of vesting.
Except as provided in the Plan, in the event the Participant
terminates employment for any reason whatsoever prior to the vesting of all
shares of Stock subject to the Award, then, all remaining shares of Stock which
have not yet been vested (including dividends paid and held by the Trustee on
such shares) shall be absolutely forfeited and the Participant shall have no
further interest therein of any kind whatsoever.
(b) CHANGE OF CONTROL. Notwithstanding the provisions of
Section 3(a) hereof, the Company and the Committee have determined that the
Participant shall be deemed vested in all remaining shares of Stock subject to
the Award which have not yet been vested upon a Change of Control of the
Company, as such term is defined in Section 9.1 of the Plan.
4. LEGENDS. The shares of Stock which are the subject of the Award
shall be subject to the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED
STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1990 STOCK
INCENTIVE PLAN DATED THE 1ST DAY OF NOVEMBER, 1997. ANY ATTEMPTED
TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN
VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT
EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY
OF FLEMING COMPANIES, INC."
5. AUTOMATIC DEFERRAL OF VESTED SHARES AND DIVIDENDS. The
Participant agrees that the grant of the Award under this Agreement is subject
to the restrictions herein contained and that all shares of Stock subject to
the Award and dividends thereon, if any, made under this Agreement shall be
automatically and irrevocably delivered directly to the Trustee and shall not
be distributed by the Trustee to the Participant until the Participant
terminates employment with the Company or a Subsidiary and all the following
conditions have been satisfied:
-2-
<PAGE>
(a) The Participant completes at least two years of employment
service with the Company or a Subsidiary;
(b) The Participant satisfies the "Rule of 70" where the
Participant's age PLUS completed years of employment service with the Company
or a Subsidiary equals 70 or more; and
(c) The Participant has attained the age of 55 and has earned
at least 10 years of employment service with the Company or a Subsidiary.
Provided, for purposes of determining a Participant's years of employment
service with the Company or a Subsidiary, such service shall be based upon the
12 month period commencing with the Participant's initial date of hire (or date
of rehire) with the Company or a Subsidiary and 12 month anniversaries of such
date during which time the Participant remains in the continuous full-time
employ of the Company or a Subsidiary. For purposes of calculating the years
of employment service with the Company or a Subsidiary under Subsections 5(b)
and 5(c) above, service will be considered both before and after the date of
the Award. For purposes of calculating the years of employment service with
the Company or a Subsidiary under Section 5(a) above, service will be
considered as commencing on November 1, 1997. With regard to the calculation
of years of employment service with respect to any Participant who is hired and
then terminated employment and was subsequently rehired by the Company or a
Subsidiary, then, the Committee shall make the determination and calculation as
to number of completed years of employment service by disregarding the break in
employment service considering such periods of employment service to be
cumulative, i.e., counting one or more periods of employment.
Provided further, notwithstanding the fact that the Participant has not
satisfied the foregoing requirements of this Section 5, in the event that the
Participant dies, incurs a Disability, or a Change of Control of the Company
occurs as defined in Section 9.1 of the Plan, then (i) the Award (all shares of
Stock) will be automatically vested and nonforfeitable and (ii) such vested
shares of Stock and dividends attributable to the Award (all shares of Stock)
will be distributed by the Trustee to the Participant (or his Beneficiary in
the event of his death) within thirty (30) days following the occurrence of the
event which would cause distribution of such vested shares of Stock.
Provided further, the Committee will make all decisions, in its sole
discretion, with regard to whether the requirements for distribution of any
Award have been satisfied, and may, in its sole discretion, waive all or any
restrictions with respect to any shares of Stock.
-3-
<PAGE>
6. NO RIGHTS IN STOCK. The Participant agrees that until such
vested shares of Stock are distributed to him, he has no rights or interest in
such shares as a shareholder of the Company or otherwise, and that such shares
shall be held by the Trustee in accordance with the terms of the Trust and
shall be voted by the Trustee. Specifically, the Participant hereby waives the
right to require the certificate representing the shares of Stock granted under
the Award to be in his name and any right to vote such shares of Stock as
provided in Section 5.3 of the Plan. Further, the Participant has no interest
in the Trust of any kind whatsoever. As a condition precedent to issuing a
certificate representing the shares of Stock granted under the Award, the
Company require the Participant to deliver to the Trustee a duly executed
irrevocable stock power (in blank) covering such shares representing the
certificate which will be utilized by the Trustee in the event the Participant
terminates employment with the Company or a Subsidiary prior to the time he
becomes vested in such shares of Stock, and will be executed by the Trustee
transferring such shares of Stock to the Company.
7. NONTRANSFERABILITY OF AWARD. With respect to all shares of
Stock held by the Trust which are subject to this Award, and dividends on such
Stock held by the Trust, the Participant shall not have the right to sell,
assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or
charge shares of Stock held by the Trustee and dividends or any interest
therein in any manner whatsoever.
8. NOTICES. All notices or other communications relating to the
Plan and this Agreement as it relates to the Participant shall be in writing,
shall be deemed to have been made if personally delivered in return for a
receipt, or if mailed, by regular U.S. mail, postage prepaid, by the Company to
the Participant at the following address:
or such other address as the Participant may advise the Company in writing.
The date of personal delivery shall be the date of giving notice, or if made by
mail in the manner prescribed above, notice shall be deemed to have been given
three (3) business days after the date of mailing.
9. BINDING EFFECT AND GOVERNING LAW. This Agreement shall be (i)
binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and assigns except as may be limited by the Plan
and (ii) governed and construed under the laws of the State of Oklahoma.
-4-
<PAGE>
10. WITHHOLDING. The Company and the Participant shall comply with
all federal and state laws and regulations respecting the withholding, deposit
and payment of any income, employment or other taxes relating to the Award.
11. AWARD SUBJECT TO CLAIMS OR CREDITORS. The Participant shall not
have any interest in any particular assets of the Company, its parent, if
applicable, or any Subsidiary by reason of the right to earn an Award under the
Plan and this Agreement, and the Participant or any other person shall have
only the rights of a general unsecured creditor of the Company, its parent, if
applicable, or a Subsidiary with respect to any rights under the Plan or this
Agreement.
12. CAPTIONS. The captions of specific provisions of this Agreement
are for convenience and reference only, and in no way define, describe, extend
or limit the scope of this Agreement or the intent of any provision hereof.
13. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed an original for all
purposes, but all of which taken together shall form but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
"COMPANY" FLEMING COMPANIES, INC., an
Oklahoma corporation
By
---------------------------------
President
"PARTICIPANT"
-----------------------------------
, Participant
--------------
-5-
<PAGE>
1990 PLAN
---------
EXHIBIT "B"
VESTING OF RESTRICTED STOCK
Restricted Stock shall vest in accordance with the following terms during
the "Award Period" which shall commence November 1, 1997 and shall terminate
December 31, 2000 if not sooner vested. Shares not fully vested during the
Award Period shall be forfeited by the Participant at the end of the Award
Period.
A. One-half of the number of shares of Stock in the Award will be subject to
vesting based upon the Participant's continuous employment with the Company
and/or any of its Subsidiaries through the vesting dates set forth on the
following table:
VESTING DATE NUMBER OF SHARES VESTED
------------ -----------------------
B. One-half of the number of shares of Stock in the Award will be subject to
vesting based upon the Stock of the Company achieving and maintaining for 20
consecutive trading days from and after October 31, 1997, the following Current
Market Values:
CURRENT MARKET VALUE NUMBER OF SHARES VESTED
-------------------- -----------------------
For purposes of this Agreement, "Current Market Value" shall mean the
closing price for shares of Stock as reported on the New York Stock Exchange as
reflected in the WALL STREET JOURNAL Southwest Edition.
<PAGE>
1997 AWARD NO. _
FLEMING COMPANIES, INC.
1996 STOCK INCENTIVE PLAN
-------------------------
FORM OF
RESTRICTED STOCK AWARD AGREEMENT
1996 PLAN
Participant
Name: Grant Date:
-------------- ------------------
Shares Subject to Restricted
Stock Award:
------------
Expiration Date:
-------------------
<PAGE>
RESTRICTED STOCK AWARD AGREEMENT FOR
THE FLEMING COMPANIES, INC.
1996 STOCK INCENTIVE PLAN
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") entered into
as of the 1st day of November, 1997, by and between Fleming Companies, Inc., an
Oklahoma corporation (the "Company"), and _____________ (herein referred to as
the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant is a key management employee of the Company;
and
WHEREAS, the Company desires to encourage the Participant to remain
in the employ of the Company in the future; and
WHEREAS, the Company has previously adopted the Fleming Companies,
Inc. 1996 Stock Incentive Plan and certain amendments thereto (the "Plan");
and
WHEREAS, in consideration of the premises and the mutual promises and
covenants herein contained, the Company desires to provide the Participant the
opportunity to acquire shares of voting common stock of the Company in exchange
for the Participant's performing future services for the Company; and
WHEREAS, the Company has established a trust entitled "Fleming
Companies, Inc. Executive Deferred Compensation Trust" (the "Trust") as a
device for assisting the Company to meet its obligations under the Plan and
other employee benefit plans sponsored by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, the Participant and the Company agree
as follows (all capitalized terms used herein, unless otherwise defined, have
the meaning ascribed to such terms as set forth in the Plan):
1. THE PLAN. The Plan, a copy of which is attached hereto as
Exhibit "A", is hereby incorporated by reference herein and made a part hereof
for all purposes, and when taken with this Agreement shall govern the rights of
the Participant and the Company with respect to the Award (as defined below).
2. GRANT OF AWARD. The Company hereby grants to the Participant an
award (the "Award") of One Hundred Eighty Thousand (180,000) shares of Company
common stock, par value $2.50 (the "Stock"), on the terms and conditions set
forth herein and in the Plan.
<PAGE>
3. TERMS OF AWARD.
(a) VESTING. Certificates representing the shares of Stock
subject to the Award shall be issued in the name of and delivered to Liberty
Bank and Trust Company of Oklahoma City, N.A., the trustee of the Trust (the
"Trustee"). Subject to the terms of the Plan, the Participant shall become
vested in the number of the shares of Stock within the Award in accordance with
the vesting schedule attached hereto as Exhibit "B" and incorporated by
reference, provided that such Participant has at all times remained in the full-
time and continuous employment of the Company through the date of vesting.
Except as provided in the Plan, in the event the Participant
terminates employment for any reason whatsoever prior to the vesting of all
shares of Stock subject to the Award, then, all remaining shares of Stock which
have not yet been vested (including dividends paid and held by the Trustee on
such shares) shall be absolutely forfeited and the Participant shall have no
further interest therein of any kind whatsoever.
(b) CHANGE OF CONTROL. Notwithstanding the provisions of
Section 3(a) hereof, the Company and the Committee have determined that the
Participant shall be deemed vested in all remaining shares of Stock subject to
the Award which have not yet been vested upon a Change of Control of the
Company, as such term is defined in Section 2.4(a) of the Plan.
4. LEGENDS. The shares of Stock which are the subject of the Award
shall be subject to the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED
STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1996 STOCK
INCENTIVE PLAN DATED THE 1ST DAY OF NOVEMBER, 1997. ANY ATTEMPTED
TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN
VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT
EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY
OF FLEMING COMPANIES, INC."
5. AUTOMATIC DEFERRAL OF VESTED SHARES AND DIVIDENDS. The
Participant agrees that the grant of the Award under this Agreement is subject
to the restrictions herein contained and that all shares of Stock subject to
the Award and dividends thereon, if any, made under this Agreement shall be
automatically and irrevocably delivered directly to the Trustee and shall not
be distributed by the Trustee to the Participant until the Participant
terminates employment with the Company or a Subsidiary and all the following
conditions have been satisfied:
-2-
<PAGE>
(a) The Participant completes at least two years of employment
service with the Company or a Subsidiary;
(b) The Participant satisfies the "Rule of 70" where the
Participant's age PLUS completed years of employment service with the Company
or a Subsidiary equals 70 or more; and
(c) The Participant has attained the age of 55 and has earned
at least 10 years of employment service with the Company or a Subsidiary.
Provided, for purposes of determining a Participant's years of employment
service with the Company or a Subsidiary, such service shall be based upon the
12 month period commencing with the Participant's initial date of hire (or date
of rehire) with the Company or a Subsidiary and 12 month anniversaries of such
date during which time the Participant remains in the continuous full-time
employ of the Company or a Subsidiary. For purposes of calculating the years
of employment service with the Company or a Subsidiary under Subsections 5(b)
and 5(c) above, service will be considered both before and after the date of
the Award. For purposes of calculating the years of employment service with
the Company or a Subsidiary under Section 5(a) above, service will be
considered as commencing on November 1, 1997. With regard to the calculation
of years of employment service with respect to any Participant who is hired and
then terminated employment and was subsequently rehired by the Company or a
Subsidiary, then, the Committee shall make the determination and calculation as
to number of completed years of employment service by disregarding the break in
employment service considering such periods of employment service to be
cumulative, i.e., counting one or more periods of employment.
Provided further, notwithstanding the fact that the Participant has not
satisfied the foregoing requirements of this Section 5, in the event that the
Participant dies, incurs a Disability, or a Change of Control of the Company
occurs as defined in Section 2.4(a) of the Plan, then (i) the Award (all shares
of Stock) will be automatically fully vested and nonforfeitable and (ii) such
vested shares of Stock and dividends attributable to the Award (all shares of
Stock) will be distributed by the Trustee to the Participant (or his
Beneficiary in the event of his death) within thirty (30) days following the
occurrence of the event which would cause distribution of such vested shares of
Stock.
Provided further, the Committee will make all decisions, in its sole
discretion, with regard to whether the requirements for distribution of any
Award have been satisfied, and may, in its sole discretion, waive all or any
restrictions with respect to any shares of Stock.
-3-
<PAGE>
6. NO RIGHTS IN STOCK. The Participant agrees that until such
vested shares of Stock are distributed to him, he has no rights or interest in
such shares as a shareholder of the Company or otherwise, and that such shares
shall be held by the Trustee in accordance with the terms of the Trust and
shall be voted by the Trustee. Specifically, the Participant hereby waives the
right to require the certificate representing the shares of Stock granted under
the Award to be in his name and any right to vote such shares of Stock as
provided in Section 7.2(c) of the Plan. Further, the Participant has no
interest in the Trust of any kind whatsoever. As a condition precedent to
issuing a certificate representing the shares of Stock granted under the Award,
the Company require and the Participant agrees to deliver to the Trustee a duly
executed irrevocable stock power (in blank) covering such shares representing
the certificate which will be utilized by the Trustee in the event the
Participant terminates employment with the Company or a Subsidiary prior to the
time he becomes vested in such shares of Stock, and will be executed by the
Trustee transferring such shares of Stock to the Company.
7. NONTRANSFERABILITY OF AWARD. With respect to all shares of
Stock held by the Trust which are subject to this Award, and dividends on such
Stock held by the Trust, the Participant shall not have the right to sell,
assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or
charge shares of Stock held by the Trustee and dividends or any interest
therein in any manner whatsoever.
8. NOTICES. All notices or other communications relating to the
Plan and this Agreement as it relates to the Participant shall be in writing,
shall be deemed to have been made if personally delivered in return for a
receipt, or if mailed, by regular U.S. mail, postage prepaid, by the Company to
the Participant at the following address:
or such other address as the Participant may advise the Company in writing.
The date of personal delivery shall be the date of giving notice, or if made by
mail in the manner prescribed above, notice shall be deemed to have been given
three (3) business days after the date of mailing.
9. BINDING EFFECT AND GOVERNING LAW. This Agreement shall be (i)
binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and assigns except as may be limited by the Plan
and (ii) governed and construed under the laws of the State of Oklahoma.
-4-
<PAGE>
10. WITHHOLDING. The Company and the Participant shall comply with
all federal and state laws and regulations respecting the withholding, deposit
and payment of any income, employment or other taxes relating to the Award.
11. AWARD SUBJECT TO CLAIMS OR CREDITORS. The Participant shall not
have any interest in any particular assets of the Company, its parent, if
applicable, or any Subsidiary by reason of the right to earn an Award under the
Plan and this Agreement, and the Participant or any other person shall have
only the rights of a general unsecured creditor of the Company, its parent, if
applicable, or a Subsidiary with respect to any rights under the Plan or this
Agreement.
12. CAPTIONS. The captions of specific provisions of this Agreement
are for convenience and reference only, and in no way define, describe, extend
or limit the scope of this Agreement or the intent of any provision hereof.
13. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed an original for all
purposes, but all of which taken together shall form but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
"COMPANY" FLEMING COMPANIES, INC., an
Oklahoma corporation
By
-------------------------------------
President
"PARTICIPANT"
----------------------------------------
------------------------, Participant
-5-
<PAGE>
1996 PLAN
EXHIBIT "B"
VESTING OF RESTRICTED STOCK
Restricted Stock shall vest in accordance with the following terms during
the "Award Period" which shall commence November 1, 1997 and shall terminate
December 31, 2001 if not sooner vested. Shares not fully vested during the
Award Period shall be forfeited by the Participant at the end of the Award
Period.
A. One-half of the number of shares of Stock in the Award will be
subject to vesting based upon the Participant's continuous employment with the
Company and/or any of its Subsidiaries through the vesting dates set forth on
the following table:
VESTING DATE NUMBER OF SHARES VESTED
------------ -----------------------
B. One-half of the number of shares of Stock in the Award will be subject to
vesting based upon the Stock of the Company achieving and maintaining for 20
consecutive trading days from and after October 31, 1997, the following Current
Market Values:
CURRENT MARKET VALUE NUMBER OF SHARES VESTED
-------------------- -----------------------
For purposes of this Agreement, "Current Market Value" shall mean the
closing price for shares of Stock as reported on the New York Stock Exchange as
reflected in the WALL STREET JOURNAL Southwest Edition.
<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE PAST SERVICE BENEFIT PLAN
(Adopted Effective November 1, 1997)
<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE PAST SERVICE BENEFIT PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I Name and Purpose of Plan 1
1.1 Name of Plan 1
1.2 Purpose of Plan 1
ARTICLE II Definitions and Construction 1
2.1 Definitions 1
2.2 Construction 5
ARTICLE III Participation 5
3.1 Participation in Consideration
for Future Services Only 5
3.2 The Agreement 5
ARTICLE IV Contributions 6
4.1 Payments by the Company 6
ARTICLE V Past Service Benefit 6
5.1 Past Service Benefit 6
5.2 Vesting of Past Service Benefit 7
5.3 Payment of Past Service Benefit 7
5.4 Form of Benefit 8
5.5 Postponed Retirement Date 8
ARTICLE VI Death of a Participant 8
6.1 Payment of Death Benefit 8
6.2 Beneficiary Designation 9
ARTICLE VII Early Retirement 9
7.1 Early Retirement 9
ARTICLE VIII Disability 9
8.1 Disability 9
8.2 Proof of Disability 9
-i-
<PAGE>
ARTICLE IX Change of Control 10
9.1 Acceleration of Vesting of Past Service
Benefit Upon Change of Control 10
ARTICLE X Manner of Payment of Benefits 12
10.1 Payment at Actual Retirement 12
ARTICLE XI General Benefit Provisions 13
11.1 Restrictions on Alienation of Benefits 13
11.2 Release of Claims 14
11.3 Plan Unfunded - No Assignment 14
11.4 Withholding and Other Employment Taxes 14
11.5 No Trust 14
ARTICLE XII Provisions Relating to Participants 15
12.1 Information Required of Participants 15
12.2 Abandonment of Benefits 15
12.3 Benefits Payable to Incompetents 16
12.4 Conditions of Employment Not
Affected by Plan 16
ARTICLE XIII Administration and Committee 16
13.1 Allocation of Responsibility
for Plan Administration 16
13.2 Appointment of Committee 16
13.3 Claims Procedure 16
13.4 Review Procedure 17
13.5 Records and Reports 17
13.6 Other Committee Powers and Duties 17
13.7 Rules and Decisions 18
13.8 Committee Procedures 18
ARTICLE XIV Amendment and Termination 19
14.1 Right to Amend or Alter Plan 19
14.2 Right to Terminate Plan 19
14.3 Forfeiture of All Benefits 19
14.4 Merger of Company; Successor Must Assume Plan 19
ARTICLE XV Miscellaneous Provisions 20
15.1 Articles and Section Titles and Headings 20
15.2 Laws of Oklahoma to Govern 20
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FLEMING COMPANIES, INC.
EXECUTIVE PAST SERVICE BENEFIT PLAN
FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the
FLEMING COMPANIES, INC. EXECUTIVE PAST SERVICE BENEFIT PLAN upon the
following terms and conditions.
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 NAME OF PLAN. This Plan shall be hereafter known as the
FLEMING COMPANIES, INC. EXECUTIVE PAST SERVICE BENEFIT PLAN.
1.2 PURPOSE OF PLAN. The Plan is established and maintained by
the Company solely for the purpose of providing benefits for certain
Associates of the Company who (i) were participants in the Amended and
Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and
Its Subsidiaries which was terminated as to such Associates effective
November 1, 1997, and (ii) have been selected for participation in this Plan
by the Committee. It is intended that this Plan be unfunded for federal
income tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. Where the following capitalized words and
phrases appear in this instrument, they shall have the respective meanings
set forth below unless a different context is clearly expressed herein.
(a) ACCOUNT: The word "Account" shall mean the account
established under Section 5.1(b) to which will be credited each
Participant's Past Service Benefit and earnings thereon.
(b) ACT: The word "Act" shall mean Public Law No. 93-406, the
Employee Retirement Income Security Act of 1974, as amended from time
to time.
