SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 17, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8140
FLEMING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 48-0222760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6301 Waterford Boulevard, Box 26647
Oklahoma City, Oklahoma 73126
(Address of principal executive offices) (Zip Code)
(405) 840-7200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock, as of May 14, 1999 is as follows:
Class Shares Outstanding
Common stock, $2.50 par value 38,384,000
<PAGE>
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Statements of Operations -
16 Weeks Ended April 17, 1999,
and April 18, 1998
Consolidated Condensed Balance Sheets -
April 17, 1999, and December 26, 1998
Consolidated Condensed Statements of Cash Flows -
16 Weeks Ended April 17, 1999,
and April 18, 1998
Notes to Consolidated Condensed Financial Statements
Independent Accountants' Review Report
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 4. Results of Votes of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Consolidated Condensed Statements of Operations
For the 16 weeks ended April 17, 1999, and April 18, 1998
(In thousands, except per share amounts)
<CAPTION>
==============================================================================
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Net sales $4,465,246 $4,567,126
Costs and expenses:
Cost of sales 4,036,868 4,124,858
Selling and administrative 376,995 364,720
Interest expense 51,606 51,202
Interest income (9,350) (11,305)
Equity investment results 3,556 3,589
Litigation charge - 2,954
Impairment/restructuring charge 37,036 (267)
- ------------------------------------------------------------------------------
Total costs and expenses 4,496,711 4,535,751
- ------------------------------------------------------------------------------
Earnings (loss) before taxes (31,465) 31,375
Taxes on income (loss) (7,224) 16,105
- ------------------------------------------------------------------------------
Net earnings (loss) $ (24,241) $ 15,270
==============================================================================
Basic and diluted net earnings (loss)
per share $(.64) $.40
Dividends paid per share $.02 $.02
Weighted average shares outstanding:
Basic 38,143 37,804
Diluted 38,143 37,972
==============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial
statements and independent accountants' review report.
<PAGE>
<TABLE>
Consolidated Condensed Balance Sheets
(In thousands)
<CAPTION>
==============================================================================
April 17, December 26,
Assets 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,012 $ 5,967
Receivables 399,705 450,905
Inventories 869,120 984,287
Other current assets 164,049 146,757
- ------------------------------------------------------------------------------
Total current assets 1,474,886 1,587,916
Investments and notes receivable 107,681 119,468
Investment in direct financing leases 154,030 177,783
Property and equipment 1,553,361 1,554,884
Less accumulated depreciation and amortization (745,512) (734,819)
- ------------------------------------------------------------------------------
Net property and equipment 807,849 820,065
Deferred income taxes 53,601 51,497
Other assets 209,760 154,524
Goodwill 556,821 579,579
- ------------------------------------------------------------------------------
Total assets $3,364,628 $3,490,832
==============================================================================
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 803,687 $ 945,475
Current maturities of long-term debt 40,368 41,368
Current obligations under capital leases 21,915 21,668
Other current liabilities 250,154 272,573
- ------------------------------------------------------------------------------
Total current liabilities 1,116,124 1,281,084
Long-term debt 1,207,307 1,143,900
Long-term obligations under capital leases 351,138 359,462
Other liabilities 143,250 136,455
Commitments and contingencies
Shareholders' equity:
Common stock, $2.50 par value per share 96,224 96,356
Capital in excess of par value 510,936 509,602
Reinvested earnings (1,839) 23,155
Accumulated other comprehensive income:
Additional minimum pension liability (57,133) (57,133)
- ------------------------------------------------------------------------------
Accumulated other comprehensive income (57,133) (57,133)
Less ESOP note (1,379) (2,049)
- ------------------------------------------------------------------------------
Total shareholders' equity 546,809 569,931
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $3,364,628 $3,490,832
==============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial
statements and independent accountants' review report.
<PAGE>
<TABLE>
Consolidated Condensed Statements of Cash Flows
For the 16 weeks ended April 17, 1999, and April 18, 1998
(In thousands)
<CAPTION>
==============================================================================
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (24,241) $ 15,270
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 46,317 56,379
Credit losses 7,942 2,713
Deferred income taxes (12,641) 10,323
Equity investment results 3,556 3,589
Consolidation and restructuring reserve activity (148) (5,126)
Impairment/restructuring and related charges 45,546 18
Cash payments on impairment/restucturing
and related charges (17,574) -
Change in assets and liabilities, excluding
effect of acquisitions:
Receivables 48,722 (6,512)
Inventories 111,128 61,809
Accounts payable (141,788) (71,108)
Other assets and liabilities (35,811) (14,122)
Other adjustments, net 576 (3,462)
- ------------------------------------------------------------------------------
Net cash provided by operating activities 31,584 49,771
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Collections on notes receivable 8,031 16,890
Notes receivable funded (4,541) (10,350)
Purchase of property and equipment (50,041) (38,334)
Proceeds from sale of property and equipment 3,465 10,708
Investments in customers (1,935) -
Proceeds from sale of investment 2,084 3,514
Businesses acquired (10,704) -
Other investing activities (51) 1,382
- ------------------------------------------------------------------------------
Net cash used in investing activities (53,692) (16,190)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term borrowings 101,000 35,000
Principal payments on long-term debt (38,593) (55,268)
Principal payments on capital lease obligations (3,614) (6,575)
Sale of common stock under incentive
stock and stock ownership plans 178 219
Dividends paid (787) (778)
Other financing activities (31) (386)
- ------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 58,153 (27,788)
- ------------------------------------------------------------------------------
Net increase in cash and cash equivalents 36,045 5,793
Cash and cash equivalents, beginning of period 5,967 30,316
- ------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 42,012 $ 36,109
==============================================================================
Supplemental information:
Cash paid for interest $ 41,070 $ 43,721
Cash paid for taxes $ 11,301 $ 8,967
==============================================================================
</TABLE>
Fleming Companies, Inc. See notes to consolidated condensed financial
statements and independent accountants' review report.
<PAGE>
Notes to Consolidated Condensed Financial Statements (See independent
accountants' review report)
1. The consolidated condensed balance sheet as of April 17, 1999, and the
consolidated condensed statements of operations and cash flows for the 16
weeks ended April 17, 1999 and April 18, 1998, have been prepared by the
company, without audit. In the opinion of management, all adjustments
necessary to present fairly the company's financial position at April 17,
1999, and the results of operations and cash flows for the periods presented
have been made. All such adjustments are of a normal, recurring nature except
as disclosed. Both basic and diluted earnings or loss per share are computed
based on net earnings or loss divided by weighted average shares as
appropriate for each calculation.
The preparation of the consolidated condensed financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Certain reclassifications have been made to prior year amounts to conform to
current year classifications.
2. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the company's 1998 annual
report on Form 10-K.
3. The LIFO method of inventory valuation is used for determining the cost of
most grocery and certain perishable inventories. The excess of current cost
of LIFO inventories over their stated value was $48 million at April 17, 1999,
and $44 million at December 26, 1998.
4. Sales and operating earnings for the company's food distribution and retail
food segments are presented below.
<TABLE>
<CAPTION>
==============================================================================
For the 16 weeks ended
April 17, April 18,
($ in millions) 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Food distribution $4,002 $4,096
Intersegment elimination (675) (610)
- ------------------------------------------------------------------------------
Net food distribution 3,327 3,486
Retail food 1,138 1,081
- ------------------------------------------------------------------------------
Total sales $4,465 $4,567
==============================================================================
Operating earnings:
Food distribution $ 83 $ 92
Retail food 13 19
Corporate (45) (33)
- ------------------------------------------------------------------------------
Total operating earnings 51 78
Interest expense (51) (51)
Interest income 9 11
Equity investment results (3) (4)
Litigation charge - (3)
Impairment/restucturing charge (37) -
- ------------------------------------------------------------------------------
Earnings (loss) before taxes $(31) $ 31
==============================================================================
</TABLE>
General corporate expenses are not allocated to food distribution and retail
food segments. The transfer pricing between segments is at cost.
5. The company's comprehensive loss totaled $24.2 million for the 16 weeks
ended April 17, 1999. The company's comprehensive income totaled $20.2
million for the 16 weeks ended April 18, 1998. The comprehensive loss in 1999
was comprised only of the reported net loss, whereas the comprehensive income
in 1998 was comprised of the reported net income plus changes in foreign
currency translation adjustments.
6. In accordance with applicable accounting standards, the company records a
charge reflecting contingent liabilities (including those associated with
litigation matters) when management determines that a material loss is
"probable" and either "quantifiable" or "reasonably estimable." Additionally,
the company discloses material loss contingencies when the likelihood of a
material loss is deemed to be greater than "remote" but less than "probable."
Set forth below is information regarding certain material loss contingencies:
Class Action Suits.
In 1996, certain stockholders and one noteholder filed purported class action
suits against the company and certain of its present and former officers and
directors, each in the U.S. District Court for the Western District of
Oklahoma. In 1997, the court consolidated the stockholder cases as City of
Philadelphia, et al. v. Fleming Companies, Inc., et al. The noteholder case
was also consolidated, but only for pre-trial purposes. During 1998, the
noteholder case was dismissed and during the first quarter of 1999, the
consolidated case was also dismissed, each without prejudice. The court gave
the plaintiffs the opportunity to restate their claims without prejudice and
amended complaints were filed in both cases during the first quarter of 1999.
In May 1999, the company filed motions to dismiss in both cases.
Tru Discount Foods.
Fleming brought suit in 1994 on a note and an open account against its former
customer, Tru Discount Foods, which counterclaimed on various grounds. The
case was initially referred to arbitration but later returned to the trial
court; Fleming appealed. In 1997, the defendant amended its counterclaim
against the company alleging fraud, overcharges for products and violations of
the Oklahoma Deceptive Trade Practices Act. In 1998, the appellate court
reversed the trial court and directed that the matter be sent again to
arbitration. Although Tru Discount Foods has not quantified damages, it has
made demand in the amount of $8 million. Management is unable to predict the
ultimate outcome of this matter. However, an unfavorable outcome could have a
material adverse effect on the company.
Don's United Super (and related cases).
In March 1998, the company and two retired executives were named in a suit
filed in the United States District Court for the Western District of Missouri
by approximately 20 current and former customers of the company (Don's United
Super, et al. v. Fleming, et al.). Plaintiffs operate retail grocery stores
in the St. Joseph and Kansas City metropolitan areas. Six plaintiffs who were
parties to supply contracts containing arbitration clauses were permitted to
withdraw from the case.
Previously, two cases had been filed in the same court (R&D Foods, Inc. et al.
v. Fleming, et al. and Robandee United Super, Inc. et al. v. Fleming, et al.)
by 10 customers, some of whom are plaintiffs in the Don's case. The earlier
two cases, which principally seek an accounting of the company's expenditure
of certain joint advertising funds, have been consolidated. All causes of
action in these cases have been stayed pending the arbitration of the causes
of action relating to supply contracts containing arbitration clauses.
The Don's suit alleges product overcharges, breach of contract,
misrepresentation, fraud, and RICO violations and seeks recovery of actual,
punitive and treble damages and a declaration that certain contracts are
voidable at the option of the plaintiffs. Damages have not been quantified.
However, with respect to some plaintiffs, the time period during which the
alleged overcharges took place exceeds 25 years and the company anticipates
that the plaintiffs will allege substantial monetary damages.
