SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 10, 1999
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
FLEMING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 48-0222760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6301 Waterford Boulevard, Box 26647
Oklahoma City, Oklahoma 73126
(Address of principal executive offices) (Zip Code)
(405) 840-7200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
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 such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments for the past 90 days. Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 6, 1999 is as follows:
Class Shares Outstanding
Common stock, $2.50 par value 38,810,000
<PAGE>
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Statements of Operations -
12 Weeks Ended July 10, 1999,
and July 11, 1998
Consolidated Condensed Statements of Operations -
28 Weeks Ended July 10, 1999,
and July 11, 1998
Consolidated Condensed Balance Sheets -
July 10, 1999, and December 26, 1998
Consolidated Condensed Statements of Cash Flows -
28 Weeks Ended July 10, 1999,
and July 11, 1998
Notes to Consolidated Condensed Financial Statements
Independent Accountants' Review Report
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
Part II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Consolidated Condensed Statements of Operations
For the 12 weeks ended July 10, 1999, and July 11, 1998
(In thousands, except per share amounts)
<CAPTION>
============================================================================
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Net sales $3,349,362 $3,505,943
Costs and expenses:
Cost of sales 3,022,154 3,164,174
Selling and administrative 286,565 284,146
Interest expense 38,647 35,861
Interest income (6,894) (8,308)
Equity investment results 2,415 3,248
Litigation charge - 2,216
Impairment/restructuring charge 6,169 916
- ----------------------------------------------------------------------------
Total costs and expenses 3,349,056 3,482,253
- ----------------------------------------------------------------------------
Earnings before taxes 306 23,690
Taxes on income 2,644 10,051
- ----------------------------------------------------------------------------
Net earnings (loss) $ (2,338) $ 13,639
- ----------------------------------------------------------------------------
Basic and diluted net earnings (loss) per share $(.06) $.36
Dividends paid per share $.02 $.02
Weighted average shares outstanding:
Basic 38,204 37,859
Diluted 38,204 38,027
- ----------------------------------------------------------------------------
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial
statements and independent accountants' review report.
<TABLE>
Consolidated Condensed Statements of Operations
For the 28 weeks ended July 10, 1999, and July 11, 1998
(In thousands, except per share amounts)
<CAPTION>
============================================================================
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Net sales $7,814,608 $8,073,069
Costs and expenses:
Cost of sales 7,059,022 7,289,032
Selling and administrative 663,560 648,866
Interest expense 90,253 87,063
Interest income (16,244) (19,613)
Equity investment results 5,971 6,837
Litigation charge - 5,170
Impairment/restructuring charge 43,205 649
- ----------------------------------------------------------------------------
Total costs and expenses 7,845,767 8,018,004
- ----------------------------------------------------------------------------
Earnings (loss) before taxes (31,159) 55,065
Taxes on income (loss) (4,580) 26,156
- ----------------------------------------------------------------------------
Net earnings (loss) $ (26,579) $ 28,909
============================================================================
Basic and diluted net earnings (loss) per share $(.70) $.76
Dividends paid per share $.04 $.04
Weighted average shares outstanding:
Basic 38,169 37,828
Diluted 38,169 37,996
============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial statements
and independent accountants' review report.
<TABLE>
Consolidated Condensed Balance Sheets
(In thousands)
<CAPTION>
============================================================================
July 10, December 26,
Assets 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,585 $ 5,967
Receivables 400,168 450,905
Inventories 852,486 984,287
Other current assets 174,196 146,757
- ----------------------------------------------------------------------------
Total current assets 1,430,435 1,587,916
Investments and notes receivable 118,829 119,468
Investment in direct financing leases 133,841 177,783
Property and equipment 1,652,512 1,554,884
Less accumulated depreciation
and amortization (779,597) (734,819)
- ----------------------------------------------------------------------------
Net property and equipment 872,915 820,065
Deferred income taxes 33,148 51,497
Other assets 184,679 154,524
Goodwill 593,323 579,579
- ----------------------------------------------------------------------------
Total assets $3,367,170 $3,490,832
============================================================================
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 876,603 $ 945,475
Current maturities of long-term debt 40,368 41,368
Current obligations under capital leases 22,567 21,668
Other current liabilities 251,255 272,573
- ----------------------------------------------------------------------------
Total current liabilities 1,190,793 1,281,084
Long-term debt 1,139,439 1,143,900
Long-term obligations under capital leases 363,690 359,462
Other liabilities 126,294 136,455
Commitments and contingencies
Shareholders' equity:
Common stock, $2.50 par value per share 97,092 96,356
Capital in excess of par value 512,633 509,602
Reinvested earnings (deficit) (4,941) 23,155
Accumulated other comprehensive income:
Additional minimum pension liability (57,133) (57,133)
- ----------------------------------------------------------------------------
Accumulated other comprehensive income (57,133) (57,133)
Less ESOP note (697) (2,049)
- ----------------------------------------------------------------------------
Total shareholders' equity 546,954 569,931
- ----------------------------------------------------------------------------
Total liabilities and shareholders' equity $3,367,170 $3,490,832
============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial statements
and independent accountants' review report.
<TABLE>
Consolidated Condensed Statements of Cash Flows
For the 28 weeks ended July 10, 1999, and July 11, 1998
(In thousands)
<CAPTION>
============================================================================
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(26,579) $ 28,909
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 83,876 98,226
Credit losses 12,558 7,914
Deferred income taxes 5,427 11,331
Equity investment results 5,882 6,837
Impairment/restructuring and related charges 61,420 934
Cash payments on impairment/restructuring
and related charges (34,104) (1,347)
Change in assets and liabilities, excluding
effect of acquisitions:
Receivables 45,847 (92,934)
Inventories 128,881 34,022
Accounts payable (68,872) 28,846
Other assets and liabilities (44,503) (22,147)
Other adjustments, net (1,126) (5,233)
- ----------------------------------------------------------------------------
Net cash provided by operating activities 168,707 95,358
- ----------------------------------------------------------------------------
Cash flows from investing activities:
Collections on notes receivable 19,764 25,845
Notes receivable funded (23,445) (15,280)
Purchase of property and equipment (82,504) (84,474)
Proceeds from sale of property and equipment 6,089 14,055
Investments in customers (8,037) (1,009)
Proceeds from sale of investment 2,203 3,483
Businesses acquired (78,075) -
Proceeds from sale of businesses 7,496 -
Other investing activities 2,441 4,430
- ----------------------------------------------------------------------------
Net cash used in investing activities (154,068) (52,950)
- ----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term borrowings 101,000 35,000
Principal payments on long-term debt (106,461) (76,028)
Principal payments on capital lease obligations (13,107) (11,929)
Sale of common stock under incentive
stock and stock ownership plans 3,130 4,196
Dividends paid (1,552) (1,541)
Other financing activities (31) (448)
- ----------------------------------------------------------------------------
Net cash used in financing activities (17,021) (50,750)
- ----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (2,382) (8,342)
Cash and cash equivalents, beginning of period 5,967 30,316
- ----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,585 $ 21,974
============================================================================
Supplemental information:
Cash paid for interest $ 89,572 $ 97,633
Cash paid for taxes $8,730 $11,021
============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial statements
and independent accountants' review report.
<PAGE>
Notes to Consolidated Condensed Financial Statements (See independent
accountants' review report)
1. The consolidated condensed balance sheet as of July 10, 1999, and the
consolidated condensed statements of operations and cash flows for the 12-week
and 28-week periods ended July 10, 1999, and for the 12-week and 28-week
periods ended July 11, 1998, have been prepared by the company, without audit.
In the opinion of management, all adjustments necessary to present fairly the
company's financial position at July 10, 1999, and the results of operations
and cash flows for the periods presented have been made. All such adjustments
are of a normal, recurring nature except as disclosed. Both basic and diluted
earnings or loss per share are computed based on net earnings or loss divided
by weighted average shares as appropriate for each calculation subject to
antidilution limitations.
The preparation of the consolidated condensed 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.
Certain reclassifications have been made to prior year amounts to conform to
current year classifications.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the company's 1998 annual
report on Form 10-K.
3. The LIFO method of inventory valuation is used for determining the cost of
most grocery and certain perishable inventories. The excess of current cost
of LIFO inventories over their stated value was $50 million at July 10, 1999,
and $44 million at December 26, 1998.
4. Sales and operating earnings for the company's food distribution and retail
food segments are presented below.
<TABLE>
<CAPTION>
============================================================================
For the 12 weeks ended
July 10, July 11,
($ in millions) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Sales:
Food distribution $2,983 $3,139
Intersegment elimination (507) (451)
- ----------------------------------------------------------------------------
Net food distribution 2,476 2,688
Retail food 874 818
- ----------------------------------------------------------------------------
Total sales $3,350 $3,506
============================================================================
Operating earnings:
Food distribution $62 $62
Retail food 4 21
Corporate (25) (25)
- ----------------------------------------------------------------------------
Total operating earnings 41 58
Interest expense (39) (36)
Interest income 6 8
Equity investment results (2) (3)
Litigation charge - (2)
Impairment/restructuring charge (6) (1)
- ----------------------------------------------------------------------------
Earnings (loss) before taxes $ - $24
============================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================
For the 28 weeks ended
July 10, July 11,
($ in millions) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Sales:
Food distribution $6,985 $7,235
Intersegment elimination (1,182) (1,061)
- ----------------------------------------------------------------------------
Net food distribution 5,803 6,174
Retail food 2,012 1,899
- ----------------------------------------------------------------------------
Total sales $7,815 $8,073
============================================================================
Operating earnings:
Food distribution $145 $154
Retail food 17 40
Corporate (70) (58)
- ----------------------------------------------------------------------------
Total operating earnings 92 136
Interest expense (90) (87)
Interest income 16 19
Equity investment results (6) (7)
Litigation charge - (5)
Impairment/restructuring charge (43) (1)
- ----------------------------------------------------------------------------
Earnings (loss) before taxes $(31) $ 55
============================================================================
</TABLE>
General corporate expenses are not allocated to food distribution and retail
food segments. The transfer pricing between segments is at cost.
5. The company's comprehensive loss for the 12 weeks ended July 10, 1999
totaled $2.3 million compared to comprehensive income for the 12 weeks ended
July 11, 1998 which totaled $13.6 million. The company's comprehensive loss
for the 28 weeks ended July 10, 1999 totaled $26.6 million compared to
comprehensive income for the 28 weeks ended July 11, 1998 which totaled $33.8
million. The comprehensive amounts for both periods in 1999 and the 12 week
period in 1998 were comprised only of the reported net loss, whereas the
comprehensive income for the 28 week period in 1998 was comprised of the
reported net income plus changes in foreign currency translation adjustments.
6. 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:
Class Action Suits.
In 1996, certain stockholders and one noteholder filed purported class action
suits against the company and certain of its present and former officers and
directors, each in the U.S. District Court for the Western District of
Oklahoma. In 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. During 1998, the
noteholder case was dismissed and during the first quarter of 1999, the
consolidated case was also dismissed, each without prejudice. The court gave
the plaintiffs the opportunity to restate their claims without prejudice and
amended complaints were filed in both cases during the first quarter of 1999.
In May 1999, the company filed motions to dismiss in both cases, and in July
1999, the plaintiffs responded. The court has not yet ruled on the motions.
Tru Discount Foods.
Fleming brought suit in 1994 on a note and an open account against its former
customer, Tru Discount Foods. The case was initially referred to arbitration
but later restored to the trial court; Fleming appealed. In 1997, the
defendant amended its counter claim against the company alleging fraud,
overcharges for products and violations of the Oklahoma Deceptive Trade
Practices Act. In 1998, the appellate court reversed the trial court and
directed that the matter be sent again to arbitration. The arbitration hearing
resumed and was concluded in July, 1999. During this hearing, the
respondents, Tru Discount and its former operators, claimed that they were
entitled to recover damages of approximately $13 million on their
counterclaims. The arbitration panel is expected to rule by late September
1999. Management is unable to predict the ultimate outcome of this matter.
However, an unfavorable outcome could have a material adverse effect on the
company.
Don's United Super (and related cases).
In 1998, the company and two retired executives were named in a suit filed by
approximately 20 current and former customers of the company (Don's United
Super, et al. v. Fleming, et al.). Plaintiffs operate retail grocery stores
in the St. Joseph and Kansas City metropolitan areas. Six plaintiffs who were
parties to supply contracts containing arbitration clauses were permitted to
withdraw from the case.
Previously, two cases had been filed in the same court (R&D Foods, Inc. et al.
v. Fleming, et al. and Robandee United Super, Inc. et al. v. Fleming, et al.)
by 10 customers, some of whom are plaintiffs in the Don's case. The earlier
two cases, which principally seek an accounting of the company's expenditure
of certain joint advertising funds, have been consolidated. All causes of
action in these cases have been stayed pending the arbitration of the causes
of action relating to supply contracts containing arbitration clauses.
The Don's suit alleges product overcharges, breach of contract, breach of
fiduciary duty, misrepresentation, fraud, and RICO violations and seeks
recovery of actual, punitive and treble damages and a declaration that certain
contracts are voidable at the option of the plaintiffs. Damages have not been
quantified. However, with respect to some plaintiffs, the time period during
which the alleged overcharges took place exceeds 25 years and the company
anticipates that the plaintiffs will allege substantial monetary damages.
In October 1998, a group of 14 retailers (ten of whom had been or are
currently plaintiffs in the Don's case and/or the Robandee case whose claims
were sent to arbitration or stayed pending arbitration) filed a new action
against the company and two former officers, one of whom was a director
(Coddington Enterprises, Inc., et al. v. Dean Werries, et al.). The
plaintiffs assert claims virtually identical to those set forth in the Don's
complaint and have not quantified damages in their pleadings.
Plaintiffs have made a settlement demand in the Don's case for $42 million and
in the Coddington case for $44 million. In July 1999, the court in the
Coddington case (i) granted the company's motion to compel arbitration as to
two of the plaintiffs and denied it as to the other plaintiffs, (ii) denied
the company's motion to consolidate the Coddington and Robandee cases and
(iii) denied the company's motion for summary judgment as to one of the
plaintiffs. The company has appealed the ruling. Although management is
currently unable to predict the ultimate outcome of this litigation, based
upon the plaintiffs' allegations, an unfavorable outcome could have a material
adverse effect on the company.
Storehouse Markets.
In 1998, the company and one of its associates were named in a suit filed in
the United States District Court for the District of Utah by three current and
former customers of the company (Storehouse Markets, Inc., et al. v. Fleming
Companies, Inc., et al.). The plaintiffs allege product overcharges,
fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach
of contract, breach of duty of good faith and fair dealing and RICO violations
and seek declaration of class action status and recovery of actual, punitive
and treble damages. Damages have not been quantified. However, the company
anticipates that the plaintiffs will seek substantial monetary damages. The
company intends to vigorously defend its interests in this case but is
currently unable to predict the ultimate outcome. Based upon the plaintiffs'
allegations, an unfavorable outcome could have a material adverse effect on
the company.
Y2K.
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 third quarter of 1999. Although the company is developing
greater levels of confidence regarding its internal systems, failure to ensure
that the company's computer systems are year-2000 compliant could have a
material adverse effect on the company's operations. In addition, failure of
the company's customers or vendors to become year-2000 compliant could also
have a material adverse effect on the company's operations.
Program costs to comply with year-2000 requirements are being expensed as
incurred. Through the end of the second quarter of 1999, total expenditures to
third parties were approximately $8 million since the beginning of 1997.
Other.
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, 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 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 and former
employees regarding labor conditions, wages, workers' compensation matters and
alleged discriminatory practices; disputes with insurance carriers; 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.
7. Certain indebtedness is 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 no restrictions on the ability of the subsidiary
guarantors to transfer funds to the company in the form of cash dividends,
loans or advances. Full financial statements for the subsidiary guarantors
are not presented herein because management does not believe such information
would be material.
The following 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.
July 10, July 11,
(In millions) 1999 1998
Current assets $39 $29
Noncurrent assets $125 $70
Current liabilities $30 $15
Noncurrent liabilities $35 $7
28 weeks ended
July 10, July 11,
(In millions) 1999 1998
Net sales $253 $191
Costs and expenses $255 $195
Net loss $(1) $(3)
8. The accompanying operating statements include the following:
12 weeks ended
(In thousands) July 10, July 11,
1999 1998
Depreciation and
amortization (includes
amortized costs in
interest expense) $37,559 $41,847
Amortized costs in
interest expense $1,125 $1,136
28 weeks ended
(In thousands) July 10, July 11,
1999 1998
Depreciation and
amortization (includes
amortized costs in
interest expense) $83,876 $98,226
Amortized costs in
interest expense $2,623 $2,975
9. In December 1998, the company announced the implementation of a strategic
plan designed to improve the competitiveness of the retailers the company
serves and improve the company's performance by building stronger operations
that can better support long-term growth. The four major initiatives of the
strategic plan are to consolidate food distribution operations, grow food
distribution sales, improve retail food performance, and reduce overhead and
operating expenses.
The total pre-tax charge of the strategic plan is presently estimated at $820
million. The pre-tax charge recorded to-date is $730 million ($16 million in
the second quarter of 1999, $46 million in the first quarter of 1999 and $668
million recorded in 1998). After tax, the expense for the first two quarters
of 1999 was $44 million or $1.15 per share ($12 million or $.31 per share for
quarter two and $32 million or $.84 per share for quarter one). The $90
million of costs relating to the strategic plan not yet charged against income
will be recorded throughout the rest of 1999 and 2000 at the time such costs
are accruable.
The $16 million charge in the second quarter of 1999 was included on several
lines of the Consolidated Condensed Statements of Operations: $7 million was
included in cost of sales and was primarily related to inventory valuation
adjustments; $3 million was included in selling and administrative expense as
disposition related costs recognized on a periodic basis; and the remaining $6
million was included in the impairment/restructuring charge line. The $16
million charge consisted of the following components:
o Impairment of assets of $1 million.
o Restructuring charges of $5 million. The restructuring charges
consisted primarily of severance and lease liabilities.
o Other disposition and related costs of $10 million. These costs
consisted primarily of inventory valuation adjustments, disposition
related costs recognized on a periodic basis and other costs.
The $16 million charge relates to the company's segments as follows: $4
million relates to the food distribution segment and $7 million relates to the
retail food segment with the balance relating to corporate overhead expenses.
The $62 million year-to-date charge was included in the following lines of the
Consolidated Condensed Statements of Operations: $13 million was included in
cost of sales and was primarily related to inventory valuation adjustments; $6
million was included in selling and administrative expense as disposition
related costs recognized on a periodic basis; and the remaining $43 million
was included in the impairment/restructuring charge line. The $62 million
charge consisted of the following components:
o Impairment of assets of $25 million. The impairment components were
$22 million for goodwill and $3 million for other long-lived assets.
o Restructuring charges of $18 million. The restructuring charges
consisted primarily of severance, lease liabilities and pension
withdrawal liabilities.
o Other disposition and related costs of $19 million. These costs
consisted primarily of inventory valuation adjustments, disposition
related costs recognized on a periodic basis and other costs.
The $62 million year-to-date charge relates to the company's segments as
follows: $36 million relates to the food distribution segment and $15 million
relates to the retail food segment with the balance relating to corporate
overhead expenses.
The strategic plan includes workforce reductions which have been recorded to-
date as follows:
($'s in thousands) Amount Headcount
1998 Activity:
Charge $25,441 1,430
Terminations (3,458) (170)
1998 Ending Liability $21,983 1,260
1999 Quarter 1 Activity:
Charge 8,565 910
Terminations (12,039) (970)
Qtr 1 Ending Liability $18,509 1,200
1999 Quarter 2 Activity:
Charge 1,912 170
Terminations (7,433) (910)
Qtr 2 Ending Liability $12,988 460
Additionally, the strategic plan includes charges related to lease obligations
which will be utilized as operating units or retail stores close, but
ultimately reduced over the expected remaining lease terms. The charges and
utilization have been recorded to-date as follows:
($'s in thousands) Amount
1998 Activity:
Charge $28,101
Utilized (385)
1998 Ending Liability $27,716
1999 Quarter 1 Activity:
Charge 2,337
Utilized (3,870)
Qtr 1 Ending Liability $26,183
1999 Quarter 2 Activity:
Charge 39
Utilized (7,323)
Qtr 2 Ending Liability $18,899
Asset impairments were recognized in accordance with SFAS No. 121 - Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, and such assets were written down to their estimated fair values
based on estimated proceeds of operating units to be sold or discounted cash
flow projections. The operating costs of operating units to be sold or closed
are treated as normal operations during the period they remain in use.