(c) ACTUARY: The word "Actuary" shall mean an enrolled actuary
selected from time to time by the Committee to provide actuarial
services for the Plan who, as of the Effective Date, was Watson, Wyatt
& Company.
(d) AGREEMENT: The word "Agreement" shall mean that certain
"Agreement for Past Service Benefit" which will be entered into by and
between the Company and the Participant together with any amendments
thereto.
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(e) ASSOCIATE: The word "Associate" shall mean any person,
employed by the Company on the basis of an employer-employee
relationship, who receives remuneration for personal services rendered
to the Company and who is either a highly compensated employee or a
select management employee.
(f) BENEFICIARY: The word "Beneficiary" shall mean that person
designated by the Participant pursuant to Section 6.2 hereof who would
be entitled to receive his Past Service Benefit upon the death of the
Participant.
(g) BOARD: The word "Board" shall mean the Board of Directors
of the Company.
(h) CAUSE: The word "Cause" shall mean the termination from
employment with the Company or a Subsidiary for one of the following
reasons:
(i) the conviction of the Participant of a felony by
a federal or state court of competent jurisdiction; (ii) an act
or acts of dishonesty taken by the Participant and intended to
result in substantial personal enrichment of the Participant at
the expense of the Company; (iii) the Participant's "willful"
failure to follow a direct, reasonable and lawful written order
from his supervisor, within the reasonable scope of the Partici-
pant's duties, which failure is not cured within 30 days; or
(iv) the Participant's failure to perform his specified duties
and responsibilities for a period of 45 days as determined by
his supervisor after a warning in writing. Further, for
purposes of this Subsection (h):
(1) No act or failure to act, on the
Participant's part shall be deemed "willful" unless done,
or omitted to be done, by the Participant not in good faith
and without reasonable belief that the Participant's action
or omission was in the best interest of the Company.
(2) The Participant shall not be deemed to
have been terminated for Cause unless and until there shall
have been delivered to the Participant a copy of a
resolution duly adopted by the affirmative vote of not less
than three-fourths (3/4ths) of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Participant and an
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opportunity for the Participant, together with the Par-
ticipant's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Participant
was guilty of conduct set forth in clauses (i), (ii), (iii)
or (iv) above and specifying the particulars thereof in
detail.
(i) CHANGE OF CONTROL: The words "Change of Control" shall
have the meaning set forth in Section 9.1 of this Plan.
(j) CODE: The word "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(k) COMMITTEE: The word "Committee" shall mean the
Compensation and Organization Committee appointed by the Board of
Directors of the Company under Article XIII herein to administer the
Plan.
(l) COMPANY: The word "Company" shall mean Fleming Companies,
Inc., an Oklahoma corporation, or its successor.
(m) DISABILITY: The word "Disability" shall mean a condition
whereby a Participant has become totally and permanently disabled
within the meaning of the Long-Term Disability Plan as in effect as of
the Effective Date of this Plan.
(n) DISABILITY RETIREMENT DATE: The words "Disability
Retirement Date" shall mean the first day of the month after which a
Participant terminating employment has satisfied all conditions
specified in the foregoing Subsection for Disability.
(o) EARLY RETIREMENT DATE: The words "Early Retirement Date"
shall mean the first day of the month coinciding with or following the
date a Participant terminates employment with the Company or any
Subsidiary after (i) earning at least 10 Years of Employment Service
and (ii) attaining at least age 55.
(p) EFFECTIVE DATE: The words "Effective Date" shall mean the
1st day of November, 1997.
(q) LONG-TERM DISABILITY PLAN: The words "Long-Term
Disability Plan" shall mean the "Long-Term Disability Benefit Plan of
Fleming Companies, Inc. and Its Subsidiaries."
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(r) NORMAL RETIREMENT AGE: The words "Normal Retirement Age"
shall mean the 65th birthday of a Participant.
(s) NORMAL RETIREMENT DATE: The words "Normal Retirement Date"
shall mean the first day of the month coinciding with or following a
Participant's Normal Retirement Age.
(t) PARTICIPANT: The word "Participant" shall mean an
Associate who has been selected for participation in the Plan as of
the Effective Date, and whose name is listed on Exhibit "A" attached
hereto.
(u) PAST SERVICE BENEFIT: The words "Past Service Benefit"
shall mean the benefit which has been credited to a Participant and
adjusted pursuant to Section 5.1 hereof.
(v) PLAN: The word "Plan" shall mean the "Fleming Companies,
Inc. Executive Past Service Benefit Plan," as set forth in this
instrument, and as hereafter amended from time to time.
(w) POSTPONED RETIREMENT DATE: The words "Postponed Retirement
Date" shall mean the first day of the month coinciding with or next
following the date that a Participant retires under Section 5.5 herein
subsequent to his Normal Retirement Date.
(x) PRIOR PLAN: The words "Prior Plan" shall mean the Amended
and Restated Supplemental Retirement Income Plan of Fleming Companies,
Inc. and Its Subsidiaries" which was terminated as to the Participants
effective November 1, 1997.
(y) RETIREMENT DATE: The words "Retirement Date" shall mean a
Participant's Early Retirement Date, Disability Retirement Date,
Normal Retirement Date, or Postponed Retirement Date, whichever
applies.
(z) SUBSIDIARY: The word "Subsidiary" shall mean any
corporation with 80% or more of its voting capital stock being owned
by the Company.
(aa) TRUST: The word "Trust" shall mean the Fleming Companies,
Inc. Executive Deferred Compensation Trust which has been established
and may be used by the Company as the device for assisting the Company
to meet its obligations under the Plan.
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(bb) TRUSTEE OR TRUSTEES: The words "Trustee" or "Trustees"
means the entity who has been designated by the Company to serve as
Trustee of the Trust.
(cc) YEAR: The word "Year" shall mean the annual period
beginning on the first day following the last Saturday of December,
and ending on the last Saturday of December of the calendar year
immediately following.
(dd) YEAR OF EMPLOYMENT SERVICE: The words "Year of Employment
Service" shall mean the 12 month period commencing with the
Participant's initial date of hire (or date of rehire) with the
Company or Subsidiary and 12 month anniversaries of such date during
which time the Participant remained in the continuous full-time employ
of the Company or a Subsidiary. For the purposes of calculating a
Year of Employment Service, service both before and after the
Effective Date of this Plan will be considered. With regard to the
calculation of Years of Employment Service with respect to any
Participant who was hired and then terminated employment and
subsequently was rehired by the Company or a Subsidiary, then, the
Committee shall make the determination and calculation as to the
number of completed Years of Employment Service by disregarding the
break in employment service and considering such periods of employment
service to be cumulative, i.e., counting one or more periods of
employment.
2.2 CONSTRUCTION. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender, unless the context
clearly indicates to the contrary. Any word appearing herein in the plural
shall include the singular, where appropriate, and likewise the singular
shall include the plural, unless the context clearly indicates to the
contrary.
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION IN CONSIDERATION FOR FUTURE SERVICES ONLY. The
only Participants in the Plan are those listed on Exhibit "A" attached
hereto, and no additional Associates will be eligible to participate in the
Plan. The Past Service Benefit will be deemed to be for all purposes in
consideration of future services which will be rendered by such Participant
to the Company.
3.2 THE AGREEMENT. Each Participant shall, as a condition of
participation, complete and return to the Committee the Agreement which
evidences participation in the Plan and the Participant's agreement to the
terms and conditions thereof.
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ARTICLE IV
CONTRIBUTIONS
4.1 PAYMENTS BY THE COMPANY. The payments required to fund the cost
of the benefits provided by the Plan shall be made solely by the Company.
ARTICLE V
PAST SERVICE BENEFIT
5.1 PAST SERVICE BENEFIT.
(a) AMOUNT OF PAST SERVICE BENEFIT. Each of the Participants
have been selected for participation in the Plan and have previously
been a Participant in the Prior Plan. While eligible to participate
in the Prior Plan, no Participant had earned any vested or accrued
benefit in the Prior Plan as of the date of its termination.
Notwithstanding the fact that the Participants have not earned any
benefit under the Prior Plan, the Company desires to provide to each
Participant the opportunity to earn a supplemental retirement benefit
in the form of the Past Service Benefit calculated, in part, by
considering his employment service with the Company earned prior to
November 1, 1997. The Actuary has determined the value of the Past
Service Benefit based upon sound actuarial principles as of November
1, 1997. The amount of Past Service Benefit for each Participant is
the amount which is set forth opposite his name on Exhibit "A"
attached hereto.
(b) ADJUSTMENTS TO PAST SERVICE BENEFIT. With respect to the
Past Service Benefit credited to each Participant, there shall be
established a separate account (the "Account") to which will be
credited the amount of Past Service Benefit. There shall also be
credited to such Account earnings in an amount equal to the greater
of (i) interest at the rate equal to 1% below the prime rate of
interest published in THE WALL STREET JOURNAL (Southwest Edition) in
the Money Rate Section at the beginning of each calendar quarter (the
"Rate of Interest") determined quarterly, or (ii) the actual earnings
of any assets held in the Trust. Earnings of the Trust shall be
credited in the ratio that the balance in each Participant's Account
determined at the end of the previous quarter bears to the balance of
all Accounts of all Participants in the Trust determined at the end
of the previous quarter. The Accounts established pursuant to this
Section 5.1(b) are fictitious and are solely for
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recordkeeping purposes and shall not be considered to be funded with
assets set aside or segregated for any Participant, but such Accounts
are only established for recordkeeping purposes to determine the
amount of earnings which will be credited to the Past Service Benefit
and such earnings shall be credited as provided herein until a
Participant's Past Service Benefit has been fully paid.
5.2 VESTING OF PAST SERVICE BENEFIT.
(a) VESTING. A Participant shall only be vested in his Past
Service Benefit upon completion of all of the following:
(i) Completing two continuous Years of Employment
Service with the Company or any Subsidiary commencing November
1, 1997;
(ii) Attaining his Early Retirement Date; and
(iii) Satisfying the "Rule of 70" which means the
Participant's age and Years of Employment Service must equal or
exceed 70.
Provided, if not sooner vested, a Participant shall be 100%
vested in his Past Service Benefit upon a Change of Control, his
death or Disability.
(b) FORFEITURE. In the event that a Participant terminates
employment prior to having satisfied the requirements for vesting as
described under Section 5.2(a) above, or if any of the provisions of
Section 14.3 are applicable to such Participant, then, the Past
Service Benefit of such Participant shall be forfeited in its
entirety and the Participant or his Beneficiary shall have no right,
claim or interest to any Past Service Benefit under this Plan or the
Agreement.
(c) POWER TO ACCELERATE VESTING. Notwithstanding any other
provisions of this Plan to the contrary, the Committee may, in its
sole and absolute discretion, waive, modify or amend any of the terms
and provisions of this Section 5.2 with respect to any Participant
with regard to the acceleration of the time during which a
Participant's Past Service Benefit may be vested or otherwise payable
pursuant to Section 5.3 below.
5.3 PAYMENT OF PAST SERVICE BENEFIT. Except in the case of
termination of employment due to death, Disability, or termination upon or
after a Change of Control, no portion of Participant's Past Service Benefit
to which he may be entitled shall be payable
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prior to the date that (i) he satisfies all of the requirements for vesting
in his Past Service Benefit under Section 5.2(a) above, and (ii) the
Participant terminates employment with the Company or a Subsidiary. Payment
of the vested Past Service Benefit to a Participant shall commence no later
than 30 days following the Participant's termination of employment or date of
death, as the case may be.
5.4 FORM OF BENEFIT. A Participant shall be entitled to receive
and be paid his vested Past Service Benefit as provided in Article X hereof,
and such payment will be made in cash.
5.5 POSTPONED RETIREMENT DATE. If a Participant continues his
employment with the Company or Subsidiary to a date after his Normal
Retirement Date, referred to as his Postponed Retirement Date, his Past
Service Benefit shall be deferred until his Postponed Retirement Date.
Benefits to which he shall be entitled as of his Postponed Retirement Date
shall be his Past Service Benefit as of his Normal Retirement Date with
adjustment after such date in accordance with Section 5.1(b) hereof.
ARTICLE VI
DEATH OF A PARTICIPANT
6.1 PAYMENT OF DEATH BENEFIT.
(a) BEFORE TERMINATION OF EMPLOYMENT. In the event that a
Participant dies while employed by the Company or any Subsidiary,
then, such Participant's Past Service Benefit shall be paid to the
Participant's designated Beneficiary in the same manner as he has
previously elected in his Agreement unless the Committee approves an
optional form of payment under Section 10.1 hereof.
(b) AFTER TERMINATION OF EMPLOYMENT. In the event that a
Participant dies after he has terminated employment with the Company
or any Subsidiary and he has not yet received all the Past Service
Benefit to which he is otherwise entitled under this Plan, then, the
remaining portion of the Past Service Benefit which would otherwise
have been paid to the Participant had he survived would then be paid
to the Participant's Beneficiary in the same form elected by the
Participant pursuant to Article X hereof.
(c) SPECIAL DEATH BENEFIT. In the event that a Participant has
elected to receive his Supplemental Normal Retirement Income for the
"Life of Participant Only" (Option 1) and such Participant dies prior
to the time that benefits actually commence pursuant to the terms of
this Plan, then, the Beneficiary of such
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deceased Participant shall receive the actuarial equivalent of such
Participant's Supplemental Normal Retirement Income paid as a "50%
Joint Annuitant Survivor Benefit" (Option 2) as described in Section
10.1 hereof.
6.2 BENEFICIARY DESIGNATION. The Participant shall designate a
Beneficiary in his Agreement who will receive the deceased Participant's Past
Service Benefit. Such Beneficiary may be changed by the Participant upon
notice to the Company pursuant to the terms of the Agreement. In the event
that the Beneficiary designated to receive the Past Service Benefit otherwise
payable to a Participant hereunder is not then surviving at the date of the
Participant's death, then, such Past Service Benefit shall be paid to the
Beneficiary designated by the Participant who is then surviving and if there
is no Beneficiary then surviving, such benefits will automatically be paid to
the estate of such Participant.
ARTICLE VII
EARLY RETIREMENT
7.1 EARLY RETIREMENT. A Participant who has attained his Early
Retirement Date and who is vested in his Past Service Benefit as provided in
Section 5.2(a) hereof may retire early from the Company or any Subsidiary and
commence payment of his Past Service Benefit in the form elected by the
Participant under Article X hereof.
ARTICLE VIII
DISABILITY
8.1 DISABILITY. In the event that a Participant incurs a
Disability and he terminates employment with the Company or any Subsidiary
(the "Disability Retirement Date"), then, in such event, the Participant
shall be entitled to receive his Past Service Benefit in the form as elected
by the Participant in accordance with Article X hereof.
8.2 PROOF OF DISABILITY. After a Participant's Disability
Retirement Date the Committee may require that the Participant's continuing
Disability be verified by medical examination at a location convenient to the
Participant; provided, such Participant shall not be required to submit to
more than one examination in a 12 month period. If a Participant fails to
allow such verification to occur, or if it does occur and the Participant is
no longer suffering a Disability as determined by the Committee, then, the
Committee may cease further payments of such Past Service Benefit.
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ARTICLE IX
CHANGE OF CONTROL
9.1 ACCELERATION OF VESTING OF PAST SERVICE BENEFIT UPON CHANGE OF
CONTROL. In the event that there is a "Change of Control," as defined below,
then, subject to Section 14.3 hereof, each Participant shall be fully vested
in his Past Service Benefit with payment of such Past Service Benefit to be
paid in the form as elected by the Participant as provided in Section 10.1
hereof immediately following his termination of employment. Anything in this
Plan to the contrary notwithstanding, if a Participant's employment with the
Company or a Subsidiary is terminated on or prior to the date on which a
Change of Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise arose
in connection with or anticipation of a Change of Control, then for all
purposes of this Plan as to such terminated Participant, a Change of Control
shall be determined to have occurred as of the date immediately prior to the
date of such termination. For the purposes of this Plan, the term "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more (the "Triggering Percentage")
of either (i) the then outstanding shares of Common Stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Out-
standing Company Voting Securities"); provided, however, in the event
the "Incumbent Board" (as such term is hereinafter defined) in
accordance with any share rights agreement to which the Company is a
party that may be in effect (the "Rights Agreement") lowers the
threshold amounts set forth in the Rights Agreement, the Triggering
Percentage shall be automatically reduced to equal the reduced
threshold amount set by the Incumbent Board pursuant to the Rights
Agreement; and provided, further, however, that the following acquisi-
tions shall not constitute a change of control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company; (iii)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company, (iv) any acquisition previously approved by at least
a majority of the members of the Incumbent Board, (v) any acquisition
approved by at least a majority of the
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members of the Incumbent Board within five (5) business days after
the Company has notice of such acquisition, or (vi) any acquisition
by any corporation pursuant to a transaction which complies with
clauses (i), (ii), and (iii) of subsection (c) of this Section 9.1; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
appointment or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
purposes of this definition, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, share exchange, merger or consolidation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Out-
standing Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 70% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities enti-
tled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the
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Business Combination, and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination or were elected,
appointed or nominated by the Board; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or, (ii) the sale
or other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 70% of, respectively,
the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportions
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation), except to the
extent that such Person owned 20% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities prior to the
sale or disposition, and (C) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such sale or
other disposition of assets of the Company or were elected, appointed
or nominated by the Board.
ARTICLE X
MANNER OF PAYMENT OF BENEFITS
10.1 PAYMENT AT ACTUAL RETIREMENT. Except as provided in Section
9.1 herein, with respect to termination upon or following a Change of
Control, each Participant shall be paid his Past
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Service Benefit upon terminating his employment with the Company or any
Subsidiary on his applicable Retirement Date. The Past Service Benefit will
be paid in one of the optional forms described below and elected by the
Participant in his Agreement. Except as pro vided in Section 10.2 below,
such elections are irrevocable. The optional forms of payment permitted
under the Plan are as follows:
OPTIONAL FORMS OF PAYMENT
Life of Participant Only
50% Joint Annuitant Survivor Benefit
75% Joint Annuitant Survivor Benefit
100% Joint Annuitant Survivor Benefit
5 Year Period Certain
10 Year Period Certain
15 Year Period Certain
A description of the optional forms of payment is contained in Exhibit "B"
attached hereto. The Actuary for the Plan shall actuarially adjust the
amount of Past Service Benefit otherwise payable to the Participant as if
such payment was to be made on a single life basis to reflect the age of the
Participant or his Beneficiary, as the case may be, and the optional form of
benefit elected by the Participant. Provided, notwithstanding that the
Participant has elected the optional form of benefit as provided in this
Section 10.1, at any time prior to the date the payment of the Participant's
Past Service Benefit commences, the Participant (or his Beneficiary in the
case of death) may make a written request to the Committee that his Past
Service Benefit be paid in any of the optional forms of payment described
above or in the form of a single lump sum payment, and, if the Committee
approves such request considering all relevant facts and circumstances,
payment may be made in one of such optional forms of payment or in a lump
sum. The decision to make payment in one of the optional forms of payment or
in a lump sum shall be made in the Committee's sole discretion; and, if
payment is made in one of such optional forms of payment or in a lump sum for
one Participant, this in no way requires the Committee to make payment in the
same manner for any other Participant.
ARTICLE XI
GENERAL BENEFIT PROVISIONS
11.1 RESTRICTIONS ON ALIENATION OF BENEFITS. No right or benefit
under this Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge the same shall be void.
No right or benefit hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities, or torts of the person entitled to such
benefit. If any Participant or Beneficiary under this Plan
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should become bankrupt or attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge any right or benefit under this Plan, then such
right or benefit shall, in the discretion of the Committee, be held or
applied for the benefit of such Partici pant or Beneficiary, his or her
spouse, children, or other dependents, or any of them, in such manner and in
such portion as the Committee, in its sole and absolute discretion, may deem
proper.
11.2 RELEASE OF CLAIMS. The Participant was previously eligible
to participate in the Prior Plan. The Prior Plan was terminated effective as
of November 1, 1997. At the time of termination of the Prior Plan, the
Participant did not have any vested or accrued benefit in the Prior Plan.
However, because the Participant will be provided the opportunity to earn the
Past Service Benefit under this Plan, the Company will require in the
Agreement that the Participant release any and all claims, rights or benefits
which he may have otherwise had with respect to any benefits which would have
otherwise been paid pursuant to the terms of the Prior Plan.
11.3 PLAN UNFUNDED - NO ASSIGNMENT. The Plan at all times shall
be entirely unfunded as provided under Title I of the Act and no provision
shall at any time be made with respect to segregating from claims of
creditors any assets of the Company, its parent, if applicable, a Subsidiary
for payment of any benefits hereunder. No Participant, Beneficiary or any
other person shall have any interest in any particular assets of the Company,
its parent, if applicable, or any Subsidiary by reason of the right to
receive a benefit under the Plan and any such Participant, Beneficiary or
other person shall have only the rights of a general unsecured creditor of
the Company, its parent, if applicable, or a Subsidiary with respect to any
rights under the Plan. No right or benefit under this Plan shall in any
manner be subject to anticipa tion, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, garnishment or charge by creditors of any
Participant or Beneficiary, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, attach, garnish or charge the same shall be void.
No right or benefit hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities, or torts of the person entitled to such
benefit.
11.4 WITHHOLDING AND OTHER EMPLOYMENT TAXES. The Company shall
comply with all federal and state laws and regulations respecting the
withholding, deposit and payment of any income or other taxes relating to any
payments made under this Plan.