In October 1998, a group of 14 retailers (ten of whom had been or are
currently plaintiffs in the Don's case and/or the Robandee case whose claims
were sent to arbitration or stayed pending arbitration) filed a new action in
the United States District Court for the Western District of Missouri against
the company and two former officers, one of whom was a director (Coddington
Enterprises, Inc. et al. v. Dean Werries, et al.). The plaintiffs assert
claims virtually identical to those set forth in the Don's complaint and have
not quantified damages in their pleadings.
Plaintiffs have made a settlement demand in the Don's case for $42 million and
in the Coddington case for $44 million. The company intends to vigorously
defend its interests in these cases. Although management is currently unable
to predict the ultimate outcome of this litigation, based upon the plaintiffs'
allegations, an unfavorable outcome could have a material adverse effect on
the company.
Storehouse Markets.
In 1998, the company and one of its associates were named in a suit filed in
the United States District Court for the District of Utah by three current and
former customers of the company (Storehouse Markets, Inc., et al. v. Fleming
Companies, Inc., et al.). The plaintiffs allege product overcharges,
fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach
of contract, breach of duty of good faith and fair dealing and RICO violations
and seek declaration of class action status and recovery of actual, punitive
and treble damages. Damages have not been quantified. However, the company
anticipates that the plaintiffs will seek substantial monetary damages. The
company intends to vigorously defend its interests in this case but is
currently unable to predict the ultimate outcome. Based upon the plaintiffs'
allegations, an unfavorable outcome could have a material adverse effect on
the company.
Y2K.
The company utilizes numerous computer systems which were developed employing
six digit date structures (i.e., two digits each for the month, day and year).
Where date logic requires the year 2000 or beyond, such date structures may
produce inaccurate results. Management has implemented a program to comply
with year-2000 requirements on a system-by-system basis. Fleming's plan
includes extensive systems testing and is expected to be substantially
completed by the third quarter of 1999. Although the company is developing
greater levels of confidence regarding its internal systems, failure to ensure
that the company's computer systems are year-2000 compliant could have a
material adverse effect on the company's operations. In addition, failure of
the company's customers or vendors to become year-2000 compliant could also
have a material adverse effect on the company's operations.
Program costs to comply with year-2000 requirements are being expensed as
incurred. Through the end of the first quarter of 1999, total expenditures to
third parties were approximately $7 million.
Other.
The company's facilities and operations are subject to various laws,
regulations and judicial and administrative orders concerning protection of
the environment and human health, including provisions regarding the
transportation, storage, distribution, disposal or discharge of certain
materials. In conformity with these provisions, the company has a
comprehensive program for testing, removal, replacement or repair of its
underground fuel storage tanks and for site remediation where necessary. The
company has established reserves that it believes will be sufficient to
satisfy the anticipated costs of all known remediation requirements.
The company and others have been designated by the U.S. Environmental
Protection Agency ("EPA") and by similar state agencies as potentially
responsible parties under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or similar state laws, as
applicable, with respect to EPA-designated Superfund sites. While liability
under CERCLA for remediation at such sites is generally joint and several with
other responsible parties, the company believes that, to the extent it is
ultimately determined to be liable for the expense of remediation at any site,
such liability will not result in a material adverse effect on its
consolidated financial position or results of operations. The company is
committed to maintaining the environment and protecting natural resources and
human health and to achieving full compliance with all applicable laws,
regulations and orders.
The company is a party to various other litigation and contingent loss
situations arising in the ordinary course of its business including: disputes
with customers and former customers; disputes with owners and former owners of
financially troubled or failed customers; disputes with employees and former
employees regarding labor conditions, wages, workers' compensation matters and
alleged discriminatory practices; disputes with insurance carriers; tax
assessments and other matters, some of which are for substantial amounts.
However, the company does not believe any such action will result in a
material adverse effect on the company.
7. Certain indebtedness is guaranteed by all direct and indirect subsidiaries
of the company (except for certain inconsequential subsidiaries), all of which
are wholly owned. The guarantees are joint and several, full, complete and
unconditional. There are no restrictions on the ability of the subsidiary
guarantors to transfer funds to the company in the form of cash dividends,
loans or advances. Full financial statements for the subsidiary guarantors
are not presented herein because management does not believe such information
would be material.
The following summarized financial information, which includes allocations of
material corporate-related expenses, for the combined subsidiary guarantors
may not necessarily be indicative of the results of operations or financial
position had the subsidiary guarantors been operated as independent entities.
<TABLE>
<CAPTION>
April 17, April 18,
(In millions) 1999 1998
<S> <C> <C>
Current assets $28 $31
Noncurrent assets $51 $72
Current liabilities $15 $15
Noncurrent liabilities $7 $7
</TABLE>
<TABLE>
<CAPTION>
16 weeks ended
April 17, April 18,
(In millions) 1999 1998
<S> <C> <C>
Net sales $104 $110
Costs and expenses $106 $112
Net earnings (loss) $(1) $(1)
</TABLE>
8. The accompanying operating statements include the following:
<TABLE>
<CAPTION>
16 weeks ended
April 17, April 18,
(In thousands) 1999 1998
<S> <C> <C>
Depreciation and amortization
(includes amortized costs in
interest expense) $46,317 $56,379
Amortized costs in
interest expense $1,498 $1,839
</TABLE>
9. In December 1998, the company announced the implementation of a strategic
plan designed to improve the competitiveness of the retailers the company
serves and improve the company's performance by building stronger operations
that can better support long-term growth ("strategic plan"). Described below
are the four major initiatives of the strategic plan along with a status
update of each initiative:
o Consolidate food distribution operations. This initially required
divestiture of seven operating units - two in 1998 and five in 1999.
Of the five divestitures in 1999, all but one have been completed.
An additional closing has taken place in 1999 which was not
originally part of the strategic plan, but was added to the plan when
costs associated with continuing to service customers during a strike
coupled with costs of reopening the operating unit made closing the
operating unit an economically sound decision. Although there has
been some loss in sales for all of these divestitures, many of the
customers at these operating units were transferred and are being
serviced by remaining operating units. Transferring customer
business to a higher volume, better utilized facility benefits the
customer with better product variety and improved buying
opportunities. The company benefits with better coverage of fixed
expenses.
o Grow food distribution sales aggressively. Higher volume, better-
utilized food distribution operations and the dynamics of the market
place represent an opportunity for sales growth. The improved
efficiency and effectiveness of the remaining food distribution
operations enhances their competitiveness and the company intends to
capitalize on these improvements. During the first quarter of 1999,
significant new customers were added in the food distribution segment
of the business.
o Improve retail food performance. This not only requires divestiture
of under-performing company-owned retail chains or groups, but also
requires increased investments in market leading chains or groups.
During the first quarter of 1999, the divestiture of a second under-
performing company-owned retail chain was announced. The divestiture
of both chains is well underway. Also during the first quarter of
1999, the company negotiated and recently finalized the purchase of a
number of retail stores that are considered to fit in well
strategically with its existing chains. A number of remodels of
existing retail stores have also been completed during the quarter.
Same-store sales for the first quarter of 1999, although still
negative, improved over previous quarters.
o Reduce overhead expense. Overhead will be reduced at both the
corporate and operating unit levels through organization and process
changes. In addition, several initiatives to reduce complexity in
business systems are underway. These initiatives should reduce costs
and improve the company's profitability and competitiveness. During
the first quarter of 1999, the company worked with specialists in
supply chain management on plans to begin implementing cost
reductions.
The total pre-tax charge of the strategic plan is presently estimated at $810
million. The pre-tax charge recorded to-date is $714 million ($46 million in
the first quarter of 1999 and $668 million recorded in 1998). After tax, the
expense for the first quarter of 1999 was $32 million or $.84 per share. The
$96 million of costs relating to the strategic plan not yet charged against
income will be recorded throughout the rest of 1999 and 2000 at the time such
costs are accruable.
The $46 million charge was included on several lines of the Consolidated
Condensed Statements of Operations for the first quarter of 1999 as follows:
$6 million was included in cost of sales and was primarily related to
inventory valuation adjustments; $3 million was included in selling and
administrative expense as disposition related costs recognized on a periodic
basis; and the remaining $37 million was included in the impairment/
restructuring charge line. The $46 million charge consisted of the
following components:
o Impairment of assets of $24 million. The impairment components were
$22 million for goodwill and $2 million for other long-lived assets.
o Restructuring charges of $13 million. The restructuring charges
consisted primarily of severance, lease liabilities and pension
withdrawal liabilities.
o Other disposition and related costs of $9 million. These costs
consist primarily of inventory valuation adjustments, disposition
related costs recognized on a periodic basis and other costs.
The $46 million charge relates to the company's segments as follows: $32
million relates to the food distribution segment and $8 million relates to the
retail food segment with the balance relating to corporate overhead expenses.
The strategic plan includes workforce reductions which have been recorded to-
date as follows:
<TABLE>
<CAPTION>
($'s in thousands) Amount Headcount
<S> <C> <C>
1998 Activity:
Charge $25,441 1,430
Terminations (3,458) (170)
Ending Liability $21,983 1,260
1999 Activity:
Charge 8,565 910
Terminations (12,039) (970)
Qtr 1 Ending Liability $18,509 1,200
</TABLE>
Additionally, the strategic plan includes charges related primarily to lease
obligations which totaled approximately $42 million ($4 million in the first
quarter of 1999 and $38 million in 1998) that will be reduced over the
expected remaining lease terms.
Asset impairments were recognized in accordance with SFAS No. 121 - Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, and such assets were written down to their estimated fair values
based on estimated proceeds of operating units to be sold or discounted cash
flow projections. The operating costs of operating units to be sold or closed
are treated as normal operations during the period they remain in use.
Salaries, wages and benefits of employees at these operating units are charged
to operations during the time such employees are actively employed.
Depreciation expense is continued for assets that the company is unable to
remove from operations.
Independent Accountants' Review Report
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
FLEMING COMPANIES, INC.
We have reviewed the accompanying condensed consolidated balance sheet of
Fleming Companies, Inc. and subsidiaries as of April 17, 1999, and the related
condensed consolidated statements of income and of cash flows for the sixteen
weeks ended April 17, 1999 and April 18, 1998. These financial statements are
the responsibility of the company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Fleming Companies Inc. and
subsidiaries as of December 26, 1998, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the year then ended
(not presented herein); and in our report dated February 18, 1999, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 26, 1998 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
May 5, 1999
Item 2. Management's Discussion and Analysis of Financial Condition And
Results of Operations
General
The company's performance for the past three years was disappointing and
concerning. In early 1998 the Board of Directors and senior management began
an extensive strategic planning process that evaluated all aspects of the
business. With the help of a consulting firm, the evaluation and planning
process was completed late in 1998. In December 1998, a new strategic plan
was approved and implementation efforts began. The strategic plan involves
three key strategies to restore sales and earnings growth: focus resources to
improve performance, build sales and revenues more aggressively in our
wholesale business and company-owned retail stores, and reduce overhead and
operating costs to improve profitability system-wide.
The three strategies are further defined in the following four major
initiatives:
o Consolidate food distribution operations. This initially required
divestiture of seven operating units - two in 1998 and five in 1999.
Of the five divestitures in 1999, all but one have been completed.
