<PAGE> 1
Schedule 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FLEMING COMPANIES, INC.
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(Name of Registrant as Specified In Its Charter)
FLEMING COMPANIES, INC.
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<TABLE>
<S> <C>
Fleming Companies, Inc.
6301 Waterford Boulevard
P.O. Box 26647
[FLEMING COMPANIES, INC. LOGO] Oklahoma City, OK 73126-0647
</TABLE>
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NOTICE OF ANNUAL MEETING
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Fleming Companies, Inc. on Wednesday, May 19, 1999, at 10:00 a.m. at the
Radisson Plaza Hotel Minneapolis, 35 South Seventh Street, Minneapolis,
Minnesota. The meeting is being held for the following purposes:
1. To elect three directors for terms expiring in 2002.
2. To consider and act upon a proposal to approve an amendment to the
company's restated certificate of incorporation to provide for the
annual election of directors.
3. To consider and act upon a proposal to approve the Fleming
Companies, Inc. 1999 Stock Incentive Plan, a copy of which is
attached to the accompanying Proxy Statement as Exhibit "A."
4. To consider and act upon a proposal to approve the Fleming
Companies, Inc. Corporate Officer Incentive Plan, a copy of which
is attached to the accompanying Proxy Statement as Exhibit "B."
5. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for 1999.
6. To transact other business as may properly come before the meeting
or any adjournment.
The accompanying proxy statement contains complete details on the proposals
and other matters. Shareholders of record as of March 22, 1999, are entitled to
notice of, and to vote at, the meeting. The company's annual report, including
financial statements for the year ended December 26, 1998, is also enclosed. A
list of shareholders entitled to vote at the meeting will be available for
examination by any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of the ten days prior to the meeting at
Rider, Bennett, Egan & Arundel, 2000 Metropolitan Centre, 333 South Seventh
Street, Minneapolis, Minnesota 55402.
We hope you can be with us for this year's meeting. Your participation in
the affairs of the company is important, regardless of the number of shares you
hold. To ensure your representation at the meeting whether or not you are able
to be present, please complete and return the enclosed proxy card as soon as
possible.
By Order of the Board of Directors
DAVID R. ALMOND
Senior Vice President
General Counsel and Secretary
Oklahoma City, March 31, 1999
<PAGE> 3
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PROXY STATEMENT
This proxy statement, which is being mailed to shareholders on or about
March 31, 1999, is furnished in connection with the solicitation of proxies by
the board of directors for use at the annual meeting of shareholders on May 19,
1999, including any adjournments.
The annual meeting is called for the purposes stated in the accompanying
notice. All holders of the company's $2.50 par value common stock as of March
22, 1999 are entitled to vote. As of that date, shares were outstanding.
On each matter coming before the meeting, a shareholder is entitled to one vote
for each share of stock held as of the record date.
If a proxy is properly signed and is not revoked by the shareholder, the
shares it represents will be voted according to the instructions of the
shareholder. If no specific instructions are given, the shares will be voted as
recommended by the board of directors.
A shareholder may revoke his or her proxy any time before it is voted at
the meeting. Any shareholder who attends the meeting and wishes to vote in
person may revoke his or her proxy at the meeting. Otherwise, a shareholder must
advise the senior vice president -- general counsel and secretary in writing of
revocation of his or her proxy.
The company will bear the cost of solicitation of proxies. Solicitations
will be made primarily by mail, but certain officers or associates of the
company may solicit proxies by telephone or in person without additional
compensation. The company has engaged Morrow & Co., Inc. to assist in the
solicitation of proxies for the annual meeting at an anticipated cost of
$10,000.
The company's transfer agent will tabulate all votes received before the
date of the annual meeting. The company will appoint two inspectors of election
to receive the transfer agent's tabulation, tabulate all other votes and certify
the results of all matters voted upon. Neither the corporate law of the State of
Oklahoma, the state in which the company is incorporated, nor the company's
certificate of incorporation or bylaws has any specific provisions regarding the
treatment of abstentions and broker non-votes. It is the company's policy to
count abstentions and broker non-votes for purposes of determining the presence
of a quorum at the meeting. The company's bylaws provide that Proposal No. 1,
the election of directors, requires a plurality of the votes cast at the
meeting. The company's bylaws also provide that matters such as those presented
in Proposal Nos. 2, 3, 4 and 5 shall be decided by the holders of a majority of
the stock having voting power present in person or represented by proxy at the
meeting. Therefore, an abstention will have no effect on Proposal No. 1 and will
have the same effect as
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a vote against Proposal Nos. 2, 3, 4 and 5. Broker non-votes will have no effect
on the outcome of any of the proposals.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The company's restated certificate of incorporation currently provides that
the board of directors be divided into three classes with staggered three-year
terms. The certificate requires that at each annual meeting, successors to
directors whose terms expire at that meeting will be elected for three-year
terms. During 1998, two directors, John A. McMillan and Robert E. Stauth,
resigned and two new directors, Messrs. Baum and Hansen, were added to fill
their vacancies. The current board is comprised of three classes with three
directors in each class with terms expiring in 1999, 2000 and 2001. The board of
directors has nominated three persons for election as directors to serve for
three-year terms expiring in 2002 or until their successors are elected and
qualified. Each nominee is currently serving as a director and has consented to
serve for the new term.
Approval by the company's shareholders of Item 2 on the agenda for the
annual meeting, the proposed amendment to the company's restated certificate of
incorporation to provide for annual election of directors, will not affect the
term of the class of directors nominated to serve until 2002, who, if elected,
will continue in office until the company's annual meeting in 2002. See
"Proposal No. 2 -- Approval of the Amendment To The Restated Certificate of
Incorporation To Provide For The Annual Election of Directors."
The board of directors has adopted a retirement policy which requires that
each director will retire upon the earlier of 30 days after reaching age 70 or
upon his/her 15th anniversary as a director; provided, however, the 15 year
limitation does not apply to directors who were holding office when the policy
was adopted in February 1997. See Item 12 of the Corporate Governance Policy
attached to this proxy statement as Exhibit D. Edward C. Joullian III, a current
nominee for election as director, will be 70 years of age on August 12, 1999. At
its meeting in January 1999, the board of directors voted to waive the
retirement policy as it applies to Mr. Joullian in view of his unique knowledge
and experience and his special contributions to the company in acting as interim
chairman for four months in 1998 while the search for a new chairman and chief
executive officer was conducted. The board decided that to waive the policy in
the case of Mr. Joullian would be in the best interest of the company and its
shareholders as it would preserve continuity in connection with the position of
chairman and it would provide the company access to Mr. Joullian's knowledge,
experience and contributions for an additional three year period. If elected,
Mr. Joullian plans to retire at the end of his term in 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE.
The persons named on the accompanying proxy card intend to vote in favor of
the three nominees listed below. Should any of these nominees become unavailable
for election, the
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proxy will be voted for a substitute nominee. If the nominees are elected, the
board will be comprised of nine members, of which seven are nonmanagement
directors, one is an officer of the company and one is responsible for the
operations of one of the company's significant retail chains.
NOMINEES FOR DIRECTOR TERMS EXPIRING IN 2002
<TABLE>
<S> <C>
Name (age), year first became a director
[DIR. PHOTO/BAKER] JACK W. BAKER (61), 1996
Chief executive of Baker's Supermarkets, a family owned
independent retail chain acquired by the company in 1992.
Mr. Baker has been associated with Baker's for his entire
business career. He is president, chief executive officer
and an owner of PDM, Inc., an Omaha, Nebraska based real
estate development firm. He served as chairman of the
Greater Omaha Chamber of Commerce in 1993, vice chairman of
the Food Marketing Institute from 1993 to 1995 and, with his
wife, co-chaired the 1998 United Way of The Midlands/Chad
Campaign.
Member of the nominating committee and the corporate
governance committee.
[DIR. PHOTO/JOULLIAN] EDWARD C. JOULLIAN III (69), 1984
Chairman of Mustang Fuel Corp. (energy development and
services) since 1964. He also served as chief executive
officer of that company until his retirement in 1998. Mr.
Joullian also served the company as interim chairman of the
board of directors from July 18, 1998 until November 30,
1998. See "The Board of Directors -- Compensation of
Directors". He is a director of The LTV Corp. and American
Fidelity Co. and a trustee of the Colonial Williamsburg
Foundation.
Chairman of the nominating committee and member of the audit
and finance committee.
[DIR. PHOTO/PETERSON] ALICE M. PETERSON (46), 1998
Vice President and general manager of Sears Online, a unit
of Sears, Roebuck and Co. (a company providing apparel, home
and automotive products and services). The Sears Online unit
houses Sears' electronic commerce and internet-related
businesses and services. Ms. Peterson was vice president and
treasurer of Sears, Roebuck and Co. from 1993 to 1998. She
joined that company in 1989 as corporate director of
finance, became managing director -- corporate finance in
1992, and vice president -- treasurer in 1993. Prior to
joining Sears, Ms. Peterson served as assistant treasurer of
Kraft, Inc. from 1988 to 1989. From 1984 to 1988, Ms.
Peterson served in a variety of financial positions for
PepsiCo, Inc., where her last position held was director of
capital markets. Ms. Peterson serves on the Ravinia Festival
Board of Trustees.
Member of the compensation and organization committee and
the nominating committee.
</TABLE>
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<PAGE> 6
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<TABLE>
<S> <C>
Name (age), year first became a director
[DIR. PHOTO/HALLETT] CAROL B. HALLETT (61), 1993
President and chief executive officer of the Air Transport
Association of America, Washington, D.C. (the nation's
oldest and largest airline trade organization). Prior to
joining the Air Transport Association in April 1995, Mrs.
Hallett served as senior government relations advisor with
Collier, Shannon, Rill & Scott from February 1993 to March
1995. From November 1989 through January 1993, Mrs. Hallett
served as the Commissioner of the United States Customs
Service. From September 1986 to May 1989, she served as the
U.S. Ambassador to The Commonwealth of the Bahamas. From
July 1983 to August 1986, Mrs. Hallett served as the
national vice chairman and field director of Citizens for
America. Mrs. Hallett also served three terms in the
California legislature and as minority leader in the State
Assembly. Mrs. Hallett is a director of Litton Industries,
Inc. and Mutual of Omaha Insurance Company. She is a trustee
for the Junior Statesmen of America. Mrs. Hallett also
serves on the President's Cabinet of California Polytechnic
State University.
Chairman of the audit and finance committee and member of
the corporate governance committee.
[DIR. PHOTO/OSBORN] GUY A. OSBORN (63), 1992
Retired as chairman of Universal Foods Corp. in April 1997.
He joined that company in 1971, became president in 1984 and
chairman in 1990. He serves on the boards of Wisconsin Gas
Co., WICOR, Inc., United Way of Milwaukee, Boys and Girls
Club of Greater Milwaukee and Alverno College and is a
trustee of Northwestern Mutual Life Insurance Company.
Chairman of the compensation and organization committee and
member of the nominating committee.
[DIR. PHOTO/RISMILLER] DAVID A. RISMILLER (61), 1997
Chairman, president, and chief executive officer of America
First Financial Institutions Management, L.L.C. (managing
general partner of an investment partnership), since 1997.
He served as chairman and chief executive officer of
FirsTier Financial Inc. from 1989 until the company's merger
with FirstBank in 1996. From 1988 to 1989, he served as
president of FirsTier Financial Inc. and from 1984 to 1988,
he served as chairman and chief executive officer of
Commerce Bank of Kansas City, N.A. From 1992 to 1995, Mr.
Rismiller served as the Federal Reserve tenth district
representative to the Federal Advisory Council and from 1979
to 1997 he served as a member of the Bankers Roundtable. He
serves as an executive committee member and director of the
Omaha Chamber of Commerce; director and executive committee
member of Woodmen Accident & Life Insurance Co.; governor,
executive committee member, treasurer and finance committee
chairman of Joslyn Art Museum; former governor, treasurer,
and finance committee chairman of the Knights of Ak-
Sar-Ben; director of Omaha Zoological Society; dean's
council member, Ohio State University Fisher College of
Business; governor and past president of American Royal
Association; trustee of Midwest Research Institute; and
member of U.S.A.F. Strategic Command Consultation Committee.
Member of the audit and finance committee and the corporate
governance committee.
</TABLE>
5
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DIRECTORS WHOSE TERMS EXPIRE IN 2001
<TABLE>
<S> <C>
Name (age), year first became a director
[DIR. PHOTO/BAUM] HERBERT M. BAUM (62), 1998
President and chief operating officer of Hasbro, Inc. (a toy
manufacturing company). Prior to joining Hasbro, Inc. in
January 1999, Mr. Baum served as chairman and chief
executive officer of Quaker State Corporation from 1993 to
1998. From 1978 to 1993, Mr. Baum served in a variety of
positions for Campbell Soup Company where his last position
held was corporate executive vice president and president
Campbell North and South America. Mr. Baum is a director of
the American Marketing Association, The Dial Corporation,
Hasbro, Inc., Midas, Inc., Meredith Corporation,
Pennzoil-Quaker State Company and Whitman Corporation.
Member of the audit and finance committee and the
compensation and organization committee.
[DIR. PHOTO/DYKES] ARCHIE R. DYKES (68), 1981
Chairman and chief executive officer of Capital City
Holdings, Inc. (a venture capital organization). He is a
director of Whitman Corporation, Hussman International
Corporation, Midas, Inc. and the Employment Corporation. A
former chancellor of the University of Kansas and of the
University of Tennessee, Mr. Dykes also serves as a trustee
of the Kansas University Endowment Association and of the
William Allen White Foundation.
Chairman of the corporate governance committee and member of
the compensation and organization committee.
[DIR. PHOTO/HANSEN] MARK S. HANSEN (44), 1998
Chairman and chief executive officer. Mr. Hansen served as
president and chief executive officer of SAM'S Club, a
division of Wal-Mart Stores, Inc., from 1997 through
September 1998. Prior to joining Wal-Mart, Mr. Hansen served
in multiple capacities from 1989 to 1997 including as
president and chief executive officer of PETsMART, Inc. a
retailer of pet food, pet supplies and related products.
Prior to 1989, Mr. Hansen served in various management
capacities in the supermarket industry. He serves as an
executive advisory board member of Swander Pace Capital and
is a director of Applebee's Restaurants.
</TABLE>
6
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THE BOARD OF DIRECTORS
Meetings of Directors. During the past year, the board of directors had
five regular meetings, five special meetings and three telephone meetings. Each
director attended 75% or more of the aggregate of the total number of meetings
of the board and of committees of which he or she was a member.
Compensation of Directors. Under the company's Amended and Restated
Directors' Compensation and Stock Equivalent Unit Plan (the "Directors' Plan")
for fiscal 1998, each nonmanagement director received (i) an annual retainer of
$16,000, plus a fee of $1,000 for each board and committee meeting attended and
an additional $250 for each committee meeting chaired, and (ii) an award of
1,500 stock equivalent units. The stock equivalent units represent the right to
receive cash equal to the value of shares of common stock when the director
ceases to serve. These units are not entitled to any voting rights. Upon payment
of the stock equivalent units, the company will also pay cash to the participant
in an amount equal to dividends or distributions which he or she would have
received if the stock equivalent units had been awarded as shares of common
stock rather than stock equivalent units. The cash compensation paid under the
Directors' Plan together with the value of the stock equivalent units yielded
actual annual compensation for 1998 of approximately $40,000 for each
nonmanagement director except for Mr. Baum, who joined the board in July 1998.
At its meeting in March 1999, the board increased to $500 the fees for each
committee meeting chaired and retained the $1,000 fee for each committee meeting
attended; provided, however, no fees will be paid for telephone board meetings
unless they exceed thirty minutes in duration and are meetings for which an
agenda has been set. The board also terminated the Directors' Plan effective
June 30, 1999 and approved the Fleming Companies, Inc. 1999 Stock Incentive
Plan. If the plan is approved by the shareholders, each nonmanagement director
will receive an award of 1,750 shares of company common stock in the form of
restricted stock on or about July 1, 1999 and an award of 3,500 shares of
company common stock in the form of restricted stock on or about March 15 for
each of the five calendar years thereafter. The shares of restricted stock will
be escrowed with the secretary of the company and will be subject to forfeiture
if net earnings from operations do not improve. See "Proposal No. 3 -- Approval
of the Fleming Companies, Inc. 1999 Stock Incentive Plan and Exhibit A."
Mr. Joullian served the company as interim chairman of the board of
directors beginning with the resignation of Mr. Stauth on July 18, 1998 and
ending with the hiring of Mr. Hansen on November 30, 1998. For his services he
received 9,023 stock equivalent units with a value at the time of the award of
$150,000. The units have the same attributes as those issued under the
Directors' Plan.
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COMMITTEES OF THE BOARD
The board of directors has four standing committees. The principal
responsibilities of each are as follows.
Audit and Finance Committee. The committee focuses primarily on ethical
and regulatory matters and on the effectiveness of the company's accounting
policies and practices, financial reporting and internal controls, and the
internal audit function. The committee oversees company policies and programs
with respect to ethical standards and regulatory compliance. It frequently
reviews company accounting policies and procedures and financial reports. It
annually reviews the selection of independent auditors and, after consultation
with management, recommends the appointment of independent auditors for board
approval and shareholder ratification. It reviews and discusses the scope of the
annual audit with management and the independent auditors and may request
additional review and audit procedures. The committee reviews the auditors'
opinion and the auditors' observations and suggestions regarding accounting and
control policies, procedures and organization, and their adequacy. The committee
makes recommendations, as appropriate, to management based on the auditors'
suggestions. The committee reports its findings to the board at least annually.
The committee met four times during 1998.
Compensation and Organization Committee. The committee oversees the
company's compensation and benefit policies and programs. The committee reviews
the objectives, structure, cost and administration of major compensation and
benefit policies and programs. It annually reviews officers' salaries, stock
options, and other management incentives, and administers the company's stock
option and management incentive plans. The stated policy of the committee is to
motivate the company's executive officers and other associates to enhance the
company's financial performance by focusing on specific business objectives. It
also makes recommendations regarding the selection of the chief executive
officer. The committee met six times during 1998.
Nominating Committee. The committee develops and recommends to the board
guidelines and criteria for selecting persons to serve as directors. It
recommends nominees for election at the annual meeting and candidates to fill
board vacancies. The committee considers and makes recommendations regarding the
composition of the board. Copies of the "Guidelines for Board Composition" and
"Guidelines for Board Candidates", which the committee has used during the past
seven years, are attached to this proxy statement as Exhibits C-1 and C-2,
respectively. The committee met three times during 1998. The committee will
consider nominees recommended by shareholders if such nomination is made
pursuant to timely notice in writing in strict accordance with the company's
bylaws. A shareholder desiring to make a nomination should contact the senior
vice president -- general counsel and secretary to obtain a copy of the bylaws.
See "Shareholder Proposals."
Corporate Governance Committee. The committee considers matters relating
to corporate governance and establishes standards which are reviewed annually
for governing the operation of the company by the board through management. The
committee will also annually
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assess board and board committee effectiveness. The committee met twice in 1998.
Attached to this proxy statement as Exhibit D is a copy of the Corporate
Governance Statement of Policy adopted by the board of directors which outlines
responsibilities and corporate governance standards under which the board of
directors manages the company.
SECURITY OWNERSHIP OF MANAGEMENT
At its meeting in March 1999, the board of directors increased the common
stock ownership requirements for directors and instituted a stock ownership
policy for corporate officers. Under the policy, directors must own at least
1,000 shares of common stock within one year of election and 12,000 shares
within four years of election. Corporate officers must own, over a five-year
period, common stock equal in value to a specified multiple of base salary,
ranging from one to three times base salary, depending on their position with
the company. The board of directors believes this policy will more closely align
the interests of the board and the corporate officers with those of the
shareholders. See Corporate Governance Policy attached to this proxy statement
as Exhibit D.
The total number of shares of common stock and stock equivalent units
beneficially owned as of March 2, 1999 by each of the present directors,
nominees, the chief executive officer and each of the other most highly
compensated executive officers listed in the Summary Compensation Table who has
retained his position with the company as of March 2, 1999, and all of the
directors and executive officers as a group, are as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
-------------------------------
COMMON STOCK
NAME OF BENEFICIAL OWNER STOCK EQUIVALENT UNITS(2)
- ------------------------ -------- -------------------
<S> <C> <C>
Mark S. Hansen............................... 57,000(3) --
Jack W. Baker................................ 489,366(4) --
Herbert M. Baum.............................. 1,000 750
Archie R. Dykes.............................. 5,170(5) 5,314
Carol B. Hallett............................. 3,145 4,456
Edward C. Joullian III....................... 10,355(6) 14,337
Guy A. Osborn................................ 10,000 5,314
Alice M. Peterson............................ 3,000 2,250
David A. Rismiller........................... 3,000 2,250
William J. Dowd.............................. 70,000(7) --
E. Stephen Davis............................. 63,994(8) --
-------- ------
All directors and executive officers
as a group (18)............................ 831,725(9) 34,671
======== ======
</TABLE>
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(1) Unless otherwise indicated, all shares are owned directly by the named
person and he or she has sole voting and investment power with respect to
such shares. The shares represent less than 1% of the total outstanding
shares for
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each person listed, except for Mr. Baker whose ownership constitutes 1.27%
of the total outstanding shares. The shares listed for all directors and
executive officers as a group constitute 2.17% of the total outstanding
shares.
(2) The stock equivalent units listed are owned as indicated by the
nonmanagement directors. Except for the 9,023 units awarded to Mr. Joullian
for his services as interim chairman, the stock equivalent units were
awarded under the Directors' Plan. All stock equivalent units are payable
only in cash when the director ceases to be a director of the company. See
"The Board of Directors -- Compensation of Directors."
(3) Includes 32,000 shares awarded under the 1990 Stock Incentive Plan, subject
to forfeiture, for which he has sole voting power. See "Summary Compensation
Table -- Long-Term Compensation Awards -- Restricted Stock Awards."
(4) Consists of 414,518 shares owned directly by Mr. Baker, 66,848 shares owned
by his wife with whom he shares voting and investment power, 5,600 shares
under options presently exercisable and 2,400 shares awarded under the 1990
Stock Incentive Plan, subject to forfeiture, for which he has sole voting
power.