11.5 NO TRUST. No action under this Plan by the Company, its
Board or the Committee shall be construed as creating a trust, escrow or
other secured or segregated fund in favor of the Participant, his
Beneficiary, or any other persons otherwise entitled to his Past Service
Benefit. The status of the Participant and his Beneficiary with respect to
any liabilities assumed by
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<PAGE>
the Company hereunder shall be solely those of unsecured creditors of the
Company, its parent, if applicable, or any Subsidiary. Any asset acquired or
held by the Company, its parent, if applicable, or any Subsidiary in
connection with liabilities assumed by it hereunder, shall not be deemed to
be held under any trust, escrow or other secured or segregated fund for the
benefit of the Participant or his Beneficiaries or to be security for the
performance of the obligations of the Company, its parent, if applicable, or
any Subsidiary, but shall be, and remain a general, unpledged, unrestricted
asset of the Company or any Subsidiary at all times subject to the claims of
general creditors of the Company or any Subsidiary. However, the Company may
contribute assets to the Trust to pay benefits under the Plan.
ARTICLE XII
PROVISIONS RELATING TO PARTICIPANTS
12.1 INFORMATION REQUIRED OF PARTICIPANTS. Payment of Benefits
shall begin as of the payments date(s) provided in this Plan and no formal
claim shall be required therefor; provided, in the interest of orderly
administration of the Plan, the Committee may make reasonable requests of
Participants and Beneficiaries to furnish information which is reasonably
necessary and appropriate to the orderly administration of the Plan, and, to
that limited extent, payments under the Plan are conditioned upon the Partici-
pants and Beneficiaries promptly furnishing true, full and complete
information as the Committee may reasonably request.
12.2 ABANDONMENT OF BENEFITS. Each Participant and Beneficiary
shall file with the Committee, from time to time in writing, his post office
address and each change of post office address, and any communication
addressed to a Participant or Beneficiary at his last post office address
filed with the Committee, or if no such address was filed, then at his last
post office address as shown on the Company's records, shall be binding on
the Participant or his Beneficiary for all purposes of the Plan, and the
Committee shall not be obliged to search for or ascertain the whereabouts of
any Participant or Beneficiary; provided, that the Committee shall mail an
annual notice of unpaid benefits to such person at such last post office
address. If the Committee furnishes such annual notice to any Participant,
or Beneficiary, that he is entitled to a distribution, and the Participant or
Beneficiary fails to claim such distribution or make his whereabouts known to
the Committee within three years thereafter, such benefits shall be disposed
of as follows:
(a) if the whereabouts of such Participant or Beneficiary are
known to the Committee, payment shall be made to such Participant or
Beneficiary; or
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<PAGE>
(b) if the whereabouts of such Participant and his Beneficiary
are unknown to the Committee, the Committee may direct the
distribution of a Participant's benefits on the same basis as though
the Participant had died without designating a Beneficiary as
provided in Subsection 6.2 hereof.
12.3 BENEFITS PAYABLE TO INCOMPETENTS. Any benefits payable
hereunder to a minor or other person under legal disability may be made, at
the discretion of the Committee, (i) directly to such person, or (ii) to a
parent, spouse, relative by blood or marriage, or the legal representative of
such person. The Committee shall not be required to see to the application
of any such payment, and the payee's receipt shall be a full and final
discharge of the Committee's responsibility hereunder.
12.4 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN. The
establishment and maintenance of the Plan shall not be construed as
conferring any legal rights upon any Participant to the continuation of
employment with the Company.
ARTICLE XIII
ADMINISTRATION AND COMMITTEE
13.1 ALLOCATION OF RESPONSIBILITY FOR PLAN ADMINISTRATION. The
Committee shall have only those specific powers, duties, responsibilities and
obligations as are specifically given them under the Plan. In general, the
Company shall have the sole responsibility for appointing and removing
Committee members, as provided in Section 13.2 herein. The Company shall
have the sole responsibility for amending or terminating, in whole or in
part, this Plan. The Committee shall have the sole responsibility for the
administration of the Plan which responsibility is specifically described in
this Plan.
13.2 APPOINTMENT OF COMMITTEE. The Plan shall be administered by
the Committee which shall be appointed by and serve at the pleasure of the
Board. All usual and reasonable expenses of the Committee may be paid in
whole or in part by the Company.
13.3 CLAIMS PROCEDURE. The Committee shall make all
determinations as to the right of any person to benefits. If any request for
a benefit is wholly or partially denied, the Committee shall notify the
person requesting the benefits, in writing, of such denial, including in such
notification the following information:
(a) the specific reason or reasons for such denial;
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<PAGE>
(b) the specific references to the pertinent Plan provisions
upon which the denial is based;
(c) a description of any additional material and information
which may be needed to clarify the request, including an explanation
of why such information is required; and
(d) an examination of this Plan's review procedure with
respect to denial of benefits.
Provided, that any such notice to be delivered to any Participant or
beneficiary shall be mailed by certified or registered mail and shall be
written to the best of the Committee's ability in a manner that may be
understood without legal counsel.
13.4 REVIEW PROCEDURE. Any Participant or Beneficiary whose claim
has been denied in accordance with Section 13.3 herein may appeal to the
Committee for review of such denial by making a written request therefor
within 60 days of receipt of the notification of such denial. Such
Participant or Beneficiary may examine documents pertinent to the review and
may submit to the Committee written issues and comments. Within 60 days
after receipt of the request for review, the Committee shall communicate to
the claimant, in writing, its decision, and the communication shall set forth
the reason or reasons for the decision and specific reference to those Plan
provisions upon which the decision is based.
13.5 RECORDS AND REPORTS. The Committee shall exercise such
authority and responsibility as it deems appropriate in order to comply with
the Act and governmental regulations issued thereunder relating to records of
the Participant's accounts and benefits which may be paid under the Plan; and
to notify Participants and Beneficiaries as required.
13.6 OTHER COMMITTEE POWERS AND DUTIES. The Committee shall have
such duties and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) to construe and interpret the Plan in its sole and
absolute discretion, decide all questions of eligibility and
determine the amount, manner and time of payment of any benefits
hereunder;
(b) to prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
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<PAGE>
(d) to receive from the Company and from Participants and
Beneficiaries such information as shall be necessary for the proper
administration of the Plan;
(e) to furnish the Company, upon request, such reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(f) to appoint and employ individuals and any other agents it
deems advisable, including legal counsel, to assist in the
administration of the Plan and to render advice with respect to any
responsibility of the Committee, or any of its individual members,
under the Plan;
(g) to allocate among themselves who shall be responsible for
specific duties and to designate fiduciaries (other than Committee
members) to carry out responsibilities under the Plan; provided that
any such allocations shall be reduced to writing, signed by all
Committee members, and filed in a permanent Committee minute book;
and
(h) to maintain continuing review of the Act, the Code and the
implementing regulations thereto and suggest changes and
modifications to the Company in connection with delegations of
responsibility, as appropriate, and amendments to the Plan.
13.7 RULES AND DECISIONS. The Committee may adopt such rules as
it deems necessary, desirable, or appropriate. All rules and decisions of
the Committee shall be uniformly and consistently applied to all Participants
and beneficiaries in similar circumstances. When making a determination or
calculation, the Committee shall be entitled to rely upon information
furnished by a Participant or Beneficiary, the Company, or the legal counsel
of the Company.
13.8 COMMITTEE PROCEDURES. The Committee may act at a meeting or
in writing without a meeting. The Committee shall have a chairman, and
appoint a secretary, who may or may not be a Committee member. The secretary
shall keep a record of all meetings in a permanent Committee minute book and
forward all necessary communications to the Company. The Committee may adopt
such bylaws and regulations as it deems desirable for the conduct of its
affairs. All decisions of the Committee shall be made by the vote of the
majority including actions in writing taken without a meeting. A dissenting
Committee member who, within a reasonable time after he has knowledge of any
action or failure to act by the majority, registers his dissent in writing
delivered to the other Committee members, to the extent permitted by law,
shall not be responsible for any such action or failure to act.
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<PAGE>
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 RIGHT TO AMEND OR ALTER PLAN. The Plan may be amended by the
Committee from time to time in any respect whatever by resolution of the
Committee specifying such amendment; provided, however, this Plan may not be
amended, modified or altered in any manner which adversely affects any
Participant without the written consent of the affected Participant.
14.2 RIGHT TO TERMINATE PLAN. The Committee expressly reserves
the right to terminate this Plan in whole or in part at any time; provided,
however, this Plan may not be terminated without the written consent of the
affected Participant.
14.3 FORFEITURE OF ALL BENEFITS. In the event that the
Participant (i) is discharged from employment service with the Company or a
Subsidiary for Cause, or (ii) commits any other act or acts which are
injurious and adversely impacts the Company or any Subsidiary in any manner
whatsoever and would be expected to substantially enrich the Participant,
then, in such events, the Committee, in its sole discretion, may determine
that any benefit which would otherwise be provided to the Participant or his
Beneficiary under the Agreement or the Plan shall be forfeited in its
entirety, and it shall thereafter be deemed as if the Participant never was
selected for participation in the Plan. Provided, however, that the
provisions of this Section 14.3 shall not be applicable in the event a Change
of Control has occurred.
14.4 MERGER OF COMPANY; SUCCESSOR MUST ASSUME PLAN. The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform the
Company's and any Subsidiary's obligations under this Plan in the same manner
and to the same extent that the Company or such Subsidiary would be required
to perform if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any
succession shall be a breach by the Company of its obligations under this
Plan and shall entitle a Participant to compensation from the Company in the
same amount and on the same terms as the Participant would be entitled to
hereunder if the Participant terminated employment following a Change of
Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of
termination of employment.
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<PAGE>
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 ARTICLES AND SECTION TITLES AND HEADINGS. The titles and
headings at the beginning of each Article and Section shall not be considered
in construing the meaning of any provisions in this Plan.
15.2 LAWS OF OKLAHOMA TO GOVERN. The provisions of this Plan
shall be construed, administered and enforced according to the laws of the
State of Oklahoma. All contributions to the Trust, if any, shall be deemed
to take place in the State of Oklahoma.
EXECUTED as of the 1st day of November, 1997.
FLEMING COMPANIES, INC., a corporation
By:
----------------------------------------
Robert E. Stauth, Chairman and
Chief Executive Officer
"COMPANY"
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<PAGE>
EXHIBIT "B"
DESCRIPTION OF OPTIONAL FORMS OF PAYMENT
OPTION 1 - Life of
Participant Only: A Supplemental Normal Retirement
Income will be paid for the Participant's
life only. Upon the Participant's death,
all payments of Supplemental Normal
Retirement Income shall cease.
OPTION 2 - 50% Joint
Annuitant Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life,
then, at the Participant's death 50% of
such amount shall be paid to the
Participant's surviving Beneficiary. In
the event that the Participant's
surviving Beneficiary has predeceased the
Participant, or should otherwise die
after the Participant's death, then no
further payments will be paid under
Option 2 or this Agreement.
OPTION 3 - 75% Joint Annuitant
Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life,
then, at the Participant's death 75% of
such amount shall be paid to the
Participant's surviving Beneficiary. In
the event that the Participant's
surviving Beneficiary has predeceased the
Participant, or should otherwise die after
the Participant's death, then no further
payments will be due under Option 3 or
this Agreement.
OPTION 4 - 100% Joint
Annuitant Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life,
then, at the
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<PAGE>
Participant's death 100% of such amount
shall be paid to the Participant's
surviving Beneficiary. In the event that
the Participant's surviving Beneficiary
has predeceased the Participant, or
should otherwise die after the
Participant's death, then no further
payments will be due under Option 4 or
this Agreement.
OPTION 5 - 5 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income will be paid for a
period of 5 years certain. After the
expiration of such 5 year period,
payments shall then continue for the
Participant's life in the same amount.
In the event of the Participant's death
during the 5 year period certain, then,
the balance of such payments due only
during such 5 year period will be paid to
the Participant's surviving Beneficiary.
After the expiration of such 5 year
period, then all payments shall cease.
In the event of the expiration of such
5 year period, and the Participant dies,
then, no further benefits will be paid
under Option 5 or this Agreement.
OPTION 6 - 10 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income shall be paid for a
period of 10 years certain. After the
expiration of such 10 year period,
payments shall then continue for the
Participant's life in the same amount. In
the event of the Participant's death
during the 10 year period certain, then,
the balance of such payments due only
during such 10 year period will be paid
to the Participant's surviving
Beneficiary. After the expiration of
such 10 year period, then all payments
shall cease. In the event of the
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<PAGE>
expiration of such 10 year period, and
the Participant dies, then, no further
benefits will be paid under Option 6 or
this Agreement.
OPTION 7 - 15 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income shall be paid for a
period of 15 years certain. After the
expiration of such 15 year period,
payments shall then continue for the
Participant's life in the same amount.
In the event of the Participant's death
during the 15 year period certain, then,
the balance of such payments due only
during such 15 year period will be paid
to the Participant's surviving
Beneficiary. After the expiration of
such 15 year period, then all payments
shall cease. In the event of the
expiration of such 15 year period, and
the Participant dies, then, no further
benefits will be paid under Option 7 or
this Agreement.
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<PAGE>
FORM OF
AGREEMENT FOR
FLEMING COMPANIES, INC.
EXECUTIVE PAST SERVICE BENEFIT PLAN
-------------------
PARTICIPANT
-------------------
DATE
<PAGE>
AGREEMENT FOR FLEMING COMPANIES, INC.
EXECUTIVE PAST SERVICE BENEFIT PLAN
THIS AGREEMENT FOR FLEMING COMPANIES, INC. EXECUTIVE PAST SERVICE
BENEFIT PLAN (the "Agreement") is made as of the ____ day of _________, ____ by
and between _________________, an individual (herein referred to as the
"Participant") and FLEMING COMPANIES, INC. (the "Company") with respect to the
following:
WHEREAS, the Company has adopted that certain non-qualified deferred
compensation plan known as "Fleming Companies, Inc. Executive Past Service
Benefit Plan" (the "Plan"); and
WHEREAS, the Plan was established by the Company for the purpose of
providing supplemental retirement income under a nonqualified plan of deferred
compensation for a select group of key management Associates of the Company;
and
WHEREAS, the Participant was formerly a participant in the Amended
and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and
Its Subsidiaries (the "Prior Plan") which was terminated as to the Participant
effective November 1, 1997; and
WHEREAS, at the time of the termination of the Prior Plan the
Participant had not accrued any benefit nor was he vested in any rights under
the Prior Plan; and
WHEREAS, the Company in recognition of the Participant's past and
future services with the Company has selected the Participant for participation
in the Plan by establishing for him a Past Service Benefit as provided herein
which will be paid following his termination of employment in accordance with
the terms of the Plan; and
WHEREAS, the Company and the Participant desire to enter into this
Agreement to evidence the Participant's participation in the Plan and his
agreement to be bound by the terms and provisions of the Plan and this
Agreement.
NOW, THEREFORE, in consideration of mutual covenants hereinafter
contained, the parties hereto agree as follows. All capitalized words used in
this Agreement shall have the same meaning ascribed to such terms in the Plan
unless specifically denoted otherwise.
1. THE PLAN AND THE AMOUNT OF PAST SERVICE BENEFIT. A copy of
the Plan is attached hereto as Exhibit "A" and is incorporated by reference
herein and made a part hereof for all purposes, and when taken with this
Agreement shall govern the Participant's rights and those of the Company with
respect to the Participant's benefits under the Plan. The Participant has
been credited with
<PAGE>
$2,364,000 in the form of the Past Service Benefit pursuant to the terms of
the Plan. The Past Service Benefit will be credited to the Account
established for the Participant under the Plan and the Trust related thereto.
2. MANNER OF PAYMENT OF PAST SERVICE BENEFIT. As of the date of this
Agreement, the Participant must elect the form under which his Past Service
Benefit will be paid in the future following the Participant's termination of
employment under the terms of the Plan. Please check the form in which the
Participant's Past Service is to be paid in the box provided below: (Please
Check and Initial One Box Only)
OPTIONAL FORMS OF PAYMENT
1. [ ] Life of Participant Only
2. [ ] 50% Joint Annuitant Survivor Benefit
3. [ ] 75% Joint Annuitant Survivor Benefit
4. [ ] 100% Joint Annuitant Survivor Benefit
5. [ ] 5 Year Period Certain
6. [ ] 10 Year Period Certain
7. [ ] 15 Year Period Certain
The actual amounts payable at retirement or death will depend upon the
Participant's age and/or the age of his Beneficiary and the form of payment
elected by the Participant. Refer to Exhibit "B" for a complete description of
the Methods of Payment. Payments to which the Participant is entitled pursuant
to the terms of the Plan will commence within 30 days following your
termination of employment and will continue to be paid in accordance with the
terms of the manner of payment elected by the Participant. With the consent of
the Committee, and if requested by the Participant or his Beneficiary in the
case of the Participant's death, the Participant or his Beneficiary may request
that the Participant's Past Service Benefit be paid in any of the optional
forms described above or in a single lump sum payment. See Section 10.1 of the
Plan. Provided, in the event that a Participant has elected to receive his
Past Service Benefit for the Life of Participant Only (Option 1 above) and such
Participant dies prior to the time his benefits commence in accordance with the
terms of the Plan, then, the deceased Participant's Beneficiary shall
automatically receive a benefit based upon the actuarial equivalent of the
Participant's Past Service Benefit, which will be paid as a 50% Joint Annuitant
Survivor Benefit (Option 2 above).
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<PAGE>
3. AMENDMENT OR TERMINATION. This Agreement may be amended,
altered or terminated by the Company from time to time upon notice to the
Participant as provided in paragraph 12 below; provided, however, this
Agreement may not be amended, modified or altered or terminated in any manner
which adversely affects the Participant without the consent of the
Participant.
4. EXPENSES. The expenses of administering this Agreement shall
be borne by the Company and shall not be charged against the Participant's
Past Service Benefit.
5. APPLICABLE LAW. The provisions of this Agreement shall be
construed, administered and enforced according to the laws of the State of
Oklahoma.
6. NO ASSIGNABILITY. Neither the Participant, his Beneficiary,
nor any other person shall acquire any right to or interest in any Past
Service Benefit and accruals thereon, otherwise than by actual payment in
accordance with the provisions of the Plan and this Agreement, or have any
power to transfer, assign, anticipate, pledge, mortgage or otherwise encumber
or alienate any rights hereunder in advance of any of the payments to be made
pursuant to the Agreement or any portion thereof which is expressly declared
to be nonassign able and nontransferable. No right or benefit hereunder
shall in any manner be liable for or subject to the debts, contracts,
liabilities, or torts of the person entitled to such benefit.
7. AGREEMENT DOES NOT GUARANTEE CONTINUED EMPLOYMENT OF PARTICIPANT.
The execution of this Agreement by the Company and the Participant, in no way
whatsoever guarantees the continuation of employment of the Participant with
the Company.
8. WITHHOLDING. The Company and the Participant shall comply with
all federal and state laws and regulations respecting the withholding,
deposit and payment of any income, employment or other taxes relating to any
payments or rights to payments under this Agreement.
9. DESIGNATION OF BENEFICIARY.
(a) The Participant, hereby designate the following individual
as his Beneficiary to receive any Past Service Benefit (including any benefit
to be paid to such Beneficiary as the surviving "joint annuitant" pursuant to
Section 2 hereof) payable to the Participant under this Agreement or the Plan
in the event of the Participant's death:
Name Address Relationship
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<PAGE>
(b) The Participant understands that during his lifetime, the
Participant may at any time change the Beneficiary designated herein by
delivering to the Committee a new designation of a Beneficiary executed by
the Participant and the Committee.
10. RELATIONSHIP BETWEEN AGREEMENT AND PLAN. This Agreement has been
entered into by and between the Company and the Participant in accordance with
and pursuant to authority granted to the Committee pursuant to the terms and
provisions of the Plan. IN THE EVENT THAT THERE DEVELOPS A CONFLICT BETWEEN
THIS AGREEMENT AND THE TERMS AND PROVISIONS OF THE PLAN, THE TERMS AND
PROVISIONS OF THE PLAN, AS INTERPRETED BY THE COMMITTEE IN ITS SOLE DISCRETION,
SHALL CONTROL AND BE FINAL AND CONCLUSIVE.
11. LIMITATION ON PAYMENT OF BENEFITS. The payment of the Past
Service Benefit as provided in this Agreement shall accrue and be payable to
the Participant or his Beneficiary, as the case may be, only at such times
and upon the occurrence of such conditions as heretofore described. In no
event whatsoever shall the Participant or his Beneficiary have any right,
claim, or interest of any kind whatsoever in any future payments of such Past
Service Benefit and such payments shall accrue and be payable only on a
monthly basis as provided hereinabove.
12. NOTICES. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
facsimile or by registered or certified mail, postage prepaid, to the parties
at the following addresses (or to the attention of such other person or such
other address as either party may provide to the other party by notice in
accordance with this paragraph 12:
if to the Company:
Fleming Companies, Inc.
6301 Waterford Blvd.
Oklahoma City, OK 73126
Attn: Larry A. Wagner
Senior Vice President -
Human Resources
Facsimile: (405) 840-7226
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<PAGE>
if to the Participant:
13. AGREEMENT SUPERSEDES ALL OTHER BENEFITS AND RELEASE OF CLAIMS.
Effective as of the date of the execution and delivery of this Agreement, this
Agreement shall supersede and replace any and all other agreements entered into
by and between the Company or any Subsidiary and the Participant with respect
to the providing of supplemental retirement benefits on a nonqualified basis
pursuant to the Prior Plan which was terminated by the Company effective
November 1, 1997. The Participant agrees that as of the date of termination of
the Prior Plan, he was not entitled to any benefit under the Prior Plan and any
rights or interest in the Prior Plan were subject to total forfeiture as of
November 1, 1997. Further, recognizing that the Participant has been selected
by the Committee to participate in this Plan and the Fleming Companies, Inc.