An additional closing has taken place in 1999 which was not
originally part of the strategic plan, but was added to the plan when
costs associated with continuing to service customers during a strike
coupled with costs of reopening the operating unit made closing the
operating unit an economically sound decision. Although there have
been some loss in sales for all of these divestitures, many of the
customers at these seven operating units were transferred and are
being serviced by remaining operating units. Transferring customer
business to a higher volume, better utilized facility benefits the
customer with better product variety and improved buying
opportunities. The company benefits with better coverage of fixed
expenses. During these divestitures the company has proceeded as
quickly as practical, but the company is very sensitive to customer
requirements and has and will continue to pace divestitures to meet
those requirements. The capital returned from the divestitures has
been reinvested in the business.
o Grow food distribution sales aggressively. Higher volume, better-
utilized food distribution operations and the dynamics of the market
place represent an opportunity for sales growth. The improved
efficiency and effectiveness of the remaining food distribution
operations enhance their competitiveness and the company intends to
capitalize on these improvements. Growth is expected from increasing
the amount of sales with existing customers and attracting new
customers. During the first quarter of 1999, significant new
customers were added in the food distribution segment of the
business.
o Improve retail food performance. This not only requires divestiture
of under-performing company-owned retail chains or groups, but also
requires increased investments in market leading chains or groups.
New stores and remodels are expected to improve performance.
Improved performance is also expected from the market leading chains
through adoption of best practices. During the first quarter of 1999,
the divestiture of a second under-performing company-owned retail
chain was announced. The divestiture of both chains is well
underway. Also during the first quarter of 1999, the company
negotiated and recently finalized the purchase of a number of retail
stores that are considered to fit in well strategically with its
existing chains. A number of remodels of existing retail stores have
also been completed during the quarter. Same-store sales for the
first quarter of 1999, although still negative, improved over
previous quarters.
o Reduce overhead expense. Overhead will be reduced at both the
corporate and operating unit levels through organization and process
changes. In addition, several initiatives to reduce complexity in
business systems are underway. These initiatives should reduce costs
and improve the company's profitability and competitiveness. During
the first quarter of 1999, the company worked with specialists in
supply chain management on plans to begin implementing cost
reductions later this year.
Implementation of the strategic plan is expected to continue through the year
2000. This time frame design accommodates the company's limited resources and
customers' seasonal marketing requirements. Additional expenses will continue
for some time beyond the year 2000 because certain disposition related costs
can only be expensed when incurred.
The total pre-tax charge of the strategic plan is presently estimated at $810
million. The pre-tax charge recorded to-date is $714 million ($46 million in
the first quarter of 1999 and $668 million recorded in 1998). Of the $46
million charge in the first quarter of 1999, only $15 million is expected to
require cash expenditures. The remaining $31 million consisted of noncash
items. The $46 million charge consisted of the following components:
o Impairment of assets of $24 million. The impairment components were
$22 million for goodwill and $2 million for other long-lived assets.
o Restructuring charges of $13 million. The restructuring charges
consisted primarily of severance, lease liabilities and pension
withdrawal liabilities.
o Other disposition and related costs of $9 million. These costs
consist primarily of inventory valuation adjustments, disposition
related costs recognized on a periodic basis and other costs.
The company recorded a net loss of $24 million or $.64 per share for the first
quarter of 1999. The after-tax effect of the strategic plan charge on the
company's first quarter of 1999 was $32 million or $.84 per share. Excluding
the strategic plan charge, the company would have recorded net income of $8
million or $.20 per share. EBITDA for the first quarter of 1999, excluding
the strategic plan charge, was $114 million.
Additional pre-tax expense relating to the strategic plan of approximately $96
million is expected throughout the rest of 1999 and 2000 as implementation of
the strategic plan continues. Approximately $63 million of these future
expenses are expected to require cash expenditures. The remaining $33 million
of the future expense relates to noncash items. These future expenses will
consist primarily of severance, real estate-related divestiture expenses,
pension withdrawal liabilities and other costs expensed when incurred.
The expected benefits of the plan are improved earnings and increased sales.
Based on management's plan, earnings are expected to improve every year
approaching one percent of net sales and exceed $3 per share by the year 2003.
Sales are also expected to increase, but the growth will not be evident in
1999 and 2000 because of the previously announced loss of three significant
customers.
Under the plan being implemented, the company has assessed the strategic
significance of all operating units. Further, the current performance of
several operating units with strategic significance needs improvement and the
strategic plan should result in their improved performance. However, in the
event that improvement is not forthcoming, additional divestitures will be
considered.
Results of Operations
Set forth in the following table is information regarding the company's net
sales and certain components of earnings expressed as a percent of sales which
are referred to in the accompanying discussion:
<TABLE>
<CAPTION>
==============================================================================
April 17, April 18,
For the 16-weeks ended 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Net sales 100.00 % 100.00 %
Gross margin 9.60 9.68
Less:
Selling and administrative 8.44 8.00
Interest expense 1.16 1.12
Interest income (.21) (.25)
Equity investment results .08 .08
Litigation charge - .06
Impairment/restructuring charge .83 (.01)
- ------------------------------------------------------------------------------
Total expenses 10.30 9.00
- ------------------------------------------------------------------------------
Earnings (loss) before taxes (.70) .68
Taxes on income (loss) (.16) .35
- ------------------------------------------------------------------------------
Net income (loss) (.54)% .33 %
==============================================================================
Net sales.
Sales for the first quarter (16 weeks) of 1999 decreased by $102 million, or
2%, to $4.5 billion from the same period in 1998.
Net sales for the food distribution segment were $3.3 billion in 1999 compared
to $3.5 billion in 1998. The loss of sales from Furr's and the Portland
division as well as the prospective loss of sales from Randall's and United
moving to self-distribution will result in sales comparisons to prior periods
being negative for some time.
Retail food segment sales increased $57 million, or 5%, in 1999 to $1.1
billion from the same period in 1998. The increase in sales was due primarily
to new stores added since first quarter 1998. This was offset partially by a
decrease of 0.8% in same-store sales for the first quarter of 1999 compared to
the same period in 1998 and the closing of non-performing stores. Although
the same store comparison is a negative 0.8%, it is an improvement from the
negative 4.5% reported in the first quarter of 1998.
Fleming measures inflation using data derived from the average cost of a ton
of product sold by the company. Food price inflation for the first quarter of
1999 was up slightly at 2.3% compared to 2.0% for the same period in 1998.
Gross margin.
Gross margin for the first quarter of 1999 decreased by $14 million, or 3%, to
$428 million from $442 million for the same period in 1998, and also decreased
as a percentage of net sales to 9.60% from 9.68% for the same period in 1998.
The decrease was due, in part, to the overall sales decrease combined with
unfavorable adjustments resulting from additional stores being closed.
Additionally, gross margin in the first quarter of 1999 was adversely affected
by costs relating to the strategic plan, primarily inventory valuation
adjustments. The decreases were offset somewhat by an overall increase in the
retail food segment, which has the better margins of the two segments.
Selling and administrative expenses.
Selling and administrative expenses for the first quarter of 1999 increased by
$12 million, or 3%, to $377 million from $365 million for the same period in
1998 and increased as a percentage of net sales to 8.44% for 1999 from 8.00%
in 1998. The increase was partly due to increased operating expense in the
retail food segment. The increase was also partly due to costs relating to
the strategic plan, including $3 million in disposition related costs. Credit
loss expense is included in selling and administrative expenses and was $8
million for the first quarter of 1999 compared to $3 million for the same
period in 1998.
As more fully described in the 1998 Annual Report on Form 10-K, the company
has a significant amount of credit extended to its customers through various
methods. These methods include customary and extended credit terms for
inventory purchases and equity investments in and secured and unsecured loans
to certain customers. Secured loans generally have terms up to ten years.
Operating earnings.
Operating earnings for the food distribution segment decreased by $9 million,
or 10%, to $83 million for the first quarter of 1999 from $92 million for the
same period of 1998. Operating earnings were affected primarily by costs
relating to the strategic plan, lower sales and higher credit loss expense,
offset in part by improved results in continuing operations.
Operating earnings for the retail food segment decreased by $6 million, or
32%, to $13 million for the first quarter of 1999 from $19 million for the
same period of 1998. Operating earnings were affected primarily by costs
relating to the strategic plan and a 0.8% decrease in same-store sales.
Partially offsetting these decreases were improved expense controls.
Corporate expenses increased in the first quarter of 1999 compared to the same
period of 1998 by $12 million, or 36%, to $45 million from $33 million.
Closed store expense, the LIFO charge and incentive compensation expense were
higher in 1999 than in 1998.
Interest expense.
Interest expense for the first quarter of 1999 was less than $1 million higher
than 1998 due primarily to higher average debt balances offset by lower
average interest rates.
The company's derivative agreements consist of simple "floating-to-fixed rate"
interest rate swaps. For the first quarter of 1999, interest rate hedge
agreements contributed $1.5 million of interest expense which is unchanged
from the contribution made in the same period of 1998. For a description of
these derivatives, see Item 7A. Quantitative and Qualitative Disclosures about
Market Risk in the company's Annual Report on Form 10-K for the fiscal year
ended December 26, 1998.
Interest income.
Interest income for the first quarter of 1999 was $2 million lower than 1998
due to lower average balances and interest rates for the company's notes
receivable and investment in direct financing leases.
Equity investment results.
The company's portion of operating losses from equity investments remained
unchanged at $4 million for the first quarter of 1999 compared to the same
period of 1998.
Litigation charge.
In October 1997, the company began paying Furr's $800,000 per month as part of
a settlement agreement. In 1998, the $3 million charge in the first quarter
represented this payment. The payments ceased upon the closing of the sale of
the El Paso product supply center to Furr's in October 1998.
Impairment/restructuring charge.
In December 1998, the company announced the implementation of a strategic plan
designed to improve the competitiveness of the retailers the company serves
and to improve the company's performance by building stronger operations that
can better support long-term growth. The pre-tax charge recorded in the
Consolidated Condensed Statements of Operations was $46 million for the first
quarter of 1999. The net charge for the first quarter of 1998 was not
significant. The $46 million charge in 1999 was recorded with $37 million
reflected in the Impairment/restructuring charge line and the balance
reflected in other financial statement lines. See -General above and Note 9.
in the notes to the consolidated condensed financial statements for further
discussion regarding the strategic plan.
Taxes on income.
The effective tax rate used for the first quarter of 1999 was 23.0%. This is
a blended rate taking into account operations activity, strategic plan
activity, write-offs of non-deductible goodwill and the timing of these
transactions during the year. The tax rate used for the first quarter of 1998
was 51.3%.
Other.
Several factors negatively affecting earnings in the first 16-weeks of 1999
are likely to continue for the near term. Management believes that these
factors include lower sales and operating losses in certain company-owned
retail stores.
Liquidity and Capital Resources
Set forth below is certain information regarding the company's capital
structure at the end of the first quarter of 1999 and at the end of fiscal
1998:
</TABLE>
<TABLE>
<CAPTION>
==============================================================================
Capital Structure (In millions) April 17, 1999 December 26, 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt $1,248 57.6% $1,185 55.5%
Capital lease obligations 373 17.2 381 17.8
- ------------------------------------------------------------------------------
Total debt 1,621 74.8 1,566 73.3
Shareholders' equity 547 25.2 570 26.7
- ------------------------------------------------------------------------------
Total capital $2,168 100.0% $2,136 100.0%
==============================================================================
</TABLE>
Note: The above table includes current maturities of long-term debt and
current obligations under capital leases.