(5) Consists of 4,536 shares owned directly by Mr. Dykes for which he has sole
voting and investment power, and 634 shares owned jointly by Mr. Dykes and
his wife with whom he shares voting and investment power.
(6) Owned by a limited liability company.
(7) Consists of 1,000 shares owned directly by Mr. Dowd, 53,000 shares under
options presently exercisable and 16,000 shares awarded under the 1990 Stock
Incentive Plan, subject to forfeiture, for which Mr. Dowd has sole voting
power.
(8) Consists of 7,244 shares owned directly by Mr. Davis for which he has sole
voting and investment power, 39,750 shares under options presently
exercisable, 9,000 shares owned jointly by Mr. Davis and his wife with whom
he shares voting and investment power and 8,000 shares awarded under the
1990 Stock Incentive Plan, subject to forfeiture, for which he has sole
voting power. Excludes 100,000 shares awarded under the 1990 Stock Incentive
Plan which are held by the trustee of the company's Executive Deferred
Compensation Trust (the "Deferred Trust") as to which Mr. Davis has neither
voting nor investment power. See "Summary Compensation Table -- Long-Term
Compensation Awards -- Restricted Stock Awards."
(9) Includes 458,828 shares for which directors and executive officers have sole
voting and investment power, 102,847 shares for which they share voting and
investment power with others, 165,050 shares under options presently
exercisable, and 80,000 shares awarded under the 1990 Stock Incentive Plan,
subject to forfeiture, for which they have sole voting power. Excludes
120,000 shares awarded under the 1990 and 1996 Stock Incentive Plans held by
the trustee of the Deferred Trust as to which they have neither voting nor
investment power.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the name and address of each known
shareholder of the company who beneficially owns more than 5% of the company's
common stock, the number of shares beneficially owned by each, and the
percentage of outstanding stock so owned according to information made available
to the company as of February 15, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
---------------- -------------------- --------
<S> <C> <C>
Crabbe Huson Group, Inc.
121 S.W. Morrison
Suite 1400
Portland, Oregon 97204........................ 3,068,130(1) 7.98%
Barclays Bank PLC
54 Lombard Street
London, England EC3P 3AH...................... 2,376,938(2) 6.19%
Dodge & Cox
One Sansome St., 35th Floor
San Francisco, CA 94104....................... 1,909,216(3) 5.0%
</TABLE>
- ---------------
(1) Based on a Schedule 13G dated February 12, 1999, Crabbe Huson Group, Inc.
has shared power to vote 2,789,430 and shared power to dispose of all
shares.
(2 )Based on a Schedule 13F dated February 12, 1999, Barclays Bank PLC has the
sole power to vote 2,267,488 shares and the sole power to dispose of all
shares.
(3 )Based on a Schedule 13G dated February 10, 1999, Dodge & Cox has shared
power to vote 9,600 shares, sole power to vote 1,654,616 shares and sole
power to dispose of all shares.
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SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the compensation
information for the chief executive officer and the four other most highly
compensated executive officers for services rendered in all capacities during
the fiscal years ended December 26, 1998, December 27, 1997 and December 28,
1996. In addition, information for the past three fiscal years is also provided
with respect to the former chairman and chief executive officer.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------------- -----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($) (#) ($)
------------------ ---- --------- ----------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark S. Hansen(3) 1998 57,692(3) -- -- 322,000(4) 800,000 306,478(6)
Chairman and Chief 1997 -- -- -- -- -- --
Executive Officer 1996 -- -- -- -- -- --
Robert E. Stauth(7) 1998 344,712 -- 288 -- -- 1,532,206(7)
Former Chairman and 1997 600,000 684,612 288 1,518,750(5) 30,000 2,364,000(8)
Chief Executive Officer 1996 600,567 -- 288 -- 60,000 --
William J. Dowd 1998 491,923 -- 570 -- -- --
President and Chief 1997 474,218 451,654 570 -- 20,000 --
Operating Officer 1996 475,144 -- 288 -- 44,000 --
E. Stephen Davis 1998 324,643 -- 570 -- -- --
Executive Vice 1997 310,153 357,571 570 843,750(5) -- 1,000,333(8)
President
Food Distribution 1996 301,140 -- 570 -- 30,000 --
Harry L. Winn, Jr.(9) 1998 331,415 -- 288 -- -- --
Former Executive Vice 1997 311,769 299,518 288 506,250(5) 15,000 243,671(8)
President and Chief 1996 294,576 -- 288 -- 30,000 --
Financial Officer
Thomas L. Zaricki(10) 1998 281,233 -- 288 -- -- --
Former Senior 1997 267,963 390,099 288 168,750(5) -- 274,260(8)
Vice President 1996 257,345 -- 288 -- 10,000 --
Retail Operations
</TABLE>
- ---------------
(1) Bonus amounts shown for 1997 were awarded pursuant to the terms of the
company's Economic Value Added Incentive Bonus Plan (the "EVA(R) Plan").
Amounts shown in 1997 represent 100% of the bonuses awarded although under
the EVA(R) Plan, 67% of the bonus awarded for fiscal 1997 was actually paid
to the named executive officer and 33% was credited to his bonus bank. The
board of directors terminated the EVA(R) Plan effective February 15, 1999
and thereafter Messrs. Dowd and Davis received payments of the remaining 33%
of their 1997 bonuses which had been credited to their bonus banks. Messrs.
Stauth, Winn and Zaricki received payment of their bonus bank balances under
the EVA(R) Plan in connection with their termination of employment. See
"Report of Compensation Committee -- Bonuses."
(2) The company provides term life insurance to all associates. There is no
imputed income to the associate with respect to the first $50,000 of
coverage except for highly compensated associates. Accordingly, the company
is required to impute income to the named individuals with respect to the
first $50,000 of coverage and reimburses them for its tax effect. The
amounts shown in this column reflect such tax reimbursement amounts.
- ---------------
EVA(R) is a registered trademark of Stern Stewart & Co.
12
<PAGE> 14
(3 )Mr. Hansen became chairman and chief executive officer on November 30, 1998
and his salary is reflective of payments for the balance of fiscal 1998. For
information regarding the terms of his employment agreement, see "Employment
Contract, Termination of Employment and Change in Control
Arrangements -- Hansen Agreement."
(4 )Mr. Hansen was awarded 32,000 shares of restricted stock under the company's
1990 Stock Incentive Plan in connection with his employment on November 30,
1998 which are escrowed with the company's corporate secretary. The shares
vest in 50% increments on November 30, 1999 and November 30, 2000,
respectively. The market price per share of the company's common stock on
the date of grant was $10.0625. Mr. Hansen has the right to vote the shares
and to receive dividends on the shares, but the shares are subject to
forfeiture in the event Mr. Hansen is terminated for cause or he terminates
his employment with the company for other than good reason. As of the last
day of fiscal 1998, there was held in escrow for Mr. Hansen 32,000
restricted shares with a value of $334,000 (based on the market price per
share of $10.4375 on December 24, 1998).
(5 )The remaining restricted stock awards reported in this column were made
under the company's 1990 Stock Incentive Plan and its 1996 Stock Incentive
Plan. The awards for Messrs. Stauth, Davis, Winn, and Zaricki were made on
November 1, 1997 in connection with the termination of the company's
Supplemental Retirement Income Plan (the "SRP"). Mr. Dowd did not
participate in the SRP. The market price per share of the company's common
stock on the date of grant was $16.8750. Mr. Davis' shares vest over three
years at the rate of 33 1/3% per year. These shares of restricted stock are
held by the trustee of the Deferred Trust, who has voting and investment
power with respect to the shares. Mr. Davis has no attributes of ownership
with respect to such shares until they are distributed. Vested shares will
not be distributed until Mr. Davis terminates employment with the company
and all of the following conditions have been satisfied: (i) the completion
of at least two years of continuous employment from November 1, 1997, (ii)
satisfaction of the "Rule of 70" where his age plus completed years of
employment service with the company equals 70 or more, and (iii) the
attainment of age 55 with at least ten years of service with the company
(collectively, the "Distribution Events"). The shares will also vest and
will be distributed upon termination of Mr. Davis' employment due to death
or disability or upon a change of control. Unearned restricted stock will be
forfeited after three years. Since Messrs. Stauth, Winn and Zaricki have
terminated their employment with the company, the vesting and distribution
of their respective shares of restricted shares is governed by their
respective severance agreements. Pursuant to Mr. Stauth's severance
arrangements, the qualifying requirements were waived and vesting and/or
distribution were accelerated with respect to 120,000 shares of restricted
stock (plus any dividends attributable to such shares). Mr. Stauth forfeited
114,000 shares of restricted stock in connection with his termination of
employment. See "Employment Contract, Termination of Employment and Change
in Control Arrangements -- Stauth Agreement." Dividends on the shares of
restricted stock awarded to Messrs. Davis, Winn and Zaricki are accrued but
not paid until the shares are distributed. As of the last day of fiscal
1998, there were held in escrow for Mr. Dowd 16,000 restricted shares with a
value of $167,000, Mr. Davis 108,000 restricted shares with a value of
$1,127,250, Mr. Winn 68,000 restricted shares with a value of $709,750 and
Mr. Zaricki 24,000 restricted shares with a value of $250,500 (based on the
market price per share of $10.4375 on December 24, 1998). In connection with
termination of their employment, the qualifying requirements were waived and
vesting and/or distribution was accelerated for 30,000 and 10,000 shares,
respectively, of restricted stock (plus any dividends attributable to such
shares) for Messrs. Winn and Zaricki. Messrs. Winn and Zaricki forfeited
38,000 and 14,000 shares of restricted stock, respectively, in connection
with their termination of employment. See "Employment Contract, Termination
of Employment and Change in Control Arrangements -- Winn
Agreement -- Zaricki Agreement."
(6 )Includes $299,105 paid to Mr. Hansen to reimburse him for his tax liability
associated with the restricted stock described in footnote 4 and $7,373
attributable to his personal use of the Company aircraft.
(7 )Mr. Stauth resigned as chairman and chief executive officer effective July
18, 1998. In fiscal 1998, he was paid a total of $1,532,206 in connection
with his termination which was comprised of $1,250,000 for two years of base
salary, $225,922 for the balance of his bonus bank under the EVA Plan,
$36,058 for accrued vacation and $20,226 for his tax liability on his
company car. Against this payment, the company applied amounts owed by Mr.
Stauth in connection with his tax liability associated with certain payments
under his severance arrangement such that he received a net payment of
$1,137,584 in 1998. For information regarding the terms of his severance
arrangement,
13
<PAGE> 15
see "Employment Contract, Termination of Employment and Change in Control
Arrangements -- Stauth Agreement."
(8 )In connection with termination of the SRP, effective November 1, 1997, the
compensation and organization committee adopted the Executive Past Service
Benefit Plan (the "Past Service Plan"). Amounts reported in this column for
1997 represent the value of accounts established for the benefit of Messrs.
Stauth, Davis, Winn and Zaricki pursuant to the Past Service Plan. Such
amounts were determined by calculating for each the present value of the
amount that would have been payable under the SRP, assuming that each had
retired as of November 1, 1997 and was fully vested. Payment to Mr. Davis
under the Past Service Plan will be made in a method elected by him at the
time he was selected for participation in the plan and will commence upon
the occurrence of the Distribution Events or termination of employment due
to death, disability, or upon or in anticipation of a change of control of
the company. Messrs. Stauth, Winn and Zaricki will receive payments under
the Past Service Plan pursuant to their severance agreements with the
Company. See "Employment Contract, Termination of Employment and Change in
Control Arrangements-- Past Service Plan."
(9 )Mr. Winn resigned as executive vice president and chief financial officer
effective February 17, 1999. For information regarding the terms of his
severance arrangement, see "Employment Contract, Termination of Employment
and Change in Control Arrangements -- Winn Agreement."
(10 )Mr. Zaricki resigned as senior vice president -- retail operations
effective January 19, 1999. For information regarding the terms of his
severance arrangement, see "Employment Contract, Termination of Employment
and Change in Control Arrangements -- Zaricki Agreement."
14
<PAGE> 16
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE OFFICERS
The policy of the compensation and organization committee (the
"Committee"), implemented through the compensation programs described below, is
to motivate executive officers to enhance the company's financial performance by
focusing attention on specific business objectives emphasizing company
profitability and teamwork among associates and to reward such executive
officers based on company and individual performance.
Compensation for the company's executive officers is generally comprised of
base salary, bonus and awards of stock options or restricted stock. Decisions
with respect to compensation, except for that of the chief executive officer
(the "CEO"), are made by the Committee, composed of nonmanagement directors,
upon the recommendation of the CEO. The Committee's decisions are submitted to
the full board of directors for its information and review only. Earnings of the
company and the market value of its stock are considered subjectively by the
members of the Committee in setting the base salaries of executive officers.
Compensation for the CEO, who was hired November 30, 1998, was determined
pursuant to negotiations which resulted in his employment agreement. See
"Employment Contract, Termination of Employment and Change in Control
Arrangements -- Hansen Agreement." Also, some bonus awards are based in part on
earnings performance. The CEO, who is also a director, does not participate in
the board's review of the Committee's decisions regarding his compensation.
Decisions about awards under certain of the company's stock-based compensation
plans are made solely by the Committee in order for awards to comply with
Securities and Exchange Commission Rule 16b-3.
Salary. In determining salary for fiscal 1998, the Committee relied on the
company's salary administration program, the objectives of which are to attract,
retain and motivate productive executive officers. For each job classification,
the program requires a written job description, an evaluation of the job with
assigned points based on the nature of the job, its functions and the level of
the position, and an assigned salary range based on the total point value.
Annual salaries are adjusted based on individual performance. In addition, the
Committee reviews the earnings of the company and the market value of the
company's common stock for the previous fiscal year-end and, based on these
factors, after considering recommendations of an outside consultant, the
Committee makes a subjective determination of the nature and extent of salary
adjustments. The Committee generally establishes target salaries in the middle
of the assigned salary ranges. In order to measure competitiveness, the
Committee also considers salary surveys comparing company jobs with similar jobs
held by employees of companies included in the company's peer group. See
"Company Performance." The company believes its executive salaries are generally
higher than executive salaries of companies in its peer group with the exception
of SUPERVALU, Inc. Although executive officers received an average 4.2% increase
in their base salaries for fiscal 1998, the Committee has frozen base salaries
of all executive officers for fiscal 1999.
15
<PAGE> 17
Bonuses. Since its adoption in 1995, bonus awards for the company's
executive officers have been determined in accordance with the EVA Plan,
however, bonuses were paid under the EVA Plan only for fiscal 1997. Pursuant to
the EVA Plan, 67% of the bonus amount awarded for fiscal 1997 was paid in
February 1998 and the balance was deposited in the participants' bonus banks.
Although certain participants qualified for bonuses under the EVA Plan for
fiscal 1998, the Committee determined that in view of the company's overall poor
performance, no bonus amounts would be paid under the EVA Plan for fiscal 1998.
The EVA Plan provides that it may be terminated at any time by the board of
directors and that upon termination all bonus bank balances will be paid to
participants. The board of directors terminated the EVA Plan effective February
15, 1999 and all participants received payment of the balance of their bonuses
awarded for fiscal 1997 which had been previously deposited in their bonus
banks. See "Summary Compensation Table -- Footnote 1."
Item 4 on the agenda for the annual meeting relates to approval of the
proposed Fleming Companies, Inc. Corporate Officer Incentive Plan. If approved
by the required vote of the shareholders, the Committee plans to determine bonus
awards for executive officers for fiscal 1999 under the new plan. See "Proposal
No. 4 -- Approval of the Fleming Companies, Inc. Corporate Officer Incentive
Plan" for a detailed description of the new bonus plan.
Restricted Stock and Stock Options. As described in footnotes three and
four to the Summary Compensation Table, pursuant to the 1990 Stock Incentive
Plan and the 1996 Stock Incentive Plan, the Committee can award restricted stock
to executive officers and other key associates which vests upon the attainment
of targeted profit and/or other performance or service related criteria. The
Committee believes that restricted stock awards build stock ownership and
provide a long-term focus since the stock is restricted from being sold,
transferred, or assigned and is forfeitable until vested. At March 2, 1999,
there were 72,712 shares and 142,500 shares, respectively, available for awards
of restricted stock under the 1990 Stock Incentive Plan and the 1996 Stock
Incentive Plan. The CEO received an award of 32,000 shares of restricted stock
in 1998 in connection with his employment with the company. See "Summary
Compensation Table -- Long-Term Incentive Awards -- Restricted Stock Awards."
The Committee can also award stock options to executive officers and key
associates pursuant to the 1990 Stock Option Plan and the 1996 Stock Incentive
Plan. The Committee believes that the granting of stock options helps to retain
and motivate key associates. At March 2, 1999, there were 12,300 options
available for grants under the 1990 Stock Option Plan and 146,375 options
available for grants under the 1996 Stock Incentive Plan. The shares under the
1996 Stock Incentive Plan include the 142,500 shares listed above as available
for restricted stock awards as the plan provides that these shares can be
awarded as either stock options or restricted stock. The CEO received stock
option grants for a total of 800,000 shares in 1998 in connection with his
employment with the company. See "Stock Option Information -- Option Grants."
Item 3 on the agenda for the annual meeting relates to approval of the
proposed Fleming Companies, Inc. 1999 Stock Incentive Plan. If approved by the
required vote of the
16
<PAGE> 18
shareholders, there will be 300,000 shares available for restricted stock awards
under the new plan and 1,885,750 shares available for stock options. Options for
614,250 shares have been granted under the new plan and such grants are subject
to shareholder approval. The number of shares available for stock options
includes the 300,000 shares available for restricted stock awards as the new
plan provides that these shares can be awarded as either stock options or
restricted stock. See "Proposal No. 3 -- Approval of the Fleming Companies, Inc.
1999 Stock Incentive Plan" for a detailed description of the new stock incentive
plan.
CHIEF EXECUTIVE OFFICER
Robert E. Stauth served the company as CEO during 1998 until July 18, 1998.
His salary for 1998 was determined by the Committee in accordance with the
policies set forth above for all executive officers. He did not receive a bonus
for 1998 under the EVA Plan, but he did receive a substantial severance payment
in connection with his resignation as chief executive officer. See "Employment
Contract, Termination of Employment and Change in Control Arrangements -- Stauth
Agreement."
Mark S. Hansen became CEO of the company on November 30, 1998. His salary
for the balance of 1998 and for 1999 was determined by the Committee as a result
of negotiations of an employment agreement with Mr. Hansen. The Committee
determined his salary and the number of stock options and shares of restricted
stock awarded pursuant to his employment agreement after consideration of the
following factors: competitive levels of compensation, his experience in
managing operations of a size and complexity similar to the company, his general
knowledge of the distribution and retail food industry, his track record in
making changes and the Committee's belief that Mr. Hansen has the qualifications
necessary to responsibly manage the company. Mr. Hansen did not receive a bonus
for 1998. If the new bonus plan is approved by the shareholders at the annual
meeting, Mr. Hansen's bonus, if any, for 1999 will be determined pursuant to the
new plan. See "Proposal No. 4 -- Approval of the Fleming Companies, Inc.
Corporate Officer Incentive Plan." Mr. Hansen's employment agreement provides
that, during its five year term, he will consult with the Committee in making
its determination of the performance goals and bonus amounts for the new bonus
plan. See "Employment Contract, Termination of Employment and Change in Control
Arrangements -- Hansen Agreement."
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Although no executive officer's total compensation for fiscal 1998 exceeded
the limitations on deductibility under Section 162(m) ("Section 162(m)") of the
Internal Revenue Code of 1986, as amended ("the Code"), the Committee has
adopted and the board of directors has ratified the following policy regarding
Section 162(m):
Section 162(m) limits the deductibility of certain compensation paid by the
company to certain of its executive officers. It is possible that future
circumstances may warrant compensation payments which will not qualify as a
tax deductible expense. It shall be the
17
<PAGE> 19
policy of the Committee to compensate executive officers based on
performance, and the Committee recognizes that flexibility with respect to
the payment of compensation must be insured in order to maintain this
policy. Accordingly, although the Committee will to the extent possible
attempt to qualify all compensation payments for deductibility under
Section 162(m), circumstances may arise which require it to authorize
compensation which is not deductible under Section 162(m).
<TABLE>
<S> <C>
Guy A. Osborn, Chairman Archie R. Dykes
Herbert M. Baum Alice M. Peterson
</TABLE>
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the company, the S&P 500 composite index and an index of peer
companies selected by the company with the investment weighted based on market
capitalization at the beginning of each year.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Fleming
Measurement Period Companies,
(Fiscal Year Covered) Inc. S&P 500 Peer Group
<S> <C> <C> <C>
1993 100 100 100
1994 98 101 81
1995 92 139 101
1996 78 171 100
1997 61 229 127
1998 48 294 139
</TABLE>
The total cumulative return on investment (change in the year-end stock
price plus reinvested dividends) for each year for the company, the peer group
and the S&P 500 composite is based on the stock price or composite index at the
end of calendar 1993.
18
<PAGE> 20
Companies in the peer group are as follows: Fleming Companies, Inc.,
SUPERVALU, Inc., Nash Finch Company, Super Food Services, Inc., Richfood
Holdings, Inc., and Super Rite Corp. Super Rite Corp. was acquired by Richfood
Holdings, Inc. in 1995 and Super Food Services, Inc. was acquired by Nash Finch
Company in 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, Guy A. Osborn served as chairman, and Herbert M. Baum,
Archie R. Dykes and Alice M. Peterson served as members of the Compensation and
Organization Committee. No executive officer of the company has any relationship
reportable under the Compensation Committee Interlock regulations.