Salaries, wages and benefits of employees at these operating units are charged
to operations during the time such employees are actively employed.
Depreciation expense is continued for assets that the company is unable to
remove from operations.
Independent Accountants' Review Report
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
FLEMING COMPANIES, INC.
We have reviewed the accompanying condensed consolidated balance sheet of
Fleming Companies, Inc. and subsidiaries as of July 10, 1999, and the related
condensed consolidated statements of income for the 12 and 28 weeks ended July
10, 1999 and July 11, 1998 and condensed consolidated statements of cash flows
for the 28 weeks ended July 10, 1999 and July 11, 1998. These financial
statements are the responsibility of the company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Fleming Companies Inc. and
subsidiaries as of December 26, 1998, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the year then ended
(not presented herein); and in our report dated February 18, 1999, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 26, 1998 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
July 29, 1999
Item 2. Management's Discussion and Analysis of Financial Condition And
Results of Operations
General
In early 1998 the Board of Directors and senior management began an extensive
strategic planning process that evaluated all aspects of Fleming's business.
With the help of a consulting firm, the evaluation and planning process was
completed late in 1998. In December 1998, the strategic plan was approved and
implementation efforts began. The strategic plan involves three key
strategies to restore sales and earnings growth: focus resources to improve
performance, build sales more aggressively in our wholesale business and
company-owned retail stores, and reduce overhead and operating costs to
improve profitability system-wide.
The three strategies are further defined in the following four major
initiatives:
o Consolidate food distribution operations. The strategic plan
initially included closing seven operating units - two in 1998 and
five in 1999. Of the five in 1999, all but one have been completed.
An additional closing has taken place in 1999 which was not
originally part of the strategic plan, but was added to the plan when
costs associated with continuing to service customers during a strike
coupled with costs of reopening the operating unit made closing the
operating unit an economically sound decision. Although there has
been some loss in sales from all of these closings, many of the
customers at these seven operating units were transferred and are
being serviced by remaining operating units. Any capital returned
from the sale of assets from the closed operating units has been
reinvested in the business.
o Grow food distribution sales. Higher volume, better-utilized food
distribution operations and the dynamics of the market place
represent an opportunity for sales growth. During the first two
quarters of 1999, significant new customers were added in the food
distribution segment. Just after the second quarter end, increased
business with Kmart Corporation was announced which is expected to
result in approximately $1 billion in annualized new sales.
o Improve retail food performance. The strategic plan not only
requires selling or closing under-performing company-owned retail
chains or groups, but also calls for increased investments in market
leading company-owned chains or groups. During the second quarter of
1999, the selling or closing of a third under-performing company-
owned retail chain was announced. The selling or closing of the
first two chains is almost finished and the third chain should be
completed by the end of the fourth quarter. Also during the first
two quarters of 1999, the company built or acquired more than 25
retail stores that are expected to fit in well strategically with its
existing chains. A number of remodels of existing retail stores have
also been completed during the quarter.
o Reduce overhead and operating expenses. Overhead will be reduced at
both the corporate and operating unit levels through organization and
process changes. In addition, several initiatives are underway to
reduce complexity in business systems and remove non-value-added
costs from operations. During the first quarter of 1999, the company
worked with specialists in supply chain management on plans to begin
implementing cost reductions. In the second quarter of 1999, the
company finalized some of those plans and began implementation.
During the first two quarters of 1999, the company eliminated over
200 corporate positions.
Implementation of the strategic plan is expected to continue through the year
2000. This time frame accommodates the company's limited resources and
customers' seasonal marketing requirements. Additional expenses will continue
for some time beyond the year 2000 because certain disposition related costs
can only be expensed when incurred.
The total pre-tax charge of the strategic plan is presently estimated at $820
million. The pre-tax charge recorded to-date is $730 million ($16 million in
the second quarter of 1999, $46 million in the first quarter of 1999 and $668
million recorded in 1998). Of the $16 million charge in the second quarter of
1999, $10 million is expected to require cash expenditures. The remaining $6
million consisted of noncash items. The $16 million charge consisted of the
following components:
o Impairment of assets of $1 million.
o Restructuring charges of $5 million. The restructuring charges
consisted primarily of severance and lease liabilities.
o Other disposition and related costs of $10 million. These costs
consisted primarily of inventory valuation adjustments, disposition
related costs recognized on a periodic basis and other costs.
The company recorded a net loss of $2 million or $.06 per share for the second
quarter of 1999. The after-tax effect of the strategic plan charge on the
company's second quarter of 1999 was $12 million or $.31 per share. Excluding
the strategic plan charge, the company would have recorded net income of $10
million or $.25 per share. EBITDA for the second quarter of 1999, excluding
the strategic plan charge, was $96 million. EBITDA is earnings before
extraordinary items, interest expense, income taxes, depreciation and
amortization, equity investment results and LIFO provision. EBITDA should not
be considered as an alternative measure of the company's net income, operating
performance, cash flow or liquidity. It is provided as additional information
related to the company's ability to service debt; however, conditions may
require conservation of funds for other uses. Although the company believes
EBITDA enhances a reader's understanding of the company's financial condition,
this measure, when viewed individually, is not necessarily a better indicator
of any trend as compared to conventionally computed measures (e.g., net sales,
net earnings, net cash flows, etc.). Finally, amounts presented may not be
comparable to similar measures disclosed by other companies.
Additional pre-tax expense of approximately $90 million is expected throughout
the rest of 1999 and 2000 relating to the continuing implementation of the
strategic plan. Approximately $61 million of these future expenses are
expected to require cash expenditures. The remaining $29 million of the
future expense relates to noncash items. These future expenses will consist
primarily of severance, real estate-related expenses, pension withdrawal
liabilities and other costs expensed when incurred.
Under the plan, the company has assessed the strategic significance of all
operating units. The company anticipates the improved performance of several
strategic operating units. However, in the event that performance is not
improved, operating units could be sold or closed.
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>
=============================================================================
July 10, July 11,
For the 12 weeks ended 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Net sales 100.00 % 100.00 %
Gross margin 9.77 9.75
Less:
Selling and administrative 8.57 8.11
Interest expense 1.15 1.02
Interest income (.21) (.24)
Equity investment results .07 .09
Litigation charge - .06
Impairment/restructuring charge .18 .03
- -----------------------------------------------------------------------------
Total expenses 9.76 9.07
- -----------------------------------------------------------------------------
Earnings before taxes .01 .68
Taxes on income .08 .29
- -----------------------------------------------------------------------------
Net income (loss) (.07)% .39 %
=============================================================================
July 10, July 11,
For the 28 weeks ended 1999 1998
- -----------------------------------------------------------------------------
Net sales 100.00 % 100.00 %
Gross margin 9.67 9.71
Less:
Selling and administrative 8.50 8.04
Interest expense 1.15 1.08
Interest income (.21) (.24)
Equity investment results .08 .08
Litigation charge - .06
Impairment/restructuring charge .55 .01
- -----------------------------------------------------------------------------
Total expenses 10.07 9.03
- -----------------------------------------------------------------------------
Earnings (loss) before taxes (.40) .68
Taxes on income (loss) (.06) .32
- -----------------------------------------------------------------------------
Net income (loss) (.34)% .36 %
=============================================================================
</TABLE>
Net sales.
Sales for the second quarter (12 weeks) of 1999 decreased by $157 million, or
5%, to $3.3 billion from the same period in 1998. Year to date, sales
decreased by $258 million, or 3%, to $7.8 billion from the same period in
1998.
Net sales for the food distribution segment were $2.5 billion for the second
quarter of 1999 compared to $2.7 billion from the same period in 1998. Year
to date, sales decreased to $5.8 billion in 1999 compared to $6.2 million in
1998. The sales decreases were primarily due to the previously announced loss
of sales to Furr's and Randall's and the disposition of the Portland division.
These sales losses plus the prospective loss of sales to United in 2000 will
be partially offset by the increase in sales to Kmart Corporation.
Retail food segment sales increased $56 million, or 7%, in the second quarter
of 1999 to $874 million from the same period in 1998. Year to date, retail
food segment sales increased $113 million, or 6%, to $2.0 billion from the
same period in 1998. The increase in sales was due primarily to new stores
added since early in 1998. This was offset partially by the closing of non-
performing stores and a decrease in same-store sales of 2.9% and 1.5% for the
second quarter and year-to-date periods in 1999 compared to the same periods
in 1998.
Fleming measures inflation using data derived from the average cost of a ton
of product sold by the company. Food price inflation year-to-date was down
slightly at 1.7% compared to 1.9% for the same period in 1998.
Gross margin.
Gross margin for the second quarter of 1999 decreased by $15 million, or 4%,
to $327 million from $342 million for the same period in 1998, but increased
as a percentage of net sales to 9.77% from 9.75% for the same period in 1998.
Year to date, gross margin decreased by $28 million, or 4%, to $756 million in
1999 from $784 million in 1998, and decreased as a percentage of net sales to
9.67% from 9.71% for the same period in 1998. Gross margin in 1999 was
adversely affected by costs relating to the strategic plan, primarily
inventory valuation adjustments. Excluding strategic plan charges, the
quarter and year-to-date comparisons to the prior year reflect a decrease in
gross margin dollars and an increase in gross margin as a percentage of net
sales. The decrease in dollars was due primarily to the overall sales
decrease. The increase in percentage to net sales was due to the impact of
the growing retail food segment compared to the food distribution segment.
The retail food segment has the better margins of the two segments. This
increase was partly offset by lower margins in the retail food segment due to
competitive pricing at company-owned new stores.
Selling and administrative expenses.
Selling and administrative expenses for the second quarter of 1999 increased
by approximately $3 million, or 1%, to $287 million from $284 million for the
same period in 1998 and increased as a percentage of net sales to 8.57% for
1999 from 8.11% in 1998. Year to date, selling and administrative expenses
increased $15 million, or 2%, to $664 million in 1999 from $649 million in
1998 and increased as a percentage of net sales to 8.50% for 1999 from 8.04%
in 1998. The increase in dollars was partly due to costs relating to the
strategic plan. The increase in percentage to net sales was due to the impact
of the growing retail food segment compared to the food distribution segment.
The retail food segment has higher operating expenses as a percent to sales
compared to the food distribution segment. Credit loss expense is included in
selling and administrative expenses and was flat for the second quarter of
1999 compared to the same period in 1998 at $5 million. Year to date, credit
loss expense was $13 million in 1999 compared to $8 million in 1998.
As more fully described in the 1998 Annual Report on Form 10-K, the company
has a significant amount of credit extended to its 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.
Operating earnings.
Operating earnings for the food distribution segment were flat for the second
quarter of 1999 compared to the same period of 1998 at $62 million. Year to
date, operating earnings decreased for the food distribution segment by $9
million, or 6%, to $145 million in 1999 from $154 million in 1998. Excluding
the costs relating to the strategic plan, operating earnings improved slightly
in the second quarter of 1999 and were almost flat year-to-date compared to
the same periods in 1998.
Operating earnings for the retail food segment decreased by $17 million to $4
million for the second quarter of 1999 from $21 million for the same period of
1998. Year to date, operating earnings decreased for the retail food segment
by $23 million to $17 million in 1999 from $40 million in 1998. Operating
earnings were affected primarily by costs relating to the strategic plan and
negative same-store sales. Start-up costs of new stores also had an effect on
operating earnings.
Corporate expenses were flat in the second quarter of 1999 compared to the
same period of 1998 at $25 million. Year to date, corporate expenses were $12
million higher at $70 million in 1999 compared to $58 million in 1998. Closed
store expense, the LIFO charge and incentive compensation expense were higher
in 1999 than in 1998. Costs relating to the strategic plan had little effect
on corporate expenses during these periods.
Interest expense.
Interest expense for the second quarter of 1999 was $3 million higher than
1998 due primarily to 1998's low interest expense as a consequence of a
favorable settlement of tax assessments. The higher 1999 expense was also due
to higher average debt balances. Year to date, interest expense was $3
million higher for the same reasons.
The company's derivative agreements consist of simple "floating-to-fixed rate"
interest rate swaps. For the second quarter of 1999, interest rate hedge
agreements contributed $1.3 million of interest expense compared to the $0.9
million contribution made in the same period of 1998. Year to date, interest
rate hedge agreements contributed $2.8 million to interest expense compared to
$2.4 million in 1998. For a description of these derivatives, see Item 7A.
Quantitative and Qualitative Disclosures about Market Risk in the company's
Annual Report on Form 10-K for the fiscal year ended December 26, 1998.
Interest income.
Interest income for the second quarter of 1999 was $1 million lower than 1998
due to lower average balances for the company's investment in direct financing
leases. Year to date, interest income was $3 million lower for primarily the
same reason.
Equity investment results.
The company's portion of operating losses from equity investments reflected a
small improvement for both the second quarter and year-to-date periods in 1999
compared to the same periods in 1998.
Litigation charge.
In 1998, the $2 million charge in the second quarter and the $5 million year-
to-date charge represented an $800,000 per month payment to Furr's as part of
a settlement agreement. The payments ceased upon the closing of the sale of
the El Paso product supply center to Furr's in October 1998.
Impairment/restructuring charge.
The pre-tax charge for the strategic plan recorded in the Consolidated
Condensed Statements of Operations totaled $16 million for the second quarter
of 1999 and $62 million for 1999 year-to-date. Of these totals, $6 million
and $43 million were reflected in the Impairment/restructuring charge line for
the second quarter and year-to-date periods, respectively, with the balance of
the charges reflected in other financial statement lines. Amounts recorded
for the first two quarters in 1998 for the strategic plan were insignificant.
See "General" above and Note 9 in the notes to the consolidated condensed
financial statements for further discussion regarding the strategic plan.
Taxes on income.
The effective tax rate used for the 28 weeks ended July 10, 1999 was 14.7%,
representing a tax benefit. This is a blended rate taking into account
operat and the timing of these transactions during the year. The effective
tax rate for the 28 weeks ended July 11, 1998 was 47.5%, representing a tax
expense. The tax amount for the second quarter of both years was derived
using the 28 week tax amount with that year's estimated effective tax rate
compared to the tax amount recorded for the first 16 weeks of the year.
Other.
Several factors negatively affecting earnings in the first 28 weeks of 1999
are likely to continue for the near term. Management believes that these
factors include costs related to the strategic plan, lower same-store sales
and operating losses in certain company-owned retail stores.
Liquidity and Capital Resources
Set forth below is certain information regarding the company's capital
structure at the end of the second quarter of 1999 and at the end of fiscal
1998:
<TABLE>
<CAPTION>
============================================================================
Capital Structure (In millions) July 10, 1999 December 26, 1998
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt $1,180 55.8% $1,185 55.5%
Capital lease obligations 386 18.3 381 17.8
- ----------------------------------------------------------------------------
Total debt 1,566 74.1 1,566 73.3
Shareholders' equity 547 25.9 570 26.7
- ----------------------------------------------------------------------------
Total capital $2,113 100.0% $2,136 100.0%
============================================================================
</TABLE>
Note: The above table includes current maturities of long-term debt and
current obligations under capital leases.
Long-term debt at the end of the second quarter of 1999 was the same as year-
end 1998 as cash requirements for capital expenditures, acquisitions of retail
stores and other investments, plus debt service requirements, were offset by
net cash provided from operations, borrowings under the revolving credit
facility, and sales of assets. Capital lease obligations were $5 million
higher because leases added for new retail stores exceeded repayments.
The debt-to-capital ratio at the end of the second quarter of 1999 was 74.1%,
up from 73.3% at year-end 1998.
Operating activities generated $169 million of net cash flows for the first
two quarters of 1999 compared to $95 million for the same period in 1998.
Working capital was $240 million at the end of the second quarter of 1999, a
decrease from $307 million at year-end 1998. The current ratio decreased to
1.20 to 1, from 1.24 to 1 at year-end 1998.
Capital expenditures were $83 million in the first two quarters of 1999
compared to $84 million for the same period in 1998. Total capital
expenditures in 1999 are expected to be approximately $200 million. The
company's strategic plan involves the divesting of a number of food
distribution and retail food facilities and other assets, and focusing
resources on the remaining food distribution and retail food operations. The
company intends to increase its retail operations by making investments in its
existing stores and by adding approximately 20 stores per year for the
foreseeable future. Acquisitions of supermarket chains or groups or other
food distribution operations will be made only on a selective basis. The
company has recently purchased an eight-store Food 4 Less group in northern
California. Expenditures for this and other acquisitions totalled $78 million
for the first two quarters of 1999 compared to no such expenditures for the
same period in 1998. Proceeds from the sale of retail stores and other
investments totaled $16 million for the first two quarters of 1999 compared to
$18 million for the same period in 1998.
Cash requirements related to the implementation and completion of the
strategic plan (on a pre-tax basis) were $34 million in the first two quarters
of 1999, and are estimated to be a total of $51 million in 1999, $57 million
in 2000, and $63 million thereafter. Management believes working capital
reductions, proceeds from the sale of assets, and increased earnings related
to the successful implementation of the strategic plan are expected to provide
adequate cash flow to cover these incremental costs.
The company makes investments in and loans to certain retail customers. Net
investments and loans increased $3 million in the first two quarters of 1999,
from $137 million at year-end 1998 to $140 million, due primarily to an
increased level of investment in loans to customers and stores acquired for
resale.
In the first two quarters of 1999, the company's primary sources of liquidity
were cash flows from operating activities, borrowings under its credit
facility, and the sale of certain assets and investments. The company's
principal sources of capital, excluding shareholders' equity, are banks and
other lenders and lessors.
The company's credit facility consists of a $600 million revolver, with a
final maturity of July 25, 2003, and a $250 million amortizing term loan, with
a final maturity of July 25, 2004. Up to $300 million of the revolver may be
used for issuing letters of credit, and borrowings and letters of credit
issued under the credit facility may be used for general corporate purposes.
Outstanding borrowings and letters of credit 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 of or other equity interests
owned by the company in its subsidiaries. In addition, the credit facility is
guaranteed by substantially all company subsidiaries. The stated interest
rate on borrowings under the credit agreement is equal to one of a group of
referenced index rates, 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 credit facility and the indentures under which other company debt
instruments were issued contain customary covenants associated with similar
facilities. The credit facility currently contains the following more
significant financial covenants: maintenance of a fixed charge coverage ratio
of at least 1.7 to 1, based on adjusted earnings, as defined, before interest,
taxes, depreciation and amortization, net rent expense and non-cash impairment
and restructuring charges and their related costs; 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 facility. The company is in compliance
with all financial covenants under the credit facility and its indentures.
The credit facility may be terminated in the event of a defined change in
control. Under the company's indentures, noteholders may require the company
to repurchase notes in the event a defined change of control coupled with a
defined decline in credit ratings.
At the end of the second quarter of 1999, borrowings under the credit facility
totaled $204 million in term loans and $110 million of revolver borrowings,
and $81 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 revolver.
At the end of the second quarter of 1999, the company would have been allowed
to borrow an additional $409 million under the revolver based on actual
borrowings and letters of credit outstanding. Under the company's most
restrictive borrowing covenant, which is the fixed charge coverage ratio
contained in the credit facility, $5 million of additional annualized fixed
charges could have been incurred.
On August 24, 1999, Moody's Investors Service revised its outlook on its
ratings for the company to positive and confirmed its existing ratings.
Standard & Poor's rating group is currently reviewing the company's ratings
and is expected to make an announcement in the near future.