Long-term debt was $63 million higher at the end of the first quarter of 1999
compared to year-end 1998 because cash requirements for capital expenditures
and other investments, plus the increase in cash balances, exceeded net cash
provided from operations and sales of assets. Capital lease obligations were
$8 million lower because repayments exceeded leases added for new retail
stores.
The debt-to-capital ratio at the end of the first quarter of 1999 was 74.8%,
up from 73.3% at year-end 1998.
Operating activities generated $32 million of net cash flows for the first
quarter of 1999 compared to $50 million for the same period in 1998. Working
capital was $359 million at the end of the first quarter of 1999, an increase
from $307 million at year-end 1998. The current ratio increased to 1.32 to 1,
from 1.24 to 1 at year-end 1998.
Capital expenditures were $50 million in the first quarter of 1999, an
increase of $12 million compared to the same period in 1998. Total capital
expenditures in 1999 are expected to be approximately $200 million. The
company's strategic plan involves the divesting of a number of food
distribution and retail food facilities and other assets, and focusing
resources in the remaining food distribution and retail food operations. The
company intends to increase its retail operations by making investments in its
existing stores and by adding approximately 20 stores per year for the
foreseeable future. Acquisitions of supermarket chains or groups or other
food distribution operations will be made only on a selective basis. The
company has recently purchased an eight-store Food 4 Less group in northern
California.
Over the next few years, the implementation of the strategic plan is expected
to result in fewer, higher-volume, more efficient food distribution operating
units; fewer and more profitable retail food stores; reduced overhead
expenses; and substantial increases in net earnings. Cash costs related to
the implementation and completion of these initiatives (on a pre-tax basis)
were $17 million in the first quarter of 1999, and are estimated to be a total
of $45 million in 1999, $51 million in 2000, and $65 million thereafter.
Management believes working capital reductions, proceeds from the sale of
assets, and increased earnings related to the successful implementation of the
strategic plan are expected to provide substantially more than enough cash
flow to cover these incremental costs.
The company makes investments in and loans to certain retail customers. Net
investments and loans decreased $12 million in the first quarter of 1999, from
$137 million at year-end 1998 to $125 million, due primarily to a reduced
level of investment in these assets by the company.
In the first quarter of 1999, the company's primary sources of liquidity were
cash flows from operating activities, borrowings under its credit facility,
and the sale of certain assets and investments. The company's principal
sources of capital, excluding shareholders' equity, are banks and other
lenders and lessors.
The company's credit facility consists of a $600 million revolving credit
facility, with a final maturity of July 25, 2003, and a $250 million
amortizing term loan, with a final maturity of July 25, 2004. Up to $300
million of the revolver may be used for issuing letters of credit, and
borrowings and letters of credit issued under the credit facility may be used
for general corporate purposes. Outstanding borrowings and letters of credit
are secured by a first priority security interest in the accounts receivable
and inventories of the company and its subsidiaries and in the capital stock
of or other equity interests owned by the company in its subsidiaries. In
addition, the credit facility is guaranteed by substantially all company
subsidiaries. The stated interest rate on borrowings under the credit
agreement is equal to a referenced index rate, normally the London interbank
offered interest rate ("LIBOR"), plus a margin. The level of the margin is
dependent on credit ratings on the company's senior secured bank debt.
The credit agreement and the indentures under which other company debt
instruments were issued contain customary covenants associated with similar
facilities. The credit agreement currently contains the following more
significant financial covenants: maintenance of a fixed charge coverage ratio
of at least 1.7 to 1, based on adjusted earnings, as defined, before interest,
taxes, depreciation and amortization and net rent expense; maintenance of a
ratio of inventory-plus-accounts receivable to funded bank debt (including
letters of credit) of at least 1.4 to 1; and a limitation on restricted
payments, including dividends. Covenants contained in the company's
indentures under which other company debt instruments were issued are
generally less restrictive than those of the credit agreement. The company is
in compliance with all financial covenants under the credit agreement and its
indentures.
The credit facility may be terminated in the event of a defined change in
control. Under the company's indentures, noteholders may require the company
to repurchase notes in the event a defined change of control coupled with a
defined decline in credit ratings.
At the end of the first quarter of 1999, borrowings under the credit facility
totaled $211 million in term loans and $170 million of revolver borrowings,
and $78 million of letters of credit had been issued. Letters of credit are
needed primarily for insurance reserves associated with the company's normal
risk management activities. To the extent that any of these letters of credit
would be drawn, payments would be financed by borrowings under the revolver.
At the end of the first quarter of 1999, the company would have been allowed
to borrow an additional $352 million under the revolving credit facility
contained in the credit agreement based on actual borrowings and letters of
credit outstanding. Under the company's most restrictive borrowing covenant,
which is the fixed charge coverage ratio contained in the credit agreement,
$12 million of additional annualized fixed charges could have been incurred.
On December 7, 1998, Standard & Poor's rating group ("S&P") announced it had
placed its BB corporate credit rating, BB- senior unsecured debt rating, B+
subordinated debt rating, and BB+ bank loan rating for the company on
CreditWatch with negative implications. The CreditWatch listing followed the
company's December 7, 1998 announcement of its new strategic plan. S&P said
that its action reflected its concern and opinion that, despite the positive
moves included in the new strategic plan, it would be difficult for Fleming to
restore measures of earnings and cash flow protection to levels appropriate
for the current rating.
On December 8, 1998, Moody's Investors Service ("Moody's") announced it had
confirmed its credit ratings of the company and had changed its rating outlook
from stable to negative following the company's December 7, 1998 announcement
of its new strategic plan. Moody's confirmed its Ba3 senior secured bank
agreements rating, B1 senior unsecured sinking fund debentures, medium-term
notes, senior notes, and issuer rating, and B3 senior subordinated unsecured
notes rating. In addition, Moody's said failure of the company to achieve
cost reductions or operational disruptions from the execution of the new
strategic initiatives could negatively impact financial returns and exert
downward pressure on the ratings.
Dividend payments in the first quarter of 1999 were $0.02 per share, which was
the same per share amount as in the first quarter of 1998. The credit
agreement and the indentures for the $500 million of senior subordinated notes
limit restricted payments, including dividends, to $67 million at the end of
the first quarter of 1999, based on a formula tied to net earnings and equity
issuances.
For the foreseeable future, the company's principal sources of liquidity and
capital are expected to be cash flows from operating activities, the company's
ability to borrow under its credit agreement and asset sale proceeds. In
addition, lease financing may be employed for new retail stores and certain
equipment. Management believes these sources will be adequate to meet working
capital needs, capital expenditures (including expenditures for acquisitions,
if any), strategic plan implementation costs and other capital needs for the
next 12 months.
Contingencies
From time to time the company faces litigation or other contingent loss
situations resulting from owning and operating its assets, conducting its
business or complying (or allegedly failing to comply) with federal, state and
local laws, rules and regulations which may subject the company to material
contingent liabilities. In accordance with applicable accounting standards,
the company records as a liability amounts reflecting such exposure when a
material loss is deemed by management to be both "probable" and "quantifiable"
or "reasonably estimable." Furthermore, the company discloses material loss
contingencies in the notes to its financial statements when the likelihood of
a material loss has been determined to be greater than "remote" but less than
"probable." Such contingent matters are discussed in Note 6 in the notes to
the consolidated condensed financial statements. An adverse outcome
experienced in one or more of such matters, or an increase in the likelihood
of such an outcome, could have a material adverse effect on the company. Also
see Legal Proceedings.
Fleming has numerous computer systems which were developed employing six digit
date structures (i.e., two digits each for month, day and year). Where date
logic requires the year 2000 or beyond, such date structures may produce
inaccurate results. Management has implemented a program to comply with
year-2000 requirements on a system-by-system basis including both information
technology (IT) and non-IT systems (e.g., microcontrollers). Fleming's plan
includes extensive systems testing and is expected to be substantially
completed by the third quarter of 1999. Code for the company's largest and
most comprehensive system, FOODS, has been completely remediated, reinstalled
and tested. Based on these tests, the company believes FOODS and the related
systems which run the company's distribution system will be year-2000 ready
and in place at all food distribution operating units. At year-end 1998, the
company was substantially complete with the replacement and upgrading
necessary to make its nearly 5,000 PCs year-2000 ready. Although the company
believes contingency plans will not be necessary based on progress to date,
contingency plans have been developed for each critical system. The content
of the contingency plans varies depending on the system and the assessed
probability of failure and such plans are modified periodically based on
remediation and testing. The alternatives include reallocating internal
resources, obtaining additional outside resources, implementing temporary
manual processes or temporarily rolling back internal clocks. Although the
company is developing greater levels of confidence regarding its internal
systems, failure to ensure that the company's computer systems are year-2000
compliant could have a material adverse effect on the company's operations.
The company is also assessing the status of its vendors' and customers'
year-2000 readiness through meetings, discussions, notices and questionnaires.
Vendor and customer responses and feedback are varied and in some cases
inconclusive. Accordingly, the company believes the most likely worst case
scenario could be customers' failure to serve and retain consumers resulting
in a negative impact on the company's sales. Failure of the company's
suppliers or its customers to become year-2000 compliant might also have a
material adverse impact on the company's operations.
Program costs to comply with year-2000 requirements are being expensed as
incurred. Total expenditures to third parties in 1997 through completion in
1999 are not expected to exceed $10 million, none of which is incremental.
Through the end of the first quarter of 1999, these third party expenditures
totaled approximately $7 million. To compensate for the dilutive effect on
results of operations, the company has delayed other non-critical development
and support initiatives. Accordingly, the company expects that annual
information technology expenses will not differ significantly from prior
years.
Forward-Looking Information
This report includes statements that (a) predict or forecast future events or
results, (b) depend on future events for their accuracy, or (c) embody
assumptions which may prove to have been inaccurate, including the company's
ability to successfully achieve the goals of its strategic plan and reverse
sales declines, cut costs and improve earnings; the company's assessment of
the probability and materiality of losses associated with litigation and other
contingent liabilities; the company's ability to develop and implement
year-2000 systems solutions; the company's ability to expand portions of its
business or enter new facets of its business; and the company's expectations
regarding the adequacy of capital and liquidity. These forward-looking
statements and the company's business and prospects are subject to a number of
factors which could cause actual results to differ materially including the:
risks associated with the successful execution of the company's strategic
business plan; adverse effects of the changing industry environment and
increased competition; continuing sales declines and loss of customers;
exposure to litigation and other contingent losses; failure of the company to
achieve necessary cost savings; failure of the company, its vendors or its
customers to develop and implement year-2000 system solutions; and the
negative effects of the company's substantial indebtedness and the limitations
imposed by restrictive covenants contained in the company's debt instruments.
These and other factors are described in the company's Annual Report on Form
10-K for the fiscal year ended December 26, 1998 and in other periodic reports
available from the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
No material change has occurred since year-end 1998. See Item 7A.
Quantitative and Qualitative Disclosures about Market Risk in the company's
Annual Report on Form 10-K for the fiscal year ended December 26, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Set forth below is information regarding litigation which became reportable or
as to which a material development has occurred since the date of the
company's Annual Report on Form 10-K for the fiscal year ended December 26,
1998:
(1) Class Action Suits. In 1996 certain stockholders and one noteholder
filed purported class action suits against the company and certain of its
present and former officers and directors, each in the U.S. District Court for
the Western District of Oklahoma. In 1997, the court consolidated the
stockholder cases as City of Philadelphia, et al. v. Fleming Companies, Inc.,
et al. The noteholder case was also consolidated, but only for pre-trial
purposes. During 1998, the noteholder case was dismissed and during the first
quarter of 1999, the consolidated case was also dismissed, each without
prejudice. The court gave the plaintiffs the opportunity to restate their
claims without prejudice and amended complaints were filed in both cases
during the first quarter of 1999. In May 1999, the company filed motions to
dismiss in both cases.