STOCK OPTION INFORMATION
Option Grants. The following table sets forth information concerning the
grant of stock options to Mr. Hansen, who was the only named executive officer
to receive any option grants during the fiscal year ended December 26, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS EMPLOYEES BASE GRANT DATE
GRANTED IN PRICE EXPIRATION PRESENT
NAME (#)(1,) (2) FISCAL YEAR ($/SH) DATE VALUE $(3)
---- ----------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mark S. Hansen...................... 425,750 51.86 9.7188 11-29-08 1,846,458
Mark S. Hansen...................... 100,000 12.18 10.0625 11-29-08 424,263
Mark S. Hansen...................... 274,250(4) 33.40 9.7188 11-29-08 1,189,410
</TABLE>
- ---------------
(1) The listed options are exercisable in four twenty-five percent (25%)
increments on the first through fourth anniversaries of the date of grant.
(2) The vesting of all listed options accelerates in the case of a change of
control of the company. In the event Mr. Hansen's employment is terminated
within one year following a change of control of the company, he will have
three years from such termination date to exercise his stock options. See
"Employment Contract, Termination of Employment and Change in Control
Arrangements -- Other Arrangements."
(3) Based on Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
assumptions as to variables such as risk free interest rate, stock price
volatility and future dividend yield as follows: the options are assumed to
be exercised at the end of a ten year term; yield volatility of 32%; annual
dividend yield of 0.8% and a risk free rate of return of 5.12%.
(4) These options were granted under the 1999 Stock Incentive Plan and are
subject to approval of the plan by the shareholders at the annual meeting.
See "Proposal No. 3 -- Approval of the Fleming Companies, Inc. 1999 Stock
Incentive Plan."
19
<PAGE> 21
Option Exercises. The following table sets forth information regarding the
value as of the fiscal year ended December 26, 1998 of any unexercised options
held by the named executive officers. No stock options were exercised by any of
the named executive officers during the fiscal year ended December 26, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(1)
--------------- -------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ --------------- -------------
<S> <C> <C> <C> <C>
Mark S. Hansen.............. -- -- 0/800,000(2) 0/8,350,000
Robert E. Stauth............ -- -- 120,000/ 0 0/0
William J. Dowd............. -- -- 42,000/ 82,000 0/0
E. Stephen Davis............ -- -- 36,000/ 33,000 0/0
Harry L. Winn, Jr........... -- -- 30,750/ 44,250 0/0
Thomas L. Zaricki........... -- -- 11,000/ 14,000 0/0
</TABLE>
- ---------------
(1) The market price of the company's common stock at 1998 fiscal year-end was
$10.4375 per share.
(2) 274,250 of these options were granted under the 1999 Stock Incentive Plan
and are conditioned on approval of the plan by the shareholders at the
annual meeting. See "Proposal No. 3 -- Approval of the Fleming Companies,
Inc. 1999 Stock Incentive Plan."
20
<PAGE> 22
PENSION PLAN
The following table illustrates estimated annual benefits payable under the
company's defined benefit plan ("Pension Plan") to the named executive officers
upon retirement, assuming retirement at age 65, including amounts attributable
to the company's Executive Deferred Compensation Plan (the "Excess Plan"), which
provides benefits that would otherwise be denied participants due to certain
limitations on qualified benefit plans in the Code:
Pension Plan Table
Years of Service
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Remuneration 10 15 20 25 30 35 40
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000.......... $ 41,675 $ 62,500 $ 83,350 $104,188 $125,000 $137,500 $150,000
300,000.......... 50,010 75,000 100,020 125,025 150,000 165,000 180,000
350,000.......... 58,345 87,500 116,690 145,863 175,000 192,500 210,000
400,000.......... 66,680 100,000 133,360 166,700 200,000 220,000 240,000
450,000.......... 75,015 112,500 150,030 187,538 225,000 247,500 270,000
500,000.......... 83,350 125,000 166,700 208,375 250,000 275,000 300,000
550,000.......... 91,685 137,500 183,370 229,213 275,000 302,500 330,000
600,000.......... 100,020 150,000 200,040 250,050 300,000 330,000 360,000
650,000.......... 108,355 162,500 216,710 270,888 325,000 357,500 390,000
700,000.......... 116,690 175,000 233,380 291,725 350,000 385,000 420,000
750,000.......... 125,025 187,500 250,050 312,563 375,000 412,500 450,000
800,000.......... 133,360 200,000 266,720 333,400 400,000 440,000 480,000
850,000.......... 141,695 212,500 283,390 354,238 425,000 467,500 510,000
</TABLE>
The estimated number of years of credited service for each of the named
executive officers is as follows: Mr. Dowd, 4; and Mr. Davis, 38. Mr. Hansen
will not be eligible to participate in the Pension Plan until November 30, 1999.
Mr. Stauth will begin receiving benefits under this plan upon attaining the age
of 55. See "Employment Contract, Termination of Employment and Change in Control
Arrangements -- Stauth Agreement." Since Messrs. Winn and Zaricki terminated
their employment with the company in 1999, they will not be eligible to receive
any payments for early retirement under the Pension Plan, but will qualify for
benefits when they each reach age 65. They will each have an estimated 5 years
of credited service.
Benefit amounts payable under the Pension Plan are (i) payable on a
straight life basis computed as a percentage of final average compensation
(consisting of salaries, wages, commissions and bonuses) for the five calendar
plan years during the last ten years of the associate's career for which such
average is the highest, (ii) subject to offset for Social Security and (iii)
limited by the Employee Retirement Income Security Act of 1974, as amended, and
by the Code. There is also an additional dollar limitation on benefits which an
associate may earn under all of the company's qualified pension plans. Since all
named
21
<PAGE> 23
executive officers, except for Mr. Dowd, participate in the Excess Plan as well
as the Pension Plan, amounts payable to them are calculated in accordance with
the Excess Plan, which provides for computation of benefits based on "Annual
Final Compensation," which is defined under the Excess Plan to be average annual
total compensation earned by the participant for the three consecutive calendar
years of his employment immediately prior to his retirement date. Benefits under
the Excess Plan are subject to offset for amounts payable under the Pension
Plan. As of December 26, 1998, Annual Final Compensation was $57,692 for Mr.
Hansen and $391,473 for Mr. Davis. Mr. Stauth will begin receiving benefits
under the Excess Plan upon attaining age 55 in October 1999 in accordance with
his termination agreement based on Annual Final Compensation of $699,998. See
"Employment Contract, Termination of Employment and Change in Control
Arrangements -- Stauth Agreement." Since Messrs. Winn and Zaricki terminated
their employment with the company in 1999, they will not be eligible to receive
any payments for early retirement under the Excess Plan but will qualify for
benefits when they each reach age 65 based on Annual Final Compensation of
$379,287 and $386,270, respectively. Mr. Dowd does not participate in the Excess
Plan; but he is a participant in the Pension Plan. As of December 26, 1998, his
covered compensation under the Pension Plan was $155,000.
Prior to November 1997, the named executive officers, except for Mr. Hansen
and Mr. Dowd who is covered by a separate agreement (the "Dowd Agreement"),
participated in the SRP. In view of its concerns regarding the continuing
expense associated with the SRP, the Committee, effective November 1, 1997,
terminated the SRP for all currently employed participants (the "Active SRP
Participants") and adopted the Excess Plan. See "Summary Compensation
Table -- Footnotes 4 and 5." Its decision to terminate the SRP, freeze the
amounts then attributable to the Active SRP Participants, make the restricted
stock grants and adopt the Past Service Plan and the Excess Plan was based
primarily on the fact that such actions yielded an overall reduction in
financial expense. Its decision was also designed to cause the compensation of
the Active SRP Participants to be aligned as nearly as possible with the
interests of the company's shareholders. See "Summary Compensation
Table -- Footnote 4." The Excess Plan is a defined benefit supplementary plan
which provides retirement income, offset by the executive's Pension Plan
benefit, equal to the existing pension formula under the Pension Plan (currently
1.667% times the years of service up to 30 years and 1% times the years of
service thereafter) without considering the limitations of Sections 415 and
401(a)(17) of the Code, which limit the amounts of benefits and includable
compensation for an executive under the Pension Plan. The Excess Plan covers all
of the named executive officers (except Mr. Dowd), the Active SRP Participants
and other corporate officers. Future executives may be added as participants
under the Excess Plan. Payments under the Excess Plan are made following
termination of employment due to retirement (age 55 or later), death, disability
or upon or in anticipation of a change of control of the company.
22
<PAGE> 24
EMPLOYMENT CONTRACT, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Hansen Agreement. Effective November 30, 1998, Mr. Hansen entered into a
five year employment agreement with the company to serve as its chairman and
chief executive officer (the "Hansen Agreement"). His annual base salary is
$750,000 subject to increase but not decrease during the term of the Hansen
Agreement. Commencing in fiscal 1999, Mr. Hansen has a target bonus of 75% of
his base salary with a maximum annual bonus of 150% of his base salary upon
meeting performance goals established by the Committee under the new bonus plan.
See "Proposal No. 4 -- Approval of the Fleming Companies, Inc. Corporate Officer
Incentive Plan." The Hansen Agreement provides that he will consult with the
Committee in making its determination of the performance goals and bonus amounts
under the new bonus plan. The company agreed to purchase one of two homes owned
by Mr. Hansen at a price equal to the greater of the appraised value or his
cost. If Mr. Hansen's employment is terminated by the company without "cause" or
he terminates his employment with the company for "good reason" as such terms
are defined in the Hansen Agreement, he will receive his base salary and accrued
vacation through his date of termination plus his base salary for 24 months
following the date of termination. During the 24 month period he, his spouse and
dependents will also be entitled to continue to be covered by the company's
medical and life insurance programs they were covered by prior to the date of
termination. If Mr. Hansen's employment is terminated by the company with cause
or Mr. Hansen terminates his employment with the company without good reason, he
will receive his base salary and accrued vacation through the date of
termination. In the event of termination of his employment due to disability,
Mr. Hansen will receive his base salary through the date of termination and
disability benefits under the company's disability program. If Mr. Hansen's
employment is terminated due to his death, his beneficiary will receive his base
salary through the date of his death. In all cases of termination, Mr. Hansen,
or his beneficiary in the case of his death, will receive amounts due for
reasonable expenses incurred but not paid prior to termination and all other
benefits provided to terminated employees under the company's plans and
arrangements. If Mr. Hansen's employment is terminated during the term of the
Hansen Agreement (except without cause by the company or for good reason by Mr.
Hansen) he has agreed for a period of two years following termination: (i) not
to compete with the company in the retail sale of food or wholesale distribution
of food within any standard metropolitan statistical areas in which the company
is operating as of the date of termination, (ii) not to divert any of the
company's customers to any entity engaged in the retail sale of food or
wholesale distribution of food in the same standard metropolitan statistical
areas as the company, and (iii) not to solicit any officer, employee or
consultant of the company or its subsidiaries to leave the employ of the
company. The above provision does not prohibit him from employment with a
national chain engaged in the retail sale of food regardless of location. Under
the Hansen Agreement, he also received an award of 32,000 shares of restricted
stock (plus $299,105 to reimburse him for his tax liability associated with the
award) and a grant of 800,000 stock options. See "Summary Compensation
Table -- Footnote 3" and "Stock Option Information -- Option Grants."
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Stauth Agreement. Mr. Stauth resigned as chairman and chief executive
officer effective July 18, 1998 and received severance benefits pursuant to a
Settlement and Severance Agreement dated as of August 28, 1998 (the "Stauth
Agreement"). Pursuant to the Stauth Agreement, Mr. Stauth received $1,250,000
(the equivalent of two times his then current annual salary), $225,922 (the
balance of his bonus bank under the EVA Plan) and $36,058 for three weeks of
accrued and unused 1998 vacation. Although the Stauth Agreement provided for a
bonus of up to $1,125,000 calculated under the EVA Plan as if his employment had
continued through the end of 1998, Mr. Stauth did not qualify otherwise for a
bonus under the EVA Plan for 1998. In addition, the Stauth Agreement provides
for the acceleration of the vesting of 120,000 stock options (30,000 at a per
share exercise price of $19.7500, 30,000 at a per share exercise price of
$16.3750 and 30,000 at a per share exercise price of $17.500 and 30,000 at a per
share exercise price of $24.9375) and extended the exercise period until July
17, 2000 for all 120,000 stock options. Pursuant to the terms of the Stauth
Agreement, the qualifying requirements were waived and vesting and/or
distribution were accelerated with respect to a total of 90,000 shares of
restricted stock (plus the dividends attributable to such shares). Qualifying
requirements were also waived as to vesting and distribution of the award made
to Mr. Stauth under the Past Service Plan of $2,364,000 plus interest at the
rate of 7.5% per annum from November 1, 1997 until paid. Payment of this amount
will start on November 1, 1999 after Mr. Stauth has reached age 55. Payment will
be accelerated if there is a change of control of the company prior to that
time. The company determined that upon turning age 55, Mr. Stauth will qualify
for early retirement income under the Pension Plan and be eligible to receive
payments under the Excess Plan and the Pension Plan. Under the Stauth Agreement,
the company also purchased for Mr. Stauth a $500,000 paid up whole life
insurance policy on the life of Mr. Stauth and agreed to pay the monthly premium
for 18 months of coverage under the company's medical plan. Thereafter, the
company will pay $5,000 annually for coverage of Mr. Stauth as a retiree under
the company's medical plan until he is eligible for medicare or no longer
qualifies to participate as a retiree. The Stauth Agreement also provides for
reimbursement of certain relocation and home sale expenses as well as
reimbursement for certain country club dues. Mr. Stauth also received his car
plus a cash payment to cover his tax liability associated therewith. In
addition, Mr. Stauth agreed that for a period of one year following July 18,
1998, he would not compete with the company in the food distribution and
marketing business in any state or market area in which the company operates or
supplies customers. He also released the company from any claims associated with
his employment.
Winn Agreement. Mr. Winn resigned as executive vice president -- chief
financial officer effective February 17, 1999 and received benefits pursuant to
a severance agreement (the "Winn Agreement"). Pursuant to the Winn Agreement, he
is entitled to receive $334,400 (one year's base salary) payable over a one year
period, $98,841 (the balance of his bonus bank under the EVA Plan), cash in lieu
of any 1999 accrued vacation and a lump sum payment in the amount of twelve
times the monthly COBRA premium for his current level of coverage under the
company's medical plan. Qualifying requirements were waived as to vesting and
distribution of the award made to Mr. Winn under the Past Service Plan of
$265,592.
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<PAGE> 26
Qualifying requirements were also waived and vesting and/or distribution were
accelerated with respect to a total of 30,000 shares of restricted stock (plus
the dividends attributable to such shares). Pursuant to the Winn Agreement, Mr.
Winn also received his company car and his laptop computer, and he is entitled
to be reimbursed for certain relocation costs. Mr. Winn released the company
from any claims associated with his employment.
Zaricki Agreement. Mr. Zaricki resigned as senior vice president -- retail
operations effective January 19, 1999 and received benefits pursuant to a
severance agreement (the "Zaricki Agreement"). Pursuant to the Zaricki
Agreement, he is entitled to receive $283,500 (one year's base salary) payable
over a one year period, $128,733 (the balance of his bonus bank under the EVA
Plan), cash in lieu of any 1999 accrued vacation and a lump sum payment in the
amount of twelve times the monthly COBRA premium for his current level of
coverage under the company's medical plan. Qualifying requirements were waived
as to vesting and distribution of the award made to Mr. Zaricki under the Past
Service Plan of $274,260. Qualifying requirements were also waived and vesting
and/or distribution were accelerated with respect to a total of 10,000 shares of
restricted stock (plus the dividends attributable to such shares). Pursuant to
the Zaricki Agreement, Mr. Zaricki also received his company car and is entitled
to be reimbursed for certain relocation costs. Mr. Zaricki released the company
from any claims associated with his employment.
Change of Control Employment Agreements. In 1995, the company entered into
change of control employment agreements with all of the named executives except
for Mr. Hansen who entered into his change of control employment agreement on
November 30, 1998. These agreements are effective only upon a "change of
control" of the company (as defined in the agreements) and for a period of three
years thereafter. In Mr. Hansen's case, if a change of control occurs prior to
November 30, 2000, the term of his change of control employment agreement will
be three years plus the number of days between the date of the change of control
and November 30, 2000. Upon a change of control, the executive is to receive an
annual base salary equal to the greater of (i) his base salary at the time of
the change of control and (ii) the highest average annual base salary paid to
the executive during any of the three out of the five fiscal years immediately
preceding the change of control which yield the highest annual base salary. In
addition, pursuant to an amendment to the change of control employment agreement
dated as of March 2, 1999, the executive will receive an annual bonus at least
equal to the greater of (i) the middle target level bonus payable, regardless of
whether any specified targets have been met, under the company's incentive
compensation plan applicable to the executive for the executive's position on
the date of the change of control (or if no middle target level has been set as
of the date of the change of control, the middle target level set for the fiscal
year immediately preceding the change of control or (ii) an amount equal to the
maximum aggregate bonus paid (under the company's incentive compensation plans
or otherwise) during the five fiscal years immediately preceding the fiscal year
in which the change of control occurs. The executive will also be entitled to
all of the benefits and to participate in all of the plans in effect immediately
preceding the change of control that are available to other key associates.
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<PAGE> 27
Pursuant to the terms of the change of control employment agreements, in
the event during the three years following a change of control, or in
anticipation of a change of control, the executive is terminated for other than
"cause", death or disability or he terminates his employment for "good reason"
(as such terms are defined in the agreements), then the executive is to receive
a lump sum cash payment comprised of the following amounts: (i) his base salary
through the date of termination at the annual rate in effect on the date of
termination or, if higher, at the highest annual rate in effect at any time
during the 36 month period preceding the change of control date through the date
of termination (the "Highest Base Salary"); (ii) the prorated portion of his
annual bonus or, if higher, an amount equal to the middle target level bonus
payable, regardless of whether specified targets are met, under the company's
incentive compensation plan applicable to the executive for his position on the
date his employment is terminated (the "Highest Bonus"); (iii) the product
obtained by multiplying 2.99 times the sum of the Highest Base Salary and the
Highest Bonus; and (iv) any amounts previously deferred by the executive (plus
any accrued interest thereon) and any accrued vacation pay. The provisions
regarding the Highest Bonus in clauses (ii) and (iii) above are pursuant to an
amendment to the change of control employment agreements dated as of March 2,
1999. In addition, for the remainder of the employment period or such longer
period as any plan or policy may provide, the executive shall also be entitled
to participate in all plans and continue all benefits at least equal to those he
would have received had he not been terminated. Any such payments to be received
by the executive shall be "grossed up" to cover any excise tax, interest or
penalties imposed under the Code. The change of control employment agreements
also provide for indemnification from the company to the executive and for
officers' and directors' insurance coverage for the executive for a period of
five years following the termination date. For a period of 30 days following the
first year after a change of control, the executive can terminate his employment
for any reason and receive all the benefits of the agreement as if he had
terminated for good reason. Under the change of control employment agreements,
assuming a change of control on December 26, 1998, and termination of employment
of the named executive for other than cause, death or disability or by the
executive for good reason, the company would be required to pay the following
amounts: Mr. Hansen, $2,242,500; Mr. Dowd, $2,830,495; and Mr. Davis,
$2,046,867. The change of control employment agreements for Messrs. Stauth, Winn
and Zaricki terminated upon their termination of employment with the company.
Supplemental Trust. The company has entered into a Supplemental Income
Trust (the "Supplemental Trust"). The board of directors has empowered the
Committee in its sole discretion to fund the Supplemental Trust as it deems
appropriate from time to time in order to satisfy the company's obligations (i)
to former associates receiving SRP benefits, (ii) under the Dowd Agreement and
the change of control employment agreements, and (iii) under the severance
agreements and employment agreements available to certain associates who are not
named executive officers. No later than sixty days following a change of control
of the company, the terms of the Supplemental Trust require the company to make
an irrevocable contribution to the Supplemental Trust in an amount sufficient to
pay participants and their beneficiaries amounts due under the SRP and to pay to
Mr. Dowd or his beneficiary the
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benefits he would be entitled to pursuant to the Dowd Agreement as of the date
the change of control occurred assuming Mr. Dowd was terminated for other than
"cause" death or disability or Mr. Dowd terminated his employment for "good
reason" as such terms are defined in the Dowd Agreement. The Supplemental Trust
assets relating to company contributions are subject to the claims of general
creditors of the company. No associate with any right to or interest in any
benefit or future payments under the Supplemental Trust will have any right to
or security interest in any specific asset of the Supplemental Trust or any
right to assign any benefits or rights which he or she may expect to receive
from the Supplemental Trust.
Past Service Plan. The Past Service Plan was adopted by the Committee
effective November 1, 1997 in connection with its termination of the SRP for
Active SRP Participants. Pursuant to the terms of the Past Service Plan, the
company calculated the present value of the amount which would have been payable
to each Active SRP Participant assuming he had retired as of November 1, 1997
and was fully vested. In the event there is a change of control of the company,
each participant in the Past Service Plan will be fully vested in his benefit
thereunder. Payments will be made under the Past Service Plan to Mr. Davis in a
method he elected at the time he was selected for participation in the plan and
payment will commence upon the occurrence of the Distribution Events or
termination of employment due to death, disability or upon or in anticipation of
a change of control of the company. See "Summary Compensation Table -- Footnote
4." Assuming (i) a change of control of the company on December 26, 1998 and
termination of employment of Mr. Davis and (ii) he elected a life only payment
method, the company would be required to pay him $190,653 annually for life.
Pursuant to the terms of the Stauth Agreement, qualifying requirements relating
to the vesting and distribution of his benefit under the Past Service Plan were
waived. Payment of his benefit of $2,364,000 (plus interest at the rate of 7.5%
from November 1, 1997 until paid) will commence on November 1, 1999 when he has
reached age 55. Pursuant to the Winn Agreement and the Zaricki Agreement,
qualifying requirements relating to the vesting and distribution of their
respective benefits under the Past Service Plan were waived, and they will be
eligible to receive lump sum payments as of December 26, 1998 of $274,260 and
$265,592, respectively, plus interest at the rate of prime minus 1% until paid.
Excess Plan and Dowd Agreement. The Excess Plan provides for payments to
be made to each of the named executive officers, except for Mr. Dowd, upon
retirement or in the event his employment is terminated by reason of death or
disability or upon or in anticipation of a change of control of the company.