Executive Deferred Compensation Plan, both of which may provide substantial
benefits to the Participant, the Participant hereby releases the Company, its
officer, directors, agents and assigns from any and all obligations under the
Prior Plan and agrees that the Participant will not bring any action, claim or
demand of any kind whatsoever with respect to any benefits to which the Partici-
pant would have otherwise been entitled had the Participant continued partici-
pating in the Prior Plan.
14. BENEFIT SUBJECT TO CLAIMS OF CREDITORS. The Participant and his
Beneficiary shall not have any interest in any particular assets of the
Company, its parent, if applicable, or any Subsidiary by reason of the right to
receive a benefit under the Plan or this Agreement, and the Participant and his
Beneficiary or any other person shall have only the rights of a general
unsecured creditor of the Company, its parent, if applicable, or a Subsidiary
with respect to any rights under the Plan or this Agreement.
15. EFFECTIVE DATE. This Agreement shall be effective from and
after the day and year first above written.
DATED the day and year first above written.
FLEMING COMPANIES, INC., an Oklahoma
corporation
By
--------------------------------------
Larry A. Wagner, Senior Vice
President-Human Resources
"COMPANY"
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<PAGE>
----------------------------------------
----------------------------------------
"PARTICIPANT"
-6-
<PAGE>
EXHIBIT "B"
DESCRIPTION OF OPTIONAL FORMS OF PAYMENT
OPTION 1 - Life of Participant Only:
A Past Service Benefit will be paid for the Participant's life only. Upon the
Participant's death, all payments of Past Service Benefit shall cease.
OPTION 2 - 50% Joint Annuitant Survivor Benefit:
A reduced amount of Past Service Benefit will be paid to Participant for the
Participant's life, then, at the Participant's death 50% of such amount shall
be paid to the Participant's surviving Beneficiary. In the event that the
Participant's surviving Beneficiary has predeceased Participant, or should
otherwise die after the Participant's death, then no further payments will be
paid under OPTION 2 or this Agreement.
OPTION 3 - 75% Joint Annuitant Survivor Benefit:
A reduced amount of Past Service Benefit will be paid to Participant for the
Participant's life, then, at the Participant's death 75% of such amount shall
be paid to the Participant's surviving Beneficiary. In the event that the
Participant's surviving Beneficiary has predeceased Participant, or should
otherwise die after the Participant's death, then no further payments will be
due under OPTION 3 or this Agreement.
OPTION 4 - 100% Joint Annuitant Survivor Benefit:
A reduced amount of Past Service Benefit will be paid to Participant for the
Participant's life, then, at the Participant's death 100% of such amount shall
be paid to the Participant's surviving Beneficiary. In the event that the
Participant's surviving Beneficiary has predeceased Participant, or should
otherwise die after the Participant's death, then no further payments will be
due under OPTION 4 or this Agreement.
<PAGE>
OPTION 5 - 5 Year Period Certain:
A reduced amount of Past Service Benefit will be paid for a period of 5 years
certain. After the expiration of such 5 year period, payments shall then
continue for the Participant's life in the same amount. In the event of the
Participant's death during the 5 year period certain, then, the balance of such
payments due only during such 5 year period will be paid to the Participant's
surviving Beneficiary. After the expiration of such 5 year period, then all
payments shall cease. In the event of the expiration of such 5 year period,
and Participant die, then, no further benefits will be paid under OPTION 5 or
this Agreement.
OPTION 6 - 10 Year Period Certain:
A reduced amount of Past Service Benefit shall be paid for a period of 10 years
certain. After the expiration of such 10 year period, payments shall then
continue for the Participant's life in the same amount. In the event of the
Participant's death during the 10 year period certain, then, the balance of
such payments due only during such 10 year period will be paid to the Partic-
ipant's surviving Beneficiary. After the expiration of such 10 year period,
then all payments shall cease. In the event of the expiration of such 10 year
period, and Participant die, then, no further benefits will be paid under
OPTION 6 or this Agreement.
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OPTION 7 - 15 Year Period Certain:
A reduced amount of Past Service Benefit shall be paid for a period of 15 years
certain. After the expiration of such 15 year period, payments shall then
continue for the Participant's life in the same amount. In the event of the
Participant's death during the 15 year period certain, then, the balance of
such payments due only during such 15 year period will be paid to the Partic-
ipant's surviving Beneficiary. After the expiration of such 15 year period,
then all payments shall cease. In the event of the expiration of such 15 year
period, and Participant die, then, no further benefits will be paid under
OPTION 7 or this Agreement.
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<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(Adopted Effective November 1, 1997)
<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I Name and Purpose of Plan 1
1.1 Name of Plan 1
1.2 Purpose of Plan 1
ARTICLE II Definitions and Construction 1
2.1 Definitions 1
2.2 Construction 7
ARTICLE III Participation 7
3.1 Selection for Participation 7
3.2 Participation in Consideration
for Future Services Only 7
3.3 Other Agreements 7
ARTICLE IV Contributions 7
4.1 Payments by the Company and/or Subsidiary 7
ARTICLE V Supplemental Normal Retirement Income 8
5.1 Amount 8
5.2 Form of Benefit 8
5.3 Commencement of Benefit 8
5.4 Postponed Retirement Date 8
5.5 Payment of Supplemental Normal
Retirement Income 9
ARTICLE VI Death of a Participant 9
6.1 Payment of Supplemental Death Benefit 9
6.2 Beneficiary Designation 10
ARTICLE VII Early Retirement 10
7.1 Supplemental Early Retirement Income 10
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ARTICLE VIII Disability 11
8.1 Supplemental Disability Retirement Income 11
8.2 Proof of Disability 11
ARTICLE IX Termination of Employment 12
9.1 Termination of Employment Prior to
Retirement Date 12
9.2 Acceleration of Vesting of
Supplemental Normal Retirement Income
Upon Change in Control 12
ARTICLE X Manner of Payment of Benefits 15
10.1 Payment at Actual Retirement 15
10.2 Committee May Approve Change of Form of
Payment 16
ARTICLE XI General Benefit Provisions 16
11.1 Reemployed Participants Who Had
Been Receiving Benefits 16
11.2 Restrictions on Alienation of Benefits 16
11.3 No Trust 17
11.4 Plan Unfunded - No Assignment 17
11.5 Withholding and Other Employment Taxes 17
ARTICLE XII Provisions Relating to Participants 18
12.1 Information Required of Participants 18
12.2 Abandonment of Benefits 18
12.3 Benefits Payable to Incompetents 18
12.4 Conditions of Employment Not
Affected by Plan 19
ARTICLE XIII Administration 19
13.1 Allocation of Responsibility for
Plan Administration 19
13.2 Appointment of Committee 19
13.3 Claims Procedure 19
13.4 Review Procedure 20
13.5 Records and Reports 20
13.6 Other Committee Powers and Duties 20
13.7 Rules and Decisions 21
13.8 Committee Procedures 21
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ARTICLE XIV Amendment and Termination 21
14.1 Right to Amend or Alter Plan 21
14.2 Right to Terminate Plan 22
14.3 Merger of Company or Termination
of Qualified Plan 22
14.4 Forfeiture of All Benefits 22
ARTICLE XV Miscellaneous Provisions 23
15.1 Articles and Section Titles
and Headings 23
15.2 Laws of Oklahoma to Govern 23
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<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the
FLEMING COMPANIES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN upon the following
terms and conditions.
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 NAME OF PLAN. This Plan shall be hereafter known as the FLEMING
COMPANIES, INC. EXECUTIVE DEFERRED COMPENSATION PLAN.
1.2 PURPOSE OF PLAN. The Plan is established and maintained by the
Company solely for the purpose of providing benefits for certain Associates of
the Company, or any Subsidiary who (i) participate in the Consolidated
Retirement Plan for Fleming Companies, Inc. and Its Subsidiaries and (ii) have
limitations on benefits imposed by Sections 415 and/or 401(a)(17) of the
Internal Revenue Code of 1986, as amended, on qualified retirement plans to
which those Sections are applicable. It is intended that this Plan be unfunded
for federal income tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. Where the following capitalized words and phrases
appear in this instrument, they shall have the respective meanings set forth
below unless a different context is clearly expressed herein.
(a) ACT: The word "Act" shall mean Public Law. No. 93-406,
the Employee Retirement Income Security Act of 1974, as amended from
time to time.
(b) ACTUARIAL EQUIVALENT: The words "Actuarial Equivalent"
shall mean the equivalent of the Supplemental Normal Retirement Income
as of the applicable Retirement Date otherwise payable to a
Participant in the mode of a single life annuity commencing on his
Normal Retirement Date, determined using the actuarial assumptions and
factors stated in the Qualified Plan.
(c) ACTUARY: The word "Actuary" shall mean an enrolled actuary
selected from time to time by the Committee to provide actuarial
services for the Plan who as of the Effective Date was Watson, Wyatt &
Company.
<PAGE>
(d) AGREEMENT: The word "Agreement" shall mean that certain
"Agreement for the Fleming Companies, Inc. Executive Deferred
Compensation Plan" which will be entered into by and between the
Company and the Participant together with any amendments thereto.
(e) ASSOCIATE: The word "Associate" shall mean any person,
employed by the Employer on the basis of an employer-employee
relationship, who receives remuneration for personal services rendered
to the Employer and who is either a highly compensated employee or a
select management employee.
(f) AUTHORIZED LEAVE OF ABSENCE: The words "Authorized Leave
of Absence" shall mean any extraordinary absence authorized by the
Committee within its sole discretion.
(g) ANNUAL FINAL COMPENSATION: The words "Annual Final
Compensation" shall mean the average annual total compensation earned
by a Participant during the three consecutive calendar years of his
employment immediately preceding his Normal Retirement Date or his
earlier termination of employment, as the case may be, which shall
include the following:
(i) the total of all amounts paid to a Participant by
the Employer as regular salary or wages including overtime,
commissions, bonuses, jury pay, vacation pay, sick pay and
holiday pay, but excluding other forms of extraordinary
compensation reported on the Participant's Form W-2 to the
Internal Revenue Service such as final payments of the balance
of the bonus bank under the Economic Value Added Incentive Bonus
Plan for Fleming Companies, Inc. and Its Subsidiaries, allow
ances or reimbursement for moving expenses, automobiles, income
recognized on the exercise of stock options or upon receipt of
an award of stock; provided, Annual Final Compensation shall
further be adjusted to include the amounts provided in the
following Subsection (ii);
(ii) any amount (x) deferred by a Participant
pursuant to Section 401(k) of the Code with respect to an
employee benefit plan sponsored by the Employer or Section 125
of the Code with respect to a "cafeteria plan" sponsored by the
Employer and (y) which would be included as "compensation" as
defined in the Qualified Plan.
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(h) BENEFICIARY: The word "Beneficiary" shall mean that person
designated by the Participant pursuant to Section 6.2 hereof who
would be entitled to receive his Supplemental Normal Retirement
Income upon the death of the Participant.
(i) BOARD: The word "Board" shall mean the Board of Directors
of the Company.
(j) CAUSE: The word "Cause" shall mean the termination from
employment with the Company or a Subsidiary for one of the following
reasons:
(i) the conviction of the Participant of a felony by a
federal or state court of competent jurisdiction; (ii) an act or
acts of dishonesty taken by the Participant and intended to
result in substantial personal enrichment of the Participant at
the expense of the Company; (iii) the Participant's "willful"
failure to follow a direct, reasonable and lawful written order
from his supervisor, within the reasonable scope of the Partici-
pant's duties, which failure is not cured within 30 days; or
(iv) the Participant's failure to perform his specified duties
and responsibilities for a period of 45 days as determined by
his supervisor after a warning in writing. Further, for
purposes of this Subsection (j):
(1) No act or failure to act, on the
Participant's part shall be deemed "willful" unless done,
or omitted to be done, by the Participant not in good faith
and without reasonable belief that the Participant's action
or omission was in the best interest of the Company.
(2) The Participant shall not be deemed to
have been terminated for Cause unless and until there shall
have been delivered to the Participant a copy of a
resolution duly adopted by the affirmative vote of not less
than three-fourths (3/4ths) of the entire membership of the
Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Participant and an
opportunity for the Participant, together with the Par
ticipant's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Participant
was guilty of conduct set forth in clauses (i),
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(ii), (iii) or (iv) above and specifying the particulars
thereof in detail.
(k) CHANGE OF CONTROL: The words "Change of Control" shall
have the meaning set forth in Section 9.2 of this Plan.
(l) CODE: The word "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(m) COMMITTEE: The word "Committee" shall mean the
Compensation and Organization Committee appointed by the Board under
Article XIII herein to administer the Plan.
(n) COMPANY: The word "Company" shall mean Fleming Companies,
Inc., an Oklahoma corporation, or its successor.
(o) DISABILITY: The word "Disability" shall mean a condition
whereby a Participant has become totally and permanently disabled
within the meaning of the Long-Term Disability Plan as in effect as
of the Effective Date of this Plan.
(p) DISABILITY RETIREMENT DATE: The words "Disability
Retirement Date" shall mean the first day of the month after which a
Participant terminating employment has satisfied all conditions
specified in the foregoing Subsection for Disability.
(q) EARLY RETIREMENT DATE: The words "Early Retirement Date"
shall mean the first day of the month coinciding with or following
the date a Participant terminates employment with the Employer after
(i) earning at least 10 Years of Credited Service and (ii) attaining
at least age 55.
(r) EFFECTIVE DATE: The words "Effective Date" shall mean the
1st day of November, 1997.
(s) ELIGIBLE SPOUSE: The words "Eligible Spouse" shall mean
the spouse to whom the Participant is married for the one-year period
preceding his date of death or the date on which payment of his
Supplemental Normal Retirement Income will commence.
(t) EMPLOYER: The word "Employer" shall mean either the
Company or any Subsidiary.
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<PAGE>
(u) LIMITATIONS ON BENEFITS: The words "Limitations on
Benefits" shall mean the limitations imposed by Sections 415 and/or
401(a)(17) of the Code on the accrual of the Qualified Plan Benefits
under the Qualified Plan.
(v) LONG-TERM DISABILITY PLAN: The words "Long-Term
Disability Plan" shall mean the "Long-Term Disability Benefit Plan of
Fleming Companies, Inc. and Its Subsidiaries."
(w) NORMAL RETIREMENT AGE: The words "Normal Retirement Age"
shall mean the 65th birthday of a Participant.
(x) NORMAL RETIREMENT DATE: The words "Normal Retirement Date"
shall mean the first day of the month coinciding with or following a
Participant's Normal Retirement Age.
(y) PARTICIPANT: The word "Participant" shall mean an
Associate who during a Year shall meet the eligibility requirements
of Article III herein for participation or reparticipation, as the
case may be. The initial participants selected for participation as
of the Effective Date are listed on Exhibit "A" attached hereto.
(z) PLAN: The word "Plan" shall mean the Fleming Companies,
Inc. Executive Deferred Compensation Plan, as set forth in this
instrument, and as hereafter amended from time to time.
(aa) POSTPONED RETIREMENT DATE: The words "Postponed Retirement
Date" shall mean the first day of the month coinciding with or next
following the date that a Participant retires under Section 5.5
herein subsequent to his Normal Retirement Date.
(bb) QUALIFIED PLAN BENEFIT: The words "Qualified Plan Benefit"
shall mean the accrued benefit earned at any point in time by a
Participant pursuant to the Qualified Plan.
(cc) QUALIFIED PLAN: The words "Qualified Plan" shall mean the
employee pension plan sponsored by the Company which is qualified
under Section 401(a) and Section 501(a) of the Code which is known as
the "Consolidated Retirement Plan for Fleming Companies, Inc. and Its
Subsidiaries."
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<PAGE>
(dd) RETIREMENT DATE: The words "Retirement Date" shall mean a
Participant's Early Retirement Date, Disability Retirement Date,
Normal Retirement Date, or Postponed Retirement Date, whichever
applies.
(ee) SUBSIDIARY: The word "Subsidiary" shall mean any
corporation with 80% or more of its voting capital stock being owned
by the Company.
(ff) SUPPLEMENTAL DEATH BENEFIT: The words "Supplemental Death
Benefit" shall mean that additional benefit which could be paid to
the Beneficiary of a deceased Participant all as provided by Article
VI hereof.
(gg) SUPPLEMENTAL DISABILITY RETIREMENT INCOME: The words
"Supplemental Disability Retirement Income" shall mean a monthly
benefit computed in accordance with Section 8.1 herein.
(hh) SUPPLEMENTAL EARLY RETIREMENT INCOME: The words
"Supplemental Early Retirement Income" shall mean a monthly benefit
computed in accordance with Section 7.1 herein.
(ii) SUPPLEMENTAL NORMAL RETIREMENT INCOME: The words
"Supplemental Normal Retirement Income" shall mean a monthly benefit
computed in accordance with Section 5.1 herein.
(jj) TRUST: The word "Trust" shall mean the Fleming Companies,
Inc. Executive Deferred Compensation Trust which has been established
and may be used by the Company, its parent, or any Subsidiary as the
device for assisting the Company to meet its obligations under the
Plan.
(kk) TRUSTEE OR TRUSTEES: The words "Trustee" or "Trustees"
means the entity who has been designated by the Company to serve as
Trustee of the Trust.
(ll) YEAR: The word "Year" shall mean the annual period
beginning on the first day following the last Saturday of December,
and ending on the last Saturday of December of the calendar year
immediately following.
(mm) YEAR OF CREDITED SERVICE: The words "Year of Credited
Service" shall have the same meaning and be calculated in the same
manner as "Years of Credited Service" are computed under the
Qualified Plan.
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<PAGE>
2.2 CONSTRUCTION. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender, unless the context
clearly indicates to the contrary. Any word appearing herein in the plural
shall include the singular, where appropriate, and likewise the singular shall
include the plural, unless the context clearly indicates to the contrary.
ARTICLE III
PARTICIPATION
3.1 SELECTION FOR PARTICIPATION. A Participant who (i) is eligible
to receive a Qualified Plan Benefit, but the amount of such benefit is reduced
by reason of the application of the Limitations on Benefits imposed by
application of Sections 415 and 401(a)(17) of the Code, as in effect at any
time while the Participant is accruing a Qualified Plan Benefit, or as in
effect at any time thereafter, (ii) is among a group of key management
employees and who are included in a classification to whom coverage under this
Plan has been extended and (iii) has been selected by the Committee to
participate in the Plan, shall be eligible to receive a Supplemental Normal
Retirement Income in accordance with the terms of the Plan. If a Participant
described in the preceding sentence dies prior to commencement of payment of
his Qualified Plan Retirement Benefit, the Beneficiary shall be eligible to
receive a Supplemental Death Benefit.
3.2 PARTICIPATION IN CONSIDERATION FOR FUTURE SERVICES ONLY.
Selection of an Associate by the Committee for participation in the Plan will
be limited to those Associates who meet the qualification requirements
heretofore described and will be deemed to be for all purposes in consideration
of future services which will be rendered by such Associate to the Company or
its Subsidiaries in order to retain such Associates and to ensure the continued
growth, development and business of the Company and its Subsidiaries.
3.3 OTHER AGREEMENTS. Any Associate having been selected by the
Committee as a Participant, including the Participants listed on Exhibit "A,"
shall, as a condition of participation, complete and return to the Committee
the Agreement and any and all other agreements which relate to the election by
the Participant to participate in the Plan and to the agreement by the Par-
ticipant to the terms and conditions hereof and thereof.
ARTICLE IV
CONTRIBUTIONS
4.1 PAYMENTS BY THE COMPANY AND/OR SUBSIDIARY. The payments
required to fund the cost of the benefits provided by the Plan shall be made
solely by the Company.
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<PAGE>
ARTICLE V
SUPPLEMENTAL NORMAL RETIREMENT INCOME
5.1 AMOUNT. The Supplemental Normal Retirement Income payable to
an eligible Participant shall be equal to the result derived by subtracting the
amount determined in clause (b) below from the amount determined in clause (a)
below where:
(a) is the monthly amount of the Qualified Plan Benefit to
which the Participant would have been entitled under the Qualified
Plan if such benefit were computed without giving effect to the
Limitations on Benefits; and
(b) is the monthly amount of the Qualified Plan Benefit which
would be actually payable to the Participant under the Qualified Plan
at the applicable point in time assuming the Participant (x)
terminated employment with the Company or any Subsidiary, (y) had
attained his Early Retirement Date (or other Retirement Date for
which he would be actually eligible) and (z) commenced receipt of his
Qualified Plan Benefit.
The amounts described in (a) and (b) above shall be computed as of
the date of termination of employment of the Participant with the Company and
all Subsidiaries in the form of a straight life annuity payable over the
lifetime of the Participant (calculated in the same manner as provided under
the Qualified Plan) assuming payment was to commence at the Participant's
Normal Retirement Date. Payment of the Supplemental Normal Retirement Income
will commence as provided under 5.3 below.
5.2 FORM OF BENEFIT. A Participant shall be entitled to receive
and be paid his Supplemental Normal Retirement Income as provided in Article X
hereof. The Participant's election under the Qualified Plan of any optional
form of payment of his Qualified Plan Benefit shall not be applicable to and
shall not determine the form of payment of his Supplemental Normal Retirement
Income under this Plan, and such payment will be made in cash.
5.3 COMMENCEMENT OF BENEFIT. Subject to earlier payment upon
termination at or after a Change of Control, payment of the Supplemental Normal
Retirement Income to a Participant shall commence on approximately the same
date as payment of the Qualified Plan Benefit to the Participant commences;
provided, the Committee may approve a request by the Participant that payments
may commence at an earlier date upon termination of employment of the Partici-
pant.