(2) Derivative Suits. In October 1996, certain of the company's present and
former officers and directors were named as defendants in two purported
shareholder derivative suits in the U.S. District Court for the Western
District of Oklahoma (Cauley, et al. v. Stauth, et al. and Rosenberg et al. v.
Stauth, et al.). Plaintiffs' complaints contain allegations that, among other
matters, the individual defendants breached their respective fiduciary duties
to the company and seek damages from the individual defendants.
Plaintiffs, the individual defendants and the company have agreed to a
Stipulation of Compromise and Dismissal that was filed with the court on May
24, 1999. The Stipulation recognizes that certain changes have been made at
the company since the derivative cases were filed and provides for payment of
plaintiffs' attorneys fees and expenses not exceeding $860,000. The
Stipulation will not be effective unless it is approved by the court after
notice to shareholders and a hearing. If approved by the court, the
derivative cases will be dismissed as to all defendants.
(3) Tobacco Cases. In August 1996, Richard E. Ieyoub, Attorney General of
the State of Louisiana, brought an action in the 14th Judicial District Court
of Louisiana against The American Tobacco Company and numerous defendants
including the company. The suit sought recovery of state health-care and
related expenditures allegedly caused by tobacco products. In 1998, the case
was settled (without liability to Fleming). In the first quarter of 1999, the
case was dismissed following final court approval of the settlement.
With respect to notices of suit or intention to sue filed by 27 individuals in
the Court of Common Pleas of Philadelphia County, during the first quarter of
1999, complaints were filed in two of the cases which were then removed to the
United States District Court for the Eastern District of Pennsylvania. With
respect to each case, the company is being indemnified and defended by a
substantial third-party co-defendant.
Pursuant to a tolling agreement among the parties, all of the cases which were
already pending in Pennsylvania (save two) were dismissed in 1998 without
prejudice and may be refiled at a later date.
(4) Don's United Super (and related cases). In March 1998, the company and
two retired executives were named in a suit filed in the United States
District Court for the Western District of Missouri by approximately 20
current and former customers of the company (Don's United Super, et al. v.
Fleming, et al.). Previously, two cases had been filed in the same court (R&D
Foods, Inc. et al. v. Fleming, et al. and Robandee United Super, Inc. et al.
v. Fleming, et al.) by 10 customers, some of whom are plaintiffs in the Don's
case. Also in 1998, a group of 14 retailers (ten of whom had been or are
currently plaintiffs in the Don's case and/or the Robandee case whose claims
were sent to arbitration or stayed pending arbitration) filed a new action
against the company and two former officers, one of whom was a director, in
the Western District of Missouri (Coddington Enterprises, Inc. et al. v. Dean
Werries, et al.).
The Don's suit alleges product overcharges, breach of contract,
misrepresentation, fraud, and RICO violations and seeks recovery of actual,
punitive and treble damages and a declaration that certain contracts are
voidable at the option of the plaintiffs. Damages have not been quantified.
However, with respect to some plaintiffs, the time period during which the
alleged overcharges took place exceeds 25 years and the company anticipates
that the plaintiffs will allege substantial monetary damages. Plaintiffs in
the Coddington cases assert claims virtually identical to those set forth in
the Don's complaint.
Plaintiffs have made a settlement demand in the Don's case for $42 million and
in the Coddington case for $44 million.
Item 4. Results of Votes of Security Holders
The company held its annual meeting on May 19, 1999. Matters voted on were as
follows:
Election of directors - Jack W. Baker, Edward C. Joullian III and Alice M.
Peterson were each elected members of the Board of Directors for terms
expiring in 2001. Directors whose terms of office continued are Carol B.
Hallett, Guy A. Osborn, David A. Rismiller, Herbert M. Baum, Archie R. Dykes
and Mark S. Hansen.
Amendment to the restated certificate of incorporation to provide for the
annual election of directors - Shareholders approved the proposal to amend the
company's restated certificate of incorporation to phase out the current
division of the Board of Directors into three classes and to provide instead
for the annual election of directors commencing with the class of directors
standing for election in 2000.
1999 stock incentive plan - Shareholders approved the proposal authorizing the
Board of Directors to grant and issue stock options and restricted stock
awards as defined by the plan.
Corporate officer incentive plan - Shareholders approved the proposal which
provides a system for determining incentive compensation to be paid to
corporate officers of the company.
Election of independed auditors - Shareholders ratified Deloitte & Touche LLP
as independent auditors for 1999.
The number of votes cast is as follows (votes in thousands):
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Election of directors
Jack W. Baker 34,198 636
Edward C. Joullian III 34,156 678
Alice M. Peterson 34,183 651
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Annual election of directors 27,076 292 192
1999 stock incentive plan 23,368 3,966 239
Corporate officer incentive plan 32,849 1,726 259
Election of independent auditors 34,623 149 62
</TABLE>
No other business came before the meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Page Number
3.1 Amended and Restated Certificate
of Incorporation as amended
May 19, 1999
3.2 Bylaws as amended May 19, 1999
10.49* Amendment to Fleming Companies,
Inc. 1990 Stock Incentive Plan
10.50* Employment Agreement for John T.
Standley dated as of May 17, 1999
10.51* Restricted Stock Agreement for John
T. Standley dated as of May 17, 1999
10.52* Letter Agreement for William H.
Marquard dated as of May 26, 1999
12 Computation of Ratio of Earnings
to Fixed Charges
15 Letter from Independent Accountants
As to Unaudited Interim Financial
Information
27 Financial Data Schedule
_______________
* Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
On April 16, 1999, the company announced that it was closing its Peoria,
Illinois food distribution division. The Peoria division was under strike by
the union. The company's LaCrosse, Wisconsin division was serving and will
continue to serve the retail customers previously supplied by Peoria.
On April 23, 1999, the company announced that the closing of its Peoria,
Illinois food distribution division was not originally part of the company's
strategic plan, but was added to the plan. The closing was expected to result
in a pre-tax charge of approximately $27 million ($25 million after income tax
benefits or $.65 per share) for the first quarter of 1999. $24 million ($23
million after income tax benefits or $.60 per share) of the $27 million
represented non-cash charges. Additional cash costs were expected to total
approximately $2 million over the next two years.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLEMING COMPANIES, INC.
(Registrant)
Date: June 1, 1999 KEVIN TWOMEY
Kevin Twomey
Senior Vice President-Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
<S> <C> <C>
3.1 Amended and Restated Certificate Filed herewith electronically
of Incorporation as amended
May 19, 1999
3.2 Bylaws as amended May 19, 1999 Filed herewith electronically
10.49 Amendment to Fleming Companies, Filed herewith electronically
Inc. 1990 Stock Incentive Plan
10.50 Employment Agreement for John T. Filed herewith electronically
Standley dated as of May 17, 1999
10.51 Restricted Stock Agreement for Filed herewith electronically
John T. Standley dated as of
May 17, 1999
10.52 Letter Agreement for William Filed herewith electronically
H. Marquard dated as of May 26,
1999
12 Computation of Ratio of Earnings Filed herewith electronically
to Fixed Charges
15 Letter from Independent Accountants Filed herewith electronically
As to Unaudited Interim Financial
Information
27 Financial Data Schedule Filed herewith electronically
</TABLE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FLEMING COMPANIES, INC.
ARTICLE ONE
The name of the corporation is:
FLEMING COMPANIES, INC.
ARTICLE TWO
The address of its registered office in the State of
Oklahoma is 735 First National Building, Oklahoma City, Oklahoma
73102, and the name of its registered agent at such address is
The Corporation Company.
ARTICLE THREE
The period of existence of the corporation shall be of
perpetual duration.
ARTICLE FOUR
The purposes for which the corporation is formed are:
To engage in the business of procuring and distributing
food and related products, and to purchase, buy, sell, exchange,
produce, manufacture, process, export, import, handle, store,
distribute, and otherwise generally deal in any and all articles
of food, food products, and food supplies of all kinds, both at
wholesale and retail, and acquire, construct, maintain, operate,
buy, sell, and deal with stores selling such goods, wares, and
merchandise; to acquire, construct, establish, maintain, operate,
or sell or dispose of factories, plants, warehouses, machinery
and equipment, markets, stores, and gathering and delivery routes
and systems for such purposes.
To engage in any lawful act or activity and to pursue
any lawful purpose for which a corporation may be formed under
the Business Corporation Act of Oklahoma.
To act in and conduct any lawful business for profit at
such places and in such manner as its directors shall determine,
and in so doing enter into any general, special or limited
partnership as a general, special or limited partner; or into any
association or arrangement for sharing profits, union of inter
est, reciprocal concessions or transactions capable of being
conducted so as to benefit, directly or indirectly, the corporation;
To raise or procure funds from other individuals,
firms, associations or corporations to be invested in any business
in which this corporation might engage, for and on behalf of
the parties investing such funds as individual owners or in one
or more joint ventures, general partnerships, limited partner
ships, syndicates or other associations or other corporations,
whether the corporation is or is not a co-owner, joint venturer,
associate, partner or shareholder in the business in which such
funds are levied;
To guarantee, co-sign and be surety for the debts, dues
and obligations of its subsidiaries, affiliates, parent corpora-
tions, shareholders, partners, whether general, special or
limited, joint co-adventurers, co-tenants, and any other persons,
firms or corporations, to obtain a loan commitment or contract
which will beneficially affect this corporation or its shareholders;
provided, it shall not be the purpose of this corporation to
transact a business of insurance or to do any act prohibited by
law to a business corporation;
The objects and purposes specified in the foregoing
clauses shall, except where otherwise expressed, be in no wise
limited or restricted by reference to, or inference from the
terms of any other clause in this or any other article of this
Certificate of Incorporation, but the objects and purposes
specified in each of the foregoing clauses of this article shall
be regarded as independent powers as well as objects and purposes
and the enumeration of specific powers, objects and purposes is
in addition to and not in limitation of the powers conferred by
the provisions of the Oklahoma General Corporation Act.
ARTICLE FIVE
The aggregate number of shares of all classes of stock
which the corporation shall have authority to issue is one
hundred two million shares (102,000,000) of which two million
(2,000,000) are to be Preferred Stock of a par value of $10.00
per share, and one hundred million shares (100,000,000) are to be
common stock with a par value of $2.50 per share. The designation
of each class, the number of shares of each class, and the par
value of each class are as follows:
Number Par
Class of Shares Value
----- --------- -----
Preferred Stock 2,000,000 $10.00
Common Stock 100,000,000 $ 2.50
The preferences, qualifications, limitations, restric-
tions and special or relative rights in respect of the shares of
each class are as follows:
Division A - Preferred Stock. Shares of the Preferred
Stock may be issued from time to time in one or more series,
shares of each series to have such voting powers, full or lim
ited, or no voting powers, and such designations, preferences and
relative, participating, option or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed herein or in a resolution or resolutions
providing for the issue of such series adopted by the Board of
Directors of the Corporation. The Board of Directors of the
Corporation is hereby expressly authorized, subject to the
limitations provided by law, to establish and designate series of
the Preferred Stock, to fix the number of shares constituting
each series, and to fix the designations of the relative powers,
rights, preferences and limitations of the shares of each series
and the variation and variations in the relative powers, rights,
preferences and limitations as between series, and to increase
and to decrease the number of shares constituting each series.