Dividend payments in the first two quarters of 1999 were $0.02 per share per
quarter, which was the same per share payout as in the first two quarters of
1998. The credit facility and the indentures for the $500 million of senior
subordinated notes limit restricted payments, including dividends, to $70
million at the end of the first quarter of 1999, based on a formula tied to
net earnings and equity issuances.
For the foreseeable future, the company's principal sources of liquidity and
capital are expected to be cash flows from operating activities, the company's
ability to borrow under its credit facility and asset sale proceeds. In
addition, lease financing may be employed for new retail stores and certain
equipment. Management believes these sources will be adequate to meet working
capital needs, capital expenditures (including expenditures for acquisitions,
if any), strategic plan implementation costs and other capital needs for the
next 12 months. Three of the company's largest customers (Furr's, Randall's
and United) are moving or have moved to self-distribution, which together
represent approximately 8% of the company's sales in 1998. This is expected
to have no significant future impact on the company's liquidity due to the
implementation of cost cutting measures and the new business gained so far
this year, particularly from Kmart Corporation.
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." 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." Such contingent matters are discussed in Note 6 in the notes to
the consolidated condensed financial statements. 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. Also
see Legal Proceedings.
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 including both information
technology (IT) and non-IT systems (e.g., microcontrollers). Fleming's plan
includes extensive systems testing and is expected to be substantially
completed by the third quarter of 1999. Code for the company's largest and
most comprehensive system, FOODS, has been completely remediated, reinstalled
and tested. Based on these tests, the company believes FOODS and the related
systems which run the company's distribution system will be year-2000 ready
and in place at all food distribution operating units. At year-end 1998, the
company was substantially complete with the replacement and upgrading
necessary to make its nearly 5,000 PCs year-2000 ready. Although the company
believes contingency plans for company systems will not be necessary based on
progress to date, contingency plans for failures outside of the company have
been or are being developed. A senior management task force is continually
reviewing and expanding contingency plans for both internal and external
failures that could disrupt the supply chain. These plans deal with such
external variables as loss of power or water, unusual consumer buying
patterns, availability of cash, and other infrastructure issues. The content
of the contingency plans varies depending on the system and the assessed
probability of failure and such plans are modified periodically. The
alternatives include reallocating internal resources, obtaining additional
outside resources, implementing temporary manual processes or temporarily
rolling back internal clocks. Although the company is developing greater
levels of confidence regarding its internal systems, failures in the company's
systems or failures in the supply chain or infrastructure could have a
material adverse effect on the company's operations.
The company is also assessing the status of its vendors' and customers'
year-2000 readiness through meetings, discussions, notices and questionnaires.
Vendor and customer responses and feedback are varied and in some cases
inconclusive. Accordingly, the company believes the most likely worst case
scenario could be customers' failure to serve and retain consumers resulting
in a negative impact on the company's sales. 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.
Program costs to comply with year-2000 requirements are being expensed as
incurred. Total expenditures to third parties in 1997 through completion in
1999 are not expected to exceed $10 million, none of which is incremental.
Through the end of the second quarter of 1999, these third party expenditures
totaled approximately $8 million. 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 includes statements that (a) predict or forecast future events or
results, (b) depend on future events for their accuracy, or (c) embody
assumptions which may prove to have been inaccurate, including the company's
ability to successfully achieve the goals of its strategic plan and reverse
sales declines, cut costs and improve earnings; the company's assessment of
the probability and materiality of losses associated with litigation and other
contingent liabilities; the company's ability to develop and implement
year-2000 systems solutions; the company's ability to expand portions of its
business or enter new facets of its business; and the company's expectations
regarding the adequacy of capital and liquidity. These forward-looking
statements and the company's business and prospects are subject to a number of
factors which could cause actual results to differ materially including the:
risks associated with the successful execution of the company's strategic
business plan; adverse effects of the changing industry environment and
increased competition; continuing sales declines and loss of customers;
exposure to litigation and other contingent losses; failure of the company to
achieve necessary cost savings; failure of the company, its vendors or its
customers to develop and implement year-2000 system solutions; and the
negative effects of the company's substantial indebtedness and the limitations
imposed by restrictive covenants contained in the company's debt instruments.
These and other factors are described in the company's Annual Report on Form
10-K for the fiscal year ended December 26, 1998 and in other periodic reports
available from the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
No material change has occurred since year-end 1998. See Item 7A.
Quantitative and Qualitative Disclosures about Market Risk in the company's
Annual Report on Form 10-K for the fiscal year ended December 26, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Set forth below is information regarding litigation which became reportable or
as to which a material development has occurred since the date of the
company's Quarterly Report on Form 10-Q for the quarter ended April 17, 1999:
(1) Class Action Suits. In 1996, certain stockholders and one noteholder
filed purported class action suits against the company and certain of its
present and former officers and directors, each in the U.S. District Court for
the Western District of Oklahoma. In 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. During 1998, the noteholder case was dismissed and during the first
quarter of 1999, the consolidated case was also dismissed, each without
prejudice. The court gave the plaintiffs the opportunity to restate their
claims without prejudice and amended complaints were filed in both cases
during the first quarter of 1999. In May 1999, the company filed motions to
dismiss in both cases, and in July 1999, the plaintiffs responded. The court
has not yet ruled on the motions.
(2) Derivative Suits. In October 1996, certain of the company's present
and former officers and directors were named as defendants in two purported
shareholder derivative suits in the U.S. District Court for the Western
District of Oklahoma (Cauley, et al. v. Stauth, et al. and Rosenberg et al. v.
Stauth, et al.). Plaintiffs' complaints contain allegations that, among other
matters, the individual defendants breached their respective fiduciary duties
to the company and seek damages from the individual defendants.
Plaintiffs, the individual defendants and the company, have agreed to a
Stipulation of Compromise and Dismissal that was filed with the court on May
24, 1999. The Stipulation recognizes that certain changes have been made at
the company since the derivative cases were filed and provides for payment of
plaintiffs' attorneys fees and expenses not exceeding $860,000. The
Stipulation will not be effective unless it is approved by the court after
notice to shareholders and a hearing. If approved by the court, the
derivative cases will be dismissed as to all defendants. Notice was sent to
shareholders in June 1999, and, at the hearing held August 24, 1999, the
Stipulation was approved and the case was dismissed.
(3) Tobacco Cases. With respect to notices of suit or intention to sue
filed by 27 individuals in the Court of Common Pleas of Philadelphia County,
complaints were filed during the first quarter of 1999 in two of the cases
which were then removed to the United States District Court for the Eastern
District of Pennsylvania. During the second quarter, these cases were
remanded to the Court of Common Pleas of Philadelphia County. No trial date
has been set. With respect to each case, the company is being indemnified and
defended by a substantial third-party co-defendant.
(4) Don's United Super (and related cases). In 1998, the company and two
retired executives were named in a suit filed in the United States District
Court for the Western District of Missouri by approximately 20 current and
former customers of the company (Don's United Super, et al. v. Fleming, et
al.). Previously, two cases had been filed in the same court (R&D Foods,
Inc., et al. v. Fleming, et al. and Robandee United Super, Inc., et al. v.
Fleming, et al.) by 10 customers, some of whom are plaintiffs in the Don's
case. Also in 1998, a group of 14 retailers (ten of whom had been or are
currently plaintiffs in the Don's case and/or the Robandee case whose claims
were sent to arbitration or stayed pending arbitration) filed a new action
against the company and two former officers, one of whom was a director, in
the Western District of Missouri (Coddington Enterprises, Inc., et al. v. Dean
Werries, et al.).
The Don's suit alleges product overcharges, breach of contract, breach of
fiduciary duty, misrepresentation, fraud, and RICO violations and seeks
recovery of actual, punitive and treble damages and a declaration that certain
contracts are voidable at the option of the plaintiffs. Damages have not been
quantified. However, with respect to some plaintiffs, the time period during
which the alleged overcharges took place exceeds 25 years and the company
anticipates that the plaintiffs will allege substantial monetary damages.
Plaintiffs in the Coddington case assert claims virtually identical to those
set forth in the Don's complaint. Plaintiffs have made a settlement demand in
the Don's case for $42 million and in the Coddington case for $44 million. In
July 1999, the court in the Coddington case (i) granted the company's motion
to compel arbitration as to two of the plaintiffs and denied it as to the
other plaintiffs, (ii) denied the company's motion to consolidate the
Coddington and Robandee cases and (iii) denied the company's motion for
summary judgment as to one of the plaintiffs. The company has appealed the
ruling.
(5) Tru Discount Foods. Fleming brought suit in 1994 on a note and an open
account against its former customer, Tru Discount Foods. The case was
initially referred to arbitration but later restored to the trial court;
Fleming appealed. In 1997, the defendant amended its counter claim against
the company alleging fraud, overcharges for products and violations of the
Oklahoma Deceptive Trade Practices Act. In 1998, the appellate court reversed
the trial court and directed that the matter be sent again to arbitration. The
arbitration hearing resumed and was concluded in July, 1999. During this
hearing, the respondents, Tru Discount and its former operators, claimed that
they were entitled to recover damages of approximately $13 million on their
counterclaims. The arbitration panel is expected to rule by late September
1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Page Number
10.53* Severance Agreement with William
J. Dowd effective as of June 17, 1999
10.54* Employment Agreement for William H.
Marquard dated as of June 1, 1999
10.55* Restricted Stock Agreement for
William H. Marquard dated as of
June 1, 1999
10.56* Employment Agreement for Dennis C.
Lucas dated as of July 28, 1999
10.57* Restricted Stock Agreement for
Dennis C. Lucas dated as of July
28, 1999
10.58* Restricted Stock Agreement for
E. Stephen Davis dated as of
July 20, 1999
10.59* Form of Loan Agreement Pursuant
to Executive Stock Ownership
Program
12 Computation of Ratio of Earnings
to Fixed Charges
15 Letter from Independent Accountants
As to Unaudited Interim Financial
Information
27 Financial Data Schedule
* Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLEMING COMPANIES, INC.
(Registrant)
Date: August 24, 1999 KEVIN TWOMEY
Kevin Twomey
Senior Vice President-Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- ------ ----------- ----------------
<S> <C> <C>
10.53 Severance Agreement with William J. Filed herewith electronically
Dowd effective as of June 17, 1999
10.54 Employment Agreement for William H. Filed herewith electronically
Marquard dated as of June 1, 1999
10.55 Restricted Stock Agreement for Filed herewith electronically
William H. Marquard dated as of
June 1, 1999
10.56 Employment Agreement for Dennis C. Filed herewith electronically
Lucas dated as of July 28, 1999
10.57 Restricted Stock Agreement for Filed herewith electronically
Dennis C. Lucas dated as of July 28,
1999
10.58 Restricted Stock Agreement for E. Filed herewith electronically
Stephen Davis dated as of July 20,
1999
10.59 Form of Loan Agreement Pursuant to Filed herewith electronically
Executive Stock Ownership Program
12 Computation of Ratio of Earnings to Filed herewith electronically
Fixed Charges
15 Letter from Independent Accountants Filed herewith electronically
as to Unaudited Interim Financial
Information
27 Financial Data Schedule Filed herewith electronically
</TABLE>
May 20, 1999
HAND DELIVERY
William J. Dowd
Dear Bill:
As we have just discussed, we have decided, with the concurrence of
the Board, to request your resignation as an associate and officer
of the Company. We appreciate all your efforts since you came to
Fleming, but simply believe a change needs to be made. Your
separation will be effective as of the close of business today.
This letter outlines the severance package Fleming is offering you
and, along with the attached General Release, will also reflect our
agreement if you decide to accept this package. This is, of
course, an individualized severance package for you. We think it
is appropriate and fair under all the circumstances. We hope you
will agree.
The terms of your severance package are as follows:
1. Salary Replacement. The Company will pay you salary
replacement in the gross amount of two (2) years' base salary,
payable in equal installments without regard to whether you have
obtained new employment. The first installment will be paid on the
Company's first regular payday after you return executed copies of
this letter agreement and the General Release referenced hereafter
or seven (7) days following that return date, whichever is later.
The remaining installments will be paid throughout the two year
period on the Company's regular paydays.
2. Bonus Potential. If the Company determines at the conclusion
of 1999 that you would otherwise have been eligible for a 1999
bonus under the Fleming Companies, Inc. Corporate Officer Incentive
Plan (the "Bonus Plan"), the Company will pay you a gross amount
equal to the pro rated portion of the bonus you would have earned
under the Bonus Plan between January 1, 1999 through May 20, 1999.
This payment, if any, will be made in calendar year 2000
contemporaneously with the payment of bonuses under the Bonus Plan,
if any, to other eligible Fleming corporate officers.
3. Accrued Vacation. The Company will pay you for 1999 vacation
accrued as of January 1, 1999 and not used. You will receive this
in a lump sum with the first installment of your salary
replacement.
4. "COBRA Premium" Replacement. You have the right pursuant to
COBRA to continued coverage under the Fleming Companies, Inc.
Health Choice Plan (the "Medical Plan"). The Company will pay you
a "COBRA premium" replacement in the amount of eighteen (18) times
the monthly COBRA premium for your current level of coverage under
the Medical Plan, plus a "gross up" to offset income taxes, FICA
and any other payroll taxes. You will receive this payment in a
lump sum with the first installment of your salary replacement.
5. Automobile. The Company will transfer title to you of the
automobile which you have been driving in connection with Company
business seven (7) days after you return executed copies of the
letter agreement and General Release.
6. Reimbursement of Relocation Costs. The Company will
reimburse you for costs you may incur in the twelve (12) months
following your separation in connection with relocating your family
members and personal possessions from your current residence to a
residence outside a 75 mile radius of Oklahoma City, Oklahoma in
order to accept new employment, provided that your next employer
does not regularly pay for these types of relocation expenses for
new executive-level employees and provided that such relocation
costs are reasonable and would be reimbursed to Fleming associates
under the Company's reimbursement practices regarding personal
travel expenses to the new destination and household goods shipment
expenses. This reimbursement will be paid within thirty (30) days
after you submit vouchers representing the payment of these
relocation costs to the Company.
7. Outplacement. The Company will provide you with a "Level
One" executive outplacement package with James Farris & Associates.
If you prefer to use a different outplacement firm, the Company
will pay that firm a reasonable fee (up to 15% of your annual base
salary) for whatever substitute outplacement package you may
select.
8. Taxes. Unless otherwise noted, any payments and benefits
which are subject to federal and state income tax withholding, FICA
and other payroll taxes will be reduced by those amounts by the
Company.
9. General Release. You will execute the General Release which
is attached and return it, along with the executed copy of this
letter agreement, within twenty-one (21) days of the date you
receive this letter. You will also agree not to attempt to revoke
or rescind the General Release at any time in the future or
commence any action against Fleming in regard to your prior
employment relationship. By signing this letter, you are
representing to the Company that you fully understand the General
Release and will have had an opportunity to seek legal advice
regarding the General Release and the agreement proposed by this
letter, if you desire to do so, before signing it. You are also
representing to the Company that between the date of this letter
and the date you sign the General Release, you have not commenced
any charge, action or complaint with any court or with the Equal
Employment Opportunity Commission, the United States or Oklahoma
Departments of Labor or with any other judicial or administrative
agency in regard to your employment relationship or any matters
arising out of that relationship. Finally, you are representing to
the Company that you fully understand that any such filing or
commencement shall constitute a rejection by you of the Company's
severance package offered in this letter.
10. Continued Litigation Assistance. You will continue to
cooperate with and assist the Company and its representatives and
attorneys as requested with respect to any litigation, arbitrations
or other dispute resolutions by being available for interviews,
depositions and/or testimony in regard to any matters in which you
are or have been involved or with respect to which you have
relevant information. The Company will reimburse you for
reasonable expenses you may incur for travel in connection with
this obligation.
11. Future Employment and Confidentiality of Information.
Except with the prior written consent of the Company, during the
period you are receiving salary replacement installments from the
Company under paragraph 1, you will not be employed by or otherwise
act on behalf of an entity which competes with the Company in the
food distribution or marketing business. Except with the prior
written consent of the Company, you will not at any time in the
future be employed or otherwise act as an expert witness or
consultant or in any similar capacity in any litigation,
arbitration, regulatory or agency hearing or other adversarial or
investigatory proceeding involving Fleming. Also, except with the
prior written consent of the Company, you will not at any time
hereafter make any independent use of or disclose to any other
person or organization any of the Company's confidential,
proprietary information or trade secrets. This shall apply to any
information concerning Fleming which is of a special and unique
value and includes, without limitation, both written and unwritten
information relating to operations; business planning and
strategies; litigation strategies; finance; accounting; sales;
personnel, salaries and management; customer names, addresses and
contracts; customer requirements; costs of providing products and
service; operating and maintenance costs; and pricing matters.
This shall also apply to any trade secrets of the Company the
protection of which is of critical importance to Fleming and
includes, without limitation, techniques, methods, processes, data
and the like. This commitment of confidentiality shall also apply
to the terms of this severance package, except for discussions with
your spouse, your personal attorney and/or accountants, or as
needed to enforce our agreement. Any disclosure by such
individuals shall be deemed a disclosure by you and shall have the
same consequences as a breach of our agreement directly by you.
12. Preserving Company Name. You will not at any time in the
future defame, disparage or make statements which could embarrass
or cause harm to the Company's name and reputation or the names and
reputation of any of its officers, directors or representatives, to
the Company's current, former or prospective vendors, customers,
professional colleagues, industry organizations, associates or
contractors, to any governmental or regulatory agency or to the
press or media.
13. Forfeiture. The continued payment by the Company and
retention by you of any payments to be made or benefits provided
under this letter agreement shall be contingent not only on your
execution of the General Release described in paragraph 9, but also
on your on-going compliance with your other obligations under our
agreement, including your commitments in paragraphs 10, 11 and 12.
Breach of your obligations at any time in the future shall entitle
the Company to cease all payments to be made or benefits provided
under this letter agreement and shall entitle the Company to
immediate reimbursement from you of any payments you have
previously received.
14. Indemnification and Insurance. The Company shall hereafter
indemnify you and hold you harmless in the same manner as it would
any other key management associate of the Company with respect to
acts or omissions occurring prior to your separation from employment.
In addition, for a period of at least five years following your
separation from employment, the Company shall cover you under any
Directors and Officers liability insurance policy which may be in
effect covering acts or omissions occurring prior to the
termination of your employment to the same extent it provides such
coverage for directors and officers of the Company at that time.
15. Arbitration. You and the Company agree that your employment
and this severance package relate to interstate commerce, and that
any disputes, claims or controversies between you and Fleming which
may arise out of or relate to our prior employment relationship or
this letter agreement shall be settled by arbitration. Our
agreement to arbitrate shall survive the termination or rescission
of this letter agreement. Any arbitration shall be in accordance
with the Rules of the American Arbitration Association and shall be
undertaken pursuant to the Federal Arbitration Act. Arbitration
will be held in Oklahoma City, Oklahoma unless we mutually agree on
another location. The decision of the arbitrator(s) will be
enforceable in any court of competent jurisdiction. The
arbitrator(s) may award costs and attorneys' fees in connection
with the arbitration to the prevailing party; however, in the
arbitrator's(s') discretion, each party may be ordered to bear
its/his own costs and attorneys' fees. We agree that punitive,
liquidated or indirect damages shall not be awarded by the
arbitrator(s). Nothing in this agreement to arbitrate, however,
shall preclude the Company from obtaining injunctive relief from a
court of competent jurisdiction prohibiting any on-going breaches
by you of your continuing obligations under paragraphs 9, 10, 11 or
12 of this letter agreement pending arbitration.
The agreement of you and the Company, in the event you execute this
letter, will be in consideration of the mutual promises described
above. Also, this letter and the General Release will constitute
the entire agreement between you and Fleming with respect to your
separation from employment and your severance package.
Please contact me if you have any questions about the severance
package. I will need to know your decision no later than the close
of business twenty-one (21) days from the date you receive this
letter.