5.4 POSTPONED RETIREMENT DATE. If a Participant continues his
employment with the Employer to a date after his Normal Retirement Date
("Postponed Retirement Date"), his Supplemental Normal Retirement Income shall
be deferred until his Postponed
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<PAGE>
Retirement Date. Benefits to which he shall be entitled as of his benefit
commencement date shall be his Supplemental Normal Retirement Income earned
at his Normal Retirement Date without adjustment after such date.
5.5 PAYMENT OF SUPPLEMENTAL NORMAL RETIREMENT INCOME.
Notwithstanding any provision contained in this Plan to the contrary and except
in the case of a Change of Control as specified in Section 9.2 of this Plan, no
portion of Participant's Supplemental Normal Retirement Income to which he may
be entitled shall be payable (i) prior to the date that he first satisfies the
requirements for retiring on his applicable Retirement Date and (ii) unless he
actually terminates employment with the Employer on the applicable Retirement
Date. Except as provided in Section 9.2 of this Plan, in the event benefits
commence prior to a Participant's Normal Retirement Date, then, such benefits
shall be adjusted as provided in Article VI in the event of a payment of a
Supplemental Death Benefit, as provided in Article VII in the event of a
Supplemental Early Retirement Income, and as provided in Article VIII in the
event of a Supplemental Disability Retirement Income.
ARTICLE VI
DEATH OF A PARTICIPANT
6.1 PAYMENT OF SUPPLEMENTAL DEATH BENEFIT.
(a) If a Participant's Qualified Plan Benefit is to be paid due
to the death of the Participant while employed by the Company or a
Subsidiary, the Beneficiary shall be entitled to receive a
Supplemental Death Benefit to be calculated as provided in Article V
hereof and will be based upon the Supplemental Normal Retirement
Income earned by the Participant as of his date of death. Provided,
however, in making such calculation under Article V hereof, the
Participant shall be credited with Years of Credited Service equal to
the greater of his actual Years of Credited Service or ten (10) Years
of Credited Service. The Supplemental Death Benefit will be paid in
the same manner as he has previously elected in his Agreement subject
to Subsection (c) below or unless the Committee approves an optional
form of benefit under Section 10.2 hereof.
(b) The foregoing Subsection (a) notwithstanding, in the event
of the death of Participant who is in the employ of the Company or a
Subsidiary prior to his Early Retirement Date, no benefit will be
paid to the Beneficiary of the Participant in the form of a
Supplemental Death Benefit until the date such Participant would have
otherwise attained his Early Retirement Date assuming he had
continued in the employ of the Company. In the event
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of the death of the Beneficiary prior to such date, then the
Supplemental Death Benefit will be paid as provided under Section 6.2
below. If the Participant dies on or after his Early Retirement
Date, then his Supplemental Death Benefit will be paid to his
Beneficiary in the form elected by the Participant unless the
Committee approves a different form under Section 10.2 herein,
as hereinabove provided.
(c) SPECIAL DEATH BENEFIT. In the event that a Participant has
elected to receive his Supplemental Normal Retirement Income for the
"Life of Participant Only" (Option 1) and such Participant dies prior
to the time that benefits actually commence pursuant to the terms of
this Plan, then, the Beneficiary of such deceased Participant shall
receive the Actuarial Equivalent of such Participant's Supplemental
Normal Retirement Income paid as a "50% Joint Annuitant Survivor
Benefit" (Option 2) as described in Section 10.1 hereof.
6.2 BENEFICIARY DESIGNATION. The Participant shall designate a
Beneficiary in his Agreement who will receive the deceased Participant's
Supplemental Death Benefit. Such Beneficiary may be changed by the Participant
upon notice to the Company pursuant to the terms of the Agreement. The
Participant's Supplemental Death Benefit shall be paid to the Beneficiary
designated by the Participant who is then surviving, and if there is no
Beneficiary then surviving, such benefits will automatically be paid to the
surviving Eligible Spouse of such Participant who will be deemed to be the
Participant's Beneficiary in such case, and if there is no surviving Eligible
Spouse or other surviving Beneficiary, then no Supplemental Death Benefit will
be paid under this Plan.
ARTICLE VII
EARLY RETIREMENT
7.1 SUPPLEMENTAL EARLY RETIREMENT INCOME. A Participant who has
attained his Early Retirement Date may retire early and receive his
Supplemental Early Retirement Income which shall commence as of such
Participant's Early Retirement Date. The monthly amount of a Supplemental
Early Retirement Income to which a Participant shall be entitled shall be (i)
based on his Supplemental Normal Retirement Income which has been earned by the
Participant as of his Early Retirement Date and (ii) paid in the manner elected
by the Participant as provided in Section 10.1. An early retiree's
Supplemental Normal Retirement Income shall be actuarially adjusted as of the
date of the commencement of payments by multiplying the Participant's
Supplemental Normal Retirement Income by the "early retirement adjustment
factors" described below. To determine a Participant's Supplemental Early
Retirement
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Income, his Supplemental Normal Retirement Income is multiplied by the
product resulting from multiplying the applicable percentage set out below by
the number of years and completed months that benefits are to commence prior
to the Participant's age 62; provided, however, that the Committee may in its
sole discretion waive the application of the "early retirement adjustment
factors."
The applicable percentage of actuarial reduction will be determined
at the time payment of benefits commences based upon the title of the
Participant with the Company or any Subsidiary as of the date closest to the
date benefits commence.
EARLY RETIREMENT
ADJUSTMENT FACTORS
------------------
EARLY RETIREMENT
POSITION ADJUSTMENT FACTORS
-------- ------------------
Chief Executive Officer 3%
Executive Vice President 4%
Senior Vice President/Vice President/Other 5%
EXAMPLE: If a Senior Vice President retires at age 59 1/2 and commences receipt
of his benefits, then, the reduction would be 12 1/2% (2 1/2 years before
62 : 2 1/2 x 5% = 12 1/2%).
ARTICLE VIII
DISABILITY
8.1 SUPPLEMENTAL DISABILITY RETIREMENT INCOME. If a Participant has
satisfied all conditions of Disability, he shall be entitled to his
Supplemental Disability Retirement Income. The monthly amount of a
Supplemental Disability Retirement Income to which a Participant shall be (i)
based on the amount of Supplemental Normal Retirement Income earned by the
Participant as of his Disability Retirement Date and (ii) paid in the form
elected by the Participant under his Agreement and as described in Section
10.1. Payment of Supplemental Disability Retirement Income benefits shall not
commence (i) prior to his Early Retirement Date assuming such Participant
continues in the employ of the Employer, and (ii) until such Participant is no
longer receiving benefits pursuant to the Long-Term Disability Plan. A
Participant's Supplemental Disability Retirement Income will be adjusted in the
same manner as Supplemental Early Retirement Income as provided in Section 7.1
hereof if benefits commence prior to attainment of the age of 62 years.
8.2 PROOF OF DISABILITY. After a Participant's Disability
Retirement Date the Committee may require that the Participant's continuing
Disability be verified by medical examination at
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a location convenient to the Participant; provided, such Participant shall
not be required to submit to more than one examination in a 12 month period.
If, at any time prior to the Participant's Normal Retirement Age, the
Committee determines that he no longer has a Disability, or if the
Participant shall refuse to submit to a medical examination, the Committee
shall direct that in computing such Participant's Supplemental Disability
Retirement Income, only "Years of Credited Service" earned prior to such
determination by the Committee be considered.
ARTICLE IX
TERMINATION OF EMPLOYMENT
9.1 TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT DATE.
(a) VESTING. The vesting schedule in the Qualified Plan, as it
exists from time to time, shall be applied to determine if a Partici-
pant is vested in his Supplemental Normal Retirement Income under
this Plan. Unless a Participant has earned a vested accrued benefit
under the Qualified Plan, or unless there has been a Change of
Control as provided in Section 9.2 below, he shall not be entitled to
any benefit under this Plan. Unless sooner vested, the Participant
will be fully vested in his Supplemental Normal Retirement Income on
his Retirement Date or date of death.
(b) PAYMENT OF VESTED BENEFIT. A Participant's Supplemental
Normal Retirement Income will be paid pursuant to Article X hereof.
9.2 ACCELERATION OF VESTING OF SUPPLEMENTAL NORMAL RETIREMENT INCOME
UPON CHANGE OF CONTROL. In the event that there is a "Change of Control" as
defined below then, each Participant shall be fully vested in his Supplemental
Normal Retirement Income earned as of the date of the Change of Control (or
earned after such date) with such Supplemental Normal Retirement Income to be
paid in the form elected by the Participant as provided in Section 10.1 hereof
immediately following his termination of employment. Such Supplemental Normal
Retirement Income shall not be reduced by any Early Retirement Adjustment
Factors as provided in Article VII hereof. It shall be calculated based upon
(i) such Participant's actual Annual Final Compensation earned by such
Participant as the date of the Change of Control, or the date of his termina-
tion of employment whichever produces the greatest amount of Supplemental
Normal Retirement Income, and (ii) the greater of such Participant's actual
Years of Credited Service or ten (10) Years of Credited Service. In each case,
the Participant shall have been deemed to have reached 65 years of age.
Anything in this Plan to the contrary notwithstanding, if a Participant's
employment with the Employer is terminated on or prior to the date on which a
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Change of Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes
of this Plan as to such terminated Participant, a Change of Control shall be
deemed to have occurred as of the date immediately prior to the date of such
termination. For the purposes of this Plan, the term "Change of Control" shall
mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more (the "Triggering Percentage")
of either (i) the then outstanding shares of Common Stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Out-
standing Company Voting Securities"); provided, however, in the event
the "Incumbent Board" (as such term is hereinafter defined) in
accordance with any share rights agreement to which the Company is a
party that may be in effect (the "Rights Agreement") lowers the
threshold amounts set forth in the Rights Agreement, the Triggering
Percentage shall be automatically reduced to equal the reduced
threshold amount set by the Incumbent Board pursuant to the Rights
Agreement; and provided, further, however, that the following acquisi-
tions shall not constitute a change of control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company; (iii)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company, (iv) any acquisition previously approved by at least
a majority of the members of the Incumbent Board, (v) any acquisition
approved by at least a majority of the members of the Incumbent Board
within five (5) business days after the Company has notice of such
acquisition, or (vi) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii), and (iii) of
subsection (c) of this Section 9.2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
appointment or nomination for election by the Company's shareholders,
was approved by a vote of at least a
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<PAGE>
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for purposes of this definition, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, share exchange, merger or consolidation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Out-
standing Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 70% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities enti-
tled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination or were
elected, appointed or nominated by the Board; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or, (ii) the sale
or other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or
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<PAGE>
other disposition, (A) more than 70% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportions
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation), except to the
extent that such Person owned 20% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities prior to the
sale or disposition, and (C) at least a majority of the members of
the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such sale or
other disposition of assets of the Company or were elected, appointed
or nominated by the Board.
ARTICLE X
MANNER OF PAYMENT OF BENEFITS
10.1 PAYMENT AT ACTUAL RETIREMENT. Upon the Participant terminating
his employment with the Employer on his applicable Retirement Date or at
termination upon or following a Change of Control, then, such Participant shall
be paid a benefit calculated as provided herein; and, such benefit shall be
paid as Supplemental Early Retirement Income, Supplemental Disability Retire-
ment Income, Supplemental Normal Retirement Income or as provided in Section
9.2 herein due to termination upon or after a Change of Control, as the case
may be. A Participant shall be entitled to receive the Actuarial Equivalent of
such benefits calculated as a single life annuity and paid in one of the
optional forms of payment described below and elected by the Participant in his
Agreement. Except as provided in Section 10.2 below, such elections are
irrevocable and will be made by the Participant on the date the Participant
becomes a participant in the Plan pursuant to the terms of the Agreement.
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<PAGE>
The optional forms of payment permitted under the Plan are as follows:
OPTIONAL FORMS OF PAYMENT
Life of Participant Only
50% Joint Annuitant Survivor Benefit
75% Joint Annuitant Survivor Benefit
100% Joint Annuitant Survivor Benefit
5 Year Period Certain
10 Year Period Certain
15 Year Period Certain
A description of the optional forms of payment is contained on Exhibit "B"
attached hereto. The Actuary shall actuarially adjust the amount of
Supplemental Normal Retirement Income otherwise payable to the Participant if
such payment was to be made on a single life basis to reflect the age of the
Participant, his Beneficiary or his Eligible Spouse, as the case may be, and
the form of payment elected.
10.2 COMMITTEE MAY APPROVE CHANGE OF FORM OF PAYMENT. In the event
that a Participant or his Beneficiary (in the event of death) desires to change
any form of payment previously elected by the Participant under his Agreement
to another optional form of payment described above, then, the Participant, or
his Beneficiary (in the case of death), may make a written request to the
Committee to change the elected form of payment to any of the other optional
form of payment described above. The decision by the Committee to agree to
make any such changes shall be in the sole discretion of the Committee and
shall be final and conclusive.
ARTICLE XI
GENERAL BENEFIT PROVISIONS
11.1 REEMPLOYED PARTICIPANTS WHO HAD BEEN RECEIVING BENEFITS. In
the case of a Participant who was previously receiving benefits under any
provision of this Plan and is reemployed with the Employer and who is again
selected for participation in the Plan, the amount of previous benefits paid
shall be taken into account and shall serve to actuarially reduce the
Participant's Supplemental Normal Retirement Income payable at his subsequent
Retirement Date.
11.2 RESTRICTIONS ON ALIENATION OF BENEFITS. No right or benefit
under this Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge the same shall be void. No right or
benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities, or torts of the person entitled to
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<PAGE>
such benefit. If any Participant or Beneficiary under this Plan should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge any right or benefit under this Plan, then such right or
benefit shall, in the discretion of the Committee, be held or applied for the
benefit of such Participant or Beneficiary, his or her spouse, children, or
other dependents, or any of them, in such manner and in such portion as the
Committee, in its sole and absolute discretion, may deem proper.
11.3 NO TRUST. No action under this Plan by the Company, the
Board or the Committee shall be construed as creating a trust, escrow or
other secured or segregated fund in favor of the Participant, his
Beneficiary, or any other persons otherwise entitled to his Supplemental
Normal Retirement Income. The status of the Participant and his Beneficiary
with respect to any liabilities assumed by the Company hereunder shall be
solely those of unsecured creditors of the Company, its parent, if
applicable, or any Subsidiary. Any asset acquired or held by the Company,
its parent, if applicable, or any Subsidiary in connection with liabilities
assumed by it hereunder, shall not be deemed to be held under any trust,
escrow or other secured or segregated fund for the benefit of the Participant
or his Beneficiaries or to be security for the performance of the obligations
of the Company, its parent, if applicable, or any Subsidiary, but shall be,
and remain a general, unpledged, unrestricted asset of the Company, it
parent, if applicable, or any Subsidiary at all times subject to the claims
of general creditors of the Company or any Subsidiary. However, the Company
may contribute assets to the Trust to pay benefits under the Plan.
11.4 PLAN UNFUNDED - NO ASSIGNMENT. The Plan at all times shall
be entirely unfunded as provided under Title I of the Act and no provision
shall at any time be made with respect to segregating from claims of
creditors any assets of the Company, its parent, if applicable, a Subsidiary
for payment of any benefits hereunder. No Participant, Beneficiary or any
other person shall have any interest in any particular assets of the Company,
its parent, if applicable, or any Subsidiary by reason of the right to
receive a benefit under the Plan and any such Participant, Beneficiary or
other person shall have only the rights of a general unsecured creditor of
the Company, its parent, if applicable, or a Subsidiary with respect to any
rights under the Plan. No right or benefit under this Plan shall in any
manner be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, garnishment or charge by creditors of any
Participant or Beneficiary, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, attach, garnish or charge the same shall be void.
No right or benefit hereunder shall in any manner be liable for or subject to
the debts, contracts, liabilities, or torts of the person entitled to such
benefit.
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<PAGE>
11.5 WITHHOLDING AND OTHER EMPLOYMENT TAXES. The Company shall
comply with all federal and state laws and regulations respecting the
withholding, deposit and payment of any income or other taxes relating to any
payments made under this Plan.
ARTICLE XII
PROVISIONS RELATING TO PARTICIPANTS
12.1 INFORMATION REQUIRED OF PARTICIPANTS. Payment of Benefits
shall begin as of the payments date(s) provided in this Plan and no formal
claim shall be required therefor; provided, in the interest of orderly
administration of the Plan, the Committee may make reasonable requests of
Participants and Beneficiaries to furnish information which is reasonably
necessary and appropriate to the orderly administration of the Plan, and, to
that limited extent, payments under the Plan are conditioned upon the Partici-
pants and Beneficiaries promptly furnishing true, full and complete
information as the Committee may reasonably request.
12.2 ABANDONMENT OF BENEFITS. Each Participant and Beneficiary
shall file with the Committee, from time to time in writing, his post office
address and each change of post office address, and any communication
addressed to a Participant or Beneficiary at his last post office address
filed with the Committee, or if no such address was filed, then at his last
post office address as shown on the Employer's records, shall be binding on
the Participant or his Beneficiary for all purposes of the Plan, and the
Committee shall not be obliged to search for or ascertain the whereabouts of
any Participant or Beneficiary; provided, that the Committee shall mail an
annual notice of unpaid pension benefits to such person at such last post
office address. If the Committee furnishes such annual notice to any
Participant or Beneficiary that he is entitled to a distribution, and the
Participant or Beneficiary fails to claim such distribution or make his
whereabouts known to the Committee within three years thereafter, such
benefits shall be disposed of as follows:
(a) if the whereabouts of such Participant or Beneficiary are
known to the Committee, payment shall be made to such Participant or
Beneficiary; or
(b) if the whereabouts of such Participant or Beneficiary are
unknown to the Committee, the Committee may direct the distribution
of a Participant's pension benefits on the same basis as though the
Participant had died without designating a Beneficiary as provided in
Subsection 6.2 hereof.
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<PAGE>
12.3 BENEFITS PAYABLE TO INCOMPETENTS. Any benefits payable
hereunder to a minor or other person under legal disability may be made, at
the discretion of the Committee, (i) directly to such person, or (ii) to a
parent, spouse, relative by blood or marriage, or the legal representative of
such person. The Committee shall not be required to see to the application
of any such payment, and the payee's receipt shall be a full and final
discharge of the Committee's responsibility hereunder.
12.4 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN. The
establishment and maintenance of the Plan shall not be construed as
conferring any legal rights upon any Participant to the continuation of
employment with the Employer.
ARTICLE XIII
ADMINISTRATION
13.1 ALLOCATION OF RESPONSIBILITY FOR PLAN ADMINISTRATION. The
Committee shall have only those specific powers, duties, responsibilities and
obligations as are specifically given them under the Plan. In general, the
Company shall have the sole responsibility for appointing and removing
Committee members, as provided in Section 13.2 herein. The Company shall
have the sole responsibility for amending or terminating, in whole or in
part, this Plan. The Committee shall have the sole responsibility for the
administration of the Plan which responsibility is specifically described in
this Plan.
13.2 APPOINTMENT OF COMMITTEE. The Plan shall be administered by
the Committee which shall be appointed by and serve at the pleasure of the
Board. All usual and reasonable expenses of the Committee may be paid in
whole or in part by the Company.
13.3 CLAIMS PROCEDURE. The Committee shall make all
determinations as to the right of any person to benefits. If any request for
a benefit is wholly or partially denied, the Committee shall notify the
person requesting the benefits, in writing, of such denial, including in such
notification the following information:
(a) the specific reason or reasons for such denial;
(b) the specific references to the pertinent Plan provisions
upon which the denial is based;
(c) a description of any additional material and information
which may be needed to clarify the request, including an explanation
of why such information is required; and
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<PAGE>
(d) an examination of this Plan's review procedure with
respect to denial of benefits.
Provided, that any such notice to be delivered to any Participant or
beneficiary shall be mailed by certified or registered mail and shall be
written to the best of the Committee's ability in a manner that may be
understood without legal counsel.
13.4 REVIEW PROCEDURE. Any Participant or Beneficiary whose claim
has been denied in accordance with Section 13.3 herein may appeal to the
Committee for review of such denial by making a written request therefor
within 60 days of receipt of the notification of such denial. Such
Participant or Beneficiary may examine documents pertinent to the review and
may submit to the Committee written issues and comments. Within 60 days
after receipt of the request for review, the Committee shall communicate to
the claimant, in writing, its decision, and the communication shall set forth
the reason or reasons for the decision and specific reference to those Plan
provisions upon which the decision is based.
13.5 RECORDS AND REPORTS. The Committee shall exercise such
authority and responsibility as it deems appropriate in order to comply with
the Act and governmental regulations issued thereunder relating to records of
the Participant's accounts and benefits which may be paid under the Plan; and
to notify Participants and Beneficiaries as required.
13.6 OTHER COMMITTEE POWERS AND DUTIES. The Committee shall have
such duties and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) to construe and interpret the Plan in its sole and
absolute discretion, decide all questions of eligibility and
determine the amount, manner and time of payment of any benefits
hereunder;
(b) to prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(d) to receive from the Employer and from Participants and
Beneficiaries such information as shall be necessary for the proper
administration of the Plan;
(e) to furnish the Employer, upon request, such reports with
respect to the administration of the Plan as are reasonable and
appropriate;
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<PAGE>
(f) to appoint and employ individuals and any other agents it
deems advisable, including legal counsel, to assist in the
administration of the Plan and to render advice with respect to any
responsibility of the Committee, or any of its individual members,
under the Plan;
(g) to allocate among themselves who shall be responsible for
specific duties and to designate fiduciaries (other than Committee
members) to carry out responsibilities under the Plan; provided that
any such allocations shall be reduced to writing, signed by all
Committee members, and filed in a permanent Committee minute book;
and
(h) to maintain continuing review of the Act, the Code, and
the implementing regulations thereto and suggest changes and
modifications to the Employer in connection with delegations of
responsibility, as appropriate, and amendments to the Plan.