Subject to the limitations imposed herein and by law, the author
ity of the Board of Directors of the Corporation with respect to
each series shall include but not be limited to the authority to
determine the following: (i) the designation and number of shares
constituting each series; (ii) the dividend rate payable on each
series and whether such dividends are cumulative or
noncumulative; (iii) the voting rights, if any, with respect to
each series; (iv) the redemption rights, if any, with respect to
each series; (v) the creation, if any, of a sinking fund with
respect to each series: (vi) the conversion rights, if any, with
respect to each series; (vii) the preference rights upon
liquidation or dissolution; (viii) the relative priority of the
shares of each series to shares of other classes or series with
respect to dividends or other dissolution of or the distribution
of the assets of the corporation; and (ix) any other rights and
qualifications, preferences and limitations or restrictions of
the shares of each series.
Division B - Common Stock. Each share of Common Stock
of the Corporation shall be equal in all respects to each other
share. The holders of Common Stock shall be entitled to one vote
for each share of Common Stock held with respect to all matters
as to which the Common Stock is entitled to be voted. Except as
otherwise required by law, the holders of Common Stock shall vote
together with the holders of shares of Preferred Stock, if any
have been issued, and all series thereof who are entitled to
vote, and not separately by class.
Subject to the preferential and other dividend rights,
if any, applicable to the shares of Preferred Stock, the holders
of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock or otherwise) as may be declared on the
Common Stock by the Board of Directors at any time or from time
to time out of any funds legally available therefor.
In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after
distribution in full of the preferential and/or other amounts to
be distributed to the holders of the shares of Preferred Stock,
if any shall have been issued, the holders of Common Stock shall
be entitled to receive all of the remaining assets of the
Corporation available for distribution to its shareholders,
ratably in proportion to the number of shares of Common Stock
held by them. A liquidation, dissolution or winding up of the
Corporation, as such terms are used in this subparagraph, shall
not be deemed to be occasioned by or to include any consolidation
or merger of the Corporation with or into any other corporation
or corporations or a sale, lease, or conveyance of all or a part
of the assets of the Corporation or any liquidation, dissolution
and/or winding up of the Corporation in connection therewith.
ARTICLE SIX
The amount of stated capital with which the corporation
will begin business is $500.00, which has been fully paid in.
ARTICLE SEVEN
The number and class of shares to be allotted by the
corporation before it shall begin business and the consideration
to be received by the corporation therefor, are:
Consideration to be
Class of Shares Number of Shares Received Therefor
- --------------- ---------------- -----------------
Common 200 $500.00
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.
ARTICLE NINE
For the regulation of the internal affairs of the
corporation, it is provided as follows:
Authority to adopt, amend, alter, repeal or readopt
bylaws for the government of the corporation is, subject to the
right of the shareholders to alter or repeal such bylaws, hereby
vested in the board of directors.
No right to dissent shall exist in behalf of any
shareholders as to all or any corporate action if such action be
approved by the vote or written consent of the holders of at
least ninety percent (90%) of all outstanding shares of the
corporation, or in behalf of the holders of the shares of any
class or classes if such corporation action be approved by the
written consent of the holders of at least ninety percent (90%)
of all outstanding shares and of at least three-fourths (3/4) of
the shares of such class or classes.
ARTICLE TEN
Section 1. Vote Required for Certain Business Combina-
tions.
A. Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law, this
Certificate of Incorporation or otherwise, and except as
otherwise expressly provided in Section 2 of this Article Ten:
(i) any merger or consolidation of the Corporation
or any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b)
any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger
or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested Share-
holder of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation
or any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or
any Subsidiary (other than pursuant to any stock option
or similar plans now in effect or hereafter adopted by
the Corporation and approved by vote of the
shareholders of the Corporation solicited substantially
in accordance with the rules and regulations then in
effect under Section 14 of the Securities Exchange Act
of 1934) to any Interested Shareholder or any Affiliate
of any Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $2,000,000 or
more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed
by or on behalf of any Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any
Affiliate of any Interested Shareholder;
shall require the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), including the holders
of at least 80% of the outstanding Common Stock not held by
Interested Shareholders, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
B. Definition of "Business Combination". The term
"Business Combination" as used in this Article Ten shall mean any
transaction that is referred to in any one or more of clauses (i)
through (v) of paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required. The
provisions of Section 1 of this Article Ten shall not be
applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as
is required by law and any other provision of this Certificate of
Incorporation, if all of the conditions specified in either of
the following paragraphs A and B are met:
A. Approval by Continuing Directors. The Business
Combination shall have been approved by three-fourths (3/4) of
the Continuing Directors (as hereinafter defined).
B. Price and Procedure Requirements. All of the
following conditions shall have been met:
(i) The aggregate amount of cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of Common Stock in
such Business Combination shall be at least equal to
the highest of the following:
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by the Interested Shareholder for any shares of
Common Stock acquired by it (1) within the
two-year period immediately prior to the first
public announcement of the proposal of the
Business Combination (the "Announcement Date") or
(2) in the transaction in which it became an
Interested Shareholder (the date of such
transaction being referred to herein as the
"Determination Date"), whichever is higher; or
(b) the Fair Market Value per share of Common
Stock on the Announcement Date or the
Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of shares of any
other class of outstanding Voting Stock shall be at
least equal to the highest of the following (it being
intended that the requirements of this paragraph B(ii)
shall be required to be met with respect to every class
of outstanding Voting Stock, whether or not the
Interested Shareholder has previously acquired any
shares of a particular class of Voting Stock):
(a) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by the Interested Shareholder for any shares of
such class of Voting Stock acquired by it (1)
within the two-year period immediately prior to
the Announcement Date or (2) in the transaction in
which it became an Interested Shareholder, which-
ever is higher;
(b) (if applicable) the highest preferential
amount per share to which the holders of shares of
such class of Voting Stock are entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; or
(c) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher.
(iii) The consideration to be received by holders
of a particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the
same form as the Interested Shareholder has previously
paid for the largest number of shares of such class of
Voting Stock.
(iv) After such Interested Shareholder has become
an Interested Shareholder and prior to the consummation
of such Business Combination: (a) except as approved by
three-fourths (3/4) of the Continuing Directors, there
shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding
Preferred Stock; (b) there shall have been (1) no
reduction in the annual rate of dividends, if any, paid
on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by
three-fourths (3/4) of the Continuing Directors, and
(2) no failure to increase the annual rate of dividends
as necessary to reflect any reclassification (including
any reverse stock split), recapitalization,
reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of
the Common Stock, unless the failure so to increase
such annual rate is approved by three-fourths (3/4) of
the Continuing Directors; and (c) such Interested
Shareholder shall have not become the beneficial owner
of any additional shares of Voting Stock except as part
of the transaction which results in such Interested
Shareholder becoming an Interested Shareholder.
(v) After such Interested Shareholder has become
an Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(vi) A proxy or information statement, describing
the proposed Business Combination and complying with
the requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be prepared and mailed by the
Corporation, at the expense of the Interested
Shareholder, to public shareholders of the Corporation
at least 30 days prior to the meeting at which such
Business Combination will be voted upon (whether or not
such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
If the conditions of paragraph B(i)-(v) of this Section
have been met, then the provisions of Section 1 of this Article
Ten shall not be applicable as to the approval of such Business
Combination. If any of such conditions have not been met, then
Section 1 of this Article Ten shall be applicable.
Section 3. Certain Definitions. For the purposes of
this Article Ten:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Shareholder" shall mean any person
(other than the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the
outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to
the date in question was the beneficial owner, directly
or indirectly, of 10% or more of the voting power of
the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded
to any shares of Voting Stock that were at any time
within the two-year period immediately prior to the
date in question owned beneficially by any Interested
Shareholder, if such assignment or succession shall
have occurred in the course of a transaction or series
of transactions not involving a public offering within
the meaning of the Securities Act of 1933.
C. A person shall be a "beneficial owner" of any
Voting Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) owns beneficially,
directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote
pursuant to any agreement, arrangement or
understanding; or
(iii) which are owned beneficially, directly or
indirectly, by any other person with which such person
or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any
shares of Voting Stock.
D. For the purposes of determining whether a person is
an Interested Shareholder pursuant to paragraph B of this Section
3, the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of
paragraph C of this Section 3 but shall not include any other
shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on December 31, 1984.
F. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Interested Shareholder set forth in
paragraph B of this Section 3, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
G. "Continuing Director" means any member of the Board
of Directors of the Corporation (the "Board") who is unaffiliated
with the Interested Shareholder and was a member of the Board
prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Shareholder and
is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the Board.
H. "Fair Market Value" means: (i) in the case of
stock, the highest closing sale price during the 30-day period
ending on the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such
stock during the 30-day period ending on the date in question on
the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in
question of a share of such stock as determined by the Board in
good faith; and (ii) in the case of property other than cash or
stock, the fair market value of such property on the date in
question as determined by the Board in good faith.
I. In the event of any Business Combination in which
the Corporation survives, the phrase "other consideration to be
received" as used in paragraphs B(i) and (ii) of Section 2 of
this Article Ten shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
Section 4. Powers of Continuing Directors. The
Continuing Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article Ten, on the
basis of information known to them after reasonable inquiry, (A)
whether a person is an Interested Shareholder, (B) the number of
shares of Voting Stock owned beneficially by any person, (C)
whether a person is an Affiliate or Associate of another and (D)
whether the assets that are the subject of any Business
Combination have an aggregate Fair Market Value of $1,000,000 or
more, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in
any Business Combination has an aggregate Fair Market Value of
$2,000,000 or more.
ARTICLE ELEVEN
Section 1. Prevention of "Greenmail". Any direct or
indirect purchase or other acquisition by the Corporation of any
Equity Security (as hereinafter defined) of any class from any
Interested Securityholder (as hereinafter defined) who has
beneficially owned such securities for less than two years prior
to the date of such purchase or any agreement in respect thereof
shall, except as hereinafter expressly provided, require the
affirmative vote of the holders of at least a majority of the
voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), voting together as a single class
(it being understood that for the purposes of this Article
Eleven, each share of the Voting Stock shall have the number of
votes granted to it pursuant to Article Five of this Certificate
of Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or any agreement of
any national securities exchange, or otherwise, but no such
affirmative vote shall be required with respect to any purchase
or other acquisition of securities made as part of a tender or
exchange offer by the Corporation to purchase securities of the
same class made on the same terms to all holders of such
securities and complying with the applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act,
rules or regulations).
Section 2. Certain Definitions. For the purposes of
this Article Eleven:
A. A "person" shall mean any individual, firm,
corporation or other entity.
B. "Interested Securityholder" shall mean any person
(other than the corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of 5% or more of the class of securities to
be acquired; or
(ii) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to
the date in question was the beneficial owner, directly
or indirectly, of 5% or more of the class of securities
to be acquired; or
(iii) is an assignee of or has otherwise succeeded
to any shares of the class of securities to be acquired
which were at any time within the two-year period
immediately prior to the date in question beneficially
owned by an Interested Security-holder, if such assign-
ment or succession shall have occurred in the course of
a transaction or transactions not involving a public
offering within the meaning of the Securities Act of
1933.