Payments are to be made in a method elected by the executive officer. Pursuant
to the terms of the Excess Plan, in the event there is a change of control of
the company, each participant is fully vested in his benefit earned under the
plan, they shall be paid beginning immediately following their termination of
employment and no reduction shall be made for any early retirement adjustment
factors provided for in the Excess Plan. Assuming (i) a change of control of the
company on December 26, 1998 and termination of employment of the following
persons and (ii) each of them elected a life only payment method, the company
would be required under the Excess Plan to pay the following amounts to the
following persons annually for life: Mr. Hansen, $6,646; and Mr. Davis, $96,805.
As of December 26, 1998, pursuant to the terms of their respective severance
arrangements
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Messrs. Stauth, Winn and Zaricki, respectively, were eligible to receive
payments under the Excess Plan, of $178,450, $18,751 and $22,457 annually for
life.
Pursuant to the Dowd Agreement, Mr. Dowd is to receive $162,000 per year as
a supplemental retirement benefit if he retires on or after July 24, 2007. If he
retires prior to July 24, 2007, but on or after July 24, 2000, he is entitled to
a reduced supplemental retirement benefit. Mr. Dowd is currently 56 years of
age. In addition, the company has agreed to pay him a severance payment equal to
one year's salary in the event he is terminated for any reason other than cause.
Mr. Dowd would be paid $81,000 annually for life under the Dowd Agreement
assuming a change of control on December 26, 1998, and the termination of his
employment within three years after the change of control.
Deferred Trust. Effective November 1, 1997, the company entered into the
Deferred Trust. See "Summary Compensation Table -- Footnote 4." The shares of
restricted stock awarded to the named executive officers in 1997 are held by the
trustee of the Deferred Trust who has sole voting and investment power with
respect to such shares until the holder terminates employment with the company
and satisfies the vesting and payment conditions of his restricted stock award
agreement. The board of directors has empowered the Committee in its sole
discretion to fund the Deferred Trust as it deems appropriate from time to time
in order to satisfy the company's obligations to associates with respect to the
restricted stock awards made November 1, 1997, the Excess Plan and the Past
Service Plan. No later than sixty days following a change of control of the
company, the terms of the Deferred Trust require the company to make an
irrevocable contribution to the Deferred Trust in an amount sufficient to pay
the holders of the restricted stock awards and participants in the Excess Plan
and the Past Service Plan or their beneficiaries the benefits to which they
would have been entitled pursuant to the terms of the restricted stock
agreements, the Excess Plan and the Past Service Plan as of the date on which
the change of control occurred. The Deferred Trust assets relating to company
contributions are subject to the claims of general creditors of the company. No
associate with any right to or interest in any benefit or future payments under
the Deferred Trust will have any right to or security interest in any specific
asset of the Deferred Trust or any right to assign any benefits or rights which
he or she may expect to receive from the Deferred Trust.
Other Arrangements. Pursuant to the provisions of the company's 1990 Stock
Option Plan and the 1996 Stock Incentive Plan, in the event of a change of
control of the company, all options outstanding under such plans will become
automatically fully vested and immediately exercisable with such acceleration to
occur without requirement of any further act by the company or any plan
participant. All of the named executive officers have stock options granted
under the above-described plans.
Pursuant to the provisions of the restricted stock award made to Mr. Hansen
in 1998, all restricted shares will vest in the event of a change of control of
the company. See "Summary Compensation Table -- Footnote 3" for information
regarding the value of such award as of December 26, 1998.
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Pursuant to the restricted stock awards made in connection with the
termination of the SRP Plan, the shares subject to the awards together with any
dividends which have accrued on such shares shall be payable only upon
termination of employment and occurrence of the Distribution Events. In the
event the participant dies, incurs a disability or a change of control of the
company occurs, the restricted stock award will become automatically fully
vested and nonforfeitable. All shares of restricted stock plus dividends
attributable thereto will be distributed to the participant within thirty days
following termination of his employment due to death, disability or a change of
control of the company. See "Summary Compensation Table -- Footnote 4."
The company leases eleven Baker's supermarket sites and a storage facility
in Omaha, Nebraska from five separate affiliates (the "Baker Affiliates") of
Jack W. Baker, a director of the company, and paid the Baker Affiliates in 1998
approximately $2.98 million for rent, taxes and common area maintenance under
the leases. The company expects to pay a similar amount in fiscal 1999 under the
leases.
In December 1998, the company sold certain software to a limited liability
company owned 75% by Mr. Baker's son-in-law (the "LLC") for $100,000 and
retained an 8% royalty fee covering revenues from sales or licensing of the
software by the LLC over the next two years. The company has an ongoing contract
with the LLC for software support to certain retail stores owned by the company.
The company expects to pay $86,000 to the LLC during fiscal 1999 for this
service. Mr. Baker expects to become an investor in the LLC in fiscal 1999, but
his equity ownership will be less than ten percent. In his capacity as an
associate of the company, Mr. Baker is also a party to a change of control
employment agreement with the company with terms similar to such agreements
between the company and the named executive officers. See "Employment Contract,
Termination of Employment and Change in Control Arrangements -- Change in
Control Employment Arrangements."
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PROPOSAL NO. 2
APPROVAL OF THE
AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION TO PROVIDE FOR
THE ANNUAL ELECTION OF DIRECTORS
In 1983, the company's shareholders approved an amendment to the company's
certificate of incorporation and its bylaws to provide for a classified board of
directors; that is, a system under which one-third of the directors would be
elected annually, each for a three year term. At that time, the board of
directors recommended such amendment because it believed that the establishment
of a classified board would help maintain stability and continuity in the
membership of the board and in the management of the affairs of the company. In
addition, a classified board has been widely viewed as a means of reducing the
possible sudden and surprise change in majority control of the board and thus
having the effect of impeding certain types of hostile takeovers.
At the company's annual meeting in 1998, the shareholders approved a
proposal submitted by a shareholder which requested that the board of directors
take the necessary steps to declassify the board. This proposal received support
of 73% of the shares voted at the meeting. The concern expressed by the
shareholder proponent was that a classified board could serve to minimize
accountability of directors to shareholders and preclude the full exercise of
the rights of shareholders to approve or disapprove annually the performance of
the director or directors.
In October 1998, the company received another proposal regarding
declassification of the board of directors from the same shareholder. In light
of the action taken by the board of directors described below, the shareholder
proposal was withdrawn. The board of directors discussed the issues regarding
classification at its meeting in January 1999 and determined that it would be in
the best interests of the company and its shareholders at this time if action
was taken to declassify the board of directors as set forth below. Accordingly,
the board of directors has unanimously approved, and recommends to shareholders
that they consider and approve, a proposal to amend the company's restated
certificate of incorporation to phase out the current division of the board of
directors into three classes, with one class elected each year for a three-year
term, and to provide instead for the annual election of directors commencing
with the class of directors standing for election in 2000. In order to ensure a
smooth transition to the new system, the proposed amendment would not shorten
the terms of directors elected prior to its effectiveness, including those
elected at the 1999 annual meeting, each of whom would serve for the full term
for which he or she is elected. The new procedure would, however, apply to all
directors as their current terms expire. Thus, the class of directors, who were
elected at the 1997 annual meeting for three-year terms, would stand for
election at the 2000 annual meeting for a one-year term. At the annual meeting
in 2001, those directors, together with the class of directors, whose terms
expire in 2001, would stand for election for a one-year term. Beginning with the
annual meeting in 2002, the classification of the board would
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terminate and all directors would be subject to annual election. After the 1999
annual meeting, directors chosen to fill vacancies in the board of directors
resulting from any increase in the number of directors or from death,
resignation, disqualification or removal shall hold office for a term expiring
at the annual meeting of shareholders at which the term of office for which they
have been elected expires; provided that vacancies on the board of directors
resulting from any increase in the number of directors shall be allocated among
the remaining classes of directors at the time such increase occurs. The vote of
the holders of a majority of the company's common stock having voting power
present in person or represented by proxy at the annual meeting shall be
required to approve Proposal No. 2.
If the proposed amendment is approved, article eight of the company's
restated certificate of incorporation would be deleted and replaced by the
following:
"ARTICLE EIGHT
The business and affairs of the corporation shall be managed by or under
the direction of a board of directors consisting of not less than three
directors or more than twenty directors, the exact number of directors to
be determined from time to time solely by resolution adopted by the board
of directors. Until the annual meeting of shareholders in 2002, the
directors shall be divided into three classes, as nearly equal in number as
possible, consisting initially of three, three and three directors. Each
director elected prior to the effective date of this Article Eight shall
serve for the full term for which he or she was elected, such that the term
of each director elected at the 1997 annual meeting shall end at the annual
meeting in 2000, the term of each director elected at the 1998 annual
meeting shall end at the annual meeting in 2001, and the term of each
director elected at the 1999 annual meeting shall end at the annual meeting
in 2002. After the 1999 annual meeting, directors chosen to fill vacancies
in the board of directors resulting from any increase in the number of
directors or from death, resignation, disqualification or removal shall
hold office for a term expiring at the annual meeting of shareholders at
which the term of office for which they have been elected expires; provided
that vacancies on the board of directors resulting from any increase in the
number of directors shall be allocated among the remaining classes of
directors at the time such increase occurs. Commencing with the annual
meeting in 2002, the foregoing classification of the board of directors
shall cease, and all directors shall be of one class and serve for a term
ending at the annual meeting following the annual meeting at which the
director was elected. In no case shall a decrease in the number of
directors shorten the term of any incumbent director. Each director shall
hold office after the annual meeting at which his or her term is scheduled
to end until his or her successor shall be elected and shall qualify,
subject, however, to prior death, resignation, disqualification or removal
from office. Any newly created directorship resulting from an increase in
the number of directors or any vacancy that may occur before the next
annual election of directors may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining
director."
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The company's bylaws also contain provisions regarding classification of
directors. The bylaws may be amended by the affirmative vote of a majority of
the directors. At its meeting in January 1999, the board of directors voted
unanimously to amend the bylaws to delete all provisions regarding
classification of directors. The amended bylaws will become effective in the
event Proposal No. 2 is approved by the shareholders at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL NO.
2.
PROPOSAL NO. 3
APPROVAL OF THE FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
The board of directors has adopted, subject to shareholder approval, the
Fleming Companies, Inc. 1999 Stock Incentive Plan (the "Stock Plan"), which will
have the effect of authorizing the company through the Committee (i) to grant
non-qualified stock options, incentive stock options and restricted stock awards
to key associates (the "Stock Incentive Feature"); and (ii) to issue restricted
company common stock (the "Directors' Restricted Stock") to the non-management
directors (the "Eligible Directors") in lieu of the company's payment of an
annual cash retainer (the "Directors' Stock Feature"). The board of directors
has reserved 2,500,000 shares of common stock of the company for grant to
participants designated by the Committee under the Stock Incentive Feature and
has reserved 200,000 shares of company common stock for issuance to Eligible
Directors under the Directors' Stock Feature.
The primary reason for adopting the Stock Incentive Feature is due to the
decreased amount of shares available under the 1990 Stock Incentive Plan, 1990
Stock Option Plan and 1996 Stock Incentive Plan. See "Report of Compensation
Committee -- Executive
Officers -- Restricted Stock and Stock Options." The board believes that the
Stock Incentive Feature will provide the additional shares needed to make grants
of stock options and awards of restricted stock to attract new associates and to
retain and provide incentives for current associates. The primary reason for
adopting the Directors' Stock Feature is to attract and retain highly qualified
persons as directors by substituting common stock of the company for the annual
cash retainer and thereby aligning such directors' interests more closely with
shareholder interests. The board terminated the Directors' Plan effective June
30, 1999, and substituted the Directors' Stock Feature of the Stock Plan. See
"The Board of Directors -- Compensation of Directors." A description of the
Stock Plan appears below. A copy of the Stock Plan is attached to this proxy
statement as Exhibit A and the description contained herein is qualified in its
entirety by reference to the complete text of the Stock Plan. Capitalized terms
used below not otherwise defined herein shall have the meaning ascribed to them
in the Stock Plan.
In November 1998, the company received a stockholder proposal urging that
the board of directors adopt a policy which would require stock option plans
covering top executives to be
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submitted to shareholders for approval. The board of directors of the company
believes that shareholders should have the ability to vote on all stock option
plans for executives. Accordingly, it has adopted such a policy and added it to
item 16 of its Corporate Governance Policy attached to this proxy statement as
Exhibit D. In view of its adoption of this policy, the shareholder proposal was
withdrawn. The vote of the holders of a majority of the company's common stock
having voting power present in person or by represented proxy at the annual
meeting shall be required to approve the Stock Plan.
THE STOCK INCENTIVE FEATURE
BACKGROUND
The purpose of the Stock Incentive Feature is to create incentives that are
designed to motivate associates of the company to put forth maximum efforts
toward the success and growth of the company and to enable the company to
attract and retain experienced individuals who by their position, ability and
diligence are able to make important contributions to the company's success.
Toward these objectives, the Stock Incentive Feature provides for the granting
of options and restricted stock awards. The Stock Incentive Feature was designed
to enable the company to adapt the long-term incentive compensation of its
associates to changing business conditions.
ADMINISTRATION
For the purposes of administration, the Stock Incentive Feature is deemed
to consist of two separate stock incentive plans: a "Non-Executive Officer Plan"
which is limited to participants who are not subject to Section 16 of the
Exchange Act and an "Executive Officer Plan" which is limited to participants
who are subject to Section 16 of the Exchange Act. Except for administration and
the category of participants eligible to receive Awards, the terms of the
Non-Executive Officer Plan and the Executive Officer Plan are identical.
The Non-Executive Officer Plan will be administered by both (i) a
committee, designated the Regular Award Committee, comprised of the company's
chief executive officer and the senior executive officer for human resources,
and (ii) the Compensation and Organization Committee (the "Compensation
Committee"). The Executive Officer Plan will be administered by the Compensation
Committee. With respect to all decisions relating to Non-Executive Officer
Participants, including the grant of Awards, the term "Committee", as hereafter
used, applies to either or both the Regular Award Committee and the Compensation
Committee and, with respect to all decisions relating to Executive Officer
Participants, including the grant of Awards, the term "Committee", as hereafter
used, applies only to the Compensation Committee. Although the Regular Award
Committee is authorized to administer the Non-Executive Officer Plan, it can
only make Awards within guidelines set by the Compensation Committee.
33
<PAGE> 35
The Committee is authorized and has complete discretion to formulate
policies, to establish rules and regulations for the administration of the Stock
Incentive Feature and to determine the terms of any options granted under the
Stock Incentive Feature.
ELIGIBILITY FOR PARTICIPATION
Any key associate of the company or any of its subsidiaries is eligible to
participate in the Stock Incentive Feature. The selection of participants from
among key associates is within the discretion of the Committee. Approximately
1,200 associates are eligible to participate. The benefits or amounts to be
received by or allocated to the participants in the Stock Incentive Feature will
be determined in the sole discretion of the Committee.
TYPES OF AWARDS
The Stock Incentive Feature provides for the granting of any or all of the
following types of awards: (i) stock options, including non-qualified stock
options and stock options intended to qualify as "incentive stock options" under
Section 422 of the Code; and (ii) restricted stock. The awards may be granted
singly, in combination or in tandem as determined by the Committee.
OTHER COMPONENTS OF THE STOCK INCENTIVE FEATURE
The Stock Incentive Feature authorizes the Committee to grant awards during
the period beginning November 30, 1998 and ending November 29, 2008. Two Million
Five Hundred Thousand shares of common stock have been reserved for issuance
subject to awards under the Stock Incentive Feature. Shares of common stock
subject to awards that terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of shares will again be available for issuance
subject to awards under the Stock Incentive Feature.
STOCK OPTIONS
Under the Stock Incentive Feature, the Committee may grant awards in the
form of options to purchase shares of common stock. The Committee will, with
regard to each option, determine the terms and conditions of each option, the
number of shares subject to the option and the manner and time of the option's
exercise. The exercise price of an option may not be less than the fair market
value of the common stock on the date of grant. The fair market value of shares
of common stock subject to options is determined by reference to the average of
the highest and lowest sales price as reported on the New York Stock Exchange.
As of March 2, 1999, the average of the high and low sales price of the
company's common stock as reported on the exchange was $7.5313. The exercise
price of an option may, at the discretion of the Committee, be paid by a
participant in cash, shares of common stock or a combination thereof. Any option
granted in the form of an incentive stock option will satisfy the applicable
requirements of Section 422 of the Code. Subject to the adjustment provisions of
the Stock
34
<PAGE> 36
Incentive Feature, the aggregate number of shares of common stock made subject
to the award of options to any participant in any fiscal year of the company may
not exceed 275,000.
RESTRICTED STOCK AWARDS
The Stock Incentive Feature authorizes the Committee to grant awards in the
form of restricted stock. Restricted stock awards will be subject to such terms,
conditions, restrictions and/or limitations, if any, as the Committee deems
appropriate including, but not limited to, restrictions on transferability and
continued employment; provided, however, all restricted stock awards must have a
minimum Restriction Period of at least one year from the date of grant. Subject
to the adjustment provisions of the Stock Incentive Feature, in no event shall
more than 300,000 shares of common stock be awarded to participants as
restricted stock awards.
OTHER TERMS OF AWARDS
The Stock Incentive Feature provides for the forfeiture of awards under
certain circumstances as determined by the Committee and authorizes the
Committee to determine what treatment will be afforded to a participant under
the Stock Incentive Feature in the event of his death, disability, retirement or
termination of employment for an approved reason. The Committee will also
determine the method, if any, for accelerating the vesting of stock options or
restricted stock awards or providing for the exercise of any unexercised stock
options in the event of a participant's death, disability, retirement or
termination of employment for an approved reason. In the event a participant's
employment with the company is terminated due to his retirement in accordance
with the company's retirement policy, the Stock Incentive Feature provides that
he will have a period of three years from his retirement date to exercise any
nonqualified stock options which are otherwise exercisable on his retirement
date.
Upon granting of any award, the Committee will, by way of an award
agreement, establish such other terms, conditions, restrictions and/or
limitations governing the granting of such awards as are not inconsistent with
the Stock Incentive Feature.
NEW PLAN BENEFITS
The following table sets forth information regarding grants of stock
options under the Stock Plan. All grants are subject to approval of the Stock
Plan by the shareholders at the annual meeting.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION STOCK OPTIONS
----------------- -------------
<S> <C>
Mark. S. Hansen, Chairman and CEO........................... 274,250
William J. Dowd, President and COO.......................... 25,000
E. Stephen Davis, EVP -- Food Distribution.................. 25,000
Executive Group............................................. 534,250
Non-Executive Director Group................................ --(1)
Non-Executive Officer Employee Group........................ 80,000
</TABLE>
35
<PAGE> 37
- ---------------
(1) Non-Executive Directors are not eligible to participate in the Stock
Incentive Feature. See the "The Directors' Stock Feature -- New Plan
Benefits" for information regarding awards of Directors' Restricted Stock to
the Non-Executive Director Group.
THE DIRECTORS' STOCK FEATURE
BACKGROUND
The purpose of the Directors' Stock Feature is to advance the interest of
the company and its shareholders by providing a means to attract and retain
highly qualified persons to serve as non-management directors and to promote
ownership of a greater proprietary interest in the company, thereby aligning
such directors' interests more closely with the interests of the shareholders.
The company believes that because of the highly competitive market for outside
director talent, the best interest of the company and its shareholders will be
served by the availability of the Directors' Stock Feature for its
non-management directors, which currently total seven in number.
ADMINISTRATION
The Directors' Stock Feature shall be administered by the Compensation
Committee. The Compensation Committee shall have the power to construe the
Directors' Stock Feature, to determine all questions arising thereunder and to
adopt and amend such rules and regulations for the administration of the
Directors' Stock Feature as it may deem desirable. Any decisions of the
Compensation Committee in the administration of the Directors' Stock Feature
shall be final and conclusive.
ELIGIBILITY FOR PARTICIPATION
Each member of the board of directors who is not a regular associate
(employee) of the company or any of its subsidiaries shall be eligible to
participate in the Directors' Stock Feature. If a director subsequently becomes
an associate of the company or any of its subsidiaries, the director shall
continue as a participant with respect to shares of Directors' Restricted Stock
previously awarded and cease to be eligible with respect to any future awards.
DESCRIPTION OF THE PLAN
The Stock Plan provides that an Eligible Director shall receive shares of
Directors' Restricted Stock each year in lieu of a cash retainer. One Thousand
Seven Hundred Fifty shares of Directors' Restricted Stock shall be credited to
each Eligible Director's Directors' Restricted Stock Account on or about July 1,
1999 and 3,500 shares of Directors' Restricted Stock shall be credited to each
Eligible Directors' Restricted Stock Account on or about the 15th day of March
of each calendar year for five years thereafter. Pending Vesting, all
certificates of Directors' Restricted Stock shall be held by an Escrow Agent who
shall be the
36
<PAGE> 38
Secretary of the Company. In the case of a new Eligible Director, there shall be
credited to the Directors' Restricted Stock Account with the Escrow Agent as
soon as shall be practicable following his or her appointment or election, a
proportionate share of Directors' Restricted Stock based upon the number of days
in the calendar year such director shall serve as an Eligible Director. All
Directors' Restricted Stock shall be credited to the Directors' Restricted Stock
Account on the date of grant. The Directors' Restricted Stock will be
distributed to the Eligible Director on Vesting as defined in the Stock Plan.
See "Attributes of Directors' Restricted Stock."
Upon termination of his position as a director of the company, a
Participant shall receive all Directors' Restricted Stock held in his or her
account in a lump sum. See "Termination and Amendment".
ATTRIBUTES OF DIRECTORS' RESTRICTED STOCK
Any cash dividends paid by the company shall be credited to a Directors'
Restricted Stock Account and disbursed to the Eligible Director by the Escrow
Agent.
Restrictions on Directors' Restricted Stock require that such stock shall
not Vest until the date which is five years from the date of the award, and
Vesting is conditioned on the company's Net Earnings From Operations for the 13
Periods preceding the date of such determination exceeding the company's Net
Earnings From Operations for Fiscal Year 1998 by at least 10%. With the consent
of the Committee, the Vesting of shares of Directors' Restricted Stock may be
accelerated in whole or in part to the date of an Eligible Director's
Termination of Service; if the Company's Net Earnings From Operations for the 13
full Periods preceding his Termination of Service exceed the Company's Net
Earnings from Operations for Fiscal Year 1998 by at least 10%.