13.7 RULES AND DECISIONS. The Committee may adopt such rules as
it deems necessary, desirable, or appropriate. All rules and decisions of
the Committee shall be uniformly and consistently applied to all Participants
and beneficiaries in similar circumstances. When making a determination or
calculation, the Committee shall be entitled to rely upon information
furnished by a Participant or Beneficiary, the Employer or the legal counsel
of the Company.
13.8 COMMITTEE PROCEDURES. The Committee may act at a meeting or
in writing without a meeting. The Committee shall have a chairman, and
appoint a secretary, who may or may not be a Committee member. The secretary
shall keep a record of all meetings in a permanent Committee minute book and
forward all necessary communications to the Employer. The Committee may
adopt such bylaws and regulations as it deems desirable for the conduct of
its affairs. All decisions of the Committee shall be made by the vote of the
majority including actions in writing taken without a meeting. A dissenting
Committee member who, within a reasonable time after he has knowledge of any
action or failure to act by the majority, registers his dissent in writing
delivered to the other Committee members, to the extent permitted by law,
shall not be responsible for any such action or failure to act.
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 RIGHT TO AMEND OR ALTER PLAN. The Plan may be amended by the
Committee from time to time in any respect whatever by resolution of the
Committee specifying such amendment; provided, however, this Plan may not be
amended in any manner which adversely
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<PAGE>
affects the Supplemental Normal Retirement Income earned by the Participant
as of the date of such amendment without the written consent of the affected
Participant.
14.2 RIGHT TO TERMINATE PLAN. The Committee expressly reserves
the right to terminate this Plan in whole or in part at any time; provided,
however, this Plan may not be terminated if such termination adversely
affects the Supplemental Normal Retirement Income earned by the Participant
as of the date of termination without the written consent of the affected
Participant. If the Plan is terminated, as provided herein or under
Subsection 14.3(b) below, then (i) each Participant will be fully vested in
his then earned Supplemental Normal Retirement Income and (ii) the Plan shall
continue with respect to the Supplemental Normal Retirement Income earned as
of such date of termination until all benefits have been paid to the
Participants.
14.3 MERGER OF COMPANY OR TERMINATION OF QUALIFIED PLAN.
(a) MERGER OF COMPANY; SUCCESSOR MUST ASSUME PLAN. The
Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume
and agree to perform the Company's and any Subsidiary's obligations
under this Plan in the same manner and to the same extent that the
Company or such Subsidiary would be required to perform if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any succession
shall be a breach by the Company of its obligations under this Plan
and shall entitle a Participant to compensation from the Company in
the same amount and on the same terms as the Participant would be
entitled to hereunder if the Participant terminated employment
immediately following a Change of Control, except that for purposes
of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination of
employment.
(b) TERMINATION OF QUALIFIED PLAN. In the event of the
termination of the Company's Qualified Plan, then, this Plan shall
terminate and in calculating any Supplemental Normal Retirement
Income which would otherwise be paid to Participant under this Plan,
the Qualified Plan Benefit earned by Participant will be calculated
as of such termination date and will be applied at such time to
determine the amount of Supplemental Normal Retirement Income to
which Participant would be entitled under this Plan.
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<PAGE>
14.4 FORFEITURE OF ALL BENEFITS. In the event that the
Participant (i) is discharged from employment service with the Employer for
Cause or (ii) commits any other act or acts which are injurious and adversely
impacts the Employer in any manner whatsoever and would be expected to
substantially enrich the Participant, then, in such events, the Committee, in
its sole discretion, may determine that any benefit which would otherwise be
provided to the Participant, his Beneficiary under the Agreement or the Plan
shall be forfeited in its entirety, and it shall thereafter be deemed as if
the Participant never was selected for participation in the Plan. Provided,
however, that the provisions of this Section 14.4 shall not be applicable in
the event a Change of Control has occurred.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 ARTICLES AND SECTION TITLES AND HEADINGS. The titles and
headings at the beginning of each Article and Section shall not be considered
in construing the meaning of any provisions in this Plan.
15.2 LAWS OF OKLAHOMA TO GOVERN. The provisions of this Plan
shall be construed, administered and enforced according to the laws of the
State of Oklahoma. All contributions to the Trust, if any, shall be deemed
to take place in the State of Oklahoma.
EXECUTED as of the 1st day of November, 1997.
FLEMING COMPANIES, INC., a corporation
By:
------------------------------------
Robert E. Stauth, Chairman and
Chief Executive Officer
"COMPANY"
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<PAGE>
EXHIBIT "B"
DESCRIPTION OF OPTIONAL FORMS OF PAYMENT
OPTION 1 - Life of
Participant Only: A Supplemental Normal Retirement Income will be
paid for the Participant's life only. Upon the
Participant's death, all payments of
Supplemental Normal Retirement Income shall
cease.
OPTION 2 - 50%
Joint Annuitant
Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life, then,
at the Participant's death 50% of such amount
shall be paid to the Participant's surviving
Beneficiary. In the event that the Partici-
pant's surviving Beneficiary has predeceased
the Participant, or should otherwise die after
the Participant's death, then no further pay
ments will be paid under Option 2 or this
Agreement.
OPTION 3 - 75%
Joint Annuitant
Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life, then,
at the Participant's death 75% of such amount
shall be paid to the Participant's surviving
Beneficiary. In the event that the Partici-
pant's surviving Beneficiary has predeceased
the Participant, or should otherwise die after
the Participant's death, then no further pay
ments will be due under Option 3 or this Agree-
ment.
OPTION 4 - 100%
Joint Annuitant
Survivor Benefit: A reduced amount of Supplemental Normal
Retirement Income will be paid to the
Participant for the Participant's life, then,
at the Participant's death 100% of such amount
shall be paid to the Par-
<PAGE>
ticipant's surviving Beneficiary. In the event
that the Participant's surviving Beneficiary
has predeceased the Participant, or should
otherwise die after the Participant's death,
then no further payments will be due under
Option 4 or this Agreement.
OPTION 5 - 5 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income will be paid for a period of
5 years certain. After the expiration of such
5 year period, payments shall then continue for
the Participant's life in the same amount. In
the event of the Participant's death during the
5 year period certain, then, the balance of
such payments due only during such 5 year
period will be paid to the Participant's sur-
viving Beneficiary. After the expiration of
such 5 year period, then all payments shall
cease. In the event of the expiration of such
5 year period, and the Participant dies, then,
no further benefits will be paid under Option 5
or this Agreement.
OPTION 6 - 10 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income shall be paid for a period of
10 years certain. After the expiration of such
10 year period, payments shall then continue
for the Participant's life in the same amount.
In the event of the Participant's death during
the 10 year period certain, then, the balance
of such payments due only during such 10 year
period will be paid to the Participant's sur-
viving Beneficiary. After the expiration of
such 10 year period, then all payments shall
cease. In the event of the expiration of such
10 year period, and the Participant dies, then,
no further benefits will be
<PAGE>
paid under Option 6 or this Agreement.
OPTION 7 - 15 Year
Period Certain: A reduced amount of Supplemental Normal
Retirement Income shall be paid for a period of
15 years certain. After the expiration of such
15 year period, payments shall then continue
for the Participant's life in the same amount.
In the event of the Participant's death during
the 15 year period certain, then, the balance
of such payments due only during such 15 year
period will be paid to the Participant's sur-
viving Beneficiary. After the expiration of
such 15 year period, then all payments shall
cease. In the event of the expiration of such
15 year period, and the Participant dies, then,
no further benefits will be paid under Option 7
or this Agreement.
<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION TRUST
<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION TRUST
TABLE OF CONTENTS
Page
----
Section 1 Establishment of Trust 1
Section 2 Payments to Participants and Their
Beneficiaries 2
Section 3 Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company is Insolvent 3
Section 4 Payments to Company 4
Section 5 Investment Authority 5
Section 6 Disposition of Income 5
Section 7 Accounting by Trustee 5
Section 8 Responsibility of Trustee 6
Section 9 Compensation and Expenses of Trustee 7
Section 10 Resignation and Removal of Trustee 7
Section 11 Appointment of Successor 7
Section 12 Amendment or Termination 8
Section 13 Miscellaneous 8
Section 14 Effective Date 8
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<PAGE>
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION TRUST
THIS AGREEMENT FOR THE FLEMING COMPANIES, INC. EXECUTIVE DEFERRED
COMPENSATION TRUST (the "Trust Agreement") made as of this ____ day of
__________, 1997, by and between Fleming Companies, Inc., an Oklahoma
corporation (the "Company"), and BANK ONE TRUST COMPANY, N.A., a national
banking association (formerly the Liberty Bank and Trust Company of Oklahoma
City, N.A.) (the "Trustee"). This Trust Agreement provides for the establish
ment of a trust to be known as the "Fleming Companies, Inc. Executive Deferred
Compensation Trust" (the "Trust") to provide a source for payments required to
be made under the plans and related agreements (collectively, the "Plans")
sponsored by the Company on behalf of certain of its key management associates
(the "Participants").
WHEREAS, Company has adopted and/or is a party to the Plans listed on
Exhibit "A" attached hereto;
WHEREAS, Company has incurred or expects to incur liability under the
terms of the Plans with respect to the individuals participating in the Plans;
and
WHEREAS, Company wishes to establish the Trust and to contribute to
the Trust assets that shall be held therein, subject to the claims of creditors
in the event of Company's "Insolvency," as herein defined, until paid to
Participants and their beneficiaries in such manner and at such times as
specified in the Plans; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended;
and
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee, in trust, One Hundred
Dollars ($100.00), which constitutes the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
<PAGE>
(b) The Trust hereby established is revocable by Company; it shall
become irrevocable upon a change of control, as such term is defined in the
Plans ("Change of Control").
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Participants and their beneficiaries
and the general creditors of Company, its Subsidiaries and its parent, if
applicable, as (as defined in the Plan ) herein set forth. The Participants
and their beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under the
Plans and this Trust Agreement shall be mere unsecured contractual rights of
the Participants and their beneficiaries against Company, its Subsidiaries or
its parent, if applicable. Any assets held by the Trust will be subject to
the claims of general creditors of the Company, its Subsidiaries and its
parent, if applicable, or its subsidiaries under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with Trustee
to augment the principal to be held, administered and disposed of by Trustee
(which may include securities issued by Company) as provided in this Trust
Agreement. In addition, Company may designate the Participants to be entitled
to receive any payments from the amounts so deposited, provided, such payments
shall only be made in accordance with the terms and provisions of the Plans.
Neither Trustee nor any Participant or beneficiary shall have any right to
compel such additional deposits.
(f) Upon a Change of Control, Company shall, as soon as possible,
but in no event longer than sixty (60) days following the Change of Control,
make an irrevocable contribution to the Trust in an amount that is sufficient
to pay the Participants or their beneficiaries the benefits to which the
Participants or their beneficiaries would be entitled pursuant to the terms
of the Plans as of the date on which the Change of Control occurred.
Section 2. PAYMENTS TO PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries) and provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable, the form in which
such amount is to be paid
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<PAGE>
(as provided for or available under the Plans), and the time of commencement
for payment of such amounts. Except as otherwise provided herein, Trustee
shall make payments to the Participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to
the terms of the Plans and shall pay amounts withheld to the appropriate
taxing authorities or determine that such amounts have been reported,
withheld and paid by Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plans shall be determined in accordance with the terms of
the Plans by Company or such party as it shall designate under the Plans, and
any claim for such benefits shall be considered and reviewed under the
procedures set out in the Plans.
(c) Company may make payment of benefits directly to the
Participants or their beneficiaries as they become due under the terms of the
Plans. Company shall notify Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to Participants or
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of the Plans, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where principal and
earnings are not sufficient.
Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN
COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Participants and
their beneficiaries if Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to
pay its debts as they become due, or (ii) Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company, its Subsidiaries and its parent, if
applicable, under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of the Insolvency of
the Company, its Subsidiaries or its parent, if applicable. If a person
claiming to be a creditor of Company alleges in writing to Trustee that
Company, its Subsidiaries or its parent, if applicable, has become Insolvent,
Trustee shall determine whether Company, its Subsidiaries or its parent, if
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<PAGE>
applicable, is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to the Participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of the Insolvency of
the Company, its Subsidiaries or its parent, if applicable, or has received
notice from Company or a person claiming to be a creditor alleging that
Company, its Subsidiaries or its parent, if applicable, is Insolvent, Trustee
shall have no duty to inquire whether Company is Insolvent. Trustee may in all
events rely on such evidence concerning the solvency of the Company, its
Subsidiaries or its parent, if applicable, as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning the solvency of the Company, its Subsidiaries and its parent, if
applicable.
(3) If at any time Trustee has determined that Company, its
Subsidiaries and its parent, if applicable, is Insolvent, Trustee shall
discontinue payments to the Participants or their beneficiaries and shall hold
the assets of the Trust for the benefit of the general creditors of the
Company, its Subsidiaries or its parent, if applicable, including the Partici-
pants. Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries to pursue their rights as general creditors
of Company, its Subsidiaries or its parent, if applicable, with respect to
benefits due under the Plans or otherwise.
(4) Trustee shall resume the payment of benefits to
Participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. PAYMENTS TO COMPANY.
(a) Except as provided in Section 3 hereof and Section 4(b) below,
after the Trust has become irrevocable, Company shall have no right or power to
direct Trustee to return to Company or to divert to others any of the Trust
assets before all payments of benefits have been made to Participants and their
beneficiaries
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<PAGE>
pursuant to the terms of the Plans, and such determination shall be made by
the Company.
(b) In the event that the Trust incurs realized earnings which are
taxable to the Company, the Trustee will reimburse the Company in an amount
necessary to meet all of the Company's income tax obligations (federal, state
and local). The determination of the amount to be reimbursed to the Company
shall be determined by the Company and the Company shall provide a worksheet of
the calculations of such tax liability to the Trustee.
Section 5. INVESTMENT AUTHORITY.
(a) Trustee may invest in or hold securities issued by Company. All
rights associated with assets of the Trust shall be exercised by Trustee or the
person designated by Trustee, and shall in no event be exercisable by or rest
with Participants. Dividend rights with respect to Trust assets will rest with
the Trust and voting rights shall be exercised by the Trustee. All investment
decisions with regard to the investment and reinvestment of the Trust assets
will be made by Trustee.
(b) Company shall have the right at anytime, and from time to time
in its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust, provided the asset or assets substituted is acceptable
to Trustee. This right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary capacity.
(c) In the event the Trust holds any life insurance policies, the
Trustee may surrender, cash in, and/or borrow against such policies in order to
provide benefits in accordance with the Payment Schedules.
Section 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net
of expenses, payments to Participants and taxes, shall be accumulated and
reinvested by Trustee.
Section 7. ACCOUNTING BY TRUSTEE.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days following the close of each
calendar year and within sixty (60) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its adminis-
tration of the Trust during such year or during the period from the close of
the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements
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<PAGE>
and other transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plans or this Trust and is given in
writing by Company. In the event of a dispute between Company and a party,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments.
(c) Trustee may consult with legal counsel (who may also be counsel
for Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on
Trustee by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) However, notwithstanding the provisions of Section 8(e) above,
Trustee may loan to Company the proceeds of any borrowing against an insurance
policy held as an asset of the Trust.
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<PAGE>
(g) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay all of Trustee's fees and expenses as well as
administrative expenses attributable to the Trust. If not so paid, the fees
and expenses shall be paid from the Trust.
Section 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company,
which shall be effective sixty (60) days after receipt of such notice unless
Company and Trustee agree otherwise.
(b) Trustee may be removed by Company on thirty (30) days notice or
upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, Trustee may not be removed by Company
or its successor for five (5) years.
(d) If Trustee resigns within five (5) years of a Change of Control,
Company shall apply to a court of competent jurisdiction for the appointment of
a successor Trustee or for instructions.
(e) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within ninety (90) days
after receipt of notice of resignation, removal or transfer, unless Company
extends the time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with section 11 hereof, as of the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions.
Section 11. APPOINTMENT OF SUCCESSOR.
If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall
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<PAGE>
have all the rights and powers of the former Trustee, including ownership
rights in Trust assets. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor Trustee to
evidence the transfer.
Section 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plans or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which
Participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans unless sooner revoked in accordance with
Section 1(b) hereof. Upon termination of the Trust any assets remaining in the
Trust shall be returned to Company.
(c) Upon written approval of all Participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plans, Company may
terminate this Trust prior to the time all benefit payments under the Plans
have been made. All assets in the Trust at termination shall be returned to
Company.
(d) This Trust Agreement may not be amended by Company for five (5)
years following a Change of Control without the consent of all Participants.
Section 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of Oklahoma.
Section 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be as of the date
hereof.
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<PAGE>
FLEMING COMPANIES, INC., an
Oklahoma corporation
By:
---------------------------------
Larry A. Wagner, Senior Vice
President-Human Resources
"COMPANY"
BANK ONE TRUST COMPANY, N.A.
(formerly the Liberty Bank and Trust
Company of Oklahoma City, N.A.)
By:
---------------------------------
Name:
---------------------------
Title: Senior Vice President
& Senior Trust Officer
"TRUSTEE"
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<PAGE>
FORM OF
AGREEMENT FOR
FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
---------------
PARTICIPANT
---------------
DATE
<PAGE>
AGREEMENT FOR FLEMING COMPANIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
THIS AGREEMENT FOR FLEMING COMPANIES, INC. EXECUTIVE DEFERRED
COMPENSATION PLAN (the "Agreement") is made as of the ___ day of __________,
____ by and between _______________, an individual (herein referred to as the
"Participant") and FLEMING COMPANIES, INC. (the "Company") with respect to
the following:
WHEREAS, the Company has adopted that certain non-qualified
deferred compensation plan known as "Fleming Companies, Inc. Executive
Deferred Compensation Plan" (the "Plan") which is an "excess plan" providing
for benefits to the Participants in the Plan in excess of the limitations on
benefits under qualified plans imposed by Sections 415 and/or 401(a)(17) of
the Internal Revenue Code of 1986, as amended; and
WHEREAS, the Company and the Participant desire to enter into this
Agreement to evidence the Participant's participation in the Plan and his
agreement to be bound by the terms and provisions of the Plan and this
Agreement.
NOW, THEREFORE, in consideration of mutual covenants hereinafter
contained, the parties hereto agree as follows. All capitalized words used
in this Agreement shall have the same meaning ascribed to such terms in the
Plan unless specifically denoted otherwise.
1. PURPOSE OF PLAN. The purpose of the Plan and this Agreement is
to provide to the Participant, the opportunity to earn supplemental
retirement income as provided in the Plan in order to retain the Participant,
as a key management Associate, with the Company. Payment of the Supplemental
Normal Retirement Income shall be made to the Participant in consideration of
future services rendered by the Participant and shall be paid to the
Participant or the Participant's Beneficiary as hereinafter provided. A copy
of the Plan is attached hereto as Exhibit "A," and is incorporated by
reference herein and made a part hereof for all purposes and when taken with
this Agreement, shall govern the Participant's rights and those of the
Company with respect to the Participant's benefits under the Plan.
2. CALCULATION AND MANNER OF PAYMENT OF SUPPLEMENTAL NORMAL
RETIREMENT INCOME.
(a) GENERAL. The Participant is also a participant in the
Qualified Plan sponsored by the Company. Further, the Participant have also
earned a benefit in the form of a Normal Retirement Income pursuant to the
terms of the Qualified Plan as of the Effective Date or a date subsequent
thereto. The Participant's Supplemental Normal Retirement Income will equal
the difference
93
<PAGE>
between the Participant's Qualified Plan Benefit and the benefit which would
otherwise be provided to the Participant under the Qualified Plan without
considering the limitations imposed by Internal Revenue Service under Section
415 and/or 401(a)(17) of the Code which limits the amount of compensation
which may be considered for calculation of benefits under the Qualified Plan.
An example of the calculation of the calculation of a Supplemental Normal
Retirement Income under the Plan is described on Exhibit "B" attached hereto.
(b) MANNER OF PAYMENT OF SUPPLEMENTAL NORMAL RETIREMENT
INCOME. As of the date of this Agreement, the Participant must elect the
form under which his Supplemental Normal Retirement Income will be paid in
the future following the Participant's termination of employment under the
terms of the Plan. Please check the form in which the Participant's
Supplemental Normal Retirement Income will be paid in the box provided below:
(Please Check and Initial One Box Only)
OPTIONAL FORMS OF PAYMENT
-------------------------
1. [ ] Life of Participant Only
2. [ ] 50% Joint Annuitant Survivor Benefit
3. [ ] 75% Joint Annuitant Survivor Benefit
4. [ ] 100% Joint Annuitant Survivor Benefit
5. [ ] 5 Year Period Certain
6. [ ] 10 Year Period Certain
7. [ ] 15 Year Period Certain
The actual amounts payable at retirement or death will depend upon the
Participant's age and/or the age of his Beneficiary and form of payment
elected by the Participant. With the consent of the Committee, and if
requested by the Participant or his Beneficiary in the case of the
Participant's death, the Participant or his Beneficiary may request that the
Participant's Supplemental Normal Retirement Income be paid in any of the
optional forms described above. See Section 10.1 of the Plan. Further, in
the event that a Participant has elected to receive his Supplemental Normal
Retirement Income for the "Life of Participant Only" (Option 1) and such
Participant dies, before payment of such benefit would otherwise commence in
accordance with the terms of the Plan, then, such deceased Participant's
Beneficiary shall be automatically paid a "survivor benefit" in the form of a
"50% Joint Annuitant Survivor Benefit" (Option 2). Refer to Exhibit "C" for
a complete Description of Payment.