Very truly yours,
MARK S. HANSEN
Mark S. Hansen
Chairman and Chief Executive Officer
DELIVERED BY:
MARK S. HANSEN
Mark S. Hansen
Signature
Date May 20, 1999
ACCEPTED AND AGREED TO BY:
WILLIAM J. DOWD
William J. Dowd
Date June 17, 1999
<PAGE>
NOTICE. Various state and federal laws, including Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, the Employee Retirement
Income Security Act and the Veterans Reemployment Rights Act (all
as amended from time to time), prohibit employment discrimination
based on sex, race, color, national origin, religion, age,
disability, eligibility for covered employee benefits or veteran
status. These laws are enforced through the Equal Opportunity
Employment Commission (EEOC), United States Department of Labor and
various state or municipal fair employment boards, human rights
commissions or similar agencies.
This General Release is being provided to you in connection
with the special, individualized severance package outlined in a
proposed letter agreement dated May 20, 1999. The federal Older
Worker Benefit Protection Act requires that you have at least
twenty-one (21) days, if you want it, to consider whether you wish
to sign a release such as this one in connection with a special,
individualized severance package. You have until the close of
business twenty-one (21) days from the date you receive the May 20,
1999 letter and this General Release to make your decision. You
may accept the special, individualized severance package at any
time during that period. BEFORE EXECUTING THIS GENERAL RELEASE YOU
SHOULD REVIEW IT AND THE PROPOSED LETTER AGREEMENT CAREFULLY AND
CONSULT WITH YOUR ATTORNEY.
You may revoke this General Release within seven (7) days after
you sign it and it shall not become effective or enforceable until
that revocation period has expired. If you do not accept the
severance package and sign and return this General Release within
twenty-one (21) days, or if you exercise your right to revoke the
General Release after signing it, you will not be eligible for the
special, individualized severance package. Any revocation must be
in writing and must be received by Fleming Companies, Inc.,
Attention: Dee Jerome, 6301 Waterford Blvd., Oklahoma City, OK
73126, within the seven-day period following your execution of this
General Release.
<PAGE>
GENERAL RELEASE
In consideration of the special, individualized severance
package offered to me by Fleming Companies, Inc. and the separation
benefits I will receive as reflected in a letter dated May 20, 1999
(the "Letter Agreement"), I release and discharge Fleming
Companies, Inc. and its successors, affiliates, parent,
subsidiaries, partners, employees, officers, directors and agents
(hereinafter referred to collectively as the "Company") from all
claims, liabilities, demands and causes of action, known or
unknown, fixed or contingent, which I may have or claim to have
against the Company, including any claims arising out of or
relating to my past employment with the Company and the severance
of that relationship, as well as my decision to accept the
separation benefits described in the Letter Agreement, and do
hereby covenant not to file a lawsuit or commence any other legal
action to assert such claims. This includes but is not limited to
claims arising under federal, state, or local laws prohibiting
employment discrimination (including the Age Discrimination in
Employment Act), relating to any prior written, oral or implied
contracts pertaining to employment, severance or retirement or
growing out of any legal or equitable restrictions on the Company's
rights not to continue an employment relationship with its
employees, but not to include any claims under the Employee
Retirement Income Security Act with regard to vested rights in any
of the Company's qualified retirement plans.
I have carefully reviewed and fully understand all the
provisions of the Letter Agreement, the foregoing Notice and this
General Release, which set forth the entire agreement between me
and the Company.
I understand that my receipt of the separation benefits under
the Letter Agreement is dependent on my execution of this General
Release, upon my return to the Company of any Company property
within my possession or control and upon my continued cooperation
in providing information necessary for transition and maintenance
of the Company's ongoing business. I also understand that my
receipt and retention of the separation benefits are also
contingent on my continued nondisclosure of the Company's
confidential information, including the terms of my severance
package, and that prohibited disclosure of information or any
future defamation, disparaging remarks or statements by me to any
third parties, other associates or the media which could embarrass
or cause harm to the Company's name and reputation or to the name
and reputation of its officers, directors or representatives shall
entitle the Company to reimbursement or retention of any separation
benefits I have received or may receive.
I acknowledge that the Company has given me a 21-day period to
consider this General Release and whether to accept the special,
individualized severance package, and that the Company has advised
me to seek independent legal advice as to these matters if I chose
to do so. I further acknowledge that I have not relied upon any
representation or statement, oral or written, by the Company not
set forth in those materials and documents.
DATED this 17th day of June, 1999.
WILLIAM J. DOWD
(Print Name) William J. Dowd
(Print Name) Witness
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made effective
the 1st day of June, 1999 (the "Effective Date"), by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company")
and William H. Marquard (the "Executive").
In consideration of their mutual obligations contained in this
Agreement, the Company hereby employs the Executive and the
Executive hereby accepts employment with the Company as of the
Effective Date upon the following terms and conditions:
1. Term of Agreement and Employment. The term of this
Agreement and of the Executive's employment (collectively, the
"Employment Period") shall be for a period of sixty (60) months
commencing on the Effective Date or for a shorter period if the
Agreement and the Executive's employment are terminated earlier as
provided in Section 9.
2. Position and Duties of Executive. During the
Employment Period, the Executive shall devote his full professional
and business-related time, skills and best efforts to the regular
duties of the position of Executive Vice President, Business
Development for the Company or to such other appropriate position
and/or reasonable duties as may be assigned to him as a corporate
officer of the Company from time to time by the Board of Directors
(the "Board") and/or the Chairman and Chief Executive Officer of
the Company. Unless otherwise agreed to in advance in writing by
the Company, during the Employment Period, the Executive shall not
be employed by others or be engaged in self-employment or in any
professional or business-related activities which are or may be
detrimental to or in conflict or competition with the business of
the Company.
3. Annual Base Salary. During the Employment Period, the
Company shall pay the Executive a base salary of $400,000 per each
fiscal year, in installments consistent with the Company's regular
payroll practices applicable to senior executive officers. The
Company shall review such base salary annually and may in its
discretion increase such base salary.
4. Annual Incentive Bonus. In addition to the base salary
described in Section 3, the Executive will be eligible for a target
annual incentive bonus of 65% of his annual base salary, with a
potential maximum annual incentive bonus of 130% of his annual base
salary. Any annual incentive bonus for fiscal 1999 or subsequent
years shall be awarded in the discretion of the Compensation
Committee using substantially the same performance goals as are
applicable to other senior executive officers.
5. Company Common Stock Options. The Company shall grant
the Executive a stock option to purchase 200,000 shares of Company
Stock pursuant to the Fleming Companies, Inc. 1999 Stock Incentive
Plan. The exercise dates and price and the other terms and
conditions of the 200,000 stock options shall be as described in
the Non-Qualified Stock Option Agreement under Fleming Companies,
Inc. 1999 Stock Incentive Plan which is being executed
contemporaneously with this Agreement.
6. Company Restricted Stock Award. The Company shall
grant the Executive an award of 20,000 shares of restricted Company
Stock pursuant to the Fleming Companies, Inc. 1990 Stock Incentive
Plan. The terms and conditions of the stock award shall be as
described in the Restricted Stock Award Agreement for the Fleming
Companies, Inc. 1990 Stock Incentive Plan which is being executed
contemporaneously with this Agreement. In connection with the
grant of the Restricted Stock, the Executive shall make an election
within thirty (30) days of the Effective Date to include in gross
income the value of the Restricted Stock on the date of grant
pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). Upon notification from the Executive that he
has made such election, the Company shall pay to the Executive an
additional payment in an amount necessary to cause the net amount
of such payment that is retained by the Executive after the
calculation and deduction of any and all federal, state and local
income taxes and employment taxes on such payment to be equal to
the Executive's income taxes attributable to the Restricted Stock
and the Executive's election under Section 83(b) of the Code in
connection with the Restricted Stock.
7. Vacation and Other Paid Leave Programs and
Welfare, Pension, Incentive and Other Benefit Plans. During the
Employment Period, the Executive shall be entitled to participate
in and be covered by all vacation and other paid and unpaid leave
programs and welfare, pension, incentive and other plans as may be
adopted and maintained from time to time by the Company as
applicable to its senior executive officers, including the Fleming
Companies, Inc. 1999 Stock Incentive Plan, the Fleming Companies,
Inc. 1990 Stock Incentive Plan and the Fleming Companies, Inc.
Executive Deferred Compensation Plan.
8. Expenses.
(a) Initial Relocation Expenses. In connection
with the Executive's initial relocation to Oklahoma City, Oklahoma,
or other corporate offices of the Company, the Company shall
provide the Executive with the relocation package for new senior
executive officers outlined in the Company's current relocation
policy. In addition, the Company will pay the Executive (i) up to
a maximum of $48,000, at the rate of up to $2,000 per month, for a
period of up to two years from the date of this Agreement to enable
Executive to secure a furnished apartment in or near the city in
which the Company's corporate offices are located and (ii) a
monthly transportation allowance (the "Transportation Allowance")
of $700 per month for up to thirty-six months from the date of this
Agreement. The Company will also pay all reasonable costs
associated with the move of the Executive's personal belongings to
a permanent residence in or near the city in which the Company's
corporate offices are located. The Company will also make an
additional payment to the Executive in an amount necessary to
offset any and all federal, state and local income taxes and
employment taxes which the Executive shall be required to pay in
connection with the Transportation Allowance.
(b) Ongoing Business Expenses. The Company
shall reimburse the Executive for all reasonable and necessary
business expenses incurred by the Executive relating to the conduct
of business of the Company, including expenses incurred in
connection with the Executive's travel to and from the Company's
corporate offices, upon presentation of an itemized account and
appropriate supporting documentation, all in accordance with the
Company's policies applicable to its senior executive officers.
9. Termination of Agreement and Employment. This
Agreement and the Executive's employment may be terminated earlier
than sixty (60) months following the Effective Date under the
following circumstances:
(a) Death or Disability. This Agreement and the
Executive's employment shall terminate automatically upon the
Executive's death. If, because of physical or mental illness, the
Executive has been substantially unable to perform the essential
duties of his position (with or without "reasonable accommodation,"
as defined under the Americans With Disabilities Act) for a period
in excess of six (6) months ("Disability"), the Company may
terminate this Agreement and the Executive's employment for
Disability.
(b) Cause. If the Executive (i) is convicted of
a felony, (ii) engages in an act of personal dishonesty which is
intended to result in personal enrichment of the Executive at the
expense of the Company, or (iii) "willfully" fails to follow a
direct, reasonable and lawful order of the Board and/or the
Chairman and Chief Executive Officer, within the reasonable scope
of the Executive's duties, and such failure, if curable, is not
cured within thirty (30) days, the Company may terminate this
Agreement and the Executive's employment for Cause. For purposes
of this Section 9(b), no act, or failure to act, by the Executive
shall be deemed "willful" unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that
the Executive's action or omission was in the best interest of the
Company. Cause shall not exist under this Section 9(b) unless and
until the Company has delivered to Executive a copy of a resolution
duly adopted by not less than three-fourths (3/4ths) of the Board
(excluding, if applicable, the Executive) at a meeting of the Board
called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, the Executive was guilty of the conduct
set forth above and specifying the particulars of such conduct in
detail.
(c) Without Cause. The Company may terminate
this Agreement and the Executive's employment at any time without
Cause.
(d) Good Reason. The Executive may terminate
this Agreement and his employment for ?Good Reason? by providing a
Notice of Termination (as defined in Section 9(f)) to the Company
within one hundred and twenty (120) days after the Executive has
actual knowledge of the occurrence, without the written consent of
the Executive, of one of the events set forth below. The
Executive?s Date of Termination shall be fifteen (15) days after
the Notice of Termination, unless the basis for Good Reason has
been cured by the Company prior to such date:
(i) the assignment of the Executive to a
position materially and adversely inconsistent with
the Executive's then current position with the
Company or a material and adverse alteration in the
nature of the Executive's duties and/or
responsibilities, reporting obligations, titles or
authority;
(ii) a reduction by the Company in the
Executive's then current base salary described in
Section 3;
(iii) the Company's failure to provide any
material employee benefits due to be provided to the Executive
(other than any such failure which affects all senior executive
officers); or
(iv) the Company's requiring the Executive to
close or relocate his secondary office outside the Chicago
metropolitan area or relocate his permanent residence outside the
Chicago metropolitan area;
(v) the failure of any successor to the
Company to assume this Agreement pursuant to Section 14(a).
The Executive's right to terminate this Agreement and his
employment for Good Reason shall not be affected by his incapacity
due to physical or mental illness. Executive's continued
employment during the one hundred and twenty (120) day period
referred to above in this paragraph (d) shall not constitute
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(e) Voluntary Termination. The Executive may
terminate this Agreement and his employment at any time voluntarily
(a "Voluntary Termination"). A Voluntary Termination is any
termination of employment by the Executive other than termination
due to death, Disability, with or without Cause or for Good Reason.
(f) Notice of and Date of Termination. Any
termination of this Agreement and the Executive's employment under
Section 9 of this Agreement by the Company or the Executive, other
than termination due to death, shall be communicated by a Notice of
Termination to the other party in accordance with Section 18. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which indicates the specific termination provision
in Section 9 relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of the Agreement. The Executive's "Termination Date" shall be the
date the Notice of Termination is deemed given pursuant to Section
18, except in the event of a termination due to the Executive's
death, when the Termination Date shall be the date of death, or in
the event of a termination by the Executive for Good Reason, when
the Termination Date shall be as provided in Section 9(d).
10. Obligations of the Company Upon Termination. In
the event this Agreement and the Executive's employment are
terminated pursuant to Section 9, the Company shall provide the
Executive with the payments and benefits set forth below. The
Executive acknowledges and agrees that the payments set forth in
this Section 10 and the other agreements and plans referenced in
this Agreement, constitute the sole and liquidated damages for a
termination of this Agreement and his employment under Section 9.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall
not be affected by any setoff or counterclaim which the Company may
have against the Executive except that the Company shall have the
right to deduct any amounts owed by the Executive to the Company
due to the Executive's misappropriation of Company funds or
property from the payments set forth in this Section 10.
(a) Termination Because of Disability or for
Cause by the Company or Due to Death or a Voluntary Termination by
the Executive. If this Agreement and the Executive's employment
are terminated because of Disability or for Cause by the Company or
due to the death or through a Voluntary Termination by the
Executive:
(i) the Company shall pay the Executive (or
his beneficiary or legal representative, if applicable) his then
current base salary described in Section 3 and his accrued, unused
vacation pay through the Termination Date, as soon as practicable
following the Termination Date;
(ii) the Company shall reimburse the Executive
(or his beneficiary or legal representative, if applicable) for
reasonable business expenses incurred, but not paid, prior to the
Termination Date; and
(iii) the Executive (or his beneficiary or
legal representative, if applicable) shall receive any other rights,
compensation and/or benefits as may be due to the Executive following
such termination to which he is entitled in accordance with the terms
and provisions of any agreements referenced herein or plans or
programs of the Company.
(b) Termination By the Company without Cause or
by the Executive for Good Reason. If this Agreement and the
Executive's employment are terminated by the Company without Cause
or by the Executive for Good Reason:
(i) the Company shall pay the Executive (A)
his then current base salary described in Section 3 and accrued,
unused vacation pay through the Termination Date, as soon as
practicable following the Termination Date, and (B) continued then
current monthly base salary described in Section 3 for a period of
twenty-four (24) months following the Termination Date;
(ii) the Company shall maintain in full force
and effect for the continued benefit of the Executive, for a period
of twenty-four (24) months following the Termination Date, the welfare
programs in which the Executive, his spouse and his dependents were
participating immediately prior to the Termination Date at the level
in effect and upon substantially the same terms and conditions
(including without limitation contributions required by the Executive
for such benefits) as existed immediately prior to the Termination Date;
provided, that if the Executive, his spouse or his dependents cannot
continue to participate in the Company programs providing such
benefits, the Company shall arrange to provide Executive, his
spouse and his dependents with comparable benefits from a third party
insurer; provided, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period. If, at
the end of the 24 month period, the Executive is receiving medical
and dental benefits from the Company and is not eligible to receive such
benefits under another employer-provided plan, the Executive and/or
the Executive's family shall be entitled to continued medical and
dental benefits under the Company programs providing such benefits
during the 24 month period at the Executive's own expense pursuant
to Title I, Part 6 of the Employee Retirement Income Security Act
of 1974, as amended ("COBRA"), and for such purpose, the end of such 24
month period shall be considered the date of the "qualifying event"
as such term is defined by COBRA.
(iii) the Company shall reimburse the
Executive for reasonable business expenses incurred, but not paid,
prior to the Termination Date; and
(iv) the Executive shall receive any other
rights, compensation and/or benefits as may be due to the Executive
following such termination to which he is entitled in accordance
with the terms and provisions of any other agreements, plans or
programs of the Company.
11. Change of Control. Contemporaneously with this
Agreement, the parties have entered into a "Change of Control
Employment Agreement."
12. Confidential Information, Ownership of Documents
and Other Property, and Non-Competition.
(a) Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of the Company
all trade secrets and confidential information, knowledge or data
relating to the Company and its businesses and investments and its
affiliates, which shall have been obtained by the Executive during
Executive's employment by the Company and which is not generally
available public knowledge (other than by acts by the Executive in
violation of this Agreement). Except as may be required or
appropriate in connection with his carrying out his duties under
this Agreement, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any
adversarial proceeding against the Company (in which case Executive
shall use his reasonable best efforts in cooperating with the
Company in obtaining from a court of competent jurisdiction a
protective order against disclosure) communicate or divulge any
such trade secrets, information, knowledge or data to anyone other
than the Company and those designated by the Company or on behalf
of the Company in the furtherance of its business or to perform his
duties hereunder.
(b) Ownership of Documents and Other Property.
All documents (including databases, records, files, models, and the
like) and all other property relating to the Company's business and
its affiliates as to which the Executive has access or control
shall be and remain the property of the Company and shall not be
removed from the Company's premises without its written consent,
unless such removal is in the furtherance of the Company's business
or is in connection with the Executive's carrying out his duties
under this Agreement. All such documents and other property shall
be returned to the Company promptly after the Employment Period
ends, or otherwise promptly after removal if such removal occurs
following the Employment Period.
(c) Non-Competition. For twenty-four (24)
months following the termination of the Employment Period other
than if such termination is by the Company without Cause, by the
Executive for Good Reason or for Disability, the Executive will not
(i) be a greater than 1% investor in an entity which competes with
the Company or any of its subsidiaries or other affiliates (the
"Designated Entities") in any of their business or (ii) be a
consultant to, employed by or otherwise act on behalf of an entity
which competes with the Company or any of the Designated Entities
in any of their businesses, in either case, within the Standard
Metropolitan Statistical Areas in which the Company or any of the
Designated Entities conduct any of their business operations or are
actively soliciting business as of the termination of the
Employment Period.
(d) Injunctive Relief. In the event of a breach
or threatened breach of this Section 12, the Executive agrees that
the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to address any such breach or threatened
breach pending arbitration under Section 13 of this Agreement.
(e) Continuing Operation. The expiration or
termination of this Agreement or of Executive's employment shall
have no effect on the continuing operation of this Section 12.
13. Arbitration; Legal Fees and Expenses. The
parties agree that Executive's employment and this Agreement relate
to interstate commerce, and that any disputes, claims or
controversies between Executive and the Company which may arise out
of or relate to the Executive's employment relationship or this
Agreement shall be settled by arbitration. This agreement to
arbitrate shall survive the termination of this Agreement. Any
arbitration shall be in accordance with the Rules of the American
Arbitration Association and shall be undertaken pursuant to the
Federal Arbitration Act. Arbitration will be held in Oklahoma
City, Oklahoma unless the parties mutually agree on another
location. The decision of the arbitrator(s) will be enforceable in
any court of competent jurisdiction. The parties agree that
punitive, liquidated or indirect damages shall not be awarded by
the arbitrator(s). Nothing in this agreement to arbitrate,
however, shall preclude the Company or the Executive from obtaining
injunctive relief from a court of competent jurisdiction
prohibiting any on-going breaches by the Executive or the Company
of this Agreement including, without limitation, violations of
Section 12. If any contest or dispute shall arise between the
Company and Executive regarding any provision of this Agreement,
the Company shall reimburse Executive for all legal fees and
expenses reasonably incurred by Executive in connection with such
contest or dispute, but only if Executive is successful in respect
of one or more of Executive's material claims or defenses brought,
raised or pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the
resolution of such contest or dispute to the extent the Company
receives reasonable written evidence of such fees and expenses.