C. A person shall be a "beneficial owner" of any
security of any class of the Corporation:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (b) any right to vote
pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person
or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any
security of any class of the Corporation.
D. For the purposes of determining whether a person is
an "Interested Securityholder" pursuant to paragraph B of this
Section 2, the relevant class of securities outstanding shall be
deemed to comprise all such securities deemed owned through
application of paragraph C of this Section 2, but shall not
include other securities of such class which may be issuable
pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on January 1, 1985.
F. "Equity Security" shall have the meaning ascribed
to such term in Section 3(a)(11) of the Securities Exchange Act
of 1934, as in effect on January 1, 1985.
ARTICLE TWELVE
Notwithstanding any other provision of this Certificate
of Incorporation or the By-Laws of the Corporation (and notwith-
standing the fact that a lesser percentage may be specified by
law, this Certificate of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of 80% or more
of the voting power of the shares of the then outstanding Voting
Stock (as defined in Article Ten of this Certificate of
Incorporation), voting together as a single class, shall be
required to amend or repeal, or adopt any provisions inconsistent
with, Article Ten and Article Eleven of this Certificate of
Incorporation; provided, however, that if not less than
three-fourths (3/4) of the entire Board of Directors shall adopt
a resolution setting forth a proposed amendment hereto and
directing that it be submitted to a vote at a meeting of
shareholders, then such amendment shall be approved upon
receiving the affirmative vote of a majority of all of the votes
entitled to be cast by the outstanding capital stock of the
Corporation.
ARTICLE THIRTEEN
No director of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or
its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or which he knows to be a
violation of law, (iii) under Section 1053 of the Oklahoma
General Corporation Act, or (iv) for any transaction from which
the director derived an improper personal benefit.
Exhibit 3.2
BYLAWS
OF
FLEMING COMPANIES, INC.
ARTICLE I
Offices
Section 1.1. Principal Office. The principal office of Fleming
Companies, Inc. (the "Corporation") shall be located at 6301 Waterford
Boulevard, Oklahoma City, Oklahoma.
Section 1.2. Other Offices. The Corporation may also have offices at
such other places both within or without the State of Oklahoma as the
Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 2.1. Annual Meeting. The annual meeting of the shareholders
shall be held on a date designated by the Board of Directors, which
shall be within six months next following the end of the fiscal year of
the Corporation, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting.
Section 2.2. Special Meetings. Except as otherwise prescribed by
statute, special meetings of the shareholders for any purpose, may be
called by the Chairman and shall be called by the Secretary at the
request in writing of a majority of the Board of Directors. Business
transacted at any special meeting shall be limited to the general
objects stated in the call.
Section 2.3. Place of Meeting. Each annual meeting of the
shareholders for the election of directors shall be held at the
principal office of the Corporation in Oklahoma City, Oklahoma unless
the Board of Directors shall by resolution, adopted at least 60 days
prior to the date of such meeting, designate any other place, within or
without the State of Oklahoma, as the place of such meeting. Meetings
of shareholders for any other purpose may be held at such place, within
or without the State of Oklahoma, and at such time as shall be
determined by the Board of Directors or the Chairman, such time to be
stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2.4. Notice of Meeting. Written or printed notice stating the
place and time of each annual or special meeting of the shareholders
entitled to vote and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given not less than
10 days nor more than 60 days before the date of the meeting. (See
also Article IV).
Section 2.5. Shareholder List. A share ledger in which the names of
the shareholders are arranged alphabetically by classes of shares, if
any, shall be maintained and open for inspection during ordinary
business hours, for a period of at least 10 days prior to the meeting,
either at the place within the city where the meeting is to be held,
which place shall be specified on the notice of the meeting. or if not
so specified, at the place where the meeting is to be held. The list
shall also be available at the time and place of the meeting, during
the whole time of the meeting, and may be inspected by any shareholder
who is present. Such access to the shareholder list shall be
restricted to those shareholders whose purpose in viewing the list is
germane to the meeting.
Section 2.6. Quorum. The holders of voting stock of the Corporation
having a majority of the voting power thereat, present in person or
represented by proxy, shall be requisite for, and shall constitute, a
quorum at all meetings of the shareholders of the Corporation for the
transaction of business, except as otherwise provided by statute or the
Corporation's Certificate of Incorporation or these Bylaws.
Section 2.7. Proxies. At every meeting of the shareholders, each
shareholder having the right to vote thereat shall be entitled to vote
in person or by proxy. Such proxy shall be appointed by an instrument
in writing subscribed by such shareholder and bearing a date not more
than three years prior to such meeting, unless such proxy provides for
a longer period; and it shall be filed with the Secretary of the
Corporation before, or at the time of, the meeting.
Section 2.8. Voting. At every meeting of shareholders, except as
otherwise provided by law, each shareholder shall be entitled to one
vote for each share of stock of the Corporation entitled to vote
thereat and registered in the name of such shareholder on the books of
the Corporation on the pertinent record date. When a quorum is present
at any meeting of the shareholders, the vote of the holders of a
majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, due to a provision of
the statutes or the Corporation's Certificate of Incorporation or these
Bylaws, a different vote is required, in which case such provision
shall govern and control the decision at such question.
Section 2.9. Record Date. (a) In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment or
any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other
lawful action other than shareholder action by written consent, the
Board of Directors may fix a record date, which shall not precede the
date such record date is fixed and shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days
prior to any such other action. If no record date is fixed, the record
date for determining shareholders entitled to notice of or to vote at
a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given. The record date for
any other purpose other than shareholder action by written consent
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the shareholders
entitled to consent to corporate action in writing without a meeting,
the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more
than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any shareholder of record
seeking to have the shareholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the
Board of Directors to fix a record date. The Board of Directors shall
promptly, but in all events within 10 days after the date on which such
a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days
of the date on which such a request is received, the record date for
determining shareholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Oklahoma, its principal place of
business, or any officer or agent of the corporation having custody of
the book in which proceedings of meetings of shareholders are recorded.
Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action
by the Board of Directors is required by applicable law, the record
date for determining shareholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution
taking such prior action.
Section 2.10. Nominations of Directors. Only persons who are
nominated in accordance with the procedures set forth in the Bylaws
shall be eligible to serve as directors. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a
meeting of shareholders (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in
this Section 2.10, who shall be entitled to vote for the election of
directors at the meeting and who complies with the notice procedures
set forth in this Section 2.10. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be delivered
to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the meeting is given
or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting or
such public disclosure was made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate
for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director
if elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the Corporation's books, of such
shareholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder. At the request of
the Board of Directors, any person nominated by the Board of Directors
for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. No
person shall be eligible to serve as a director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 2.10. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and if he
should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. Notwithstanding the
foregoing provisions of this Section 2.10, a shareholder shall also
comply with all applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section.
Section 2.11. Business. At any meeting of the shareholders, only such
business shall be conducted as shall have been brought before the
meeting (a) by or at the direction of the Board of Directors or (b) by
any shareholder of the Corporation who is a shareholder of record at
the time of giving of the notice provided for in this Section 2.11, who
shall be entitled to vote at such meeting and who complies with the
notice procedures set forth in this section 2.11. For business to be
properly brought before a shareholder meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days
prior to the meeting; provided, however, that in the event that less
than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to
be timely must be received no later than the close of business on the
10th day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A shareholder's
notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on the Corporation's books, of the
shareholder proposing such business, (c) the class and number of shares
of the Corporation which are beneficially owned by the shareholder and
(d) any material interest of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at a shareholder meeting except in accordance with
the procedures set forth in this Section 2.11. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and
in accordance with the provisions of the Bylaws, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 2.11, a
shareholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this
Section.
ARTICLE III
Directors
Section 3.1. Number and Election. The property and business of the
Corporation shall be managed by its Board of Directors. The number of
directors which shall constitute the whole Board shall be not more than
20 and not less than three. The Board of Directors shall from time to
time by a vote of a majority of the directors then in office fix within
the maximum and minimum the number of directors to constitute the
Board. Except as provided in Section 3.2 of these Bylaws, the
directors shall be elected at the annual meeting of shareholders, or at
any adjournment thereof, and each director shall be elected and shall
hold office in the manner provided by Article Eight of the Restated
Certificate of Incorporation. Directors need not be shareholders of
the Corporation.
Section 3.2. Resignations and Vacancies. Any director may resign at
any time by giving written notice to the Chairman or Secretary of the
Corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. Vacancies created on the
Board of Directors shall be filled in accordance with the procedure set
forth in Article Eight of the Restated Certificate of Incorporation.
Section 3.3. Place of Meetings. Meetings of the Board of Directors
may be held at such place or places, within or without the State of
Oklahoma, as may be designated by the person or persons calling such
meetings.
Section 3.4. Annual Meeting. A meeting of the Board of Directors, to
be known as the annual meeting, shall be held following and on the same
day as the meeting of shareholders at which such Board of Directors is
elected. This meeting shall be held for the purpose of electing the
officers of the Corporation and for transacting any other business that
may properly come before the meeting. No notice of this annual meeting
other than these Bylaws shall be necessary in order to legally
constitute the meeting, provided a quorum shall be present.
Section 3.5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times as the Chairman or the Board of
Directors may from time to time determine.
Section 3.6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman and shall be called by the
Secretary at the request of any two directors, to be held at such time
and place, either within or without the State of Oklahoma, as shall be
designated by the call and specified in the notice of such meeting; and
notice thereof shall be given as provided in Section 3.7 of these
Bylaws.
Section 3.7. Notice. Except as otherwise prescribed by statute,
written notice of the time and place of each regular or special meeting
of the Board of Directors shall be given at least two days prior to the
time of holding the meeting. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute
a waiver of notice of such meeting, except where a director expressly
objects to the transaction of any business because the meeting is not
lawfully called or convened and such objection is made prior to the
transaction of such business. Neither the business to be transacted
at, nor the purpose of, any special meeting of the Board of Directors
need be specified in any notice, or waiver of notice, of such special
meeting except that notice shall be given of any proposed amendment by
these Bylaws or with respect to any other matter where notice is
required by statute. (See also Article IV).
Section 3.8. Quorum. At each meeting of the Board of Directors, the
presence of not less than a majority of the whole board shall be
necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute
or the Corporation's Certificate of Incorporation or these Bylaws. If
a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.9. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or
more committees, each committee to consist of two or more directors of
the Corporation, which, to the extent provided in the resolution, shall
have and may exercise the powers of the Board of Directors in the
management of the business or affairs of the Corporation and may
authorize the seal of the Corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by
the Board of Directors. The Board of Directors may designate one or
more directors as alternate members of any such committee, who may
replace any absent or disqualified member thereof. Each committee
shall keep regular minutes of its meetings and report the same to the
Board of Directors when required by the Board.
Section 3.10. Fees and Compensation of Directors. Directors may
receive stated salary for their services as such; or, by resolution of
the Board of Directors, a fixed fee, with or without expenses of
attendance, may be allowed for attendance at each regular or special
meeting of the Board. Members of the board shall be allowed their
reasonable traveling expenses when actually engaged in the business of
the Corporation, to be audited and allowed as in other cases of demands
against the Corporation. Members of standing or special committees may
be allowed like fees and expenses for attending committee meetings.
Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 3.11. Action Without a Meeting. Any action which might be
taken at a meeting of the Board of Directors may be taken without a
meeting if a record or memorandum thereof be made in writing and signed
by all the members of the board, and such writing is filed with the
minutes of the proceedings of the board.