Participants shall have rights as shareholders, including voting rights.
Shares of Directors' Restricted Stock are not transferrable by an Eligible
Director except by will or the laws of descent and distribution.
TERMINATION
Unless earlier terminated by action of the Board or the Committee, the
Directors' Stock Feature will remain in effect until the earlier of (i) such
time as no Common Stock remains available for delivery under the Stock Plan and
the company has no further rights or obligations under the Stock Plan, or (ii)
December 31, 2004. No termination of the Stock Plan shall materially and
adversely affect the rights or obligations of any person without his or her
consent with respect to any shares of Directors' Restricted Stock theretofore
earned and issuable under the Stock Plan.
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<PAGE> 39
NEW PLAN BENEFITS
Since none of the named executive officers, the executive group or the
non-executive officer employer group are entitled to participate in the
Directors' Stock Feature, they will receive no benefits under this feature of
the Stock Plan. All current Eligible Directors are eligible to participate in
the Directors' Stock Feature of the Stock Plan. Assuming the Stock Plan is
approved by the shareholders and the three nominees for election as directors
are elected at the annual meeting, each of the Eligible Directors (including the
three nominees for election as directors at the annual meeting) shall receive on
or about July 1, 1999, 1,750 shares of Directors' Restricted Stock for a total
award of 12,250 shares of Directors' Restricted Stock to all seven Eligible
Directors.
MISCELLANEOUS PROVISIONS
AMENDMENT OF THE STOCK PLAN
The company, through the board, may amend the Stock Plan at any time, but
may not, without stockholder approval, adopt any amendment that would increase
the maximum number of shares that may be issued under either the Stock Incentive
Feature or the Directors' Stock Feature (except for certain antidilution
adjustments described below), or materially modify the Stock Plan's eligibility
requirements. In addition, the Stock Plan provides for the automatic adjustment
of the number and kind of shares available thereunder and the number and kind of
shares subject to outstanding awards in the event the common stock is changed
into or exchanged for a different number or kind of shares of stock or other
securities of the company or another corporation, or if the number of shares of
common stock is increased through a stock dividend. The Stock Plan also provides
that an adjustment in the number of shares available thereunder and in the
number of shares subject to any outstanding awards may be made if the Committee
determines that any other change in the number or kind of shares of common stock
equitably requires such an adjustment.
CHANGE OF CONTROL EVENT
Upon the occurrence of a Change of Control Event, the Committee can within
its discretion accelerate the Vesting of any unvested portion of any outstanding
awards under the Stock Incentive Feature. The Stock Plan provides that
Directors' Restricted Stock held by the Escrow Agent will Vest automatically
upon the occurrence of a Change of Control Event to Eligible Directors.
FEDERAL TAX TREATMENT
Under current federal tax law, the following are the federal tax
consequences generally arising with respect to awards under the Stock Plan.
38
<PAGE> 40
A participant who is granted an incentive stock option does not realize any
taxable income at the time of the grant or at the time of exercise. Similarly,
the company is not entitled to any deduction at the time of grant or at the time
of exercise. If the participant makes no disposition of the shares acquired
pursuant to an incentive stock option before the later of two years from the
date of grant of such option and one year of the transfer of such shares to him,
any gain or loss realized on a subsequent disposition of the shares will be
treated as a long-term capital gain or loss. Under such circumstances, the
company will not be entitled to any deduction for federal income tax purposes.
The participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. The company is entitled
to a corresponding deduction for the same amounts.
A participant who has been granted an award in the form of restricted stock
will not realize taxable income at the time of the grant, and the company will
not be entitled to a deduction at the time of the grant, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. When such restrictions lapse, the participant will receive taxable
income in an amount equal to the excess of the fair market value of the shares
at such time over the amount, if any, paid for such shares. The company will be
entitled to a corresponding deduction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1999 STOCK
INCENTIVE STOCK PLAN.
PROPOSAL NO. 4
APPROVAL OF THE
FLEMING COMPANIES, INC. CORPORATE OFFICER INCENTIVE PLAN
GENERAL
The board of directors has adopted, subject to shareholder approval, the
Fleming Companies, Inc. Corporate Officer Incentive Plan (the "Bonus Plan")
which will provide a system for determining incentive compensation to be paid to
corporate officers of the company. Bonuses for corporate officers were
determined previously under the EVA Plan. The board of directors terminated the
EVA Plan effective February 15, 1999. Although shareholder approval is not
required to implement the Bonus Plan, the board of directors has requested such
approval in order to ensure deductibility under the Code for income tax purposes
of amounts paid to executive officers under the plan. See "Report of
Compensation Committee -- Deductibility of Executive Compensation." In the event
of a negative vote on the Bonus Plan, it will be terminated. A copy of the Bonus
Plan is attached to this proxy statement as Exhibit B and the description
contained herein is qualified in its entirety by reference to the complete text
of the Bonus Plan. Capitalized terms not defined in the summary shall have the
meaning
39
<PAGE> 41
ascribed to them in the Bonus Plan. The vote of the holders of a majority of the
Company's common stock having voting power present in person or by represented
by proxy at the annual meeting shall be required to approve the Bonus Plan.
DESCRIPTION OF THE BONUS PLAN
The Bonus Plan is designed to provide corporate officers an incentive to
motivate and financially reward them by providing the opportunity to earn a
bonus if certain Targets are met. Certain primary goals of the Bonus Plan are to
(i) attain substantial improvement in Sales, (ii) improve Earnings, (iii)
provide a concrete and understandable linkage between performance, rewards and
share value creation for shareholders and (iv) encourage team work.
For each Year, the Committee will determine the amount of each
Participant's Award by selecting a designated percentage of each Participant's
Base Salary which will be the amount which may be earned as an Award for such
Year if the middle level Targets for the Year are met. For each Year, the
Committee will also determine the applicable Targets. Awards will be determined
based on performance of the company in relation to Earnings Per Share, Sales and
Earnings.
To be entitled to an Award, the Earnings Per Share Target first must be met
or exceeded; and if that has occurred, the Award will be weighted based on Sales
and Earnings as such weighting is determined each year by the Committee. For
fiscal 1999, the Committee has determined that 60% of the Award will be based on
Sales and 40% will be based on Earnings. For each Year the Committee will also
set threshold levels, middle levels and maximum levels within each Target. If
actual results for Sales or Earnings for a Year are between specified Target
levels, the Committee will interpolate the value of any Award on an arithmetic
proportionate basis.
A Participant whose employment is terminated during a Year due to death,
Disability, Retirement or elimination of his position with the company will
receive the pro rata portion of the Award which he would have otherwise received
had he remained in the employ of the company. Unless the Committee otherwise
determines, a Participant whose employment is terminated for any other reason
shall forfeit all interest in his Award.
ADMINISTRATION
The Bonus Plan will be administered by the Committee. The Committee is
authorized and has complete discretion to formulate policies and to establish
rules and regulations for the administration of the Bonus Plan and to set or
establish the Targets. Awards will be paid under the Bonus Plan only with the
approval of the Committee. The Committee can reduce or eliminate the payment of
any Award. The Committee cannot increase the amount of any Award.
40
<PAGE> 42
PARTICIPANTS
The Bonus Plan provides that Key Associates are eligible to participate.
The term Key Associates includes any employee holding the position of chairman,
chief executive officer, president, executive vice president, senior vice
president or vice president. The Committee can also select any other associate
who is an officer of the company or its subsidiaries to participate in the Bonus
Plan. It is impossible at this time to determine who among the eligible
associates may be selected to be participants in the Bonus Plan in the future.
It is expected, however, that these determinations will be made on the basis of
the associate's responsibilities and present and potential contribution to the
success of the company and its subsidiaries as indicated by the Committee's
evaluation of such associate's position. The Bonus Plan will cover only
corporate officers (14 participants) for fiscal 1999.
CHANGE IN CONTROL
Participants in the Bonus Plan are parties to change of control employment
agreements with the company which are effective only upon a change of control of
the company. The Bonus Plan provides that any provision of the plan which would
result in a loss or reduction of an Award will be subject to and superseded by
the provisions of the Change of Control Agreements. For a description of these
agreements see "Employment Agreement, Termination of Employment and Change in
Control Arrangements -- Change of Control Employment Agreements."
NEW PLAN BENEFITS
The following table sets forth the bonus amounts to be received by named
executive officers who are participants in the Bonus Plan and the other
specified groups for the fiscal year ending December 25, 1999, assuming the
Bonus Plan is approved by the shareholders. These amounts have been calculated
assuming that the Earnings Per Share Target has been met for fiscal 1999 and the
middle threshold targets on Sales and Earnings have been met. The following
table is for information purposes only, the company cannot predict whether any
Targets will be met for fiscal 1999 or whether any bonuses will be paid under
the Bonus Plan for fiscal 1999.
<TABLE>
<CAPTION>
BONUS PLAN
NAME AND POSITION DOLLAR VALUE
----------------- ------------
<S> <C>
Mark S. Hansen, Chairman and CEO............................ $ 526,500
William J. Dowd, President and COO.......................... 321,800
E. Stephen Davis, EVP -- Food Distribution.................. 196,200
Executive Group............................................. 1,734,300
Non-Executive Director Group................................ --
Non-Executive Officer Employee Group........................ 336,300
</TABLE>
- ---------------
(1) Non-Executive Directors are not eligible to participate in the Bonus Plan.
41
<PAGE> 43
EFFECTIVE DATE
The effective date of the Bonus Plan is December 27, 1998, upon approval of
the shareholders at this annual meeting.
AMENDMENTS
The Bonus Plan may be amended, suspended or terminated at any time at the
sole discretion of the Committee. The Committee may revise the various rates and
percentages as provided in the plan from time to time with respect to any future
Year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE FLEMING
COMPANIES, INC. CORPORATE OFFICER INCENTIVE PLAN.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the audit and finance committee, the board of
directors has reappointed Deloitte & Touche LLP as independent auditors for 1999
and is requesting ratification by the shareholders. Deloitte & Touche LLP has
audited the consolidated financial statements since 1967.
Services performed by Deloitte & Touche LLP for the 1998 fiscal year
included, among others, the audit of annual financial statements and
consultations concerning various tax and accounting matters. Representatives of
Deloitte & Touche LLP will attend the meeting, have the opportunity to make a
statement if they so desire, and be available to answer questions.
Ratification of the appointment of independent auditors requires the
affirmative vote by the holders of a majority of the shares of common stock
present, or represented, and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors and executive officers, and persons who own more than ten percent of
common stock, to file with the Securities and Exchange Commission and the New
York Stock Exchange initial reports of beneficial ownership and reports of
changes in beneficial ownership of common stock of the company. Such persons are
also required by applicable regulations to furnish the company with copies of
all Section 16(a) forms they file. To the company's knowledge, based
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<PAGE> 44
solely on a review of the copies of such reports furnished to the company and
written representations that no other reports were required to be filed, during
1998 all Section 16(a) filing requirements were met.
SHAREHOLDER PROPOSALS
Any proposals of shareholders intended to be presented at the 2000 annual
meeting must be submitted in writing to the secretary of the company at its
principal executive offices and must be received not later than December 3,
1999, to be considered for inclusion in the proxy statement and form of proxy
relating to the meeting. For any other proposal that a shareholder wishes to
have considered at the 2000 annual meeting, the company must receive written
notice of such proposal during the period beginning February 18, 2000 and ending
March 22, 2000. Proposals which are not received by the dates specified will be
considered untimely. In addition, proposals must comply with the company's
bylaws and the rules and regulations of the Securities and Exchange Commission.
OTHER BUSINESS
The board of directors knows of no business which will be presented for
action at the meeting other than that described in the notice of annual meeting.
If other matters come before the meeting, the proxies will be voted according to
the judgment of the persons named on the proxy card.
It is important that the proxies be returned promptly. Therefore,
shareholders who do not expect to attend the annual meeting in person are
requested to complete and return the proxy card as soon as possible.
By Order of the Board of Directors
David R. Almond
Senior Vice President
General Counsel and Secretary
43
<PAGE> 45
EXHIBIT A
FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
<PAGE> 46
FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I PURPOSE..................................................... A-1
Section 1.1 Purpose..................................................... A-1
Section 1.2 Establishment............................................... A-1
Section 1.3 Shares Subject to the Plan.................................. A-1
ARTICLE II DEFINITIONS................................................. A-1
ARTICLE III ADMINISTRATION.............................................. A-7
Section 3.1 Administration of the Plan; the Committee................... A-7
Section 3.2 Committee to Make Rules and Interpret Plan.................. A-8
ARTICLE IV GRANT OF AWARDS; DIRECTORS' RESTRICTED STOCK
AWARDS; SHARES SUBJECT TO THE PLAN.......................... A-8
Section 4.1 Committee to Grant Awards to Eligible Associates............ A-8
Section 4.2 Directors' Restricted Stock Awards.......................... A-9
ARTICLE V ELIGIBILITY................................................. A-9
ARTICLE VI STOCK OPTIONS............................................... A-10
Section 6.1 Grant of Options............................................ A-10
Section 6.2 Conditions of Options....................................... A-10
ARTICLE VII RESTRICTED STOCK AWARDS..................................... A-11
Section 7.1 Grant of Restricted Stock Awards............................ A-11
Section 7.2 Conditions of Restricted Stock Awards....................... A-12
ARTICLE VIII ISSUANCE OF DIRECTORS' RESTRICTED STOCK..................... A-12
Section 8.1 Issuance and Number of Shares of Restricted Stock........... A-12
Section 8.2 Restricted Stock Held in Escrow; Vesting; Forfeiture........ A-13
(a) Certificates................................................ A-13
(b) Dividends and Voting........................................ A-13
(c) Vesting..................................................... A-13
(d) The Accountant.............................................. A-14
(e) Other Restrictions.......................................... A-14
(f) Forfeiture.................................................. A-14
(g) Securities Laws............................................. A-14
Section 8.3 Escrow Agent................................................ A-14
Section 8.4 Restrictions on Alienation of Benefits...................... A-14
</TABLE>
A-ii
<PAGE> 47
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IX SETTLEMENT OF DIRECTORS' RESTRICTED STOCK ACCOUNTS.......... A-15
Section 9.1 Settlement of Restricted Stock Accounts..................... A-15
Section 9.2 Distribution of Directors' Restricted Stock................. A-15
Section 9.3 Beneficiaries............................................... A-15
ARTICLE X STOCK ADJUSTMENTS........................................... A-15
ARTICLE XI GENERAL..................................................... A-16
Section 11.1 Amendment or Termination of Plan............................ A-16
Section 11.2 Termination of Employment; Termination of Service........... A-16
Section 11.3 Limited Transferability -- Options.......................... A-17
Section 11.4 Withholding Taxes........................................... A-18
Section 11.5 Dividends and Dividend Equivalents -- Awards................ A-18
Section 11.6 Change of Control........................................... A-18
Section 11.7 Amendments to Awards........................................ A-18
Section 11.8 Regulatory Approval and Listings............................ A-18
Section 11.9 Right to Continued Employment............................... A-19
Section 11.10 No Right to Continue as a Director.......................... A-19
Section 11.11 Reliance on Reports......................................... A-19
Section 11.12 Construction................................................ A-19
Section 11.13 Governing Law............................................... A-19
</TABLE>
A-iii
<PAGE> 48
ARTICLE I
PURPOSE
SECTION 1.1 Purpose. This 1999 Stock Incentive Plan (the "Plan") is
established by Fleming Companies, Inc. (the "Company") to create incentives
which are designed to motivate participants ("Eligible Associates" and "Eligible
Directors") to put forth maximum effort toward the success and growth of the
Company and to enable the Company to attract and retain experienced individuals
who by their position, ability and diligence are able to make important
contributions to the Company's success. Toward these objectives, the Plan
provides for the granting of Options and Restricted Stock Awards to Eligible
Associates (the "Stock Incentive Feature") and the issuance of Directors'
Restricted Stock to Eligible Directors in lieu of his Base Compensation (the
"Directors' Stock Feature") subject to the conditions set forth in the Plan.
SECTION 1.2 Establishment. The Stock Incentive Feature is effective as of
November 30, 1998 and for a period of ten years thereafter. The Directors' Stock
Feature shall be effective July 1, 1999 and for a period of five and one-half
years thereafter. The Plan shall continue in effect until all matters relating
to the payment of Awards and the issuance of Directors' Restricted Stock and
administration of the Plan have been settled.
The Plan shall be approved by the holders of a majority of the outstanding
shares of Common Stock, present, or represented, and entitled to vote at a
meeting called for such purpose, which approval must occur within the period
ending twelve months after the date the Plan is adopted by the Board. Pending
such approval by the shareholders, Awards of Options under the Stock Incentive
Feature may be granted to Eligible Associates, but no such Awards may be
exercised prior to receipt of shareholder approval. In the event shareholder
approval is not obtained within such twelve-month period, all such Awards shall
be void. No Directors' Restricted Stock Awards will be made and no Eligible
Director shall receive shares of Directors' Restricted Stock in lieu of his Base
Compensation until after the shareholders shall have approved the Plan.
SECTION 1.3 Shares Subject to the Plan. Subject to the limitations set
forth in the Plan, Awards may be made under this Plan for a total of Two Million
Five Hundred Thousand (2,500,000) shares of Common Stock to Eligible Associates
and grants of Two Hundred Thousand (200,000) shares of Directors' Restricted
Stock to Eligible Directors.
ARTICLE II
DEFINITIONS
SECTION 2.1 "Accountant" means the office of the Company's independent
certified public accountant located in the city where the Company's principal
executive offices are located.
A-1
<PAGE> 49
SECTION 2.2 "Award" means, individually or collectively, any Option or
Restricted Stock Award granted under the Stock Incentive Feature to an Eligible
Associate by the Committee pursuant to such terms, conditions, restrictions,
and/or limitations, if any, as the Committee may establish by the Award
Agreement or otherwise.
SECTION 2.3 "Award Agreement" means any written instrument that
establishes the terms, conditions, restrictions, and/or limitations applicable
to an Award in addition to those established by this Plan and by the Committee's
exercise of its administrative powers.
SECTION 2.4 "Base Compensation" means the annual retainer paid to Eligible
Directors under the Directors' Plan.
SECTION 2.5 "Beneficiary" shall mean that person or persons designated by
an Eligible Director in accordance with Section 9.3 who may be entitled to
receive such Eligible Director's Directors' Restricted Stock in the event of the
death of the Eligible Director.
SECTION 2.6 "Board" means the Board of Directors of the Company.
SECTION 2.7 "Change of Control Event" means each of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more (the "Triggering Percentage") of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"); provided,
however, in the event the "Incumbent Board" (as such term is hereinafter
defined) pursuant to authority granted in any rights agreement to which the
Company is a party (the "Rights Agreement") lowers the acquisition
threshold percentages set forth in such Rights Agreement, the Triggering
Percentage shall be automatically reduced to equal the threshold
percentages set pursuant to authority granted to the board in the Rights
Agreement; and provided, further, however, that the following acquisitions
shall not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (x), (y), and (z) of subsection (c) of this Section 2.7; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, appointment or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
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Board, but excluding, for purposes of this definition, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
share exchange, merger or consolidation or acquisition of assets of another
corporation (a "Business Combination"), in each case, unless, following
such Business Combination, (x) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination will beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction will own the Company
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (y) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) will beneficially own, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (z) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination will
have been members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or, (y) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors will be beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) less than 20% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors will be
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beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation), except to the extent that such Person owned 20% or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities prior to the sale or disposition, and (C) at least a majority of
the members of the board of directors of such corporation will have been
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such sale or other
disposition of assets of the Company.
SECTION 2.8 "Code" means the Internal Revenue Code of 1986, as amended.
References in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
SECTION 2.9 "Committee" shall have the meaning set forth in Section 3.1.
SECTION 2.10 "Common Stock" means the common stock, par value $2.50 per
share, of the Company, and after substitution, such other stock as shall be
substituted therefor as provided in Article X.
SECTION 2.11 "Company" means Fleming Companies, Inc., an Oklahoma
corporation.
SECTION 2.12 "Compensation Committee" means the Compensation and
Organization Committee of the Board.
SECTION 2.13 "Controller" means the controller of the Company duly elected
by the Board.
SECTION 2.14 "Date of Grant" means the date on which the granting of an
Award to an Eligible Associate is authorized by the Committee or such later date
as may be specified by the Committee in such authorization.
SECTION 2.15 "Directors' Plan" means the Amended and Restated Directors'
Compensation and Stock Equivalent Unit Plan adopted by the Board in February
1997.
SECTION 2.16 "Directors' Restricted Stock" means shares of Common Stock
which an Eligible Director has earned as provided in Article VIII of the Plan.
SECTION 2.17 "Directors' Restricted Stock Account" shall mean the account
of an Eligible Director established with the Escrow Agent under the Escrow.
SECTION 2.18 "Directors' Restricted Stock Award" shall mean the issuance
of Directors' Restricted Stock under Article VIII of the Plan.
SECTION 2.19 "Directors' Stock Feature" shall have the meaning set forth
in Section 1.1.
SECTION 2.20 "Eligible Associate" means any key associate of the Company
or a Subsidiary.
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SECTION 2.21 "Eligible Director" means any member of the Board who is also
not an associate of the Company.
SECTION 2.22 "Escrow" means that separate arrangement under which
Directors' Restricted Stock will be held pending distribution to the Eligible
Director on Vesting or as otherwise provided in the Plan.
SECTION 2.23 "Escrow Agent" means the Secretary.
SECTION 2.24 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
SECTION 2.25 "Executive Officer Participants" means Participants who are
subject to the provisions of Section 16 of the Exchange Act.