14. Successors and Assignability.
(a) The Company's Successors and Assignability.
No rights or obligations of the Company under this Agreement may
be assigned or transferred except that 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 this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place.
(b) The Executive's Successors and
Assignability. No rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive
other than his rights to payments or benefits hereunder, which may
be transferred only by will or the laws of descent and
distribution. Upon the Executive's death, this Agreement and all
rights of the Executive hereunder shall inure to the benefit of and
be enforceable by the Executive's beneficiary or legal
representative, to the extent any such person succeeds to the
Executive's interests under this Agreement.
15. Severability. In the event that any provision of
this Agreement shall be deemed to be illegal or unenforceable for
any reason, such provision shall be deemed modified or deleted in
such a manner so as to make this Agreement as so modified legal and
enforceable to the fullest extent permitted under applicable laws.
16. Entire Agreement; Amendment and Waiver. This
Agreement and the other agreements referenced herein constitute the
entire agreement between the parties hereto with regard to the
subject matter hereof, and there are no agreements, understandings,
specific restrictions, warranties or representations relating to
said subject matter between the parties other than those set forth
herein or herein provided for. Any provision of this Agreement may
be amended or the observance thereof may be waived only by written
consent signed by both parties. Such amendment or waiver shall be
binding upon the Company and the Executive and their successors and
assigns.
17. Counterparts. This Agreement may be executed in
one or more counterparts, each of which will take effect as an
original and all of which shall evidence one and the same
Agreement.
18. Notices. All notices required under this
Agreement shall be in writing and shall be deemed given when
delivered personally to the other party, when delivered by
facsimile transmission or when delivered by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
At his last known address evidenced on
the Company's payroll records
fax: 847-920-1749
If to the Company:
Fleming Companies, Inc.
6301 Waterford Boulevard
Oklahoma City, OK 73126-0647
fax: 405-841-8504
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to become effective as of the date first above written.
FLEMING COMPANIES, INC.
By: SCOTT M. NORTHCUTT
Scott M. Northcutt,
Senior Vice President -
Human Resources
WILLIAM H. MARQUARD
William H. Marquard
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 1st day of June, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and William H. Marquard (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant has entered into an Employment
Agreement with the Company of even date pursuant to which he will
serve the Company as Executive Vice President, Business Development
(the "Employment Agreement"); and
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1990 Stock Incentive Plan and certain amendments
thereto (the "Plan"); and
WHEREAS, pursuant to the Employment Agreement, the Company has
awarded the Participant 20,000 shares of common stock under the
Plan subject to the terms and conditions of this Agreement.
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 twenty thousand (20,000)
shares of Company common stock, par value $2.50 (the "Stock"), on
the terms and conditions set forth herein and in the Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate representing the
shares of Stock subject to the Award (the "Restricted Stock") shall
be issued in the name of the Participant and shall be escrowed with
the Secretary of the Company (the "Escrow Agent") subject to
removal of the restrictions placed thereon or forfeiture pursuant
to the terms of this Agreement.
(b) Vesting. One-half of the shares of Restricted
Stock will vest based on the Participant's continuous employment
with the Company through June 1, 2000 and the remaining one-half of
the shares of Restricted Stock will vest based on the Participant's
continuous employment with the Company through June 1, 2001. In
the event the Participant's employment with the Company is
terminated by reason of (i) death, (ii) disability, (iii) without
"Cause" (as such term is defined in the Employment Agreement), or
(iv) by the Participant for "Good Reason" (as such term is defined
in the Employment Agreement), then all remaining shares of
Restricted Stock (including any "Accrued Dividends," as such term
is hereafter defined) which have not yet been vested shall
immediately vest. Once vested pursuant to the terms of this
Agreement, the Restricted Stock shall be deemed Vested Stock.
(c) Voting Rights and Dividends. The Participant
shall have all of the voting rights attributable to the shares of
Restricted Stock issued to him. Regular quarterly cash dividends
declared and paid by the Company with respect to the shares of
Restricted Stock shall be paid to the Participant. Any
extraordinary dividends declared and paid by the Company with
respect to shares of Restricted Stock ("Accrued Dividends") shall
not be paid to the Participant until such Restricted Stock becomes
Vested Stock. Such Accrued Dividends shall be held by the Company
as a general obligation and paid to the Participant at the time the
underlying Restricted Stock becomes Vested Stock.
(d) Vested Stock - Removal of Restrictions. Upon
Restricted Stock becoming Vested Stock, all restrictions shall be
removed from the certificates representing such Stock and the
Secretary of the Company shall deliver to the Participant
certificates representing such Vested Stock free and clear of all
restrictions together with a check in the amount of all Accrued
Dividends attributed to such Vested Stock without interest thereon.
(e) Forfeiture. In the event the Participant's
employment with the Company is terminated for any reason other than
(i) death, (ii) disability, (iii) without Cause, or (iv) by the
Participant for Good Reason prior to all shares of Restricted Stock
becoming Vested Stock, then, all remaining shares of Restricted
Stock which have not yet been vested (including any Accrued
Dividends) shall be absolutely forfeited and the Participant shall
have no further interest therein of any kind whatsoever.
4. Change of Control.
(a) In the event of a Change of Control, all
Restricted Stock shall become Vested Stock and the Company shall
deliver to the Participant certificates representing the Vested
Stock free and clear of all restrictions, together with any Accrued
Dividends attributable to such Vested Stock without interest
thereon.
(b) The Company shall also pay to the Participant any
Gross-Up Payment determined in accordance with Section 9.2 of the
Plan.
5. 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 JUNE, 1999. 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."
6. Stock Powers and the Beneficiary. The Participant
hereby agrees to execute and deliver to the Secretary of the
Company a stock power (endorsed in blank) in the form of Exhibit B
hereto covering his Award and authorizes the Secretary to deliver
to the Company any and all shares of Restricted Stock that are
forfeited under the provisions of this Agreement. The Participant
further authorizes the Company to hold as a general obligation of
the Company any Accrued Dividends and to pay such dividends to the
Participant at the time the underlying Restricted Stock becomes
Vested Stock. Pursuant to Section 6.2 of the Plan, the Participant
designates his Eligible Spouse as the Beneficiary under this
Agreement.
7. Nontransferability of Award. The Participant shall not
have the right to sell, assign, transfer, convey, dispose, pledge,
hypothecate, burden, encumber or charge any shares of Restricted
Stock 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 address set forth in the Employment Agreement.
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.
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 (including Accrued Dividends).
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 (including Accrued Dividends) 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 SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior Vice
President - Human Resources
"PARTICIPANT"
WILLIAM H. MARQUARD
William H. Marquard, Participant
<PAGE>
Exhibit B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, __________________, an individual,
hereby irrevocably assigns and conveys to ________________________,
______________ AND NO/100 (_____) shares of the Common Capital
Stock of Fleming Companies, Inc., an Oklahoma corporation, $2.50
par value.
DATED:
__________________
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made
effective the 28th day of July, 1999 (the "Effective Date"), by
and between Fleming Companies, Inc., an Oklahoma corporation (the
"Company") and Dennis C. Lucas (the "Executive").
In consideration of their mutual obligations contained
in this Agreement, the Company hereby employs the Executive and
the Executive hereby accepts employment with the Company as of
the Effective Date upon the following terms and conditions:
1. Term of Agreement and Employment. The term of
this Agreement and of the Executive's employment (collectively,
the "Employment Period") shall be for a period of sixty (60)
months commencing on the Effective Date or for a shorter period
if the Agreement and the Executive's employment are terminated
earlier as provided in Section 9.
2. Position and Duties of Executive. During the
Employment Period, the Executive shall devote his full
professional and business-related time, skills and best efforts
to the regular duties of the position of Executive Vice President
and President-Retail or to such other appropriate position and/or
reasonable duties as may be assigned to him as a corporate
officer of the Company from time to time by the Board of
Directors (the "Board") and/or the Chairman and Chief Executive
Officer of the Company. Unless otherwise agreed to in advance in
writing by the Company, during the Employment Period, the
Executive shall not be employed by others or be engaged in self-
employment or in any professional or business-related activities
which are or may be detrimental to or in conflict or competition
with the business of the Company.
3. Annual Base Salary. During the Employment
Period, the Company shall pay the Executive a base salary of
$400,000 per each fiscal year, in installments consistent with
the Company's regular payroll practices applicable to senior
executive officers. The Company shall review such base salary
annually and may in its discretion increase such base salary.
4. Annual Incentive Bonus. In addition to the base
salary described in Section 3, the Executive will be eligible for
a target annual incentive bonus of 65% of his annual base salary,
with a potential maximum annual incentive bonus of 130% of his
annual base salary. Any annual incentive bonus for fiscal 1999
or subsequent years shall be awarded in the discretion of the
Compensation Committee using substantially the same performance
goals as are applicable to other senior executive officers.
5. Company Common Stock Options. The Company shall
grant the Executive a stock option to purchase 300,000 shares of
Company Stock pursuant to the Fleming Companies, Inc. 1999 Stock
Incentive Plan. The exercise dates and price and the other terms
and conditions of the 300,000 stock options shall be as described
in the Non-Qualified Stock Option Agreement under Fleming
Companies, Inc. 1999 Stock Incentive Plan which is being executed
contemporaneously with this Agreement.
6. Company Restricted Stock Award. The Company
shall grant the Executive an award of 20,000 shares of restricted
Company Stock pursuant to the Fleming Companies, Inc. 1990 Stock
Incentive Plan. The terms and conditions of the stock award
shall be as described in the Restricted Stock Award Agreement for
the Fleming Companies, Inc. 1990 Stock Incentive Plan which is
being executed contemporaneously with this Agreement. In
connection with the grant of the Restricted Stock, the Executive
shall make an election within thirty (30) days of the Effective
Date to include in gross income the value of the Restricted Stock
on the date of grant pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). Upon notification
from the Executive that he has made such election, the Company
shall pay to the Executive an additional payment in an amount
necessary to cause the net amount of such payment that is
retained by the Executive after the calculation and deduction of
any and all federal, state and local income taxes and employment
taxes on such payment to be equal to the Executive's income taxes
attributable to the Restricted Stock and the Executive's election
under Section 83(b) of the Code in connection with the Restricted
Stock.
7. Vacation and Other Paid Leave Programs and
Welfare, Pension, Incentive and Other Benefit Plans. During the
Employment Period, the Executive shall be entitled to participate
in and be covered by all vacation and other paid and unpaid leave
programs and welfare, pension, incentive and other plans as may
be adopted and maintained from time to time by the Company as
applicable to its senior executive officers.
8. Expenses.
(a) Initial Relocation Expenses. In
connection with the Executive's initial relocation to Oklahoma
City, Oklahoma, or other corporate offices of the Company, the
Company shall provide the Executive with the relocation package
for new senior executive officers outlined in the Company's
current relocation policy. The Company will also make an
additional payment to the Executive in an amount necessary to
offset any and all federal, state and local income taxes and
employment taxes which the Executive shall be required to pay in
connection with his initial relocation to Oklahoma City,
Oklahoma. Also at the Executive's option, at any time during up to
the first two (2) years of the Employment Period, the Company shall
purchase the residence in Boise, Idaho currently owned by the
Executive at a purchase price equal to the greater of its appraised
value (as set by an appraiser designated by the Company) or the
Executive's documented invested cost in that residence.
(b) Ongoing Business Expenses. The Company
shall reimburse the Executive for all reasonable and necessary
business expenses incurred by the Executive relating to the
conduct of business of the Company, including expenses incurred
in connection with the Executive's travel to and from the
Company's corporate offices, upon presentation of an itemized
account and appropriate supporting documentation, all in
accordance with the Company's policies applicable to its senior
executive officers.
9. Termination of Agreement and Employment. This
Agreement and the Executive's employment may be terminated
earlier than sixty (60) months following the Effective Date under
the following circumstances:
(a) Death or Disability. This Agreement and
the Executive's employment shall terminate automatically upon the
Executive's death. If, because of physical or mental illness,
the Executive has been substantially unable to perform the
essential duties of his position (with or without "reasonable
accommodation," as defined under the Americans With Disabilities
Act) for a period in excess of six (6) months ("Disability"), the
Company may terminate this Agreement and the Executive's
employment for Disability.
(b) Cause. If the Executive (i) is convicted
of a felony, (ii) engages in an act of personal dishonesty which
is intended to result in personal enrichment of the Executive at
the expense of the Company, or (iii) "willfully" fails to follow
a direct, reasonable and lawful order of the Board and/or the
Chairman and Chief Executive Officer, within the reasonable scope
of the Executive's duties, and such failure, if curable, is not
cured within thirty (30) days, the Company may terminate this
Agreement and the Executive's employment for Cause. For purposes
of this Section 9(b), no act, or failure to act, by the Executive
shall be deemed "willful" unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief
that the Executive's action or omission was in the best interest
of the Company. Cause shall not exist under this Section 9(b)
unless and until the Company has delivered to Executive a copy of
a resolution duly adopted by not less than three-fourths (3/4ths)
of the Board (excluding, if applicable, the Executive) at a
meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, the
Executive was guilty of the conduct set forth above and
specifying the particulars of such conduct in detail.
(c) Without Cause. The Company may terminate
this Agreement and the Executive's employment at any time without
Cause.
(d) Good Reason. The Executive may terminate
this Agreement and his employment for "Good Reason" by providing
a Notice of Termination (as defined in Section 9(f)) to the
Company within one hundred and twenty (120) days after the
Executive has actual knowledge of the occurrence, without the
written consent of the Executive, of one of the events set forth
below. The Executive's Date of Termination shall be fifteen (15)
days after the Notice of Termination, unless the basis for Good
Reason has been cured by the Company prior to such date:
(i) the assignment of the Executive to a
position materially and adversely inconsistent with the
Executive's then current position with the Company or a material
and adverse alteration in the nature of the Executive's duties
and/or responsibilities, reporting obligations, titles or
authority;
(ii) a reduction by the Company in the
Executive's then current base salary described in Section 3;
(iii) the Company's failure to provide any
material employee benefits due to be provided to the Executive
(other than any such failure which affects all senior executive
officers); or
(iv) the failure of any successor to the
Company to assume this Agreement pursuant to Section 14(a).
The Executive's right to terminate this Agreement and
his employment for Good Reason shall not be affected by his
incapacity due to physical or mental illness. Executive's
continued employment during the one hundred and twenty (120) day
period referred to above in this paragraph (d) shall not
constitute consent to, or a waiver of rights with respect to, any
act or failure to act constituting Good Reason hereunder.
(e) Voluntary Termination. The Executive may
terminate this Agreement and his employment at any time
voluntarily (a "Voluntary Termination"). A Voluntary Termination
is any termination of employment by the Executive other than
termination due to death, Disability, with or without Cause or
for Good Reason.
(f) Notice of and Date of Termination. Any
termination of this Agreement and the Executive's employment
under Section 9 of this Agreement by the Company or the
Executive, other than termination due to death, shall be
communicated by a Notice of Termination to the other party in
accordance with Section 18. For purposes of this Agreement, a
"Notice of Termination" means a written notice which indicates
the specific termination provision in Section 9 relied upon and
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Agreement. The
Executive's "Termination Date" shall be the date the Notice of
Termination is deemed given pursuant to Section 18, except in the
event of a termination due to the Executive's death, when the
Termination Date shall be the date of death, or in the event of a
termination by the Executive for Good Reason, when the
Termination Date shall be as provided in Section 9(d).
10. Obligations of the Company Upon Termination.
In the event this Agreement and the Executive's employment are
terminated pursuant to Section 9, the Company shall provide the
Executive with the payments and benefits set forth below. The
Executive acknowledges and agrees that the payments set forth in
this Section 10 and the other agreements and plans referenced in
this Agreement, constitute the sole and liquidated damages for a
termination of this Agreement and his employment under Section 9.
The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any setoff or counterclaim which the
Company may have against the Executive except that the Company
shall have the right to deduct any amounts owed by the Executive
to the Company due to the Executive's misappropriation of Company
funds or property from the payments set forth in this Section 10.
(a) Termination Because of Disability or for
Cause by the Company or Due to Death or a Voluntary Termination
by the Executive. If this Agreement and the Executive's
employment are terminated because of Disability or for Cause by
the Company or due to the death or through a Voluntary
Termination by the Executive:
(i) the Company shall pay the Executive (or
his beneficiary or legal representative, if applicable) his then
current base salary described in Section 3 and his accrued,
unused vacation pay through the Termination Date, as soon as
practicable following the Termination Date;
(ii) the Company shall reimburse the
Executive (or his beneficiary or legal representative, if
applicable) for reasonable business expenses incurred, but not
paid, prior to the Termination Date; and
(iii) the Executive (or his beneficiary or
legal representative, if applicable) shall receive any other
rights, compensation and/or benefits as may be due to the
Executive following such termination to which he is entitled in
accordance with the terms and provisions of any agreements
referenced herein or plans or programs of the Company.
(b) Termination By the Company without Cause
or by the Executive for Good Reason. If this Agreement and the
Executive's employment are terminated by the Company without
Cause or by the Executive for Good Reason:
(i) the Company shall pay the Executive (A)
his then current base salary described in Section 3 and accrued,
unused vacation pay through the Termination Date, as soon as
practicable following the Termination Date, and (B) continued
then current monthly base salary described in Section 3 for a
period of twenty-four (24) months following the Termination Date;
(ii) the Company shall maintain in full
force and effect for the continued benefit of the Executive, for
a period of twenty-four (24) months following the Termination
Date, the welfare programs in which the Executive, his spouse and
his dependents were participating immediately prior to the
Termination Date at the level in effect and upon substantially
the same terms and conditions (including without limitation
contributions required by the Executive for such benefits) as
existed immediately prior to the Termination Date; provided, that
if the Executive, his spouse or his dependents cannot continue to
participate in the Company programs providing such benefits, the
Company shall arrange to provide Executive, his spouse and his
dependents with the economic equivalent of such benefits which
they otherwise would have been entitled to receive under such
plans and programs; provided, that if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period.
(iii) the Company shall reimburse the
Executive for reasonable business expenses incurred, but not
paid, prior to the Termination Date; and
(iv) the Executive shall receive any other
rights, compensation and/or benefits as may be due to the
Executive following such termination to which he is entitled in
accordance with the terms and provisions of any other agreements,
plans or programs of the Company.
11. Change of Control. Contemporaneously with this
Agreement, the parties have entered into a "Change of Control
Employment Agreement."
12. Confidential Information, Ownership of
Documents and Other Property, and Non-Competition.
(a) Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of the Company
all trade secrets and confidential information, knowledge or data
relating to the Company and its businesses and investments and
its affiliates, which shall have been obtained by the Executive
during Executive's employment by the Company and which is not
generally available public knowledge (other than by acts by the
Executive in violation of this Agreement). Except as may be
required or appropriate in connection with his carrying out his
duties under this Agreement, the Executive shall not, without the
prior written consent of the Company or as may otherwise be
required by law or any legal process, or as is necessary in
connection with any adversarial proceeding against the Company
(in which case Executive shall use his reasonable best efforts in
cooperating with the Company in obtaining from a court of
competent jurisdiction a protective order against disclosure)
communicate or divulge any such trade secrets, information,
knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the
furtherance of its business or to perform his duties hereunder.
(b) Ownership of Documents and Other Property.
All documents (including databases, records, files, models, and
the like) and all other property relating to the Company's
business and its affiliates as to which the Executive has access
or control shall be and remain the property of the Company and
shall not be removed from the Company's premises without its
written consent, unless such removal is in the furtherance of the
Company's business or is in connection with the Executive's
carrying out his duties under this Agreement. All such documents
and other property shall be returned to the Company promptly
after the Employment Period ends, or otherwise promptly after
removal if such removal occurs following the Employment Period.