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<PAGE>
3. COMMENCEMENT OF SUPPLEMENTAL RETIREMENT INCOME. Subject to the
provisions of Section 9.2 of the Plan with respect to termination following a
Change of Control, based upon the manner of payment elected by the
Participant for payment of the Participant's Supplemental Normal Retirement
Income, payments shall commence as of the Participant's Early Retirement
Date, Normal Retirement Date, Disability Retirement Date, Postponed
Retirement Date, or date of death, as the case may be, and will continue to
be paid in accordance with the form of payment elected by the Participant.
4. AMENDMENT OR TERMINATION. This Agreement may be amended,
altered or terminated by the Company from time to time upon notice to the
Participant as provided in paragraph 13 below; provided, however, this
Agreement may not be amended, modified, or altered or terminated in any
manner which adversely affects the Participant's Supplemental Normal
Retirement Income earned as of the date of amendment or termination, as the
case may be, without the consent of the Participant. Further, in such event
of termination, the Participant's Supplemental Normal Retirement Income
earned as of such date will be paid pursuant to the Plan.
5. EXPENSES. The expenses of administering this Agreement shall
be borne by the Company and shall not be charged against the Participant's
Supplemental Normal Retirement Income.
6. APPLICABLE LAW. The provisions of this Agreement shall be
construed, administered and enforced according to the laws of the State of
Oklahoma.
7. NO ASSIGNABILITY. Neither the Participant, his Beneficiary,
nor any other person shall acquire any right to or interest in any
Supplemental Normal Retirement Income and accruals thereon, otherwise than by
actual payment in accordance with the provisions of this Agreement, or have
any power to transfer, assign, anticipate, pledge, mortgage or otherwise
encumber or alienate any rights hereunder in advance of any of the payments
to be made pursuant to the Agreement or any portion thereof which is
expressly declared to be nonassignable and nontransferable. No right or
benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities, or torts of the person entitled to such benefit.
8. AGREEMENT DOES NOT GUARANTEE CONTINUED EMPLOYMENT OF
PARTICIPANT. The execution of this Agreement by the Company and the
Participant, in no way whatsoever guarantees the continuation of employment
of the Participant with the Company.
9. WITHHOLDING. The Company and the Participant shall comply with
all federal and state laws and regulations respecting the withholding,
deposit and payment of any income, employment or
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<PAGE>
other taxes relating to any payments or rights to payments under this
Agreement.
10. DESIGNATION OF BENEFICIARY.
(a) The Participant, as the Participant, hereby designate the
following individual as his Beneficiary to receive any Supplemental Death
Benefit (including any benefit to be paid to such Beneficiary as the
surviving "joint annuitant" pursuant to Section 2(b) hereof) payable to the
Participant under this Agreement or the Plan in the event of the
Participant's death:
Name Address Relationship
(b) The Participant understand that during his lifetime, the
Participant may at any time change the Beneficiary designated herein by
delivering to the Committee a new designation of a Beneficiary, executed by
the Participant and the Committee. If the Participant desires to change a
beneficiary designation, please contact the Senior Vice President, Human
Resources for a new beneficiary designation form.
11. RELATIONSHIP BETWEEN AGREEMENT AND PLAN. This Agreement has
been entered into by and between the Company and the Participant in
accordance with and pursuant to authority granted to the Committee pursuant
to the terms and provisions of the Plan. IN THE EVENT THAT THERE DEVELOPS A
CONFLICT BETWEEN THIS AGREEMENT AND THE TERMS AND PROVISIONS OF THE PLAN, THE
TERMS AND PROVISIONS OF THE PLAN, AS INTERPRETED BY THE COMMITTEE IN ITS SOLE
DISCRETION, SHALL CONTROL AND BE FINAL AND CONCLUSIVE.
12. LIMITATION ON PAYMENT OF BENEFITS. The payment of the
Supplemental Normal Retirement Income as provided in this Agreement shall
accrue and be payable to the Participant or his Beneficiary, as the case may
be, only at such times and upon the occurrence of such conditions as
heretofore described. In no event whatsoever shall the Participant or the
Participant's Beneficiary have any right, claim, or interest of any kind
whatsoever in any future payments of such Supplemental Normal Retirement
Income and such payments shall accrue and be payable only on a monthly basis
as provided hereinabove. In no event may the Participant or the
Participant's Beneficiary be entitled to receive a lump sum payment or other
sum approximating the right to receive any future payments of Supplemental
Normal Retirement Income hereunder.
13. NOTICES. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered
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<PAGE>
personally, by a recognized courier service, by a recognized overnight
delivery service, by facsimile or by registered or certified mail, postage
prepaid, to the parties at the following addresses (or to the attention of
such other person or such other address as either party may provide to the
other party by notice in accordance with this paragraph 13:
if to the Company:
Fleming Companies, Inc.
6301 Waterford Blvd.
Oklahoma City, OK 73126
Attn: Larry A. Wagner
Senior Vice President -
Human Resources
Facsimile: (405) 840-7226
if to the Participant:
14. AGREEMENT SUPERSEDES ALL OTHER BENEFITS AND RELEASE OF CLAIMS.
Effective as of the date of the execution and delivery of this Agreement,
this Agreement shall supersede and replace any and all other agreements
entered into by and between the Company or any Subsidiary and the Participant
with respect to the providing of supplemental retirement benefits on a
nonqualified basis pursuant to the Prior Plan which was terminated by the
Company effective November 1, 1997. The Participant agrees that as of the
date of termination of the Prior Plan, the Participant was not entitled to
any benefit under the Prior Plan and any rights or interest in the Prior Plan
were subject to total forfeiture as of November 1, 1997. Further,
recognizing that the Participant has been selected by the Committee to
participate in this Plan and the Fleming Companies, Inc. Executive Past
Service Benefit Plan, both of which may provide substantial benefits to the
Participant, the Participant hereby releases the Company, its officers,
directors, agents and assigns from any and all obligations under the Prior
Plan and agrees that the Participant will not bring any action, claim or
demand of any kind whatsoever with respect to any benefits to which the
Participant would have otherwise been entitled had the Participant continued
participating in the Prior Plan.
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<PAGE>
15. BENEFIT SUBJECT TO CLAIMS OF CREDITORS. The Participant and
his Beneficiary shall not have any interest in any particular assets of the
Company, its parent, if applicable, or any Subsidiary by reason of the right
to receive a benefit under the Plan or this Agreement, and the Participant
and his Beneficiary or any other person shall have only the rights of a
general unsecured creditor of the Company, its parent, if applicable, or a
Subsidiary with respect to any rights under the Plan or this Agreement.
16. EFFECTIVE DATE. This Agreement shall be effective from and
after the day and year first above written.
DATED the day and year first above written.
FLEMING COMPANIES, INC., an Oklahoma
corporation
By
---------------------------------------------
Larry A. Wagner, Senior Vice
President-Human Resources
"COMPANY"
----------------------------------
-----------------------
"PARTICIPANT"
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<PAGE>
EXHIBIT "C"
DESCRIPTION OF OPTIONAL FORMS OF PAYMENT
OPTION 1 - Life of Participant Only:
A Supplemental Normal Retirement Income will be paid for the Participant's
life only. Upon the Participant's death, all payments of Supplemental Normal
Retirement Income shall cease.
OPTION 2 - 50% Joint Annuitant Survivor Benefit:
A reduced amount of Supplemental Normal Retirement Income will be paid to the
Participant for the Participant's life, then, at the Participant's death 50%
of such amount shall be paid to the Participant's surviving Beneficiary. In
the event that the Participant's surviving Beneficiary has predeceased the
Participant, or should otherwise die after the Participant's death, then no
further payments will be paid under OPTION 2 or this Agreement.
OPTION 3 - 75% Joint Annuitant Survivor Benefit:
A reduced amount of Supplemental Normal Retirement Income will be paid to the
Participant for the Participant's life, then, at the Participant's death 75%
of such amount shall be paid to the Participant's surviving Beneficiary. In
the event that the Participant's surviving Beneficiary has predeceased the
Participant, or should otherwise die after the Participant's death, then no
further payments will be due under OPTION 3 or this Agreement.
<PAGE>
OPTION 4 - 100% Joint Annuitant Survivor Benefit:
A reduced amount of Supplemental Normal Retirement Income will be paid to the
Participant for the Participant's life, then, at the Participant's death 100%
of such amount shall be paid to the Participant's surviving Beneficiary. In
the event that the Participant's surviving Beneficiary has predeceased the
Participant, or should otherwise die after the Participant's death, then no
further payments will be due under OPTION 4 or this Agreement.
OPTION 5 - 5 Year Period Certain:
A reduced amount of Supplemental Normal Retirement Income will be paid for a
period of 5 years certain. After the expiration of such 5 year period,
payments shall then continue for the Participant's life in the same amount.
In the event of the Participant's death during the 5 year period certain,
then, the balance of such payments due only during such 5 year period will be
paid to the Participant's surviving Beneficiary. After the expiration of
such 5 year period, then all payments shall cease. In the event of the
expiration of such 5 year period, and the Participant dies, then, no further
benefits will be paid under OPTION 5 or this Agreement.
OPTION 6 - 10 Year Period Certain:
A reduced amount of Supplemental Normal Retirement Income shall be paid for a
period of 10 years certain. After the expiration of such 10 year period,
payments shall then continue for the Participant's life in the same amount.
In the event of the Participant's death during the 10 year period certain,
then, the balance of such payments due only during such 10 year period will
be paid to the Participant's surviving Beneficiary. After the expiration of
such 10 year period, then all payments shall cease. In the event of the
expiration of such 10 year period, and the Participant dies, then, no further
benefits will be paid under OPTION 6 or this Agreement.
<PAGE>
OPTION 7 - 15 Year Period Certain:
A reduced amount of Supplemental Normal Retirement Income shall be paid for a
period of 15 years certain. After the expiration of such 15 year period,
payments shall then continue for the Participant's life in the same amount.
In the event of the Participant's death during the 15 year period certain,
then, the balance of such payments due only during such 15 year period will
be paid to the Participant's surviving Beneficiary. After the expiration of
such 15 year period, then all payments shall cease. In the event of the
expiration of such 15 year period, and the Participant dies, then, no further
benefits will be paid under OPTION 7 or this Agreement.
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FLEMING COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN
Effective Date: July 1, 1997
<PAGE>
FLEMING COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN
TABLE OF CONTENTS
ARTICLE I NAME AND PURPOSE OF PLAN . . . . . . . . . . . . . . . . . B-1
1.1 Name of Plan. . . . . . . . . . . . . . . . . . . . . B-1
1.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . B-1
ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . B-1
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . B-1
2.2 Construction. . . . . . . . . . . . . . . . . . . . . B-3
ARTICLE III FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS . . . . . . . . . B-3
3.1 Stock Purchase Accounts . . . . . . . . . . . . . . . B-3
3.2 Participant's Contributions . . . . . . . . . . . . . B-3
3.3 Continued Participation; Voluntary Withdrawal
from Plan . . . . . . . . . . . . . . . . . . . . . . B-4
3.4 Withdrawal by Terminating Participant . . . . . . . . B-4
3.5 Reparticipation . . . . . . . . . . . . . . . . . . . B-4
3.6 Interest Accrual. . . . . . . . . . . . . . . . . . . B-4
ARTICLE IV EXERCISE OF STOCK OPTION . . . . . . . . . . . . . . . . . B-5
4.1 Exercise. . . . . . . . . . . . . . . . . . . . . . . B-5
4.2 Amount of Shares of Stock . . . . . . . . . . . . . . B-5
4.3 Distribution. . . . . . . . . . . . . . . . . . . . . B-5
4.4 Issuance of Shares; Stock Certificates. . . . . . . . B-6
ARTICLE V MAXIMUM SHARES OF STOCK AVAILABLE . . . . . . . . . . . . B-6
5.1 Maximum Number of Shares Available to Participants. . B-6
5.2 Maximum Authorized Shares . . . . . . . . . . . . . . B-6
5.3 Termination of Offering for the Second and
Subsequent Purchase Periods . . . . . . . . . . . . . B-6
ARTICLE VI ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . B-6
6.1 Appointment of Committee. . . . . . . . . . . . . . . B-6
6.2 Committee Powers and Duties . . . . . . . . . . . . . B-6
6.3 Committee to Make Rules and Interpret Plan. . . . . . B-6
ARTICLE VII AMENDMENT OF THE PLAN. . . . . . . . . . . . . . . . . . . B-7
ARTICLE VIII RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS. . . . B-7
8.1 Stock Adjustments . . . . . . . . . . . . . . . . . . B-7
8.2 Effect of Certain Transactions. . . . . . . . . . . . B-7
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . B-8
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . B-8
9.2 Application of the Funds. . . . . . . . . . . . . . . B-8
9.3 Repurchase of Stock . . . . . . . . . . . . . . . . . B-8
9.4 Alternate Contribution Methods. . . . . . . . . . . . B-8
9.5 Nonassignability. . . . . . . . . . . . . . . . . . . B-8
9.6 Government Regulation . . . . . . . . . . . . . . . . B-8
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<PAGE>
9.7 Effective Date of Plan. . . . . . . . . . . . . . . . B-8
9.8 Termination of Plan . . . . . . . . . . . . . . . . . B-8
9.9 No Obligations to Exercise Stock Option . . . . . . . B-8
9.10 Right to Continued Employment . . . . . . . . . . . . B-9
9.11 Reliance on Reports . . . . . . . . . . . . . . . . . B-9
9.12 Applicable Law. . . . . . . . . . . . . . . . . . . . B-9
9.13 Construction. . . . . . . . . . . . . . . . . . . . . B-9
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<PAGE>
FLEMING COMPANIES, INC. ASSOCIATE STOCK PURCHASE PLAN
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 NAME OF PLAN. This Plan shall be known as: Fleming Companies, Inc.
Associate Stock Purchase Plan.
1.2 PURPOSE. The Fleming Companies, Inc. Associate Stock Purchase
Plan, by offering Associates the opportunity to purchase the Company's Stock
through payroll deductions, is intended to encourage participation in the
ownership and economic progress of the Company. Associates may only be
granted Stock Options to purchase Stock. Except as otherwise provided in the
Plan, by reason of their employment relationship with the Company and/or the
Employer, all Associates of all Employers will be eligible to participate in
the Plan.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. Where the following capitalized words and phrases
appear in either a singular or plural form in this instrument, they shall
have the respective meanings set forth below unless a different context is
clearly expressed herein.
(a) ACCOUNT AND ACCOUNT BALANCE:
(i) The word "Account" shall mean the record established and
maintained to record the interest in the Plan of each Participant in
accordance with Article III.
(ii) The words "Account Balance" shall mean the credited balance
standing in a Participant's Account from time to time.
(b) ASSOCIATE: The word "Associate" shall mean any person employed
by the Employer on the basis of an employer-employee relationship who
receives remuneration for personal services rendered to the Employer.
(c) BOARD: The word "Board" shall mean the Board of Directors of the
Company.
(d) CODE: The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(e) COMMITTEE: The word "Committee" shall mean the Compensation
Committee of the Board referred to in Article VI.
(f) COMPANY: The word "Company" shall mean Fleming Companies, Inc..
an Oklahoma corporation.
(g) EMPLOYER: The word "Employer" shall mean the Company and any
Subsidiary of the Company.
(h) EXERCISE DATE: The words "Exercise Date" shall mean June 30 of
any year during which the Plan is in existence, being June 30, 1998, 1999,
2000, 2001 and 2002.
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<PAGE>
(i) FAIR MARKET VALUE: The words "Fair Market Value" shall mean (A)
during such time as the Stock is listed upon the New York Stock Exchange or
other exchanges or the NASDAQ/National Market System, the closing price of
the Stock on such stock exchange or exchanges or the NASDAQ/ National
Market System on the day for which such value is to be determined, or if no
sale of the Stock shall have been made on any such stock exchange or the
NASDAQ/National Market System that day, on the next preceding day on which
there was a sale of such Stock or (B) during any such time as the Stock is
not listed upon an established stock exchange or the NASDAQ/National Market
System, the mean between dealer "bid" and "ask" prices of the Stock in the
over-the-counter market on the day for which such value is to be
determined, as reported by the National Association of Securities Dealers,
Inc.
(j) GRANTING DATE: The words "Granting Date" shall mean the
beginning of each applicable Purchase Period, being July 1, 1997, 1998,
1999, 2000, 2001 and 2002.
(k) OPTION AGREEMENT: The words "Option Agreement" shall mean an
agreement to be executed by the Participant and the Company, which shall
comply with the terms of the Plan and shall be in such form as the
Committee agrees upon from time to time.
(l) OPTION PRICE: The words "Option Price" shall mean the price
which shall be paid by the Participant from his Account for any Stock
purchased on an applicable Exercise Date pursuant to any Stock Option
granted to such Participant; provided, such option price shall be the
lesser of:
(i) 85% of the per share Fair Market Value on the Granting Date
of the Purchase Period applicable to such Participant: or
(ii) 85% of the per share Fair Market Value on the Exercise Date
of the Purchase Period applicable to such Participant.
Provided, in no event shall the Option Price per share be less than the par
value of the Stock.
(m) PARTICIPANT: The word "Participant" shall mean an Associate (i)
who executes with the Company an Option Agreement on or prior to a Granting
Date, (ii) who on such Granting Date has been continuously employed by the
Employer for at least six months, and (iii) whose customary employment is
more than 20 hours per week and more than five months in any calendar year.
Provided, for purposes of calculating the foregoing six month service
requirement for an Associate, all employment service with the Company and
its subsidiaries will be recognized. The word "Participant" shall also
include the legal representative of a deceased Participant, and a
Participant who, within three months prior to the end of the applicable
Purchase Period for which he is a Participant, terminates his employment
with the Employer on account of (i) retirement on or after age 55, (ii)
retirement because of disability, (iii) lay off by the Employer, or (iv) an
authorized leave of absence granted by the Employer. "Disability" for
purposes of this Subsection (m) shall mean a physical or mental condition
which, in the judgment of the Committee, totally and permanently prevents a
Participant from engaging in any substantial gainful employment with the
Employer. A determination that disability exists shall be based upon
independent medical evidence satisfactory to the Committee. In the event
that any Employer ceases to be a Subsidiary of the Company, the Associates
of such Employer will be deemed to have terminated employment as of such
date.
(n) PLAN: The word "Plan" shall mean this Fleming Companies, Inc.
Associate Stock Purchase Plan, and any amendments thereto.
(o) PURCHASE PERIOD: The words "Purchase Period" shall mean any one
year period commencing on July 1 and ending on June 30 of each year during
which the Plan is in existence, as follows:
(i) "First Purchase Period"--July 1, 1997 through June 30, 1998.
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<PAGE>
(ii) "Second Purchase Period"--July 1, 1998 through June 30,
1999.
(iii) "Third Purchase Period"--July 1, 1999 through June 30,
2000.
(iv) "Fourth Purchase Period"--July 1, 2000 through June 30,
2001.
(v) "Fifth Purchase Period"--July 1, 2001 through June 30, 2002.
(p) STOCK: The word "Stock" shall mean any of the total number of
shares of common stock of the Company being authorized for issuance
pursuant to the terms of the Plan in accordance with Article V.
(q) STOCK OPTION: The words "Stock Option" shall mean the right of a
Participant on an applicable Exercise Date to purchase the number of whole
shares of Stock as provided in Article IV.
(r) SUBSIDIARY: The word "Subsidiary" shall mean any present or
future subsidiary corporation of the Company as defined in Section 424 of
the Code.
(s) TERMINATING PARTICIPANT: The words "Terminating Participant"
shall mean a Participant who terminates his employment for reasons other
than those set forth in Subsection 2.1(m).
2.2 CONSTRUCTION. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. Any word appearing herein in the plural shall
include the singular, where appropriate, and likewise the singular shall
include the plural, unless the context clearly indicates to the contrary.
ARTICLE III
FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS
3.1 STOCK PURCHASE ACCOUNTS. As of the applicable Granting Date, there
shall be established and maintained under the Plan in the name of each
Participant (who is a Participant with respect to the Purchase Period
pertaining to such Granting Date) an Account which shall be debited and
credited in accordance with the following Sections of this Article III.
3.2 PARTICIPANT'S CONTRIBUTIONS. By becoming a Participant,
authorization shall be deemed to be automatically given by the Participant
for his periodic contributions which shall be credited to his Account
calculated as follows:
FIRST: The Participant's basic compensation rate (excluding any form
of extraordinary compensation such as overtime, prizes, bonuses,
commissions, reimbursed relocation expenses and the like), as of the date
("Determination Date") which is three months prior to the applicable
Granting Date, shall be determined and annualized ("Annual Compensation").
Increases in such basic compensation rate after such Determination Date
shall be disregarded for that Purchase Period, Decreases in such basic
compensation rate shall be adjusted as provided hereinafter.