SECTION 2.26 "Fair Market Value" means (A) during such time as the Common
Stock is listed upon the New York Stock Exchange or other exchanges or the
NASDAQ/National Market System, the average of the highest and lowest sales
prices of the Common Stock as reported by such stock exchange or exchanges or
the NASDAQ/National Market System on the day for which such value is to be
determined, or if no sale of the Common Stock shall have been made on any such
stock exchange or the NASDAQ/National Market System that day, on the next
preceding day on which there was a sale of such Common Stock or (B) during any
such time as the Common Stock is not listed upon an established stock exchange
or the NASDAQ/National Market System, the mean between dealer "bid" and "ask"
prices of the Common Stock in the over-the-counter market on the day for which
such value is to be determined, as reported by the National Association of
Securities Dealers, Inc.
SECTION 2.27 "Fiscal Year" means a year comprised of 13 Periods ending on
the last Saturday in December in each such year.
SECTION 2.28 "GAAP" means Generally Accepted Accounting Principles.
SECTION 2.29 "Incentive Stock Option" means an Option within the meaning
of Section 422 of the Code.
SECTION 2.30 "Net Earnings From Operations" means the net sales of the
Company for the period or duration of the determination, calculated in
accordance with GAAP, as applied by the Company on a consistent basis, minus the
total costs and expenses for such period determined in accordance with GAAP, as
applied by the Company on a consistent basis, excluding extraordinary items of
revenue and expense and excluding revenue and expense items related to strategic
plan implementation.
SECTION 2.31 "Non-Executive Officer Participants" means Participants who
are not subject to the provisions of Section 16 of the Exchange Act.
SECTION 2.32 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
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SECTION 2.33 "Option" means an Award granted under Article VI of the Plan
and includes both Nonqualified Stock Options and Incentive Stock Options to
purchase shares of Common Stock.
SECTION 2.34 "Participant" means an Eligible Associate of the Company or a
Subsidiary to whom an Award has been granted by the Committee under the Stock
Incentive Feature or an Eligible Director who is entitled to receive Directors'
Restricted Stock under the Directors' Stock Feature.
SECTION 2.35 "Period" means any of 13 periods in any Fiscal Year, each
containing four weeks, as established by the Company for accounting purposes.
SECTION 2.36 "Plan" means Fleming Companies, Inc. 1999 Stock Incentive
Plan.
SECTION 2.37 "Regular Award Committee" means a committee comprised of the
Company's chief executive officer and the Company's senior executive officer for
human resources.
SECTION 2.38 "Restricted Stock Award" means an Award granted to an
Eligible Associate under Article VII of the Plan.
SECTION 2.39 "Secretary" means the corporate secretary of the Company duly
elected by the Board.
SECTION 2.40 "Stock Incentive Feature" shall have the meaning set forth in
Section 1.1.
SECTION 2.41 "Subsidiary" shall have the same meaning set forth in Section
424 of the Code.
SECTION 2.42 "Termination of Service" means termination of service as a
Director under any of the following circumstances:
(1) Where the Eligible Director voluntarily resigns or retires;
(2) Where the Eligible Director is not re-elected (or elected in the case
of an appointed director) to the Board by the shareholders; or
(3) Where the Eligible Director dies or is unable to serve as a Director by
reason of disability.
SECTION 2.43 "Vest" or "Vesting" or "Vested" shall have the meaning set
forth in Section 8.2(c).
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ARTICLE III
ADMINISTRATION
SECTION 3.1 Administration of the Plan; the Committee. For purposes of
administration, the Stock Incentive Feature shall be deemed to consist of two
separate stock incentive plans, a "Non-Executive Officer Participant Plan" which
is limited to Non-Executive Officer Participants and an "Executive Officer
Participant Plan" which is limited to Executive Officer Participants. Except for
administration and the category of Eligible Associates eligible to receive
Awards under the Stock Incentive Feature, the terms of the Non-Executive Officer
Participant Plan and the Executive Officer Participant Plan are identical.
The Non-Executive Officer Participant Plan shall be administered by both
the Regular Award Committee and the Compensation Committee. The Regular Award
Committee may only act within guidelines established by the Compensation
Committee. The Executive Officer Participant Plan and the Directors' Stock
Feature shall be administered by the Compensation Committee. With respect to the
Non-Executive Officer Participant Plan and to decisions relating to
Non-Executive Officer Participants, including the grant of Awards, the term
"Committee" shall mean both the Regular Award Committee and the Compensation
Committee; and with respect to the Executive Officer Participant Plan and to
decisions relating to the Executive Officer Participants, including the granting
of Awards, and with respect to any decisions relating to the administration of
the Directors' Stock Feature, the term "Committee" shall mean only the
Compensation Committee.
Unless otherwise provided in the by-laws of the Company or the resolutions
adopted from time to time by the Board establishing the Committee, the Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board. The
Committee shall hold meetings at such times and places as it may determine. A
majority of the members of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is present
or acts reduced to or approved in writing by a majority of the members of the
Committee shall be the valid acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
(a) Select the Eligible Associates to participate in the Stock
Incentive Feature and determine the eligibility of Directors to be Eligible
Directors and to participate in the Directors' Stock Feature.
(b) Determine the time or times when Awards will be made.
(c) Determine the form of an Award, whether an Option or a Restricted
Stock Award, the number of shares of Common Stock subject to the Award, all
the terms, conditions (including performance requirements), restrictions
and/or limitations, if any, of an Award, including the time and conditions
of exercise or vesting, and the terms of any Award Agreement, which may
include the waiver or amendment of prior terms and
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conditions or acceleration or early vesting or payment of an Award under
certain circumstances determined by the Committee.
(d) Determine whether Awards will be granted singly or in combination.
(e) Accelerate the vesting, exercise or payment of an Award and the
award of Directors' Restricted Stock or the performance period of an Award
when such action or actions would be in the best interest of the Company.
(f) Take any and all other action it deems necessary or advisable for
the proper operation or administration of the Plan.
SECTION 3.2 Committee to Make Rules and Interpret Plan. The Committee in
its sole discretion shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any Awards or the issuance of Directors' Restricted Stock and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties.
ARTICLE IV
GRANT OF AWARDS; DIRECTORS' RESTRICTED STOCK AWARDS;
SHARES SUBJECT TO THE PLAN
SECTION 4.1 Committee to Grant Awards to Eligible Associates. The
Committee may, from time to time, grant Awards to one or more Eligible
Associates, provided, however, that:
(a) Subject to Article X, the aggregate number of shares of Common
Stock made subject to the Award of Options to any Eligible Associate in any
Fiscal Year of the Company may not exceed 275,000.
(b) Subject to Article X, in no event shall more than 300,000 shares
of Common Stock subject to the Plan be awarded to Eligible Associates as
Restricted Stock Awards (the "Restricted Stock Award Limit").
(c) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of
shares of Common Stock or are exchanged in the Committee's discretion for
Awards not involving Common Stock, shall be available again for grant under
the Plan and shall not be counted against the Restricted Stock Award Limit.
(d) Common Stock delivered by the Company in payment of any Award
under the Plan may be authorized and unissued Common Stock or Common Stock
held in the treasury of the Company.
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(e) The Committee shall, in its sole discretion, determine the manner
in which fractional shares arising under this Plan shall be treated.
(f) The Compensation Committee shall from time to time establish
guidelines for the Regular Award Committee regarding the grant of Awards to
Eligible Associates.
(g) Separate certificates representing Common Stock to be delivered to
an Eligible Associate Participant upon the exercise of any Option will be
issued to such Participant.
SECTION 4.2 Directors' Restricted Stock Awards. The issuance of
Director's Restricted Stock to Eligible Directors under Article VIII shall be
automatic, provided, however, that:
(a) Subject to Article X, in no event shall more than 200,000 shares
of Common Stock subject to the Plan be issued to Eligible Director
Participants as Directors' Restricted Stock.
(b) Any Directors' Restricted Stock Award which is forfeited for any
reason including failure to Vest shall be available again for grant under
the Plan as Directors' Restricted Stock.
(c) Common Stock delivered by the Company as Directors' Restricted
Stock may be authorized and unissued Common Stock or Common Stock held in
the treasury of the Company.
(d) Separate certificates representing Directors' Restricted Stock
shall be delivered to the Eligible Directors upon Vesting.
ARTICLE V
ELIGIBILITY
Subject to the provisions of the Plan, the Committee shall, from time to
time, select from the Eligible Associates those to whom Awards shall be granted
and shall determine the type or types of Awards to be made and shall establish
in the related Award Agreements the terms, conditions, restrictions and/or
limitations, if any, applicable to the Awards in addition to those set forth in
the Plan and the administrative rules and regulations issued by the Committee.
Each Eligible Director shall be entitled to receive Directors' Restricted
Stock under Article VIII of the Plan. If an Eligible Director subsequently
becomes an associate (employee) of the Company (or any Subsidiary), but does not
incur a Termination of Service, such Director shall (a) continue to be a
Participant for Directors' Restricted Stock previously issued and (b) cease
eligibility with respect to all future issuance of Directors' Restricted Stock.
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ARTICLE VI
STOCK OPTIONS
SECTION 6.1 Grant of Options. The Committee may, from time to time,
subject to the provisions of the Plan and such other terms and conditions as it
may determine, grant Options to Eligible Associates. These Options may be
Incentive Stock Options or Nonqualified Stock Options, or a combination of both.
Each grant of an Option shall be evidenced by an Award Agreement executed by the
Company and the Eligible Associate Participant, and shall contain such terms and
conditions and be in such form as the Committee may from time to time approve,
subject to the requirements of Section 6.2.
SECTION 6.2 Conditions of Options. Each Option so granted shall be
subject to the following conditions:
(a) Exercise Price. As limited by Section 6.2(e) below, each Option
shall state the exercise price which shall be set by the Committee at the
Date of Grant; provided, however, no Option shall be granted at an exercise
price which is less than the Fair Market Value of the Common Stock on the
Date of Grant.
(b) Form of Payment. The exercise price of an Option may be paid (i)
in cash or by check, bank draft or money order payable to the order of the
Company; (ii) by delivering shares of Common Stock having a Fair Market
Value on the date of payment equal to the amount of the exercise price; or
(iii) a combination of the foregoing. In addition to the foregoing, any
Option granted under the Plan may be exercised by a broker-dealer acting on
behalf of an Eligible Associate Participant if (A) the broker-dealer has
received from the Eligible Associate Participant or the Company a notice
evidencing the exercise of such Option and instructions signed by the
Eligible Associate Participant requesting the Company to deliver the shares
of Common Stock subject to such Option to the broker-dealer on behalf of
the Eligible Associate Participant and specifying the account into which
such shares should be deposited, (B) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise or,
in the case of an Incentive Stock Option, upon the disposition of such
shares and (C) the broker-dealer and the Eligible Associate Participant
have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR,
Part 220 and any successor rules and regulations applicable to such
exercise.
(c) Exercise of Options. Options granted under the Plan shall be
exercisable, in whole or in such installments and at such times, and shall
expire at such time, as shall be provided by the Committee in the Award
Agreement. Exercise of an Option shall be by written notice to the
Secretary two business days in advance of such exercise stating the
election to exercise in the form and manner determined by the Committee.
Every share of Common Stock acquired through the exercise of an Option
shall be deemed to be fully paid at the time of exercise and payment of the
exercise price.
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(d) Other Terms and Conditions. Among other conditions that may be
imposed by the Committee, if deemed appropriate, are those relating to (i)
the period or periods and the conditions of exercisability of any Option;
(ii) the minimum periods during which Participants must be employed by the
Company or its Subsidiaries, or must hold Options before they may be
exercised; (iii) the minimum periods during which shares acquired upon
exercise must be held before sale or transfer shall be permitted; (iv)
conditions under which such Options or shares may be subject to forfeiture;
(v) the frequency of exercise or the minimum or maximum number of shares
that may be acquired at any one time and (vi) the achievement by the
Company of specified performance criteria.
(e) Special Restrictions Relating to Incentive Stock Options. Options
issued in the form of Incentive Stock Options shall, in addition to being
subject to all applicable terms, conditions, restrictions and/or
limitations established by the Committee, comply with the requirements of
Section 422 of the Code, including, without limitation, the requirement
that the exercise price of an Incentive Stock Option not be less than 100%
of the Fair Market Value of the Common Stock on the Date of Grant, the
requirement that each Incentive Stock Option, unless sooner exercised,
terminated or cancelled, expire no later than 10 years from its Date of
Grant, and the requirement that the aggregate Fair Market Value (determined
on the Date of Grant) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant during
any calendar year (under this Plan or any other plan of the Company or any
Subsidiary) not exceed $100,000.
(f) Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
(g) Shareholder Rights. No Participant shall have a right as a
shareholder with respect to any share of Common Stock subject to an Option
prior to purchase of such shares of Common Stock by exercise of the Option.
ARTICLE VII
RESTRICTED STOCK AWARDS
SECTION 7.1 Grant of Restricted Stock Awards. The Committee may, from
time to time, subject to the provisions of the Plan and such other terms and
conditions as it may determine, grant a Restricted Stock Award to any Eligible
Associate. Restricted Stock Awards shall be awarded in such number and at such
times during the term of the Plan as the Committee shall determine. Each
Restricted Stock Award may be evidenced in such manner as the Committee deems
appropriate, including, without limitation, a book-entry registration or
issuance of a stock certificate or certificates, and by an Award Agreement
setting forth the terms of such Restricted Stock Award.
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SECTION 7.2 Conditions of Restricted Stock Awards. The grant of a
Restricted Stock Award shall be subject to the following:
(a) Restriction Period. In addition to any vesting conditions
determined by the Committee, including, but not by way of limitation, the
achievement by the Company of specified performance criteria, vesting of
each Restricted Stock Award shall require the holder to remain in the
employment of the Company or a Subsidiary for a prescribed period (a
"Restriction Period"). The Committee shall determine the Restriction Period
or Periods which shall apply to the shares of Common Stock covered by each
Restricted Stock Award or portion thereof; provided, however, all
Restricted Stock Awards shall have a minimum Restriction Period of at least
one year from the Date of Grant. At the end of the Restriction Period,
assuming the fulfillment of any other specified vesting conditions, the
restrictions imposed by the Committee shall lapse with respect to the
shares of Common Stock covered by the Restricted Stock Award or portion
thereof. The Committee may, in its sole discretion, modify or accelerate
the vesting of a Restricted Stock Award under such circumstances as it
deems appropriate.
(b) Restrictions. The holder of a Restricted Stock Award may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the
shares of Common Stock represented by the Restricted Stock Award during the
applicable Restriction Period. The Committee shall impose such other
restrictions and conditions on any shares of Common Stock covered by a
Restricted Stock Award as it may deem advisable including, without
limitation, restrictions under applicable Federal or state securities laws,
and may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions.
(c) Rights as Shareholders. During any Restriction Period, the
Committee may, in its discretion, grant to the holder of a Restricted Stock
Award all or any of the rights of a shareholder with respect to the shares,
including, but not by way of limitation, the right to vote such shares and
to receive dividends. If any dividends or other distributions are paid in
shares of Common Stock, all such shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
ARTICLE VIII
ISSUANCE OF DIRECTORS' RESTRICTED STOCK
SECTION 8.1 Issuance and Number of Shares of Restricted Stock. Each
Eligible Director shall be awarded annually, in lieu of the cash annual retainer
and the stock equivalent units payable for services to be rendered by him as a
Director of the Company under the Directors' Plan, shares of Company Common
Stock with the attributes and restrictions as provided in the Plan (the
"Directors' Restricted Stock"). There shall be credited to the Directors'
Restricted Stock Account (i) on or about July 1, 1999 1,750 shares of Directors'
Restricted Stock for the year 1999 and (ii) 3,500 shares of Directors'
Restricted Stock on or
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about the 15th day of March of each calendar year for a period of 5 years
thereafter. Persons who become Eligible Directors during the term of the
Directors' Stock Feature by appointment of the Board or election by the
shareholders shall receive an award of their pro rata share of Directors'
Restricted Stock on or about the 15th day of March next succeeding such
appointment or election, determined by multiplying 3,500 by a fraction the
numerator of which is the number of days remaining in the year of appointment or
election and the denominator of which is 365 except for the year 1999. For the
year 1999, persons who become Eligible Directors prior to July 1, 1999 shall be
an Eligible Director for all purposes under the Directors Stock Feature. Persons
who become Eligible Directors on or after July 1, 1999 and prior to January 1,
2000 shall receive an award of their pro rata share of Directors' Restricted
Stock determined by multiplying 1,750 by a fraction the numerator of which is
the number of days remaining in the year 1999 from such appointment or election,
and the denominator of which is 182. Each award of Directors' Restricted Stock
shall contain such terms, restrictions, attributes and conditions as set forth
in Section 8.2.
SECTION 8.2 Restricted Stock Held in Escrow; Vesting; Forfeiture. The
Committee shall cause a certificate to be delivered to the Escrow Agent
(appointed pursuant to Section 8.3 below) registered in the name of the Eligible
Director for the total number of shares of Directors' Restricted Stock
represented by his award in accordance with the following terms, attributes and
conditions:
(a) Certificates. Any such certificate shall be legended to indicate
that the shares of Directors' Restricted Stock represented by such
certificate are subject to the terms and conditions of the Plan.
(b) Dividends and Voting. All Directors' Restricted Stock held by the
Escrow Agent shall constitute issued and outstanding shares of Common Stock
of the Company for all corporate purposes, and the Eligible Director shall
receive all cash dividends thereon and shall have the right to vote such
shares provided that the right to receive such dividends and to vote such
shares shall forthwith terminate with respect to unvested shares of
Directors' Restricted Stock of any Eligible Director whose grant has been
forfeited as provided in this Plan.
(c) Vesting. With respect to each Eligible Director, shares of
Directors' Restricted Stock held by the Escrow Agent shall fully vest and
be nonforfeitable on the date which is five years from the date of the
award if the Company's Net Earnings From Operations for the 13 full Periods
preceding the date of such determination exceed the Company's Net Earnings
From Operations for Fiscal Year 1998 by at least 10%, such date being
herein sometimes referred to as the date the shares of Directors'
Restricted Stock "Vest" or "Vesting" occurs or shares of Directors'
Restricted Stock become "Vested." Provided, however, with the consent of
the Committee following request by an Eligible Director, the Vesting of
shares of Directors' Restricted Stock may be accelerated in whole or in
part to the date of an Eligible Director's Termination of Service if the
Company's Net Earnings From Operations for the 13 full Periods preceding
his Termination of Service exceed the Company's Net Earnings From
Operations for Fiscal Year 1998 by at least 10%. As such
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Directors' Restricted Stock shall Vest in accordance with this Plan, the
Escrow Agent shall deliver to such Participant or his respective
Beneficiary (in the case of the Eligible Director's death) certificates
representing such Vested shares of Directors' Restricted Stock as provided
in Section 9.2. As a condition precedent to delivering a certificate
representing shares of Directors' Restricted Stock to the Escrow Agent, the
Committee may require each Eligible Director to deliver to the Escrow Agent
a duly executed irrevocable stock power or powers (in blank) covering the
Directors' Restricted Stock represented by such certificate.
(d) The Accountant. The Controller of the Company shall determine the
Net Earnings From Operations whenever the occasion for such determination
is required. Any Eligible Director, however, may request the Committee to
engage the Accountant to verify the Controller's determination whose
verification or independent determination, as the case may be, shall be
conclusive and binding on the Company, the Committee and the Eligible
Directors.
(e) Other Restrictions. In addition to Vesting, while Directors'
Restricted Stock is held in Escrow and until such Directors' Restricted
Stock has become fully Vested, it shall also be subject to the restrictions
set forth in Section 8.4 of the Plan.
(f) Forfeiture. Shares of Directors' Restricted Stock which are not
Vested in accordance with Section 8.2(c) shall be forfeited and will again
become subject to the terms of the Directors' Stock Feature. Certificates
representing unvested shares of Directors' Restricted Stock held by the
Escrow Agent for the benefit of any Eligible Directors whose grant (to the
extent then unvested) has been forfeited shall be returned (together with
the related stock power) by the Escrow Agent to the Company.
(g) Securities Laws. The Company shall have no liability to issue any
Directors' Restricted Stock hereunder unless such Directors' Restricted
Stock and issuance thereof comply with all applicable federal or state
securities laws and all other applicable laws.
SECTION 8.3 Escrow Agent. The Secretary is hereby designated as the
Escrow Agent for the Escrow. The Committee shall have the power to remove the
Secretary from the position of Escrow Agent and to appoint a substitute or
successor Escrow Agent. The out-of-pocket expenses of the Escrow Agent shall be
paid by the Company subject to approval of the Committee. The Escrow Agent shall
not be entitled to any fees or commission for such services. The Escrow Agent
shall not incur liability for any action taken pursuant to the Plan or any
issuance of Directors' Restricted Stock made thereunder so long as the Escrow
Agent acts in good faith in accordance with the instructions of the Committee.
The Escrow Agent shall disburse all cash dividends he receives to the Eligible
Directors and shall hold the Directors' Restricted Stock until the stock has
Vested and he is directed by the Committee to deliver such certificates to the
Eligible Director.
SECTION 8.4 Restrictions on Alienation of Benefits. Directors' Restricted
Stock Awards shall not be subject in any manner to garnishment, attachment,
anticipation, alienation, sale, transfer, assignment, gift, pledge, encumbrance,
disposition, hypothecation,
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levy, execution or the claims of creditors, either voluntarily or involuntarily,
as long as such award has not vested. Any attempt to so garnish, attach,
anticipate, alienate, sell, transfer, assign, gift, pledge, encumber, dispose,
hypothecate, levy or execute on the same such Directors' Restricted Stock shall
be null and void, and neither shall such benefits or beneficial interests be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person to whom such benefits or funds are payable.
ARTICLE IX
SETTLEMENT OF DIRECTORS' RESTRICTED STOCK ACCOUNTS
SECTION 9.1 Settlement of Restricted Stock Accounts. When an Eligible
Director's Directors' Restricted Stock is Vested, the Company will settle an
Eligible Directors' Restricted Stock Account in the manner described in Section
9.2 as soon as administratively feasible.