(c) Non-Competition. For twenty-four (24)
months following the termination of the Employment Period (other
than if such termination is by the Company without Cause or by
the Executive for Good Reason), the Executive will not, directly
or indirectly, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or
consultant of any retail chain or any subsidiary or affiliate of
any retail chain, engage in the business of the retail sale of
food and related products within the Standard Metropolitan
Statistical Areas in which the Company or any of its subsidiaries
was conducting business or was actively soliciting business as of
the Executive's Termination Date; provided, however, this Section
12(c) shall not prohibit (i) the Executive's employment or other
relationship with any national chain engaged in the retail sale of
food and related products, regardless of location, such as Kroger,
Albertson's or Safeway or (ii) the Executive from owning less than
one percent (1%) of any such retail chain. If, at any time, the
provisions of this Section 12(c) shall be determined to be
invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this
Section 12(c) shall be considered divisible and shall become and
be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable
by the court or other body having jurisdiction over the matter;
and the Executive agrees that this Section 12(c) as so amended
shall be valid and binding as though any invalid or unenforceable
provision had not been included herein. The parties agree that
the area, duration and scope of activity for which the covenant
not to compete set forth in this Section 12(c) is to be effective
are reasonable.
(d) Injunctive Relief. In the event of a
breach or threatened breach of this Section 12, the Executive
agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to address any such breach or
threatened breach pending arbitration under Section 13 of this
Agreement.
(e) Continuing Operation. The expiration or
termination of this Agreement or of Executive's employment shall
have no effect on the continuing operation of this Section 12.
13. Arbitration; Legal Fees and Expenses. The
parties agree that Executive's employment and this Agreement relate
to interstate commerce, and that any disputes, claims or
controversies between Executive and the Company which may arise out
of or relate to the Executive's employment relationship or this
Agreement shall be settled by arbitration. This agreement to
arbitrate shall survive the termination of this Agreement. Any
arbitration shall be in accordance with the Rules of the American
Arbitration Association and shall be undertaken pursuant to the
Federal Arbitration Act. Arbitration will be held in Oklahoma
City, Oklahoma unless the parties mutually agree on another
location. The decision of the arbitrator(s) will be enforceable in
any court of competent jurisdiction. The parties agree that
punitive, liquidated or indirect damages shall not be awarded by
the arbitrator(s). Nothing in this agreement to arbitrate,
however, shall preclude the Company or the Executive from obtaining
injunctive relief from a court of competent jurisdiction
prohibiting any on-going breaches by the Executive or the Company
of this Agreement including, without limitation, violations of
Section 12. If any contest or dispute shall arise between the
Company and Executive regarding any provision of this Agreement,
the Company shall reimburse Executive for all legal fees and
expenses reasonably incurred by Executive in connection with such
contest or dispute, but only if Executive is successful in respect
of one or more of Executive's material claims or defenses brought,
raised or pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the
resolution of such contest or dispute to the extent the Company
receives reasonable written evidence of such fees and expenses.
14. Successors and Assignability.
(a) The Company's Successors and Assignability.
No rights or obligations of the Company under this Agreement may
be assigned or transferred except that 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 this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place.
(b) The Executive's Successors and
Assignability. No rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive
other than his rights to payments or benefits hereunder, which may
be transferred only by will or the laws of descent and
distribution. Upon the Executive's death, this Agreement and all
rights of the Executive hereunder shall inure to the benefit of and
be enforceable by the Executive's beneficiary or legal
representative, to the extent any such person succeeds to the
Executive's interests under this Agreement.
15. Severability. In the event that any provision
of this Agreement shall be deemed to be illegal or unenforceable
for any reason, such provision shall be deemed modified or deleted
in such a manner so as to make this Agreement as so modified legal
and enforceable to the fullest extent permitted under applicable
laws.
16. Entire Agreement; Amendment and Waiver. This
Agreement and the other agreements referenced herein constitute the
entire agreement between the parties hereto with regard to the
subject matter hereof, and there are no agreements, understandings,
specific restrictions, warranties or representations relating to
said subject matter between the parties other than those set forth
herein or herein provided for. Any provision of this Agreement may
be amended or the observance thereof may be waived only by written
consent signed by both parties. Such amendment or waiver shall be
binding upon the Company and the Executive and their successors and
assigns.
17. Counterparts. This Agreement may be executed in
one or more counterparts, each of which will take effect as an
original and all of which shall evidence one and the same
Agreement.
18. Notices. All notices required under this
Agreement shall be in writing and shall be deemed given when
delivered personally to the other party, when delivered by
facsimile transmission or when delivered by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
At his last known address evidenced on
the Company's payroll records
If to the Company:
Fleming Companies, Inc.
6301 Waterford Boulevard
Oklahoma City, OK 73126-0647
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement to become effective as of the date first above
written.
FLEMING COMPANIES, INC.
By: SCOTT M. NORTHCUTT
Scott M. Northcutt,
Senior Vice President - Human Resources
DENNIS C. LUCAS
Dennis C. Lucas
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 28th day of July, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and Dennis C. Lucas (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant has entered into an Employment
Agreement with the Company of even date pursuant to which he will
serve the Company as Executive Vice President, President - Retail
(the "Employment Agreement"); and
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1990 Stock Incentive Plan and certain amendments
thereto (the "Plan"); and
WHEREAS, pursuant to the Employment Agreement, the
Company has awarded the Participant 20,000 shares of common stock
under the Plan subject to the terms and conditions of this
Agreement.
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 twenty thousand
(20,000) shares of Company common stock, par value $2.50 (the
"Stock"), on the terms and conditions set forth herein and in the
Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate
representing the shares of Stock subject to the Award (the
"Restricted Stock") shall be issued in the name of the
Participant and shall be escrowed with the Secretary of the
Company (the "Escrow Agent") subject to removal of the
restrictions placed thereon or forfeiture pursuant to the terms
of this Agreement.
(b) Vesting. One-half of the shares of
Restricted Stock will vest based on the Participant's continuous
employment with the Company through July 28, 2000 and the
remaining one-half of the shares of Restricted Stock will vest
based on the Participant's continuous employment with the Company
through July 28, 2001. In the event the Participant's employment
with the Company is terminated by reason of (i) death, (ii)
disability, (iii) without "Cause" (as such term is defined in the
Employment Agreement), or (iv) by the Participant for "Good
Reason" (as such term is defined in the Employment Agreement),
then all remaining shares of Restricted Stock (including any
"Accrued Dividends," as such term is hereafter defined) which
have not yet been vested shall immediately vest. Once vested
pursuant to the terms of this Agreement, the Restricted Stock
shall be deemed Vested Stock.
(c) Voting Rights and Dividends. The
Participant shall have all of the voting rights attributable to
the shares of Restricted Stock issued to him. Regular quarterly
cash dividends declared and paid by the Company with respect to
the shares of Restricted Stock shall be paid to the Participant.
Any extraordinary dividends declared and paid by the Company
with respect to shares of Restricted Stock ("Accrued Dividends")
shall not be paid to the Participant until such Restricted Stock
becomes Vested Stock. Such Accrued Dividends shall be held by
the Company as a general obligation and paid to the Participant
at the time the underlying Restricted Stock becomes Vested Stock.
(d) Vested Stock - Removal of Restrictions.
Upon Restricted Stock becoming Vested Stock, all restrictions
shall be removed from the certificates representing such Stock
and the Secretary of the Company shall deliver to the Participant
certificates representing such Vested Stock free and clear of all
restrictions together with a check in the amount of all Accrued
Dividends attributed to such Vested Stock without interest
thereon.
(e) Forfeiture. In the event the Participant's
employment with the Company is terminated for any reason other
than (i) death, (ii) disability, (iii) without Cause, or (iv)
by the Participant for Good Reason prior to all shares of
Restricted Stock becoming Vested Stock, then, all remaining
shares of Restricted Stock which have not yet been vested
(including any Accrued Dividends) shall be absolutely
forfeited and the Participant shall have no further interest
therein of any kind whatsoever.
4. Change of Control.
(a) In the event of a Change of Control, all
Restricted Stock shall become Vested Stock and the Company shall
deliver to the Participant certificates representing the Vested
Stock free and clear of all restrictions, together with any
Accrued Dividends attributable to such Vested Stock without
interest thereon.
(b) The Company shall also pay to the
Participant any Gross-Up Payment determined in accordance with
Section 9.2 of the Plan.
5. 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 28TH DAY OF JULY,
1999. 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."
6. Stock Powers and the Beneficiary. The
Participant hereby agrees to execute and deliver to the Secretary
of the Company a stock power (endorsed in blank) in the form of
Exhibit B hereto covering his Award and authorizes the Secretary
to deliver to the Company any and all shares of Restricted Stock
that are forfeited under the provisions of this Agreement. The
Participant further authorizes the Company to hold as a general
obligation of the Company any Accrued Dividends and to pay such
dividends to the Participant at the time the underlying
Restricted Stock becomes Vested Stock. Pursuant to Section 6.2 of
the Plan, the Participant designates his Eligible Spouse as the
Beneficiary under this Agreement.
7. Nontransferability of Award. The Participant
shall not have the right to sell, assign, transfer, convey,
dispose, pledge, hypothecate, burden, encumber or charge any
shares of Restricted Stock 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 address set forth in the Employment
Agreement.
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.
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 (including
Accrued Dividends).
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 (including Accrued
Dividends) 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 SCOTT M. NORTHCUTT
Scott M. Northcutt
Senior Vice President -
Human Resources
"PARTICIPANT"
DENNIS C. LUCAS
Dennis C. Lucas, Participant
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 20th day of July, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and E. Stephen Davis (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1996 Stock Incentive Plan and certain amendments
thereto (the "Plan"); and
WHEREAS, in connection with his employment with the
Company, the Company has awarded the Participant 60,000 shares of
common stock under the Plan subject to the terms and conditions
of this Agreement.
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 60,000 shares of Company
common stock, par value $2.50 (the "Stock"), on the terms and
conditions set forth herein and in the Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate representing
the shares of Stock subject to the Award (the "Restricted Stock")
shall be issued in the name of the Participant and shall be
escrowed with the Secretary of the Company (the "Escrow Agent")
subject to removal of the restrictions placed thereon or
forfeiture pursuant to the terms of this Agreement.
(b) Vesting. Vesting of all of the shares of
Restricted Stock is subject to fulfillment of both of the
following conditions: (i) continuous employment by the
Participant with the Company through July 20, 2001 and (ii)
achievement by the Company of the "Target" as such term is
defined in that certain Letter Agreement effective as of June 1,
1999, between the Company and Ernst & Young LLP covering Phase
II of the Low Cost Pursuit Program (the "Performance Vesting
Objective"). Any questions regarding satisfaction of the
Performance Vesting Objective shall be resolved by the Chairman
and Chief Executive Officer of the Company in his sole and
absolute discretion. In the event the Participant's employment
with the Company is terminated by reason of (i) death, (ii)
disability, (iii) without "Cause" (as such term is defined in
Section 3(f)(i) of this Agreement), or (iv) by the Participant
for "Good Reason" (as such term is defined in Section 3(f)(ii) of
this Agreement), then all remaining shares of Restricted Stock
(including any "Accrued Dividends," as such term is hereafter
defined) which have not yet been vested shall immediately vest.
Once vested pursuant to the terms of this Agreement, the
Restricted Stock shall be deemed "Vested Stock."
(c) Voting Rights and Dividends. The Participant
shall have all of the voting rights attributable to the shares of
Restricted Stock issued to him. Regular quarterly cash dividends
declared and paid by the Company with respect to the shares of
Restricted Stock shall be paid to the Participant. Any
extraordinary dividends declared and paid by the Company with
respect to shares of Restricted Stock ("Accrued Dividends") shall
not be paid to the Participant until such Restricted Stock
becomes Vested Stock. Such Accrued Dividends shall be held by
the Company as a general obligation and paid to the Participant
at the time the underlying Restricted Stock becomes Vested Stock.
(d) Vested Stock - Removal of Restrictions. Upon
Restricted Stock becoming Vested Stock, all restrictions shall be
removed from the certificates representing such Stock and the
Secretary of the Company shall deliver to the Participant
certificates representing such Vested Stock free and clear of all
restrictions, except for any applicable securities laws
restrictions, together with a check in the amount of all Accrued
Dividends attributed to such Vested Stock without interest
thereon.
(e) Forfeiture. Restricted Stock that does not
become Vested Stock pursuant to the terms of this Agreement shall
be absolutely forfeited and the Participant shall have no future
interest therein of any kind whatsoever. In the event the
Participant's employment with the Company is terminated for any
reason other than (i) death, (ii) disability, (iii) without
Cause, or (iv) by the Participant for Good Reason prior to all
shares of Restricted Stock becoming Vested Stock, then, all
remaining shares of Restricted Stock which have not yet been
vested (including any Accrued Dividends) shall be absolutely
forfeited and the Participant shall have no further interest
therein of any kind whatsoever.
(f) Certain Definitions.
(i) Cause. For purposes of this Agreement,
termination of the employment by the Company for Cause shall mean
termination for one of the following reasons: (A) the conviction
of the Participant of a felony by a federal or state court of
competent jurisdiction; (B) 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; or
(C) the Participant's "willful" failure to follow a direct,
reasonable and lawful written order from his supervisor, within
the reasonable scope of the Participant's duties, which failure
is not cured within 30 days. Further, for purposes of this
Section 3(f)(i):
(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 Participant'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 (A), (B)
or (C) above and specifying the particulars thereof in detail.
(ii) Good Reason. For purposes of this
Agreement, "Good Reason" means:
(A) the assignment to the Participant of any
duties inconsistent in any respect with the Participant's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities or any other
action by the Company which results in a diminishment in such
position, compensation, authority, duties or responsibilities,
other than an insubstantial and inadvertent action which is
remedied by the Company promptly after receipt of written notice
thereof given by the Participant, or
(B) the Company's requiring the Participant
to be based at any office or location more than 25 miles from
where the Participant was employed immediately prior to a Change
of Control, except for periodic travel reasonably required in the
performance of the Participant's responsibilities.
4. Change of Control.
(a) In the event of a Change of Control, all
Restricted Stock shall become Vested Stock and the Company shall
deliver to the Participant certificates representing the Vested
Stock free and clear of all restrictions, together with any
Accrued Dividends attributable to such Vested Stock without
interest thereon.
(b) The Company shall also pay to the Participant
any Gross-Up Payment determined in accordance with Section 9.2 of
the Plan.
5. 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 2OTH DAY OF
JUNE, 1999. 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."
6. Stock Powers and the Beneficiary. The Participant
hereby agrees to execute and deliver to the Secretary of the
Company a stock power (endorsed in blank) in the form of Exhibit
B hereto covering his Award and authorizes the Secretary to
deliver to the Company any and all shares of Restricted Stock
that are forfeited under the provisions of this Agreement. The
Participant further authorizes the Company to hold as a general
obligation of the Company any Accrued Dividends and to pay such
dividends to the Participant at the time the underlying
Restricted Stock becomes Vested Stock. Pursuant to Section 6.2 of
the Plan, the Participant designates his Eligible Spouse as the
Beneficiary under this Agreement.
7. Nontransferability of Award. The Participant
shall not have the right to sell, assign, transfer, convey,
dispose, pledge, hypothecate, burden, encumber or charge any
shares of Restricted Stock 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 his last known address evidenced on the
payroll records of the Company.
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.
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 (including
Accrued Dividends).
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 (including Accrued
Dividends) 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.
14. Protection of Business as Consideration. As
specific consideration to the Company for the Restricted Stock
Award:
(a) Limitations on Competition. Subject to
subsection (d), the Participant will not, during his employment
with the Company and until the first anniversary of his date of
termination/separation from employment with the Company, without
the Company's written consent, directly or indirectly, be a
shareholder, principal, agent, partner, officer, director,
employee or consultant of SUPERVALU, Inc., Nash Finch Company,
Associated Wholesale Grocers, Inc., Richfood Holdings, Inc. or
any other direct competitor of the Company, excluding national
retail chains, or any of their respective subsidiaries,
affiliates or successors (the "Competitors").
(b) Confidential Information. The Participant
acknowledges that during the course of his employment, he will
have access to and gain knowledge of highly confidential and
proprietary information and trade secrets. He further
acknowledges that the misuse, misappropriation or disclosure of
this information could cause irreparable harm to the Company,
both during and after the term of his employment. Therefore, he
agrees that during his employment and at all times thereafter he
will hold in a fiduciary capacity for the benefit of the Company
and will not divulge or disclose, directly or indirectly, to any
other person, firm or business, all confidential or proprietary
information, knowledge and data (including, but not limited to,
processes, programs, trade "know how," ideas, details of
contracts, marketing plans, strategies, business development
techniques, business acquisition plans, personnel plans, pricing
practices and business methods and practices) relating in any way
to the business of the Company, customers, joint ventures,
licensors, licensees, distributors and other persons and entities
with whom the Company does business ("Confidential Data"), except
upon the Company's written consent or as required by the
Participant's duties with the Company, for so long as such
Confidential Data remains confidential and all such Confidential
Data, together with all copies thereof and notes and other
references thereto, shall remain the sole property of the
Company.
(c) Consequences of Breach of Limitations.
Subject to subsection (d), if at any time within (i) the term of
this Agreement or (ii) within one (1) year following the
Participant's date of termination/separation, but only if such
termination/separation occurs on a date prior to July 20, 2001,
or (iii) within one (1) year after vesting any portion of the
Restricted Stock, whichever is latest, the Participant, without
the Company's written consent, directly or indirectly, is a
shareholder, principal, agent, partner, officer, director,
employee or consultant of any of the Competitors or breaches the
provisions of subsection (b) regarding Confidential Information,
then (iv) with respect to any shares of Restricted Stock,
effective the date the Participant enters into such activity all
such Restricted Stock shall be absolutely forfeited and the
Participant shall have no further interest therein of any kind
whatsoever (unless forfeited sooner by operation of another term
or condition of this Agreement or the Plan), and (v) with respect
to any shares of Vested Stock, the Participant shall be required
to return to the Company all of the actual shares of Vested
Stock, or other equivalent shares of Company common stock, within
thirty (30) days after the date of written notice from the
Company that pursuant to the provisions of this subsection
delivery of such shares is due and the Participant shall forfeit
all rights to such shares of Vested Stock. The Participant
acknowledges that damages which may arise from a breach of this
Section 14 may be impossible to ascertain or prove with
certainty. In addition to the other legal or equitable remedies
which may be available, the parties agree to specific performance
of the provisions of this subsection (c), and the Company shall
be entitled to an immediate injunction from a court of competent
jurisdiction to end such breach, without further proof of
damages.
(d) Permitted Ownership. Nothing in this
Section 14 shall prohibit the Participant from owning less than
one percent (1%) of any company whose securities are publicly
traded on a national securities exchange.
(e) Severability and Reasonableness. If, at any
time, the provisions of this Section 14 shall be determined to be
invalid or unenforceable, by reason of being vague or
unreasonable as to duration or scope of activity, this Section 14
shall be considered divisible and shall become and be immediately
amended to only such duration and scope of activity as shall be
determined to be reasonable and enforceable by a court or other
body having jurisdiction over the matter; and the Participant
agrees that this Section 14 as so amended shall be valid and
binding as though any invalid or unenforceable portion had not
been included herein. The parties agree that the duration and
scope of the limitations on competition and disclosure of
information described in subsections (a) and (b) are reasonable.
15. Arbitration of Disputes. Any disputes, claims or
controversies between the Participant and the Company which may
arise out of or relate to this Agreement shall be settled by
arbitration. This agreement to arbitrate shall survive the
termination of this Agreement. Any arbitration shall be in
accordance with the Rules of the American Arbitration Association
and shall be undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Oklahoma City, Oklahoma unless the
parties mutually agree on another location. The decision of the
arbitrator(s) will be enforceable in any court of competent
jurisdiction. The arbitrator(s) may, but will not be required, to
award such damages or other monetary relief as either party might
be entitled to receive from a court of competent jurisdiction.