SECOND: Prior to the applicable Granting Date, the Participant shall
elect in his Option Agreement filed with the Committee a percentage of
either 1%, 2%, 3%, 4%, 5%, or 6% ("Contribution Rate"); provided, an
election, once effective with respect to the first Purchase Period
applicable to such Participant following such election cannot thereafter be
changed; and provided, a Participant may elect to change his Contribution
Rate for succeeding Purchase Periods by notifying the Committee within 10
days of any succeeding Granting Date. If a Participant receives a
"hardship withdrawal" from a cash or deferred arrangement established by
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<PAGE>
the Employer under Code Section 401(k), he shall be prohibited from making
contributions to his Account under this Plan for a period of 12 months
after receipt of such hardship distribution.
THIRD: The Participant's Annual Compensation for the applicable
Purchase Period shall be multiplied by his Contribution Rate, and the
product thereof shall equal his aggregate maximum contributions ("Aggregate
Contributions") to be made under the Plan for the applicable Purchase
Period.
FOURTH: A Participant's Aggregate Contributions shall be divided by
the number of his payroll payment dates falling within the applicable
Purchase Period to determine the dollar amount of equal periodic
contributions which shall be withheld by the Employer by payroll deduction.
If a Participant's number of payroll payment dates thereafter shall be
changed, appropriate adjustment shall be made so that equal periodic
contributions shall be made. Provided, in the event that a Participant
incurs a decrease in his basic compensation during any Purchase Period, and
such Participant is not a Terminating Participant or has not voluntarily
withdrawn from the Plan, then, in such event, and if requested by the
Participant, appropriate adjustments will be made by the Committee to
reduce the maximum amount of periodic contributions which such Participant
would otherwise make pursuant to the Plan to his Stock Purchase Account.
The reduction shall occur by determining the Participant's reduced basic
compensation rate and then multiplying such rate by the Contribution Rate
which such Participant had previously elected for that Purchase Period.
This reduced amount thereafter will be credited to the Stock Purchase
Account of such Participant for the balance of the applicable Purchase
Period.
3.3 CONTINUED PARTICIPATION; VOLUNTARY WITHDRAWAL FROM PLAN. Once a
Participant elects to participate in the Plan, he shall thereafter remain as a
Participant until expiration or termination of the Plan, unless he otherwise
withdraws from, or otherwise becomes ineligible to participate in the Plan. A
legal representative of a deceased participant and a Participant who terminates
employment for any reasons specified in Subsection 2.1(m) within three months
prior to the end of the applicable Purchase Period will continue to be a
Participant in the Plan until the next succeeding Exercise Date unless such
Participant or his representative (in the event of the Participant's death)
elects to withdraw from the Plan pursuant to this Section 3.3. A Participant
may withdraw from the Plan at any time by filing a written notice with the
Committee of withdrawal prior to the next applicable Exercise Date. Upon a
Participant's withdrawal, his entire Account Balance, if any, on the date of
withdrawal shall be refunded to him.
3.4 WITHDRAWAL BY TERMINATING PARTICIPANT. A Terminating Participant
shall be deemed to have made an election to withdraw from the Plan on the
date his employment terminates. Upon such withdrawal, his entire Account
Balance, if any, on the date of withdrawal, shall be refunded to him.
3.5 REPARTICIPATION. A Participant who withdraws under Section 3.3
within any Purchase Period shall not be eligible to reenter the Plan with
respect to the same Purchase Period; provided, a Participant who withdraws
from the Plan under Section 3.3 prior to the end of any Purchase Period shall
not be precluded from becoming a Participant with respect to any succeeding
Purchase Period if he satisfies the eligibility requirements of the Plan.
3.6 INTEREST ACCRUAL. With respect to the refund or distribution of an
Account Balance under either of Sections 3.3 or 3.4, no interest shall be
paid or payable. If the Plan is terminated under either of Sections 8.2 or
9.8, the refund of an Account Balance shall be with interest at a per annum
rate of 5% and shall be computed upon the average balance in such
Participant's Account for the period of time following the Granting Date
applicable to such Participant and ending on the day of the withdrawal or
distribution.
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<PAGE>
ARTICLE IV
EXERCISE OF STOCK OPTION
4.1 EXERCISE. If a Participant has not made an earlier election to
withdraw pursuant to either of Sections 3.3 or 3.4, he shall be deemed to
have elected to exercise his Stock Option as of each Exercise Date with
respect to the applicable Purchase Periods.
4.2 AMOUNT OF SHARES OF STOCK.
(a) Subject to the Subsection (b) following, the whole number of
shares of Stock to which a Participant shall be entitled ("Total Stock
Entitlement") upon the applicable Exercise Date shall be determined under
the following formula:
ACCOUNT BALANCE
--------------- = Total Stock Entitlement
Option Price
Provided, the Account Balance for purposes of this Section 4.2 shall be
determined without crediting any interest thereon.
(b) The Total Stock Entitlement computed for each Participant shall
be reduced to the extent that any of the following Subsections shall apply:
(i) No Participant shall be entitled to participate in the Plan
to a greater extent than that permitted under Section 423(b)(3) of the
Code. Thus, no Employee may be granted a Stock Option if such
Employee, immediately after the Stock Option is granted, owns stock
possessing five percent or more of the total combined voting power or
value of all classes of stock of the Company or of its parent or any
Subsidiary (if applicable). For purposes of this Subsection, the
rules of Section 424(d) of the Code shall apply in determining the
stock ownership of an individual, and stock which the Employee may
purchase under all outstanding stock options shall be treated as stock
owned by the Employee.
(ii) No Participant shall be entitled to participate in the Plan
to a greater extent than that permitted under Section 423(b)(8) of the
Code. Thus, no Employee may be granted a Stock Option which permits
his rights to purchase stock under all such "employee stock ownership
plans" of the Company and its parent or any Subsidiary (if applicable)
intended to qualify under Section 423 of the Code to accrue at a rate
which exceeds $25,000 of fair market value of such stock (determined
at the time such Stock Option is granted) for each calendar year in
which such Stock Option is outstanding at any time. For purposes of
this Subsection, (1) the right to purchase stock under an option
accrues when the option (or any portion thereof) first becomes
exercisable during the calendar year; (2) the right to purchase stock
under an option accrues at the rate provided in the option, but in no
case may such rate exceed $25,000 of fair market value of such stock
(determined at the time such stock option is granted) for any one
calendar year; and (3) a right to purchase stock which has accrued
under one option granted pursuant to any such plan may not be carried
over to any other such stock option.
4.3 DISTRIBUTION. A Participant's Total Stock Entitlement as
determined under Section 4.2 shall be distributed to him pursuant to Section
4.4(b) together with any cash which is not applied toward the purchase of
whole shares of Stock. No interest shall be payable upon such refunded
Account Balance.
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4.4 ISSUANCE OF SHARES; STOCK CERTIFICATES.
(a) The shares of Stock purchased by a Participant on the applicable
Exercise Date shall for all purposes, be deemed to have been issued and
sold at the close of business on such Exercise Date. Prior to that time,
none of the rights or privileges of a stockholder of the Company shall
exist with respect to such shares.
(b) As soon as practicable after each Exercise Date, the Company
shall issue and deliver a certificate, registered in the Participant's
name, for the number of shares of Stock purchased.
ARTICLE V
MAXIMUM SHARES OF STOCK AVAILABLE
5.1 MAXIMUM NUMBER OF SHARES AVAILABLE TO PARTICIPANTS. If on the
Exercise Date of any Purchase Period the Total Stock Entitlement for all
Participants, determined under Section 4.2 hereof exceeds the number of
shares of Stock available for issuance under the Plan, there shall be a
proportionate reduction for the ensuing applicable Purchase Period of each
Participant's Total Stock Entitlement in order to eliminate such excess.
5.2 MAXIMUM AUTHORIZED SHARES. Subject to adjustment under Article
VIII, the maximum number of shares of Stock which may be issued under the
Plan shall not in the aggregate exceed 60,000 shares of Stock.
5.3 TERMINATION OF OFFERING FOR THE SECOND AND SUBSEQUENT PURCHASE
PERIODS. If in the opinion of the Committee, there is insufficient Stock
available for Stock Options at any Granting Date after the July 1, 1997
Granting Date, the Committee may terminate the offering contemplated for any
or all succeeding Purchase Periods.
ARTICLE VI
ADMINISTRATION
6.1 APPOINTMENT OF COMMITTEE. The Plan shall be administered by the
Committee appointed by the Board and consisting of not less than two members
from the Board none of whom shall be employees of the Company or a subsidiary
of the Company while serving on the Committee. The members of the Committee
shall serve at the pleasure of the Board and shall be ineligible to
participate under the Plan. Any member may serve concurrently as a member of
any other administrative committee of any other plan of the Company or its
affiliates entitling participants therein to acquire stock, stock options or
deferred compensation rights including stock appreciation rights.
6.2 COMMITTEE POWERS AND DUTIES. The Committee shall have all the
powers and authorities which are reasonably appropriate and necessary to
discharge its duties under the Plan.
6.3 COMMITTEE TO MAKE RULES AND INTERPRET PLAN. The Committee, in its
sole discretion, shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise rules and regulations with respect to
the administration of the Plan and to make all such determinations relating
to the Plan as it may deem necessary or advisable for the administration of
the Plan. The Committee's interpretation of the Plan and all decisions and
determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the
Board.
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ARTICLE VII
AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect consistent with Sections 421 and 423 of the Code, except that,
without approval of the stockholders, no amendment shall (i) increase the
maximum number of shares reserved under the Plan other than as provided in
Article VIII, or (ii) make the Plan available to any person who is not a
Participant.
ARTICLE VIII
RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS
8.1 STOCK ADJUSTMENTS. In the event that the shares of Stock, as presently
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation
(whether by reason of merger, consolidation, recapitalization, reclassification,
stock split, combination of shares or otherwise), or if the number of such
shares of Stock shall be increased through the payment of a stock dividend, then
there shall be substituted for or added to each share available under and
subject to the Plan as provided in Section 5.3 hereof, and each share
theretofore appropriated or thereafter subject or which may become subject to
Stock Options under the Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Stock shall be so changed or for
which each such share shall be exchanged or to which each such share shall be
entitled, as the case may be, on a fair and equivalent basis in accordance with
the applicable provisions of Section 424 of the Code; provided, in no such event
will such adjustment result in a modification of any Stock Option as defined in
Section 424(h) of the Code. In the event there shall be any other change in the
number or kind of the outstanding shares of Stock, or any stock or other
securities into which the Stock shall have been changed or for which it shall
have been exchanged, then if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in the shares
available under and subject to the Plan, or in any Stock Option theretofore
granted or which may be granted under the Plan, such adjustments shall be made
in accordance with such determination, except that no adjustment of the number
of shares of Stock available under the Plan or to which any Stock Option relates
that would otherwise be required shall be made unless and until such adjustment
either by itself or with other adjustments not previously made would require an
increase or decrease of at least 1% in the number of shares of Stock available
under the Plan or to which a Stock Option relates immediately prior to the
making of such adjustment (the "Minimum Adjustment"). Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment together with other adjustments required by
this Section 8.1 and not previously made would result in a Minimum Adjustment.
Notwithstanding the foregoing, any adjustment required by this Section 8.1 which
otherwise would not result in a Minimum Adjustment shall be made with respect to
shares of Stock relating to any Stock Option immediately prior to exercise,
payment or settlement of such Stock Option.
No fractional shares of Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share. Any adjustments under this Section 8.1 shall be made
according to the sole discretion of the Company, and its decision shall be
binding and conclusive.
8.2 EFFECT OF CERTAIN TRANSACTIONS. Subject to any required action by
the stockholders, if the Company shall be the surviving or resulting
corporation in any merger or consolidation, any Stock Option hereunder shall
pertain to and apply to the shares of stock of the Company; but a dissolution
or liquidation of the Company or merger or consolidation in which the Company
is not the surviving or the resulting corporation shall cause the Plan and
any Stock Option hereunder to terminate upon the effective date of such
dissolution, liquidation, merger or consolidation, and the Account Balance of
each Participant shall be refunded to him. Provided, that for the purpose of
this Section 8.2, if any merger, consolidation or combination occurs in which
the Company is not the surviving corporation and is the result of a mere
change in the identity, form or place of organization of the Company
accomplished in accordance with Section 368(a)(1)(F) of the Code, then, such
event shall not cause a termination.
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ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. Any notice which a Participant files pursuant to the Plan
shall be on the form prescribed by the Committee and shall be effective when
received by the Committee.
9.2 APPLICATION OF THE FUNDS. All funds received by the Company under
the Plan may be used for any corporate purpose.
9.3 REPURCHASE OF STOCK. The Company shall not be required to
repurchase from any Participant shares of Stock which he acquired under the
Plan.
9.4 ALTERNATE CONTRIBUTION METHODS. If authorized payroll deductions
of a Participant's periodic contributions under Section 3.2 are not permitted
by reason of the provisions of any law applicable to an Employer, the
Committee shall adopt an appropriate alternative method under which affected
Participants may make payment for shares of Stock purchased hereunder which
would otherwise have been made pursuant to Section 3.2.
9.5 NONASSIGNABILITY. Stock Options are exercisable only by the
Participant during his lifetime, or by his estate or the person who acquires
the right to exercise such Stock Option upon his death by bequest or
inheritance, and are not transferable by him other than by will or the laws
of descent and distribution. No Stock Option shall be subject in any manner
to alienation, anticipation, sale, transfer, assignment, pledge, or
encumbrance, except for transfer by will or the laws of descent and
distribution. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any Stock Option contrary to the provisions hereof, shall be void
and ineffective, shall give no right to any purported transferee, and may, at
the sole discretion of the Committee, result in forfeiture of the Stock
Option involved in such attempt.
9.6 GOVERNMENT REGULATION. The Company's obligation to sell and
deliver the Stock under the Plan is at all times subject to any and all
approvals, rules and regulations of any governmental authority required in
connection with the authorization, issuance, sale or delivery of such Stock.
In addition, the rights of Participants under the Plan who are subject to
Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"),
are subject to compliance by such Participants with the applicable provisions
of Section 16 and the rules and regulations promulgated thereunder.
9.7 EFFECTIVE DATE OF PLAN. The Plan shall become effective on July 1,
1997, if prior to that date the Plan has been approved by the holders of a
majority of the common stock of the Company present, or represented, and
entitled to vote at a meeting called for such purposes.
9.8 TERMINATION OF PLAN. The Plan shall continue in effect through
June 30, 2002, unless terminated pursuant to Section 8.2 or by the Board,
which shall have the right to terminate the Plan at any time. Upon the
termination of the Plan pursuant to this Section 9.8 or Section 8.2, the
Account Balance of each Participant shall be refunded to him.
9.9 NO OBLIGATIONS TO EXERCISE STOCK OPTION. The granting of a Stock
Option shall impose no obligation upon the Participant to exercise his Stock
Option.
9.10 RIGHT TO CONTINUED EMPLOYMENT. Participation in the Plan shall not
give any Participant any right to remain in the employ of the Employer. The
Employer reserves the right to terminate any Participant at any time.
Further, the adoption of this Plan shall not be deemed to give any
Participant or any other individual any right to be selected as a Participant
or to be granted a Stock Option.
B-8
<PAGE>
9.11 RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board shall be fully justified in relying or acting in good faith upon
any report made by the independent public accountants of the Company and upon
any other information furnished in connection with the Plan by any person or
persons other than himself. In no event shall any person who is or shall have
been a member of the Committee or of the Board be liable for any
determination made or other action taken or any omission to act in reliance
upon any such report or information or for any action taken, including the
furnishing of information, or failure to act, if in good faith.
9.12 APPLICABLE LAW. This Plan shall be governed by and interpreted in
accordance with the laws of the State of Oklahoma.
9.13 CONSTRUCTION. It is intended that this Plan shall qualify in
accordance with Sections 421 and 423 of the Code, and the provisions of this
Plan shall be interpreted and applied in a manner consistent with such
intent. Pursuant to the terms of the Plan and the applicable provisions of
the Code, all Participants in the Plan will have the same rights and
privileges and all such Participants will be treated in an equal, uniform and
nondiscriminatory manner.
B-9
<PAGE>
Exhibit 12
FLEMING COMPANIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
FISCAL YEAR ENDED THE LAST SATURDAY IN DECEMBER
1993 1994 1995 1996 1997
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income $ 72,078 $112,337 $ 85,892 $ 54,573 $ 82,685
Fixed charges, net 102,311 148,125 212,173 204,527 199,329
Total earnings $174,389 $260,462 $298,065 $259,100 $282,014
Fixed charges:
Interest expense $ 78,029 $120,071 $175,390 $163,466 $162,506
Portion of rental charges
deemed to be interest 22,969 27,746 36,456 40,699 36,456
Capitalized interest and
debt issuance cost
amortization 1,005 364 708 104 1,186
Total fixed charges $102,003 $148,181 $212,554 $204,269 $200,148
Ratio of earnings
to fixed charges 1.71 1.76 1.40 1.27 1.41
</TABLE>
"Earnings" consist of income from continuing operations before income taxes
and fixed charges excluding capitalized interest. Capitalized interest
amortized during the respective periods is added back to earnings.
"Fixed charges, net" consist of interest expense, an estimated amount of
rental expense which is deemed to be representative of the interest factor
and amortization of capitalized interest and debt issuance cost.
The pro forma ratio of earnings to fixed charges is omitted as it is not
applicable.
<PAGE>
Exhibit 21
FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Fleming Companies, Inc. had the following subsidiaries at year-end 1997:
ABCO Holding, Inc.
ABCO Markets Inc.
ABCO Realty Corp.
Big W of Florida, Inc.
Fleming Foreign Sales Corporation
Fleming International Ltd.
Fleming Supermarkets of Florida, Inc.
Fleming Transportation Service, Inc.
Fleming Wholesale, Inc.
Gateway Insurance Agency, Inc.
LAS, Inc.
Netco Foods, Inc.
Northwest Foods, L.L.C.
Piggly Wiggly Company
Progressive Realty, Inc.
Retail Investments, Inc.
Retail Supermarkets, Inc.
RFS Marketing Services, Inc.
Richmar Foods, Inc.
SAV-U-FOODS, Inc.
Scrivner Transportation, Inc.
Smartrans, Inc.
Timber Ridge Foods, L.L.C.
University Foods, Inc.
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in:
(i) Registration Statement No. 2-98602 (1985 Stock Option Plan) on Form
S-8;
(ii) Registration Statement No. 33-36586 (1990 Fleming Stock Option Plan)
on Form S-8;
(iii) Registration Statement No. 33-56241 (Dividend Reinvestment and Stock
Purchase Plan) on Form S-3;
(iv) Registration Statement No. 333-11317 (1996 Fleming Incentive Stock
Option Plan) on Form S-8;
(v) Registration Statement No. 333-35703 (Senior Subordinated Notes) on
Form S-4;
(vi) Registration Statement No. 333-28219 (Associate Stock Purchase Plan)
on Form S-8;
of our report dated February 19, 1998 appearing in this Annual Report on Form
10-K of Fleming Companies, Inc. for the year ended December 27, 1997.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
March 11, 1998
<PAGE>
Exhibit 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Fleming Companies, Inc.
(hereinafter the "Company"), hereby severally constitute Robert E. Stauth,
Harry L. Winn, Jr. and David R. Almond, and each of them severally, our true
and lawful attorneys with full power to them and each of them to sign for us,
and in our names as officers or directors, or both, of the Company, the
Annual Report on Form 10-K for the fiscal year ended December 27, 1997, and
any and all amendments thereto, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and to perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
Dated this 24th day of February, 1998.
Signature Title
--------- -----
ROBERT E. STAUTH Chairman and Chief Executive
- -------------------------- Officer (principal executive
Robert E. Stauth officer)
HARRY L. WINN, JR. Executive Vice President and
- -------------------------- Chief Financial Officer
Harry L. Winn, Jr. (principal financial officer)
KEVIN J. TWOMEY Vice President - Controller
- -------------------------- (principal accounting officer)
Kevin J. Twomey
JACK W. BAKER
- -------------------------- Director
Jack W. Baker
ARCHIE R. DYKES
- -------------------------- Director
Archie R. Dykes
CAROL B. HALLETT
- -------------------------- Director
Carol B. Hallett
EDWARD C. JOULLIAN III
- -------------------------- Director
Edward C. Joullian III
JOHN A. MCMILLAN
- -------------------------- Director
John A. McMillan
GUY A. OSBORN
- -------------------------- Director
Guy A. Osborn
- -------------------------- Director
Alice M. Peterson
DAVID A. RISMILLER
- -------------------------- Director
David A. Rismiller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR DECEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-28-1996
<PERIOD-END> DEC-27-1997
<CASH> 30,316
<SECURITIES> 0
<RECEIVABLES> 353,290
<ALLOWANCES> 19,012
<INVENTORY> 1,018,666
<CURRENT-ASSETS> 1,494,990
<PP&E> 1,598,786
<DEPRECIATION> 648,943
<TOTAL-ASSETS> 3,923,971
<CURRENT-LIABILITIES> 1,154,597
<BONDS> 1,127,311
0
0
<COMMON> 95,660
<OTHER-SE> 994,012
<TOTAL-LIABILITY-AND-EQUITY> 3,923,971
<SALES> 15,372,666
<TOTAL-REVENUES> 15,372,666
<CGS> 13,941,838
<TOTAL-COSTS> 15,102,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,484
<INTEREST-EXPENSE> 162,506
<INCOME-PRETAX> 82,685
<INCOME-TAX> 43,963
<INCOME-CONTINUING> 38,722
<DISCONTINUED> 0
<EXTRAORDINARY> (13,330)
<CHANGES> 0
<NET-INCOME> 25,392
<EPS-PRIMARY> .67<F1>
<EPS-DILUTED> .67<F1>
<FN>
<F1> EPS amounts since year-end 1995 have not changed
due to adopting SFAS No. 128.
</FN>
</TABLE>