SECTION 9.2 Distribution of Directors' Restricted Stock. Each Eligible
Director shall specify at the time he becomes an Eligible Director (or in the
case of the current Eligible Directors on or prior to July 1, 1999) the name and
address of his Beneficiary as required by Section 9.3, which may be changed by
the Eligible Director upon notice to the Committee. Upon Vesting of any shares
of Directors' Restricted Stock and upon direction from the Committee, the Escrow
Agent shall cause any restrictive legend to be removed from the certificates of
Vested Directors' Restricted Stock and new certificates issued in accordance
with federal and state securities laws to the Eligible Director (or his
Beneficiary).
SECTION 9.3 Beneficiaries. Each Eligible Director may designate, on a
form provided by the Committee, one or more Beneficiaries to receive his shares
of Directors' Restricted Stock described in Section 8.1 in the event of such
Eligible Director's death. The Company may rely upon the beneficiary designation
last filed with the Committee, provided that such form was executed by the
Eligible Director or his legal representative and filed with the Committee prior
to the Eligible Director's death.
ARTICLE X
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, stock
split, combination of shares or otherwise), or if the number of such shares of
Common Stock shall be increased through the payment of a stock dividend, or a
dividend on the shares of Common Stock or rights or warrants to purchase
securities of the Company shall be made, then there shall be substituted for or
added to each share available under and subject to the Plan, and each share
theretofore appropriated or thereafter subject or which may become subject to
any Award or any Directors' Restricted
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Stock Award under the Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock shall be so changed
or for which each such share shall be exchanged or to which each such share
shall be entitled, as the case may be, on a fair and equivalent basis in
accordance with the applicable provisions of Section 424 of the Code; provided,
however, with respect to Options, in no such event will such adjustment result
in a modification of any Option as defined in Section 424(h) of the Code. In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock, or any stock or other securities into which the Common
Stock shall have been changed or for which it shall have been exchanged, then if
the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the shares available under and subject to
the Plan, or in any Award, or any Directors' Restricted Stock Award theretofore
granted or which may be granted under the Plan, such adjustments shall be made
in accordance with such determination, except that no adjustment of the number
of shares of Common Stock available under the Plan or to which any Award or any
Directors' Restricted Stock Award relates that would otherwise be required shall
be made unless and until such adjustment either by itself or with other
adjustments not previously made would require an increase or decrease of at
least 1% in the number of shares of Common Stock available under the Plan or to
which any Award or any Directors' Restricted Stock Award relates immediately
prior to the making of such adjustment (the "Minimum Adjustment"). Any
adjustment representing a change of less than such minimum amount shall be
carried forward and made as soon as such adjustment together with other
adjustments required by this Article X and not previously made would result in a
Minimum Adjustment. Notwithstanding the foregoing, any adjustment required by
this Article X which otherwise would not result in a Minimum Adjustment shall be
made with respect to shares of Common Stock relating to any Award or any
Directors' Restricted Stock Award immediately prior to exercise, payment or
settlement of such Award.
No fractional shares of Common Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share.
ARTICLE XI
GENERAL
SECTION 11.1 Amendment or Termination of Plan. The Board may alter,
suspend or terminate the Plan at any time. In addition, the Board may, from time
to time, amend the Plan in any manner, but may not without shareholder approval
adopt any amendment which would increase the aggregate number of shares of
Common Stock available under the Plan (except by operation of Article X) or
materially modify the requirements as to eligibility of Eligible Associates or
Eligible Directors for participation in the Plan.
SECTION 11.2 Termination of Employment; Termination of Service. If an
Eligible Associate's employment with the Company or a Subsidiary terminates for
a reason other than
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death, disability, retirement, or any approved reason, all unexercised,
unearned, and/or unpaid Awards, including, but not by way of limitation, Awards
earned, but not yet paid, all unpaid dividends and dividend equivalents, and all
interest, if any, accrued on the foregoing shall be cancelled or forfeited, as
the case may be, unless the Eligible Associate's Award Agreement provides
otherwise. The Committee shall (i) determine what events constitute disability,
retirement, or termination for an approved reason for purposes of the Plan, and
(ii) determine the treatment of a Participant under the Plan in the event of his
or her death, disability, retirement, or termination for an approved reason. The
Committee shall also determine the method, if any, for accelerating the vesting
or exercisability of any Options, or providing for the exercise of any
unexercised Options in the event of an Eligible Associate's death, disability,
retirement, or termination for an approved reason. In the event an Eligible
Associate's employment is terminated due to retirement in accordance with the
Company's retirement policies, unless the Eligible Associate's Award Agreement
provides otherwise, the Eligible Associate shall have a period of three years
following his date of retirement to exercise any Nonqualified Stock Options
which are otherwise exercisable on his date of retirement.
In the event of a Termination of Service by an Eligible Director, the
provisions of Section 8.2 of the Plan shall control. The Committee shall
determine in its sole discretion when an Eligible Director has voluntarily
resigned or retired or is unable to serve as a Director by reason of disability.
SECTION 11.3 Limited Transferability -- Options. The Committee may, in
its discretion, authorize all or a portion of the Nonqualified Stock Options to
be granted under this Plan to be on terms which permit transfer by the
Participant to (i) the ex-spouse of the Participant pursuant to the terms of a
domestic relations order, (ii) the spouse, children or grandchildren of the
Participant ("Immediate Family Members"), (iii) a trust or trusts for the
exclusive benefit of such immediate Family Members, or (iv) a partnership in
which such Immediate Family Members are the only partners. In addition (x) there
may be no consideration for any such transfer, (y) the stock option agreement
pursuant to which such Nonqualified Stock Options are granted must be approved
by the Committee, and must expressly provide for transferability in a manner
consistent with this paragraph, and (z) subsequent transfers of transferred
Nonqualified Stock Options shall be prohibited except as set forth below in this
Section 11.3. Following transfer, any such Nonqualified Stock Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 11.2 hereof
the term "Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Section 11.2 hereof shall continue to be applied
with respect to the original Participant, following which the Nonqualified Stock
Options shall be exercisable by the transferee only to the extent, and for the
periods specified in Section 11.2 hereof. No transfer pursuant to this Section
11.3 shall be effective to bind the Company unless the Company shall have been
furnished with written notice of such transfer together with such other
documents regarding the transfer as the Committee shall request. In addition,
subject to the foregoing provisions of this Section 11.3, Awards shall be
transferable only by will or the laws of descent and distribution; however, no
such transfer of an Award by the Participant shall be effective to
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bind the Company unless the Company shall have been furnished with written
notice of such transfer and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee of the terms and conditions of
such Award.
SECTION 11.4 Withholding Taxes. Unless otherwise paid by the Participant,
the Company shall be entitled to deduct from any payment under the Plan,
regardless of the form of such payment, the amount of all applicable income and
employment taxes required by law to be withheld with respect to such payment or
may require the Participant to pay to it such tax prior to and as a condition of
the making of such payment. In accordance with any applicable administrative
guidelines it establishes, the Committee may allow a Participant or an Eligible
Director to pay the amount of taxes required by law to be withheld from an Award
or Directors' Restricted Stock Award by (i) directing the Company to withhold
from any payment of the Award or Directors' Restricted Stock Award a number of
shares of Common Stock having a Fair Market Value of the date of payment equal
to the amount of the required withholding taxes or (ii) delivering to the
Company previously owned shares of Common Stock having a Fair Market Value on
the date of payment equal to the amount of the required withholding taxes.
SECTION 11.5 Dividends and Dividend Equivalents -- Awards. The Committee
may choose, at the time of the grant of any Award or any time thereafter up to
the time of payment of such Award, to include as part of such Award an
entitlement to receive dividends or dividend equivalents subject to such terms,
conditions, restrictions, and/or limitations, if any, as the Committee may
establish. Dividends and dividend equivalents granted hereunder shall be paid in
such form and manner (i.e., lump sum or installments), and at such time as the
Committee shall determine. All dividends or dividend equivalents which are not
paid currently may, at the Committee's discretion, accrue interest.
SECTION 11.6 Change of Control. Awards granted under the Plan to any
Eligible Associate may, in the discretion of the Committee, provide that such
Awards shall be immediately vested, fully earned and exercisable upon the
occurrence of a Change of Control Event. Directors' Restricted Stock Awards
shall immediately vest upon the occurrence of a Change of Control Event without
the action or intervention of the Committee.
SECTION 11.7 Amendments to Awards. The Committee may at any time
unilaterally amend the terms of any Award Agreement, whether or not presently
exercisable or vested, to the extent it deems appropriate; provided, however,
that any such amendment which is adverse to the Participant shall require the
Participant's consent.
SECTION 11.8 Regulatory Approval and Listings. The Company shall use its
best efforts to file with the Securities and Exchange Commission as soon as
practicable following approval by the shareholders of the Company of the Plan as
provided in Section 1.2 of the Plan, and keep continuously effectively, a
Registration Statement on Form S-8 with respect to shares of Common Stock
subject to Awards and Directors' Restricted Stock Awards
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hereunder. Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue shares of Common Stock under this Plan
prior to:
(a) the obtaining of any approval from, or satisfaction of any waiting
period or other condition imposed by, any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or
advisable;
(b) the admission of such shares to listing on the stock exchange on
which the Common Stock may be listed; and
(c) the completion of any registration or other qualification of such
shares under any state or Federal law or ruling of any governmental body
which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
SECTION 11.9 Right to Continued Employment. Participation in the Plan
shall not give any Eligible Associate any right to remain in the employ of the
Company or any Subsidiary. The Company or, in the case of employment with a
Subsidiary, the Subsidiary reserves the right to terminate any Eligible
Associate at any time. Further, the adoption of this Plan shall not be deemed to
give any Eligible Associate or any other individual any right to be selected as
a Participant or to be granted an Award.
SECTION 11.10 No Right to Continue as a Director. Nothing contained in
this Plan will confer upon an Eligible Director any right to continue to serve
as a Director.
SECTION 11.11 Reliance on Reports. Each member of the Committee and each
member of the Board shall be fully justified in relying or acting in good faith
upon any report made by the independent public accountants of the Company and
its Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself. In no event shall any person
who is or shall have been a member of the Committee or of the Board be liable
for any determination made or other action taken or any omission to act in
reliance upon any such report or information or for any action taken, including
the furnishing of information, or failure to act, if in good faith.
SECTION 11.12 Construction. Masculine pronouns and other words of
masculine gender shall refer to both men and women. The titles and headings of
the sections in the Plan are for the convenience of reference only, and in the
event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.
SECTION 11.13 Governing Law. The Plan shall be governed by and construed
in accordance with the laws of the State of Oklahoma except as superseded by
applicable Federal law.
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EXHIBIT B
FLEMING COMPANIES, INC.
CORPORATE OFFICER INCENTIVE PLAN
(Adopted January 19, 1999)
<PAGE> 68
FLEMING COMPANIES, INC.
CORPORATE OFFICER INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I Name and Purpose of Plan.................................... B-1
1.1 Name of Plan........................................... B-1
1.2 Purpose................................................ B-1
ARTICLE II Definitions and Construction................................ B-1
2.1 Definitions............................................ B-1
2.2 Construction........................................... B-3
ARTICLE III Participation............................................... B-3
3.1 Selection for Participation............................ B-3
3.2 Relationship to Change of Control Agreements........... B-4
ARTICLE IV Determination of Awards..................................... B-4
4.1 Determination.......................................... B-4
4.2 Committee to Establish Targets......................... B-4
ARTICLE V Payment of Awards........................................... B-5
5.1 Date of Payment of Awards.............................. B-5
5.2 Certain Terminations of Employment..................... B-5
5.3 Forfeiture, Reduction and Elimination of Awards........ B-5
5.4 Awards Exceeding IRS Limits............................ B-5
ARTICLE VI General Benefit Provisions.................................. B-6
6.1 No Trust............................................... B-6
6.2 Withholding for Income and Employment Taxes............ B-6
6.3 No Interest on Awards.................................. B-6
6.4 Payments by the Company or Subsidiary.................. B-6
6.5 Payment in Event of Death.............................. B-6
6.6 Restriction on Alienation of Awards.................... B-6
6.7 Expenses............................................... B-7
6.8 No Prior Right or Offer................................ B-7
6.9 No Continued Employment................................ B-7
6.10 No Vested Rights....................................... B-7
6.11 No Part of Other Benefits.............................. B-7
6.12 Other Plans............................................ B-7
ARTICLE VII Provisions Relating to Participants......................... B-7
7.1 Information Required of Participants................... B-7
7.2 Benefits Payable to Incompetents....................... B-7
</TABLE>
B-i
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VIII Administration.............................................. B-8
8.1 The Committee Shall Administer the Plan................ B-8
8.2 Claims Procedure....................................... B-8
8.3 Review Procedure....................................... B-8
8.4 Records and Reports.................................... B-8
8.5 Rules and Decisions.................................... B-8
ARTICLE IX Amendment and Termination................................... B-9
9.1 Right to Amend Plan.................................... B-9
9.2 Right to Terminate Plan................................ B-9
ARTICLE X Miscellaneous Provisions.................................... B-9
10.1 Articles and Section Titles and Headings.............. B-9
10.2 Laws of Oklahoma to Govern............................ B-9
10.3 Effective Date of Plan; Shareholder Approval.......... B-9
</TABLE>
B-ii
<PAGE> 70
FLEMING COMPANIES, INC.
CORPORATE OFFICER INCENTIVE PLAN
FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the Fleming
Companies, Inc. Corporate Officer Incentive Plan upon the following terms and
conditions:
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be hereafter known as the FLEMING
COMPANIES, INC. CORPORATE OFFICER INCENTIVE PLAN.
1.2 Purpose. The purpose of the Plan is to provide the Key Associates who
are selected to be Participants under the Plan an incentive to motivate and
financially reward such individuals by providing the opportunity to earn a bonus
if certain Targets are met. The general objective of the Plan is to establish
intense focus upon those performance criteria which are most critical to the
Company's success in 1999 and thereafter. Certain primary goals of the Plan are
to (i) attain substantial improvement in Sales, (ii) improve Earnings, (iii)
provide a concrete and understandable linkage between performance, rewards and
share value creation for the Company's stockholders, and (iv) encourage team
work. The Plan is not an "employee benefit plan" under the Employee Retirement
Security Act of 1974, as amended.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Where the following capitalized words and phrases appear
in this instrument, they shall have the respective meanings set forth below
unless a different context is clearly expressed herein.
(a) Anniversary Date: The words "Anniversary Date" shall mean the
last Saturday of December which is end of each Year of the Company.
(b) Award: The word "Award" shall mean, with respect to any
Participant, the amount of bonus calculated in accordance with Section 4.1
hereof.
(c) Beneficiary: The word "Beneficiary" shall mean that person
designated by the Participant pursuant to Section 6.5 hereof.
(d) Base Salary: The words "Base Salary" shall mean the Participant's
base salary as determined by the Committee for each Year of the Plan
adjusted for salary merit increases or any salary decreases occurring
during such Year.
(e) Board: The word "Board" shall mean the Board of Directors of the
Company.
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(f) Code: The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(g) Committee: The word "Committee" shall mean the Compensation and
Organization Committee appointed by the Board which in accordance with
Article VIII herein will administer the Plan.
(h) Company: The word "Company" shall mean Fleming Companies, Inc.,
or its successor.
(i) Disability: The word "Disability" shall have the meaning set
forth in the Company's Long Term Disability Plan.
(j) Earnings: The word "Earnings" shall mean, for the Year of
determination of an Award, the consolidated gross revenues of the Company
(excluding Extraordinary Revenue Items) computed in accordance with GAAP,
consistently applied, from which shall be deducted an amount for such
period equal to the aggregate of all consolidated expenses and other
charges for such period (excluding Extraordinary Charge Items) and income
taxes for such period computed in accordance with GAAP, consistently
applied.
(k) Earnings Per Share: The words "Earnings Per Share" shall mean,
for the Year of determination of an Award, Earnings divided by the weighted
average shares outstanding for a fully diluted earnings per share
calculation as determined in accordance with GAAP consistently applied.
(l) Effective Date: The words "Effective Date" shall mean December
27, 1998.
(m) Employer: The word "Employer" shall mean the Company or any
Subsidiary.
(n) Extraordinary Charge Items: The words "Extraordinary Charge
Items" shall mean for the Year of determination of an Award: (i) expense
items and other charges as determined extraordinary in accordance with
GAAP, consistently applied, as shall appear on the consolidated earnings
statements of the Company for such Year; and (ii) expense items and other
charges the Committee considers non-operating and by nature unusual or
infrequent.
(o) Extraordinary Revenue Items: The words "Extraordinary Revenue
Items" shall mean for the Year of determination of an Award: (i) revenue
items determined as extraordinary in accordance with GAAP, consistently
applied, as shall appear on the consolidated earnings statements of the
Company, and (ii) revenue items the Committee considers non-operating and
by nature unusual or infrequent.
(p) GAAP: "GAAP" shall mean Generally Accepted Accounting Principles.
(q) Key Associate: The words "Key Associate" shall mean any full time
employee of the Company or a Subsidiary who holds the position of Chairman,
Chief Executive Officer, President, Executive Vice President, Senior Vice
President or Vice President or
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any other associate who is an officer of the Company or a Subsidiary and
who is selected for participation in the Plan.
(r) Participant: The word "Participant" shall mean a Key Associate
who has been selected for participation in the Plan by the Committee.
(s) Plan: The word "Plan" shall mean the "Fleming Companies, Inc.
Corporate Officer Incentive Plan" as set forth in this instrument, and as
hereafter amended from time to time.
(t) Retirement: The word "Retirement" means the date that a
Participant terminates employment in accordance with the Company's
retirement policy after (i) attaining the age of at least 55 years and(ii)
earning at least 10 years of employment service. Years of employment
service will be determined by the Committee in their sole discretion on a
reasonable and consistent basis for all Participants.
(u) Sales: The word "Sales" shall mean for the Year of determination
of an Award (i) minus (ii) where (i) is consolidated net sales of the
Company as determined in accordance with GAAP consistently applied and (ii)
is the sum of amounts included in (i) that represent bill-through sales,
selected drop ship sales, selected direct store delivery sales, fees
charged customers, transportation related fees and revenues, and
miscellaneous revenues and income.
(v) Subsidiary: The word "Subsidiary" shall mean any corporation
consolidated with Company under GAAP.
(w) Targets: The word "Targets" shall mean those performance goals
established each Year by the Committee which require predetermined levels
of Earnings Per Share, Sales and Earnings be met before an Award will be
earned and payable. Targets for Sales and Earnings will consist of a
threshold Target, middle Target and maximum Target.
(x) Year: The word "Year" shall mean the fiscal year of the Company.
2.2 Construction. The masculine gender, wherever appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. Any word appearing herein in the plural shall include
the singular, where appropriate, and likewise the singular shall include the
plural, unless the context clearly indicates to the contrary.
ARTICLE III
PARTICIPATION
3.1 Selection for Participation. A Key Associate must be selected by the
Committee to be a Participant based on criteria determined by the Committee,
which may include the Key Associate's overall job level and his ability to
impact financial results of the Company or any Subsidiary. The Committee may add
or remove Key Associates from the group of Participants
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at any time during each Year in its sole discretion.
3.2 Relationship to Change of Control Agreements. If a Participant is a
party to an employment agreement with the Company which is effective upon a
"change of control" as such term is defined in the agreement (the "Change of
Control Agreement"), any provision of this Plan which would result in a loss or
reduction of an Award shall be subject to and superseded by the applicable
provisions of the Change of Control Agreement.
ARTICLE IV
DETERMINATION OF AWARDS
4.1 Determination.
(a) Award. For each Year, the Committee will determine the amount of
each Participant's Award by selecting a designated percentage of the
Participant's Base Salary which will be the amount which may be earned as
an Award for such Year if the middle level Targets for the Year are met.
The designated percentage of Base Salary may not be the same for each
Participant. Awards will be determined by performance of the Company based
on Earnings Per Share, Sales and Earnings. The Committee shall select the
applicable Targets for each Year. Participants will have their Awards for
each such Year based upon the same Targets.
(b) Calculation of Award. For any Participant to be entitled to an
Award, the Target level of Earnings Per Share for the applicable Year first
must be attained or exceeded. Once the Target for Earnings Per Share for
such Year has been achieved, then the Award will be weighted based on Sales
and Earnings, as such weighting is determined each Year by the Committee.
4.2 Committee To Establish Targets. The Committee in its sole and
absolute discretion shall establish the Targets for each Year as well as any
threshold level, middle level and maximum level within each Target. If the
actual results for Sales or Earnings for a Year are between specified Target
levels, the Committee shall interpolate the value of any Award on an arithmetic
proportionate basis between such Targets. The determination of the Targets for
one Year may or may not be applicable for any following Year. Further, it is the
intent of the Company and the Committee that this Plan, the Awards and the
Targets satisfy the requirements of Section 162(m) of the Code. Accordingly, the
Committee will makes its determination as to the Targets and all other
applicable provisions of the Plan as are necessary in order to attempt to have
the Plan, the Awards and the Targets meet the requirements of Section 162(m) of
the Code.
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ARTICLE V
PAYMENT OF AWARDS
5.1 Date of Payment of Awards. Payment of Awards shall be made, in cash,
as soon as practicable following the Anniversary Date of the Year which relates
to the Award.
5.2 Certain Terminations of Employment. Subject to Section 5.3 of the
Plan, if, prior to the end of the Year for which he would have otherwise
qualified for an Award, a Participant's employment with the Employer is
terminated due to death, Disability, Retirement or elimination of his position
with the Employer ("Approved Termination Events"), any Award which would
otherwise have been paid for such Year assuming the Participant continued in the
employ of the Employer for such Year, will be prorated based on the number of
completed months of employment during the Year of the occurrence of the Approved
Termination Event; and, payment will be made in accordance with the terms of
this Plan.
5.3 Forfeiture, Reduction and Elimination of Awards. Unless the Committee
otherwise determines, if, prior to the end of the Year for which he would have
otherwise qualified for an Award, a Participant's employment with the Employer
is terminated for any reason other than the occurrence of an Approved
Termination Event, the Participant, his Beneficiary and any other person will
forfeit any interest which the Participant had in the Award. The Committee has
the right, in its sole and absolute discretion, to reduce or eliminate any Award
to any Participant in the event the Committee determines that amounts to be paid
under the Award are excessive or are not warranted. While the Committee has the
right to eliminate or reduce any Award, the Committee does not have the right to
increase any Award or change the Targets which have been set for a particular
Year except to the extent any Award is increased because of the exclusion of any
Extraordinary Charge Items as determined by the Committee.