Nothing in this agreement to arbitrate shall preclude the Company
from obtaining injunctive relief from a court of competent
jurisdiction prohibiting any on-going breaches of the Agreement by
the Participant pending arbitration. The arbitrator(s) may also
award costs and attorneys' fees in connection with the arbitration
to the prevailing party; however, in the arbitrator's(s')
discretion, each party may be ordered to bear its/his/her own costs
and attorneys' fees.
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 SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior Vice President
- Human Resources
"PARTICIPANT" E. STEPHEN DAVIS
E. Stephen Davis
<PAGE>
Exhibit A
[Copy of 1999 Stock Incentive Plan]
<PAGE>
Exhibit B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, __________________, an individual, hereby
irrevocably assigns and conveys to ________________________,
______________ AND NO/100 (_____) shares of the Common Capital
Stock of Fleming Companies, Inc., an Oklahoma corporation, $2.50
par value.
DATED:
Attachment 1
LOAN AGREEMENT
between
FLEMING COMPANIES, INC.
and
___________________________
___________, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. Loan Amount and Purpose . . . . . . . . . . . . . . . . . . . .1
2. Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 Interest . . . . . . . . . . . . . . . . . . . . . . .1
2.2 Interest Moratorium. . . . . . . . . . . . . . . . . .1
2.3 Payments . . . . . . . . . . . . . . . . . . . . . . .1
3. Collateral and Security Agreement . . . . . . . . . . . . . . .1
4. Conditions of Lending . . . . . . . . . . . . . . . . . . . . .2
4.1 Loan Documents . . . . . . . . . . . . . . . . . . . .2
4.2 No Violation . . . . . . . . . . . . . . . . . . . . .2
4.3 No Default . . . . . . . . . . . . . . . . . . . . . .2
5. Representations and Warranties . . . . . . . . . . . . . . . . .2
5.1 Capacity and Power . . . . . . . . . . . . . . . . . .2
5.2 No Conflict. . . . . . . . . . . . . . . . . . . . . .2
6. Covenants of the Borrower . . . . . . . . . . . . . . . . . . .2
6.1 Mandatory Prepayments. . . . . . . . . . . . . . . . .2
6.2 Pledged Shares . . . . . . . . . . . . . . . . . . . .2
7. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
7.1 Nonpayment of Note . . . . . . . . . . . . . . . . . .3
7.2 Breach of Agreement. . . . . . . . . . . . . . . . . .3
7.3 Representations and Warranties . . . . . . . . . . . .3
7.4 Insolvency . . . . . . . . . . . . . . . . . . . . . .3
7.5 Receivership . . . . . . . . . . . . . . . . . . . . .3
7.6 Judgment . . . . . . . . . . . . . . . . . . . . . . .3
7.7 Termination for Cause. . . . . . . . . . . . . . . . .3
8. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
8.1 Termination. . . . . . . . . . . . . . . . . . . . . .4
8.2 Acceleration of Note . . . . . . . . . . . . . . . . .4
8.3 Selective Enforcement. . . . . . . . . . . . . . . . .4
8.4 Waiver of Default. . . . . . . . . . . . . . . . . . .4
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .4
9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . .4
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . .5
9.3 Severability . . . . . . . . . . . . . . . . . . . . .5
9.4 Construction and Venue . . . . . . . . . . . . . . . .5
9.5 No Waiver. . . . . . . . . . . . . . . . . . . . . . .5
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . .6
Exhibit "A" - Promissory Note
Exhibit "B" - Security Agreement
Exhibit "C" - Form of UCC-1 Financing Statement
Exhibit "D" - Form of Stock Power Separate from Certificate
Exhibit "E" - Form of Notice to Transfer Agent
<PAGE>
LOAN AGREEMENT
THIS AGREEMENT is entered into effective this ____ day of
___________, 1999, between _____________________, an individual
(the "Borrower"), and Fleming Companies, Inc., an Oklahoma
corporation (the "Lender").
W I T N E S S E T H:
1. Loan Amount and Purpose. Subject to the terms and
conditions of this Agreement, the Lender agrees to lend to the
Borrower such amounts as the Borrower may from time to time
request prior to April 1, 2004, but not to exceed principal
advances in the aggregate amount of _________________ Dollars
($____________). The loan proceeds will be used solely to
purchase shares of Lender's common stock, par value $2.50 per
share (the "Shares").
2. Note. The loans to be made hereunder will be evidenced
by the Promissory Note (the "Note") in the form of Exhibit "A"
attached hereto as a part hereof and payable on the following
terms:
2.1 Interest. Except as otherwise provided in Section 2.2
hereof and in the Note, the unpaid principal balance of
the Note will bear interest at the rate of seven
percent (7%) per annum. Interest will be payable
quarterly throughout the loan term commencing on
_____________, 1999, and on the last day of each
successive December, March, June and September
thereafter until the Note is paid in full. All
interest will be computed at a per diem charge for the
actual number of days elapsed on the basis of a year
consisting of three hundred sixty-five (365) days.
2.2 Interest Moratorium. Interest shall neither accrue nor
be payable so long as Borrower is the full time
employee of Lender. Interest shall accrue and be
payable as set forth in Section 2.1 from and after the
first day following Borrower's termination as a full
time employee of Lender.
2.3 Payments. Each payment on the Note will be applied
first to accrued and unpaid interest, if any, and the
remainder to the principal balance of the Note. The
entire unpaid principal balance of the Note, together
with all accrued and unpaid interest thereon, if any,
will be due and payable upon acceleration as provided
in the Note or, if not accelerated, on April 1, 2005.
3. Collateral and Security Agreement. Payment of the Note
will be secured by a first lien on and security interest
in the Collateral (as defined in the Security Agreement
in the form of Exhibit "B" attached hereto as a part
hereof; the "Security Agreement"). All existing and
future Collateral will be subject to the Security
Agreement.
4. Conditions of Lending. The obligation of the Lender to
perform this Agreement and to make the initial or any subsequent
advance under the Note is subject to the following conditions
precedent:
4.1 Loan Documents. This Agreement, the Note, the Security
Agreement, UCC-1 Financing Statements, Stock Powers,
the Notice to Transfer Agent, and any related documents
and all extensions, amendments and modifications
thereof (collectively the "Loan Documents") will have
been duly executed, acknowledged (where appropriate) by
all parties thereto and delivered to the Lender, all in
form and substance satisfactory to the Lender.
Borrower's spouse and any other joint owner of the
Collateral must execute and deliver a Security
Agreement, UCC-1 Financing Statement, Stock Power and
Notice to Transfer Agent to the Lender prior to any
advance being made hereunder.
4.2 No Violation. The advance shall not cause the Lender
to be in violation of any law, rule, regulation or
covenant applicable to the Lender.
4.3 No Default. There will have occurred and be continuing
no event of default as of the date of this Agreement or
the date of any advances under the Note.
5. Representations and Warranties. In order to induce the
Lender to enter into and perform the Loan Documents, the Borrower
represents and warrants to the Lender as follows:
5.1 Capacity and Power. The Borrower has adequate
capacity, power and legal right to enter into, execute,
deliver and perform the terms of the Loan Documents, to
borrow money, to give security for borrowings (either
alone or together with any additional Pledgor who has
executed the Security Agreement) and to consummate the
transactions contemplated by the Loan Documents.
5.2 No Conflict. The execution, delivery and performance
of the Loan Documents by the Borrower will not violate
any law, regulation, rule or any other agreement or
instrument binding on the Borrower or the Collateral.
6. Covenants of the Borrower. Until the expiration of the
Lender's obligation to advance funds under this Agreement and
payment in full of the Note:
6.1 Mandatory Prepayments. The Borrower will promptly
apply at least one-half of any cash proceeds and one
hundred percent (100%) of all distributions (other than
scheduled dividends) received in respect of the
Collateral as prepayments of principal amounts owing
under the Note. In the event of a voluntary sale,
shares cannot be released if such release would cause
the Lender to fail to satisfy Regulation U.
6.2 Pledged Shares. All Shares acquired by Borrower with
the proceeds of the Note and all Shares acquired by
Borrower relating to the Shares pledged as Collateral,
whether by dividend, stock split or otherwise, shall be
pledged to the Lender hereunder and shall immediately
be subject to the security interest created by the
Security Agreement. All certificates representing such
Shares shall be issued in the individual name of the
Borrower; provided that certificates evidencing Shares
may be registered jointly in the name of the Borrower
and any joint owner if such joint owner shall have
executed and delivered a Security Agreement, UCC-1
Financing Statement, Stock Powers and a Notice to
Transfer Agent. Borrower shall direct the transfer
agent or the issuer, as applicable, to deliver
certificates representing the Shares directly to the
office of Lender's Corporate Secretary.
7. Default. The Lender may terminate all of the Lender's
obligations under the Loan Documents and may declare the Note and
all other indebtedness and obligations of the Borrower owing to
the Lender to be due and payable if any of the following events
of default occur and have not been cured or waived by the Lender:
7.1 Nonpayment of Note. Default in payment when due of any
interest on or principal of the Note; or
7.2 Breach of Agreement. Default in the performance or
observance of any covenant contained in the Loan
Documents or under the terms of any other instrument
delivered to the Lender in connection with this
Agreement; or
7.3 Representations and Warranties. Any representation or
statement made or furnished to the Lender by or on
behalf of the Borrower proves to be false or erroneous
in any material respect or any warranty ceases to be
complied with in any material respect; or
7.4 Insolvency. The Borrower admits the inability to pay
the Borrower's debts as such debts mature; or any
bankruptcy, reorganization, readjustment of debt,
liquidation or receivership proceedings by or against
the Borrower is commenced under the Bankruptcy Code, as
amended, or any part thereof, or under any other laws,
for the relief of debtors, whether state or federal,
now or hereafter existing; or
7.5 Receivership. The appointment of a receiver or trustee
for the Borrower or for any substantial part of the
Collateral; or
7.6 Judgment. Entry by any court of a final judgment
against the Borrower attaching any part of the
Collateral by any means, including, without limitation,
levy, distraint, replevin or self-help, which is not
discharged or stayed within ten (10) days thereof; or
7.7 Termination for Cause. Borrower is terminated as an
employee of Lender for Cause as defined herein. For
purposes of this Agreement, "Cause" shall be deemed to
exist when Borrower shall have committed any
intentional act which involves moral turpitude and
which causes a significant adverse effect on Borrower,
its business, properties or prospects.
8. Remedies. On the occurrence of an event of default the
Lender may, at the Lender's option:
8.1 Termination. Terminate the Lender's obligations
hereunder, including the obligation to make any
advances under the Note.
8.2 Acceleration of Note. Declare the Note and all sums
due pursuant to the Loan Documents to be immediately
due and payable, whereupon the same will become
forthwith due and payable, and the Lender will be
entitled to proceed to selectively and successively
enforce the Lender's rights under the Loan Documents or
any other instruments delivered to the Lender in
connection with the Loan Documents; provided that if
any event of default specified in Sections 7.4, 7.5 or
7.6 shall occur, all amounts owing under the Loan
Documents, including the Note, shall thereafter become
due and payable concurrently therewith, and the
Lender's obligations hereunder shall automatically
terminate, without presentment, demand, protest, notice
of default, notice of acceleration or intention to
accelerate or other notice of any kind, all of which
the Borrower hereby expressly waives; and further
provided that if any event of default specified in
Section 7.7 shall occur, all amounts owing under the
Loan Documents, including the Note, shall become due
and payable on the ninetieth (90th) day following such
termination without presentment, demand, protest,
notice of default, notice of acceleration or intention
to accelerate or other notice of any kind, all of which
the Borrower hereby expressly waives.
8.3 Selective Enforcement. In the event the Lender elects
to selectively and successively enforce the Lender's
rights under any one or more of the instruments
securing payment of the indebtedness evidenced by the
Note, such action will not be deemed a waiver or
discharge of any other lien or encumbrance securing
payment of any of the indebtedness evidenced by the
Note until such time as the Lender has been paid in
full all sums advanced by the Lender plus all accrued
interest thereon.
8.4 Waiver of Default. The Lender may, by an instrument or
instruments in writing, signed by the Lender, waive any
default which has occurred and any of the consequences
of such default, and, in such event, the Lender and the
Borrower will be restored to their respective former
positions, rights and obligations hereunder. Any
default so waived will, for all purposes of this
Agreement, be deemed to have been cured and not to be
continuing, but no such waiver will extend to any
subsequent or other default or impair any consequence
of such subsequent or other default.
9. Miscellaneous. It is further agreed as follows:
9.1 Expenses. All reasonable out-of-pocket expenses
incurred by the Lender in connection with the
enforcement of the Loan Documents including, without
limitation, reasonable attorneys' fees, will be paid by
the Borrower.
9.2 Notices. All notices, requests and demands will be
served by hand delivery, telefacsimile or by registered
or certified mail, with return receipt requested, as
follows:
To the Borrower: _________________________
_________________________
_________________________
Fax No. ( ) _____________
To the Lender: Fleming Companies, Inc.
P.O. Box 26647
Oklahoma City, Oklahoma 73126-0647
Fax No. (405) 841-8504
Attention: Treasury Department/Margin Loans
or at such other address as either party designates for
such purpose in a written notice to the other party.
Notice will be deemed to have been given on the date
actually received in the event of personal or
telefacsimile delivery or on the date two (2) days
after notice is deposited in the mail, properly
addressed, postage prepaid.
9.3 Severability. In the event any one or more of the
provisions contained in any of the Loan Documents is
determined to be invalid, illegal or unenforceable in
any respect in any jurisdiction, the validity, legality
and enforceability of such provision or provisions will
not in any way be affected or impaired thereby in any
other jurisdiction nor will the validity, legality and
enforceability of the remaining provisions contained in
the Loan Documents in any way be affected or impaired
thereby.
9.4 Construction and Venue. This Agreement and the
documents issued hereunder are executed and delivered
as an incident to a lending transaction negotiated and
to be performed in Oklahoma City, Oklahoma. The Loan
Documents are intended to constitute a contract made
under the laws of the State of Oklahoma and to be
construed in accordance with the internal laws of the
State of Oklahoma. The descriptive headings of the
paragraphs of this Agreement are for convenience only
and are not to be used in the construction of the
content of this Agreement. All actions relating to or
arising under the Loan Documents will be instituted in
the courts of the State of Oklahoma sitting in Oklahoma
County, Oklahoma, or the United States District Court
for the Western District of Oklahoma, and the Borrower
irrevocably and unconditionally waives any objection to
the venue in such court and any claim that any action
has been brought in an inconvenient forum.
9.5 No Waiver. No advance of loan proceeds under the Loan
Documents will constitute a waiver of any of the
Borrower's representations, warranties, conditions or
covenants under the Loan Documents.
9.6 Counterparts. This Agreement may be executed via
telefacsimile in two or more counterparts and it will
not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof. Each
counterpart will be deemed an original, but all
counterparts together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the Borrower and the Lender have
executed this Agreement effective on the date first above written.
______________________________
__________________, individually
(the "Borrower")
FLEMING COMPANIES, INC.,
an Oklahoma corporation
By:_______________________________
_______________________________
(the "Lender")
<PAGE>
Attachment 2
EXHIBIT A
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, ______________________,
an individual (the "Borrower"), promises to pay to the order of
Fleming Companies, Inc., an Oklahoma corporation (the "Lender"),
at P.O. Box 26647, Oklahoma City, Oklahoma 73126-0647, or at such
other place as may be designated in writing by the holder of this
Note, the principal sum as set forth on Schedule 1 attached
hereto and made a part hereof as follows:
Prior to default, the unpaid principal balance of this Note
will bear interest at seven percent (7%) per annum, payable
quarterly throughout the loan term commencing on the date
first indicated on Schedule 1, and on the last day of each
successive December, March, June and September thereafter
until this Note is paid in full. All interest will be
computed at a per diem charge for the actual number of days
elapsed on the basis of a year consisting of three hundred
sixty five (365) days; provided, however, that interest
shall neither accrue nor be payable so long as Borrower
remains the full-time employee of Lender.
All payments will be applied first to any accrued and unpaid
interest on this Note and the remainder to the principal
balance of this Note. The entire unpaid principal balance
of this Note, together with all accrued and unpaid interest
thereon, if any, will be due and payable upon acceleration
hereunder or, if not accelerated, on April 1, 2005.
The Borrower will promptly apply not less than 50% of any
cash proceeds and 100% of any distributions (other than
scheduled dividend payments) received in respect of the
Collateral as prepayments of the principal amount owing
under the Note.
Except as otherwise defined herein all terms defined in the
Loan Agreement of even date herewith between the Borrower and the
Lender (the "Loan Agreement") will have the same meanings herein
as therein. Any sum not paid when due will bear interest at
nine percent (9%) per annum and will be paid at the time of and
as a condition precedent to the curing of any default under the
Loan Documents. During the existence of any such default, the
holder of this Note may apply payments received on any amount due
hereunder as the holder may determine. The Borrower will have
the right to prepay this Note in whole or in part at any time
without penalty.
Advances and payments hereunder shall be recorded on
Schedule 1 to this Note and initialed by Borrower. Schedule 1
shall be prima facie evidence of all advances and payments made
under the Note and of the unpaid balance of this Note. All
advances hereunder shall be made by the Lender in accordance with
the terms of the Loan Agreement.
All Shares acquired by Borrower with the proceeds of this
Note and all Shares acquired by Borrower relating to the Shares
pledged as Collateral hereunder, whether by dividend, stock
split, or otherwise, shall be pledged to the Lender hereunder and
shall immediately be subject to the security interest created by
the Security Agreement entered into in connection herewith. All
certificates representing such Shares shall be registered in
Borrower's individual name; provided that certificates evidencing
Shares may be registered jointly in the name of any joint owner
if such joint owner shall have executed and delivered to the
Lender a Security Agreement, UCC-1 Financing Statement, Stock
Powers and a Notice to Transfer Agent with respect to such
Shares. Borrower shall direct the transfer agent or the issuer
of the Shares, as applicable, to deliver certificates representing
the Shares directly to the office of Lender's Corporate Secretary.
The Borrower agrees that if, and as often as, this Note is
placed in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder or under any
instrument securing payment of the same, the Borrower will pay to
such holder its reasonable attorneys' fees and all reasonable
expenses incurred in connection therewith, whether or not an
action shall be instituted to enforce this Note.
This Note is given by the Borrower and accepted by the
holder hereof pursuant to a lending transaction contracted,
consummated and to be performed in Oklahoma City, Oklahoma, and
this Note is to be construed according to the laws of the State
of Oklahoma.
This Note is issued subject to the terms of the Loan
Agreement and is secured by the Loan Documents. On the breach of
any provision of this Note, or any provision of the Loan
Documents at the option of the holder, the entire unpaid
indebtedness evidenced by this Note will become due, payable and
collectible then or thereafter as the holder may elect,
regardless of the date of maturity of this Note. Notice of the
exercise of such option is hereby expressly waived. Failure by
the holder to exercise such option will not constitute a waiver
of the right to exercise the same in the event of any subsequent
default.
The failure of the Lender to exercise any of the remedies or
options set forth in this Note, or in any instrument securing
payment hereof, upon the occurrence of one or more events of
default, shall not constitute a waiver of the right to exercise
the same or any other remedy at any subsequent time in respect to
the same or any other event of default. The acceptance by the
Lender of any payment which is less than the total of all amounts
due and payable at the time of such payment shall not constitute
a waiver of the right to exercise any of the foregoing remedies
or options at that time or any subsequent time, or nullify any
prior exercise of such remedy or option, without the express
consent of the Lender.
Time is of the essence of each obligation of the Borrower
hereunder.
For the purposes of computing interest under this Note,
payments of all or any portion of the principal sum owing under
this Note will not be deemed to have been made until such
principal payments are received by the Lender in collected funds.
The makers, endorsers, sureties, guarantors and all other
persons who may become liable for all or any part of this
obligation severally waive presentment for payment, protest,
demand and notice of nonpayment. Said parties consent to any
extension of time (whether one or more) of payment hereof, the
modification (whether one or more) of payment hereof, release or
substitution of all or part of the security for the payment
hereof or release of any party liable for payment of this
obligation. Any such extension or release may be made without
notice to any such party and without discharging such party's
liability hereunder.
IN WITNESS WHEREOF, the Borrower has executed this
instrument effective the date first above written.
___________________________________
___________________,individually
(the "Borrower")
<PAGE>
Attachment 3
EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed effective the ____ day
of ____________, 1999, between _____________________, an
individual (the "Debtor" and a "Pledgor" hereunder), and
_____________________, an individual (one of the "Pledgors"
hereunder; collectively, the "Pledgors"), each having a notice
address of ____________________________, and Fleming Companies,
Inc., an Oklahoma corporation having a notice address at P.O. Box
26647, Oklahoma City, Oklahoma 73126-0647 (the "Secured Party").
W I T N E S S E T H :
WHEREAS, the Debtor is liable to the Secured Party under
that certain Promissory Note of even date herewith (the "Note")
in connection with that certain Loan Agreement (the "Loan
Agreement") of even date herewith between the Debtor and the
Secured Party; and
WHEREAS, as a material condition precedent to the Secured
Party's entering into the Loan Agreement, the Pledgors have
agreed to secure payment of the Note by granting the Secured
Party a lien, security interest and pledge covering certain
assets of the Pledgors; and
WHEREAS, each Pledgor wishes to grant to each other Pledgor,
severally, an irrevocable power of attorney to amend and modify
the list of assets covered by this Security Agreement attached
hereto as Schedule I.
NOW, THEREFORE, (i) in order to comply with the terms and
conditions of the Loan Agreement; (ii) for and in consideration
of the premises and the agreements herein contained; and (iii)
for other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged, the Pledgors
hereby agree with the Secured Party as follows:
1. Definitions. Unless otherwise defined herein, all
terms which are defined in the Loan Agreement will have the same
meanings herein as therein unless the context otherwise requires,
and all terms used herein which are defined in the Oklahoma
Uniform Commercial Code ("UCC") will have the same meanings
herein unless the context otherwise requires.
2. Security Interest. As collateral security for the
Secured Indebtedness, the Pledgors hereby grant to the Secured
Party a security interest in, an assignment of, and a general
lien upon the following described property (the "Collateral"):
2.1 all of the Pledgors' right, title and interest in and
to the shares of common stock of Fleming Companies,
Inc., par value $2.50 per share, described at Schedule
I attached hereto (as such schedule may be amended from
time to time by the Secured Party or by one or more of
the Pledgors), and all certificates representing such
property, and all tangible and intangible rights in
connection therewith and all accounts, contract rights
and general intangibles relating thereto (the "Shares");
2.2 any additional Shares from time to time delivered to or
deposited with the Secured Party as security for the
obligations of the Debtor to the Secured Party or
otherwise pursuant to the terms of this Agreement,
including all Shares purchased with the proceeds of the
Note and any additional Shares pledged by Pledgors
pursuant to the Loan Agreement or otherwise; and
2.3 all cash, securities, dividends (whether cash, property
or stock), preferential, conversion or other rights
attaching to the Shares, all distributions or payments
in partial or complete liquidation or redemption or as
a result of reclassifications, readjustments,
reorganizations or changes in the capital structure of
the issuer of the Shares and all rights and privileges
pertaining thereto and all subscriptions, warrants,
options and any other rights issued by the issuer of
the Shares or any other person upon or in connection
with the Shares and all other proceeds, products,
additions to, replacements of, substitutions for and
accessions of any and all Collateral described in this
Section 2.
3. Upon the prepayment of all or any portion of the
principal amount of the Secured Indebtedness, Borrower shall be
entitled to receive, free and clear of the security interest
created by the Loan Documents, certificates representing that
number of Shares equal to the product of (x) the number of Shares
subject to the Security Agreement immediately prior to the
prepayment multiplied by (y) a fraction, the numerator of which
shall be the dollar amount of the principal prepayment and the
denominator of which shall be the principal amount of the Secured
Indebtedness immediately prior to the prepayment; provided,
however, that no collateral shall be released if the Secured
Party would not be in compliance with Reg. U immediately
following such proposed release. Certificates shall be delivered
to Borrower as soon as practicable after release hereunder.
4. Secured Indebtedness. The security interest granted
hereby in the Collateral is given to secure the Debtor's payment
of: (a) the Note together with interest thereon, if any; (b) all
extensions, renewals, amendments, modifications, substitutions
and changes in form to the Note; (c) all costs and expenses
incurred in connection with the collection of the Note and
enforcement of the Loan Documents and the Secured Party's rights
under this Agreement and all other Loan Documents, including
attorneys' fees and expenses; (d) all advances made by the
Secured Party to protect the security hereof, including advances
made for or on account of levies, insurance, repairs, taxes and
for maintenance or recovery of the Collateral, together with
interest thereon at the rate specified in the Note; and (e)
performance of the agreements herein set forth (the foregoing
items (a) through (e) are collectively referred to herein as the
"Secured Indebtedness").
5. Debtors' Representations and Covenants. The Pledgors
hereby warrant, represent and agree as follows:
5.1 Principal Place of Business. The Debtor's principal
place of business is P.O. Box 26647, Oklahoma City,
Oklahoma 73126-0647.
5.2 Title. The Pledgors have absolute title to the
Collateral free and clear of all liens, encumbrances,
negative pledges and security interests except the
security interest hereby granted to the Secured Party,
and the Pledgors warrant and will defend the same unto
the Secured Party against the claims and demands of all
other persons and parties whomsoever.
5.3 Transfers. Without the prior written consent of the
Secured Party, the Pledgors agree that the Pledgors
will not sell, exchange or in any manner dispose of any
of the Collateral or any interest therein nor permit
any other lien, encumbrance or security interest to
attach thereto except those contemplated herein.
5.4 Secured Party's Security Interest. This Agreement
creates a valid and binding security interest in the
Collateral securing the Secured Indebtedness. There
are no consents required in connection with the grant
by the Pledgors of the security interests in the
Collateral. The Pledgors have good, right and lawful
authority to pledge the Collateral in the manner hereby
done or contemplated. All filings and other actions
necessary or appropriate to perfect or protect such
security interest will be or have been duly taken.
5.5 Further Assurances. The Pledgors will from time to
time sign, execute, deliver and file, alone or with the
Secured Party, any financing statements, stock powers,
notices to issuers of securities constituting
collateral security, security agreements or other
documents; procure any instruments or documents as may
be reasonably requested by the Secured Party; and take
all further action that may be necessary or desirable,
or that the Secured Party may reasonably request, to
confirm, perfect, preserve and protect the security
interests intended to be granted hereby, and in
addition, the Pledgors hereby authorize the Secured
Party to execute and deliver on behalf of the Pledgors
and file such financing statements, stock powers,
security agreements and other documents without the
signature of the Pledgors either in the Secured Party's
name or in the name of the Pledgors and as agent and
attorney-in-fact for the Pledgors. The Pledgors shall
do all such additional and further acts or things, give
such assurances and execute such documents or
instruments as the Secured Party requires to vest more
completely in and assure to the Secured Party its
rights under the Loan Documents.
5.6 Filing Reproductions. At the option of the Secured
Party, a carbon, photographic or other reproduction of
this Agreement or of a financing statement covering the
Collateral shall be sufficient as a financing statement
and may be filed as a financing statement.
5.7 Possession. Physical possession of the certificates
representing or evidencing the Shares, together with
duly executed stock powers, shall be delivered to and
held by Secured Party.
6. Secured Party's Expenditures. If the Pledgors fail to
make any expenditure or pay any sum necessary to discharge any
lien, encumbrance, levy, security interest or other charge on the
Collateral as required hereby, the Secured Party may but shall
not be required to make any expenditure for such purpose or
purposes and all sums so expended shall be payable on demand,
shall bear interest at the rate specified in the Note and all
such sums and interest will additionally be secured hereby. The
Pledgors will pay all costs of filing any financing, continuation
or termination statements with respect to the security interest
granted hereby in the Collateral.
7. Powers of Attorney. The Pledgors hereby grant the
following irrevocable powers of attorney:
7.1 Secured Party. The Secured Party is hereby fully
authorized and empowered (without the necessity of any
further consent or authorization from the Pledgors), and the
Pledgors hereby constitute, appoint and make the Secured
Party, the Pledgors' true and lawful attorney-in-fact and
agent for the Pledgors and in the Pledgors' name, place and
stead with full power of substitution, in the Secured
Party's name or the Pledgors' name or otherwise, for Secured
Party's sole use and benefit, but at the Pledgors' cost and
expense, to exercise, without notice, all or any of the
following powers at any time with respect to all or any of
the Collateral after the occurrence of any default under
this Agreement or any of the other Loan Documents which has
not been timely cured: (a) all voting rights, all other
corporate rights and all conversion, exchange, subscription
or other rights pertaining to the Shares, whether or not the
Shares have been registered in the Secured Party's name and
this Agreement will constitute the Pledgors' proxy to the
Secured Party for such purpose; (b) to demand, sue for,
collect, receive and give acquittance for any and all monies
due or to become due by virtue thereof and otherwise deal
with proceeds; (c) to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, documents and
other negotiable and non-negotiable instruments and chattel
paper taken or received by the Secured Party in connection
therewith; (d) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect thereto; (e) to
sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof as fully and effectively
as if the Secured Party were the absolute owner thereof; and
(f) to extend the time of payment of any or all thereof and
to grant waivers and make any allowance or other adjustment
with reference thereto; provided, however, the Secured Party
shall be under no obligation or duty to exercise any of the
powers hereby conferred upon it and shall be without
liability for any act or failure to act in connection with
the collection of, or the preservation of any rights under,
any Collateral.
7.2 Other Pledgors. Each Pledgor is hereby fully
authorized and empowered severally by each other Pledgor
(without the necessity of any further consent or
authorization from any Pledgor), and each Pledgor hereby
severally constitutes, appoints and makes each other
Pledgor, the granting Pledgor's true and lawful
attorney-in-fact and agent to amend, modify or supplement
the list of shares pledged hereunder from time to time on
Schedule I attached hereto. This grant shall be irrevocable
and shall be deemed to be coupled with an interest until all
of the Secured Indebtedness is paid in full as the same
becomes due and payable and until the Secured Party, upon
request of the Pledgors, has executed a written termination
statement pursuant to Section 10 hereof.
8. Default; Remedies. On the occurrence of any event of
default under any of the Loan Documents or if the Pledgors fail
to keep, observe, comply with and perform all of the material
obligations and undertakings under this Agreement or any of the
other Loan Documents or fail to pay any principal or interest on
the Note when due, then, and in any such event, the Secured Party
may, at its option and without notice to any party, declare all
or any portion of the Secured Indebtedness to be due and payable
and may proceed to enforce payment of the same, to exercise any
or all rights and remedies provided herein, in the other Loan
Documents, and by the UCC and otherwise available at law or in
equity. All remedies hereunder are cumulative, and any
indulgence or waiver by the Secured Party shall not be construed
as an abandonment of any other right hereunder or of the power to
enforce the same or another right at a later time. Whether the
Secured Party elects to exercise any other rights or remedies
under this Agreement or applicable law, the Secured Party will be
entitled to have a receiver appointed to take possession of the
Collateral without notice, which notice the Pledgors hereby
waive, notwithstanding anything contained in this Agreement or
any law heretofore or hereafter enacted.
9. Secured Party's Duties. The powers conferred upon the
Secured Party by this Agreement are solely to protect its
interest in the Collateral and will not impose any duty upon the
Secured Party to exercise any such powers. The Secured Party
shall be under no duty whatsoever to make or give any
presentment, demand for performance, notice of nonperformance,
protest, notice of protest, notice of dishonor, or other notice
or demand in connection with any of the Collateral or the Secured
Indebtedness, or to take any steps necessary to preserve any
rights against prior parties. The Secured Party shall not be
liable for failure to collect or realize upon any or all of the
Secured Indebtedness or Collateral, or for any delay in so doing,
nor shall the Secured Party be under any duty to take any action
whatsoever with regard thereto.
10. Continuing Agreement. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in
full force and effect and all the rights, powers and remedies of
the Secured Party hereunder shall continue to exist until all of
the Secured Indebtedness is paid in full as the same becomes due
and payable and until the Secured Party, upon request of the
Pledgors, has executed a written termination statement,
reassigned to the Pledgor, without recourse, the Collateral and
all rights conveyed hereby and returned possession of any
Collateral in the Secured Party's possession to the Pledgors.
11. Preservation of Liability. Neither this Agreement nor
the exercise by the Secured Party of (or the failure to so
exercise) any right, power or remedy conferred herein or by law
shall be construed as relieving any person liable on the Secured
Indebtedness from liability on the Secured Indebtedness and for
any deficiency thereon.
12. Waivers. It is the intention of the Pledgors and
Secured Party that the validity of this Security Agreement shall
not be impaired by any defenses given to sureties or guarantors
at law or in equity. Nonexercise by the Secured Party of any
right or remedy of the Secured Party provided in the Note, Loan
Agreement or other Loan Documents shall in no manner affect the
validity or enforceability of this Agreement or give any Pledgors
any recourse against the Secured Party.
12.1 Certain Actions. Each Pledgor agrees that from time to
time, without affecting the Pledgors' obligations
hereunder or the Secured Party's rights in the
Collateral, and without giving notice to or obtaining
the consent of any Pledgor, and without liability on
the Secured Party's part, the Secured Party may, at its
option, (i) extend the time for payment of the Note or
any interest thereon, (ii) release anyone liable under
the Loan Agreement or Note; (iii) renew, rearrange,
consolidate or modify the Note; (iv) take or release
any security or additional security for the Note or
Loan Agreement; (v) increase or decrease the rate of
interest payable on the Note; or (vi) grant any other
leniencies, indulgences, or compromises under the Loan
Agreement or Note as the Secured Party may deem
appropriate or desirable.
12.2 Certain Defenses. Each Pledgor hereby waives
diligence, presentment, demand, notice of demand,
notice of nonpayment or dishonor, protest, notice of
protest and all other notices of any kind whatsoever as
to the Note, or any renewal, extension, rearrangement,
consolidation or modification thereof. Each Pledgor
agrees that it shall not be necessary for the Secured
Party, in order to enforce this Agreement, first, (i)
to exhaust its remedies against the Debtor, any
guarantor or others liable on the obligations evidenced
by the Note or (ii) to enforce the Secured Party's
rights in any other security given to secure the Note.
Each Pledgor further waives, to the fullest extent
permitted by law, (i) all defenses given to sureties or
guarantors at law or in equity other than the actual
payment of the sums evidenced by the Note and secured
by this Agreement and the performance of the other
covenants and agreements contained herein and (ii) any
defense it may have to any liability hereunder based on
any asserted lack of diligence, delay in prosecuting
any action with regard to the Note, or any impairment
of any other security for payment of the Note.
12.3 Additional Waivers. The validity of this Agreement as
to the indebtedness secured by the Note shall not be
affected in any manner whatsoever on account of any or
all of the following: (i) incapacity, death,
disability, dissolution or termination of any person or
entity; (ii) the failure of the Secured Party to file
or enforce a claim against the estate (either in
administration, bankruptcy or other proceedings) of the
Debtor, any Pledgor or any other person or entity;
(iii) any defenses, setoffs or counterclaims which may
be available to the Debtor or any other person or
entity; (iv) any modifications, extensions, amendments,
consents, releases or waivers with respect to the Note
or any other instrument now or hereafter securing the
payment of the Note, or any guaranty of the Note; (v)
any failure of the Secured Party to give any notice to
any Pledgor of any default under any other instrument
securing payment of the Note; or (vi) any impairment,
modification, change, release or limitation of the
liability of, or stay of actions or lien enforcement
proceedings against, the Debtor, its Collateral or its
estate in bankruptcy resulting from the operation of
any present or future federal or state statute relating
to bankruptcy or insolvency or from the decision of any
court relating thereto. The Secured Party shall not be
required to pursue any other remedies before invoking
the benefits of this Agreement and, specifically, it
shall not be required to exhaust its remedies against
the Debtor or any guarantor or surety or to proceed
against any other security now or hereafter existing
for the payment of any of the indebtedness evidenced by
the Note. The Secured Party may exercise its rights
hereunder without bringing a separate action against
the Debtor.
13. Notices. Any notice or demand under this Agreement or
in connection with this Agreement may be given at the addresses
set forth in the initial paragraph of this Agreement or by
telefacsimile, but actual notice, however given or received, will
always be effective.
14. Successors and Assigns. The covenants and agreements
herein contained by or on behalf of the Pledgors shall bind the
Pledgors, and the Pledgors' legal representatives, successors and
assigns and shall inure to the benefit of the Secured Party and
the Secured Party's successors and assigns.
15. Invalidity. If any provision hereof shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof.
16. Construction. This Agreement will be governed by and
construed in accordance with the laws of the State of Oklahoma
applicable to contracts made and to be performed entirely within
the State of Oklahoma.
IN WITNESS WHEREOF, this Agreement is executed effective the
date first above written.
___________________________________
____________________, individually
(the "Debtor" and a "Pledgor")
___________________________________
_____________________, individually
(Additional "Pledgor")
FLEMING COMPANIES, INC.,
an Oklahoma corporation
By:________________________________
________________________________
(the "Lender")
Exhibit 12
Fleming Companies, Inc.
Computation of Ratio of Earnings to Fixed Charges
28 Weeks Ended
July 10, July 11,
(In thousands of dollars) 1999 1998
Earnings:
Pretax income (loss) $(31,159) $ 55,065
Fixed charges, net 106,661 106,609
-------- --------
Total earnings $ 75,502 $161,674
Fixed charges:
Interest expense $ 90,253 $ 87,063
Portion of rental charges
deemed to be interest 16,163 19,316
Capitalized interest 178 -
-------- --------
Total fixed charges $106,594 $106,379
-------- --------
Deficiency $31,092
========
Ratio of earnings
to fixed charges .71 1.52
======== ========
"Earnings" consists of income before income taxes and fixed charges
excluding capitalized interest. Capitalized interest amortized during
the respective periods is added back to earnings.
"Fixed charges, net" consists of interest expense, an estimated amount
of rental expense which is deemed to be representative of the interest
factor and amortization of capitalized interest.
The pro forma ratio of earnings to fixed charges is omitted as it is not
applicable.
Under the company's long-term debt agreements, "earnings" and "fixed
charges" are defined differently and amounts and ratios differ
accordingly.
Exhibit 15
Fleming Companies, Inc.
6301 Waterford Boulevard, Box 26647
Oklahoma City, OK 73126
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited
interim financial information of Fleming Companies, Inc. and
subsidiaries for the 12 and 28 weeks ended July 10, 1999 and July 11,
1998, as indicated in our report dated July 29, 1999; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
your Quarterly Report on Form 10-Q for the 12 and 28 weeks ended July
10, 1999, is incorporated by reference in the following:
(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 Stock Incentive
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;
(vii) Registration Statement No. 333-80445 (1999 Stock Incentive
Plan) on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part of a
registration statement prepared or certified by an accountant or a
report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
August 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE TWO FISCAL QUARTERS ENDED JULY 10, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> JUL-10-1999
<CASH> 3,585
<SECURITIES> 0
<RECEIVABLES> 426,361
<ALLOWANCES> 26,193
<INVENTORY> 852,486
<CURRENT-ASSETS> 1,430,435
<PP&E> 1,652,512
<DEPRECIATION> 779,597
<TOTAL-ASSETS> 3,367,170
<CURRENT-LIABILITIES> 1,190,793
<BONDS> 1,139,439
0
0
<COMMON> 97,092
<OTHER-SE> 449,862
<TOTAL-LIABILITY-AND-EQUITY> 3,367,170
<SALES> 7,814,608
<TOTAL-REVENUES> 7,814,608
<CGS> 7,059,022
<TOTAL-COSTS> 7,742,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,981
<INTEREST-EXPENSE> 90,253
<INCOME-PRETAX> (31,159)
<INCOME-TAX> (4,580)
<INCOME-CONTINUING> (26,579)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,579)
<EPS-BASIC> (.70)
<EPS-DILUTED> (.70)
</TABLE>