5.4 Awards Exceeding IRS Limits. The Committee has the right to determine
if any Award (or portion thereof) exceeds the limit as established under Section
162(m) of the Code so if paid it would not be deductible to the Company for
federal income tax purposes (the "Excess Amount"). If the Committee makes this
determination, the Committee may determine that such Excess Amount shall be paid
to the affected Participant (i) as provided under this Plan, (ii) in a Year
during which payment of such Excess Amount to the Participant would not result
in the payment of an Excess Amount, or (iii) as rapidly as possible following
the termination of employment of such Participant but made in a manner which
does not result in an Excess Amount being paid. The Committee may or may not, in
its sole discretion, credit interest with respect to any Excess Amounts if
payment is deferred.
B-5
<PAGE> 75
ARTICLE VI
GENERAL BENEFIT PROVISIONS
6.1 No Trust. No action under this Plan by the Company, its Board or the
Committee shall be construed as creating a trust, escrow or other secured or
segregated fund in favor of the Participant or any other persons otherwise
entitled to his Award. The status of the Participant and any other person
entitled to his Award with respect to any liabilities assumed by the Company or
any Subsidiary hereunder shall be solely those of unsecured creditors of the
Company or such Subsidiary. Any asset acquired or held by the Company or any
Subsidiary in connection with liabilities assumed by it hereunder, shall not be
deemed to be held under any trust, escrow or other secured or segregated fund
for the benefit of the Participant or any other person entitled to his Award or
to be security for the performance of the obligations of the Company or any
Subsidiary, but shall be, and remain, a general, unpledged, unrestricted asset
of the Company or such Subsidiary at all times subject to the claims of general
creditors of the Company.
6.2 Withholding for Income and Employment Taxes. Since all amounts to be
paid under the Plan to a Participant are to be considered as compensation paid
for services rendered by the Participant, the Company shall comply with all
federal and state laws and regulations respecting the withholding, deposit and
payment of any income, employment or other taxes relating to any payments made
under this Plan, and all Awards shall be subject to and reduced by the amount of
such taxes.
6.3 No Interest on Awards. Unless determined by the Committee under
Section 5.4 hereof, all Awards to be paid hereunder will be paid without
interest or investment earnings of any kind whatsoever.
6.4 Payments by the Company or Subsidiary. The payments required to fund
the cost of the Awards provided by the Plan shall be made solely by the Company
or any Subsidiary whose Key Associates are participating in the Plan.
6.5 Payment in Event of Death. In the event of the death of a
Participant, the Participant's Award, if earned as provided in Section 5.2
above, shall be paid to the Beneficiary designated by the Participant on a form
provided by the Committee, who is (i) an individual or a trust established for
the benefit of an individual, and (ii) living on the date of the Participant's
death, and if there is no Beneficiary then living, the benefit will be paid to
the estate of the Participant and payment shall be made in a single lump sum.
While a Participant is employed by the Employer, the Participant may change his
Beneficiary by delivering to the Committee a properly executed form designating
a new Beneficiary.
6.6 Restriction on Alienation of Awards. No right or benefit under this
Plan or under any Award shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities, or torts of the person entitled to such benefit.
B-6
<PAGE> 76
6.7 Expenses. All expenses and costs in connection with adoption and
administration of the Plan shall be borne by the Company.
6.8 No Prior Right or Offer. No Key Associate shall have any contractual
or other right to participate in the Plan until he is selected for participation
by the Committee. No Award to any Participant in any Year shall be deemed to
create a right to receive any Award or to participate in the Plan in any
subsequent Year.
6.9 No Continued Employment. Neither the establishment of the Plan nor
the grant of an Award under the Plan shall be deemed to constitute an express or
implied contract of employment of any Participant for any period of time or in
any way abridge the rights of the Company to determine the terms and conditions
of employment or to terminate the employment of any Key Associate at any time.
6.10 No Vested Rights. Except as expressly provided herein, no Key
Associate or any other person shall have any claim or right (legal, equitable,
or otherwise) to any Award, allocation or distribution of any right, title or
vested interest in any amounts, and no officer or employee of the Company or any
Subsidiary or any other person shall have any authority to make representations
or agreements to the contrary.
6.11 No Part of Other Benefits. The benefits provided in this Plan shall
not be deemed a part of any other benefit provided by the Company or any
Subsidiary to its Key Associates. The Company assumes and shall have no
obligation to Participants except as expressly provided in the Plan. This Plan
is a complete statement of the terms and conditions of the Plan.
6.12 Other Plans. Nothing contained herein shall limit the Company's
power to grant other bonuses to Key Associates regardless of their participation
in the Plan.
ARTICLE VII
PROVISIONS RELATING TO PARTICIPANTS
7.1 Information Required of Participants. Payment of Awards shall be made
as provided in this Plan and no formal claim shall be required therefor.
7.2 Benefits Payable to Incompetents. Any benefits payable hereunder to a
minor or other person under legal disability may be made, at the discretion of
the Committee, (i) directly to such person, or (ii) to a parent, spouse,
relative by blood or marriage, or the legal representative of such person. The
Committee shall not be required to see to the application of any such payment,
and the payee's receipt shall be a full and final discharge of the Committee's
responsibility hereunder.
B-7
<PAGE> 77
ARTICLE VIII
ADMINISTRATION
8.1 The Committee Shall Administer the Plan. A member of the Committee
may not be eligible to become a Participant in the Plan. The Committee shall
have the power where consistent with the general purpose and intent of the Plan
to (i) establish Targets, (ii) modify the requirements of the Plan to conform
with the law or to meet special circumstances not anticipated or covered in the
Plan, (iii) suspend or discontinue the Plan, (iv) establish policies and (v)
adopt rules and regulations and prescribe forms for carrying out the purposes
and provisions of the Plan. The Committee shall have the authority to interpret
and construe the Plan, and determine all questions arising under the Plan in its
sole discretion. Any interpretation, decision or determination made by the
Committee shall be final, binding and conclusive. A majority of the Committee
shall constitute a quorum, and an act of the majority of the members present at
any meeting at which a quorum is present shall be the act of the Committee.
8.2 Claims Procedure. The Committee shall in its sole discretion make all
determinations as to the right of any person to benefits under the Plan. If any
request for a benefit is wholly or partially denied, the Committee shall notify
the person requesting the benefits, in writing, of such denial, including in
such notification the following information:
(a) the specific reason or reasons for such denial;
(b) the specific references to the pertinent Plan provisions upon
which the denial is based;
(c) a description of any additional material and information which may
be needed to clarify the request, including an explanation of why such
information is required; and
(d) an examination of this Plan's review procedure with respect to
denial of benefits.
8.3 Review Procedure. Any Participant or Beneficiary whose claim has been
denied in accordance with Section 8.2 above may appeal to the Committee for
review of such denial by making a written request therefor within 60 days of
receipt of the notification of such denial. Such Participant or Beneficiary may
examine documents pertinent to the review and may submit to the Committee
written issues and comments. Within 60 days after receipt of the request for
review, the Committee shall communicate to the claimant, in writing, its
decision, and the communication shall set forth the reason or reasons for the
decision and specific references to those Plan provisions upon which the
decision is based.
8.4 Records and Reports. The Committee shall exercise such authority and
responsibility as it deems appropriate in order to comply with governmental laws
and regulations.
8.5 Rules and Decisions. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. When making a determination or
calculation, the Committee shall be
B-8
<PAGE> 78
entitled to rely upon information furnished by a Participant, the Employer, the
accountants of the Company or the legal counsel of the Company.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 Right to Amend Plan. The Plan may be amended by the Committee from
time to time in any respect whatsoever. Any amendments may be made retroactively
which in the judgment of the Committee are necessary or advisable.
9.2 Right to Terminate Plan. The Committee expressly reserves the right
to terminate this Plan in whole or in part at any time. The Company shall
determine a proposed date of termination, and the Committee shall notify the
Participants.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Articles and Section Titles and Headings. The titles and headings at
the beginning of each Article and Section shall not be considered in construing
the meaning of any provisions in this Plan.
10.2 Laws of Oklahoma to Govern. The provisions of this Plan shall be
construed, administered and enforced according to the laws of the State of
Oklahoma.
10.3 Effective Date of Plan; Shareholder Approval. This Plan shall be
effective as of the Effective Date subject to approval by the holders of a
majority of the Company's common stock having voting power in person or
represented by proxy at the 1999 annual meeting of shareholders.
B-9
<PAGE> 79
EXHIBIT C-1
GUIDELINES FOR BOARD COMPOSITION
Size: Between 3 and 20 members (as set by Restated
Certificate of Incorporation). Board chooses
within those parameters.
Election: Board of directors to be elected annually*.
Mix: Maximum of 3 inside directors; must always be a
majority of independent directors.
Independent Director: Must offer to stand down at end of term following
change in occupation or profession that would
diminish director's ability to contribute as a
board member.
Inside Director:
(Non-CEO) Must offer to resign from board upon the earlier
of either reaching age 65 or retirement,
resignation, other termination from company, or
downward revision of status in company.
Disability: Must stand down if suffering from disability or
ill health sufficiently serious to prevent active
participation in board affairs over a sustained
period.
Retirement from Board: A director must retire from the board during the
month following his or her 70th birthday.
Attendance: If cumulative attendance at board and committee
meetings over two successive years falls below
60%, director must offer to stand down.
- ---------------
* Subject to Article Eight, as amended, of the Restated Certificate of
Incorporation if amendment is approved at 1999 annual meeting.
C-1
<PAGE> 80
EXHIBIT C-2
GUIDELINES FOR BOARD CANDIDATES
1. A director should have the ability to apply good independent judgment to a
business situation and should be able to represent broadly the interests of
all the company's shareholders and constituencies. Board members should be
recommended primarily on the basis of their qualification to meet these
fundamental criteria.
2. A director must be free of any conflicts of interest which would interfere
with his or her loyalty to the company and its shareholders. Those who have
positions with or significant interests in competitors of the company may
not be considered. To avoid even the appearance of a conflict of interest,
members of legal firms which provide legal counsel to the company and
representatives of investment banking houses, commercial banks or management
consulting firms which have or are anticipated to have business relations
with the company should not be considered.
3. In addition, the following criteria should be considered in recommending
candidates for board membership, although these should not be applied
rigidly:
a. Maturity and Experience
A director should be mature and have practical or academic experience
in business, economics, government or the sciences. Ideally, a director
would have 15 or more years of experience including management
responsibilities.
b. Geography
Since the company's operations are primarily mainland United States in
scope, it is desirable to have a balanced geographic representation
with major geographic areas of the company's business being reflected
on the board to the extent practicable.
c. Past Experience in Order of Preference
(1) Chief executive officer, chief operating officer or senior
executive officer of a public or substantial private company,
preferably of an industrial, distribution or retailing company,
with sales in excess of $500,000,000.
(2) An educator from fields of business, economics or the sciences
with management experience.
d. Women, Minorities and Special Interests
Since a director represents broadly the interests of all the company's
shareholders and constituencies, he or she should be chosen for his or
her individual abilities and not be recommended based upon gender,
minority group status or as a representative of any special interest
group. However, it is desirable to have a cross section of backgrounds,
and candidates otherwise qualified may be recommended with due
consideration given to their gender, minority status or special
interests.
C-2
<PAGE> 81
EXHIBIT D
FLEMING COMPANIES, INC. MARCH 1999
CORPORATE GOVERNANCE
STATEMENT OF POLICY
THE PHILOSOPHY.
The Company will operate pursuant to the highest possible ethical standards
with integrity, propriety, and fairness, and in full compliance with the law.
Each director and management associate is expected to conduct himself or herself
at all times in accordance with these tenets. Every action by each director and
management associate will be taken with full consideration for the interests and
well-being, first, of all Company stockholders and, second, of all other Company
stakeholders. Equal opportunity without qualification is the Company's policy in
employment practices, in its daily management, and in its procurement and sale
of goods and services. Discrimination will not be permitted based on race,
color, religion, sex, age, disability status, national origin, citizenship, or
Vietnam veteran status.
THE STANDARDS.
The Governance Committee of the Board has adopted and will administer the
following Corporate Governance Standards for the guidance of the Company:
1. The Board will operate in accordance with a statement of Requirements of
Management and Directors attached hereto as Attachment I.
2. The Chairman of the Compensation and Organization Committee (the
"Compensation Committee") shall conduct a performance appraisal review with
the CEO at least annually. In connection with the annual review the Chairman
shall seek consultation with, and request information from, the other
members of the Compensation Committee and other independent directors.
3. The Board will annually review and approve a three-year strategic plan and a
one-year operating plan for the Company.
4. All directors will stand for election annually*.
5. The Board believes that as a general rule, former Company associates should
not serve on the Board; provided, however, this standard shall not apply to
former Company associates five years after he/she has no longer been an
associate.
6. The Audit and Finance Committee ("Audit Committee") and the Compensation
Committee shall consist entirely of independent directors.
- ---------------
* Subject to Article Eight, as amended, of the Restated Certificate of
Incorporation if amendment is approved at 1999 annual meeting.
D-1
<PAGE> 82
7. The Board will appoint all committee members of the designated standing
committees of the Board (Audit Committee, Compensation Committee, Nominating
Committee and the Governance Committee) upon the recommendation of the
Governance Committee. The intent will be to rotate various members of the
Board through various Committees so that each independent member of the
Board has an opportunity to become more experienced about the internal
operations and affairs of the Company.
8. The Governance Committee will annually assess Board and committee
effectiveness through the use of the "Board Evaluation" questionnaire
attached hereto as Attachment II. Each independent member of the Board will
be required to complete the questionnaire annually. The questionnaires shall
become a part of the permanent records of the Company and maintained by the
Company's corporate secretary.
9. Whenever feasible, directors will receive materials well in advance of
meetings for items to be acted upon. In addition, independent directors
shall meet outside of the presence of non-independent directors from time to
time as deemed appropriate.
10. Interlocking directorships will not be allowed. (An interlocking
directorship would occur if a Fleming director or officer served on the
board of company X and a director or an officer of company X served on the
Fleming Board, or if a major supplier or customer served on Fleming's
Board.) Joint ventures will be permitted between the Company and independent
Board members subject to approval by the Board and Securities and Exchange
Commission disclosure rules.
11. Directors are required to own at least 1,000 shares of Fleming common stock
within one year of election (by the Board or the Stockholders) and 12,000
shares within four years of such election. A substantial portion of each
independent director's annual compensation shall be paid in Fleming common
stock or its equivalent.
12. Each director will retire upon the earlier of 30 days after reaching age 70
or upon his/her 15th anniversary as a director; provided, however, the 15
year limitation shall not apply to directors holding office upon the
adoption by the Board of these standards.
13. Succession planning and management development will be reported annually to
the independent directors by the CEO.
14. All corporate officers are required to own Fleming common stock, with a
value equal to a specified multiple of their base salary with the ownership
requirements to be met over a five year period. The Compensation Committee
will be responsible for setting the multiples on which the ownership
requirements will be based.
15. Generally, management's incentive compensation will be linked directly and
objectively to measured financial goals set in advance by the Compensation
Committee; however, the Board recognizes that flexibility is important in
determining compensation and that all management compensation may not be so
linked.
D-2
<PAGE> 83
16. Stock options will not be repriced (the exercise price for options will not
be lowered even if the current market price of the stock is below the
exercise price) and all stock option plans will be subject to stockholder
approval.
17. All stockholders have equal voting rights except as may be provided by law,
the Restated Certificate of Incorporation or, if applicable, under a share
rights plan adopted by the Company.
18. These Corporate Governance standards have been developed and approved by the
Board and will be reviewed by the Board and published at least annually and
revised where appropriate.
D-3
<PAGE> 84
ATTACHMENT I
REQUIREMENTS OF MANAGEMENT AND DIRECTORS
The Governance Committee shall direct the operation of the Company through
management in accordance with the following Requirements of Management and
Directors in order to enhance Board effectiveness:
<TABLE>
<CAPTION>
BOARD REQUIREMENTS FLEMING REQUIREMENTS
OF MANAGEMENT OF DIRECTORS
------------------ --------------------
<S> <C>
- - Strong principled and ethical - Represent and act in the best
leadership. interests of the stockholders.
- - Develop strategies to deliver strong - Critique and approve strategic and
market franchises and build operating plans.
stockholder wealth over the long term.
- - Recommend appropriate strategic and - Select, motivate, evaluate, and
operating plans. compensate the CEO and all senior
officers.
- - Maintain effective control of - Good understanding of strategies and
operations. the business.
- - Measure performance against peers. - Review succession planning and
management development. (For
independent directors only.)
- - Assure sound succession planning and - Advise and consult on key
management development. organizational changes.
- - Sound organizational structure. - Careful study of Board materials and
issues.
- - Inform the Board regularly regarding - Active, objective and constructive
the status of key initiatives. participation at meetings of Board
and Committees.
- - No surprises. - Assistance in representing Fleming to
the outside world.
- - Board meetings which are well-planned, - Counsel on corporate issues.
allow meaningful participating, and
provide for timely resolution of
issues.
- - Advance Board materials which contain - Good understanding of general
the right amount of information and economic trends and corporate
are received sufficiently in advance governance.
of meetings.
</TABLE>
D-4
<PAGE> 85
ATTACHMENT II
BOARD EVALUATION QUESTIONNAIRE
This questionnaire shall be provided to each independent director on or
about January 1 of each year and such directors shall complete the questionnaire
by entering a number grade from 1 to 5 (where 1 is considered "poor" and 5 is
considered "excellent") and written comments, where appropriate, as to each of
the following 14 standards.
<TABLE>
<CAPTION>
QUESTION POINTS
-------- ------
<C> <S> <C>
1. The Board knows and understands the
Company's vision, strategic precepts,
strategic plan and operating plan.
------
2. The Board reflects its understanding of
the Company's vision, strategic
precepts, strategic plan, and operating
plan in its discussions and actions on
key issues throughout the year.
------
3. Board meetings are conducted in a manner
which ensures open communication,
meaningful participation, and timely
resolution of issues.
------
4. Board materials contain the right amount
of information, and Board members
receive their materials sufficiently in
advance of meetings.
------
5. Board members are diligent in preparing
for meetings.
------
6. The Board reviews and adopts an annual
operating budget and regularly monitors
performance against it throughout the
year.
------
7. The Board monitors the Company's income
statement, balance sheet, and cash flow.
------
8. The Board reviews and adopts an annual
capital budget and receives regular
written or oral reports of performance
against it throughout the year.
------
9. In tracking Company performance, the
Board regularly considers the
performance of peer companies.
------
10. The Board reviews on at least an annual
basis the performance of the CEO through
the Compensation Committee.
------
11. On an annual basis, the Board and/or the
Compensation Committee will review the
performance and ethics of the senior
officers.
------
12. The correlation between executive pay
and Company performance will be reviewed
on an annual basis by the Board and/or
the Compensation Committee.
------
13. On an annual basis, the independent
directors shall review the succession
plans for the CEO and key senior
management.
------
14. Each individual director standing for
re-election will receive a performance
review prior to his/her nomination from
those members of the Governance
Committee who are not standing for
re-election. This assures that each
director receives feedback from his
fellow directors on his/her performance
as a director.
------
</TABLE>
D-5
<PAGE> 86
The Governance Committee will analyze the numerical ratings and comments in
detail and develop recommendations to enhance Board effectiveness. The Chairman
of the Governance Committee shall present the assessments and recommendations to
the full Board annually at its meeting immediately prior to the mailing of the
proxy materials. The Governance Committee will oversee the process of
implementing recommendations.
D-6
<PAGE> 87
P
R
O
X
Y
FLEMING COMPANIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1999
10:00 a.m.
Mark S. Hansen or David R. Almond is hereby constituted the proxy of the
undersigned with full power of substitution to represent and vote all shares of
stock of the undersigned at the annual meeting of shareholders of Fleming
Companies, Inc., to be held at the Radisson Plaza Hotel Minneapolis, 35 S. 7th
Street, Minneapolis, Minnesota, on May 19, 1999 at 10:00 a.m., or at any
adjournment thereof.
- --------------------------------------------------------------------------------
This proxy is continued on the reverse side. Please mark the appropriate boxes,
sign, date, and return promptly in the enclosed envelope.
-------------
SEE REVERSE
SIDE
-------------
<PAGE> 88
Please mark your
[X] votes as in this
example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
WITHHOLD
FOR authority to vote
all nominees for all nominees
listed below listed below
1. Election of [ ] [ ]
Directors
Nominees: Jack W. Baker, Edward C. Joullian III,
and Alice M. Peterson
(for three-year terms)
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of an amendment [ ] [ ] [ ]
to the company's restated
certificate of incorporation
to provide for the annual
election of directors.
3. Approval of the Fleming [ ] [ ] [ ]
Companies, Inc. 1999 Stock
Incentive Plan.
FOR AGAINST ABSTAIN
4. Approval of the Fleming [ ] [ ] [ ]
Companies, Inc. Corporate Officer
Incentive Plan.
5. Ratification of Deloitte & Touche [ ] [ ] [ ]
LLP as independent auditors for
1999.
- --------------------------------------------------------------------------------
[ ]
THE PROXY WILL VOTE IN HIS DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The shares represented by this proxy will be voted as specified, or if no
direction is indicated, they will be voted "FOR" the election of the directors
nominated by the board and "FOR" Proposals 2, 3, 4 and 5. The board of directors
recommends a vote "FOR" each of these proposals.
I RESERVE THE RIGHT TO REVOKE THIS PROXY AT ANYTIME BEFORE THE EXERCISE
THEREOF.
SIGNATURE(S) DATE
---------------------------------------------- -------------
SIGNATURE(S) DATE
---------------------------------------------- -------------
Please sign exactly as name appears above, indicating official position or
representative capacity. FOR JOINT ACCOUNTS EACH OWNER SHOULD SIGN.