ARTICLE IV
Notices
Section 4.1. Manner of Notice. Whenever under the provisions of the
statutes or the Corporation's Certificate of Incorporation or these
Bylaws notice is required to be given to any director, member of any
committee designated by the Board of Directors pursuant to authority
conferred by Section 3.9 of these Bylaws, or shareholder, it shall be
given in writing by depositing it, in a sealed envelope, in the mails,
postage prepaid, addressed (or by delivering it to a telegraph company,
charges prepaid, for transmission) to such director, member or
shareholder either at the address of such director, member or
shareholder as it appears on the books of the Corporation or, in the
case of such a director or member, at his business address; and such
notice shall be deemed to be given at the time when it is thus
deposited in the mails (or delivered to the telegraph company).
Section 4.2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes or the Corporation's
Certificate of Incorporation or these Bylaws, a waiver thereof in
writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed
equivalent thereto. Any shareholder or director who attends any
meeting, annual, regular or special, shall be conclusively presumed to
have waived notice thereof, except where such shareholder or director
expressly objects to the transaction of any business because the
meeting is not lawfully called or convened and such objection is made
prior to the transaction of such business.
ARTICLE V
Officers
Section 5.1. Officers and Official Positions. The Board of Directors
may elect a Chairman of the Board. The office of Chairman of the Board
may be named Chairman if so designated by the Board of Directors. The
Board may elect a President, one or more Vice Presidents, a Secretary,
a Treasurer, a Controller, such Assistant Secretaries, Assistant
Treasurers, and Assistant Controllers and such other officers as the
Board of Directors shall determine. Any two or more offices may be
held by the same person. None of the officers need be a director or
a shareholder of the Corporation or a resident of the State of
Oklahoma.
Section 5.2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at the
annual meeting of the Board. If the election of officers shall not be
held at such meeting of the board, such election shall be held at a
regular or special meeting of the Board of Directors as soon thereafter
as may be convenient. Each officer shall hold office until a successor
is chosen and qualified or until death, or until such officer shall
resign, or shall have been removed in the manner hereinafter provided.
Section 5.3. Removal and Resignation. Any officer may be removed,
either with or without cause, by a majority of the directors at the
time in office at any regular or special meeting of the Board; but such
removal shall be without prejudice to the contract rights, if any, of
such person so removed. Any officer may resign at any time by giving
written notice to the Chairman or Secretary of the Corporation. Any
such resignation shall take effect at the date of the receipt of such
notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5.4. Vacancies. A vacancy in any office because of death,
resignation, removal, or any other cause may be filled for the
unexpired portion of the term by the Board of Directors at any regular
or special meeting of the Board.
Section 5.5. Chief Executive Officer. If the Board of Directors has
elected a Chairman, it may designate the Chairman as the Chief
Executive Officer of the Corporation. If no Chairman has been elected,
or in the Chairman's absence or inability to act or if no such
designation has been made by the Board of Directors, the President or
such other designee as the Board of Directors shall determine shall act
as the Chief Executive Officer of the Corporation. The Chief Executive
Officer shall (i) have the overall supervision of the business of the
Corporation and shall direct the affairs and policies of the
Corporation, subject to any directions which may be given by the Board
of Directors, (ii) shall have authority to delegate special powers and
duties to specified officers, so long as such designations shall not be
inconsistent with the statutes or the Corporation's Certificate of
Incorporation or these Bylaws or action of the Board of Directors and
(iii) shall in general have all other powers and shall perform all
other duties incident to the chief executive officer of a corporation
and such other powers and duties as may be prescribed by the Board of
Directors from time to time.
The Chairman, if one has been elected, shall preside at all meetings of
the shareholders, and of the Board of Directors. The Chairman may sign
with the Secretary or an Assistant Secretary, certificates for shares
of stock of the Corporation, the issuance of which shall have been duly
authorized by the Board of Directors.
Section 5.6. President. (a) If the Board of Directors has elected a
Chairman and designated such officer as the Chief Executive Officer of
the Corporation, the President shall be subject to the control of the
Board of Directors and the Chairman, and shall have such powers and
perform such duties as from time to time may be assigned by the Board
of Directors or the Chairman.
(b) If the Board of Directors has not elected a Chairman, or, if
one has been elected and has not been designated the Chief Executive
Officer of the Corporation, then the President or such other person as
may be designated by the Board of Directors shall be the Chief
Executive Officer of the Corporation with the powers and duties
provided in Section 5.5 of these Bylaws.
(c) In any event, the President shall have power to execute, and
shall execute, deeds, mortgages, bonds, contracts or other instruments
of the corporation except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The
President may sign with the Secretary or an Assistant Secretary,
certificates for shares of stock of the Corporation, the issuance of
which shall have been duly authorized by the Board of Directors, and
shall vote, or give a proxy to any other person to vote, all shares of
stock of any other corporation standing in the name of the Corporation.
Section 5.7. Vice Presidents. In the absence of the President, or in
the event of his inability or refusal to act, the Vice President
designated by the Board of Directors or the Chief Executive Officer,
shall perform all duties of the President and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon,
the President. The Vice Presidents shall have such other powers and
perform such other duties, not inconsistent with the statutes or the
Corporation's Certificate of Incorporation or these Bylaws or action of
the Board of Directors, as from time to time may be prescribed for
them, respectively, by the Chief Executive Officer. The Board of
Directors may, from time to time, designate certain of the Vice
Presidents as Executive Vice Presidents, Senior Vice Presidents, Vice
Presidents, Assistant Vice Presidents or such other designation as the
Board of Directors deems appropriate. The duties and areas of
responsibility of the various Vice Presidents shall be determined by
the Chairman and the Board of Directors, to the extent not inconsistent
with applicable statutes or these Bylaws.
Section 5.8. Secretary. The Secretary shall: (a) keep the minutes of
the meetings of the shareholders, the Board of Directors and committees
of directors, in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) have charge of the corporate
records and of the seal of the Corporation; (d) affix the seal of the
Corporation or a facsimile thereof, or cause it to be affixed, to all
certificates for shares prior to the issuance thereof and to all
documents the execution of which on behalf of the Corporation under its
seal is duly authorized by the Board of Directors or otherwise in
accordance with the provisions of these Bylaws; (e) keep a register of
the post office address of each shareholder, director and committee
member, which shall from time to time be furnished to the Secretary by
such shareholder, director or member; (f) sign with the Chairman or
President certificates for shares of stock of the Corporation, the
issuance of which shall have been duly authorized by resolution of the
Board of Directors; (g) have general charge of the stock transfer
books of the Corporation; and (h) in general, perform all duties
incident to the office of Secretary and such other duties as from time
to time may be assigned by the Chairman, the President or by the Board
of Directors. The Secretary may delegate such details of the
performance of duties of the office of Secretary as may be appropriate
in the exercise of reasonable care to one or more persons, but shall
not thereby be relieved of responsibility for the performance of such
duties.
Section 5.9. Chief Financial Officer. The Chief Financial Officer
shall be a Vice President, elected and designated as Chief Financial
Officer, who shall: (a) be responsible to the Board of Directors for
the receipt, custody and disbursement of all funds and securities of
the Corporation; (b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever and deposit all
such moneys in the name of the Corporation in such banks, trust
companies or other depositories as shall from time to time be selected
in accordance with the provisions of Section 6.4 of these Bylaws; (c)
disburse the funds of the Corporation as ordered by the Board of
Directors or the Chief Executive Officer or as required in the ordinary
conduct of the business of the Corporation; (d) render to the Chief
Executive Officer or the Board of Directors, upon request, an account
of all transactions as Chief Financial Officer and on the financial
condition of the Corporation; and (e) in general, perform all the
duties incident to the office of Chief Financial Officer and such other
duties as from time to time may be assigned by the Chairman, the
President, the Board of Directors or these Bylaws. In the event there
be no Chief Financial Officer, the Board of Directors may designate any
officer to perform the duties of the Chief Financial Officer.
Section 5.10. Treasurer. The Treasurer shall have such duties and
responsibilities as may, from time to time, be designated by the Board
of Directors, the Chairman and the Chief Financial Officer.
Section 5.11. Controller. The Controller shall be the chief
accounting officer of the Corporation, and shall be responsible to the
Board of Directors and the Chief Financial Officer for internal
accounting and control of the books and records of the Corporation.
Such responsibility includes preparation of all financial reports, tax
returns and such other duties as may be assigned by the Board of
Directors or the Chief Financial Officer.
ARTICLE VI
Contracts, Borrowings, Checks and Deposits
Section 6.1. Contracts and Other Instruments. The Board of Directors
may authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of and
on behalf of the Corporation, and such authority may be general or
confined to specific instances.
Section 6.2. Borrowings. No borrowings shall be contracted on behalf
of the corporation, or any division thereof, and no evidence of
indebtedness shall be issued in the name of the Corporation, unless
authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 6.3. Checks, Drafts, etc. All checks, demands, drafts or
other orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by
such officer or officers, agent or agents of the Corporation, and in
such manner, as shall from time to time be determined by the Board of
Directors.
Section 6.4. Deposits. All funds of the Corporation, not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the
Chief Financial Officer or Treasurer may select.
Section 6.5. Investments. The Board of Directors may authorize any
officer or officers, agent or agents of the Corporation, to invest the
funds of the Corporation in obligations of the Federal government or
any agency thereof or of any state government or any agency thereof,
commercial paper, real estate, equity securities or debt obligations of
any other corporation and such other investments as the Board of
Directors may approve, and such authority may be general or confined to
specific instances.
ARTICLE VII
Certificates of Stock and Their Transfer
Section 7.1. Certificates of Stock. The certificates of stock of the
Corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the name of the
Corporation, the state of incorporation, the name of the registered
holder, the number of shares and the par value thereof and shall be
signed by the Chairman or President and by the Secretary or an
Assistant Secretary. The signature of any such officer may be
facsimile. In case any such officer who shall have signed or whose
facsimile signature has thus been used on any such certificate shall
cease to be such officer, whether because of death, resignation or
otherwise, before such certificate has been delivered by the
Corporation, such certificate may nevertheless be delivered by the
Corporation, as though the person whose facsimile signature has been
used thereon had not ceased to be such officer. All certificates
properly surrendered to the Corporation for transfer shall be cancelled
and no new certificate shall be issued to evidence transferred shares
until the former certificate for at least a like number of shares shall
have been surrendered and cancelled and the Corporation reimbursed for
any applicable taxes on the transfer, except that in the case of a
lost, destroyed or mutilated certificate a new one may be issued
therefor upon such terms, and with such indemnity (if any) to the
Corporation, as the Board of Directors may prescribe specifically or in
general terms or by delegation to a transfer agent for the Corporation.
(See Section 7.2.)
Section 7.2. Lost or Destroyed Certificates. The Board of Directors
in individual cases, or by general resolution or by delegation to a
transfer agent, may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued
by the Corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost or destroyed.
Section 7.3. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and upon payment of applicable taxes with
respect to such transfer, it shall be the duty of the Corporation,
subject to such rules and regulations as the Board of Directors may
from time to time deem advisable concerning the transfer and
registration of certificates for shares of stock of the Corporation, to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Transfers of
shares shall be made only on the books of the Corporation on behalf of
the registered holder thereof or by his attorney or successor duly
authorized as evidenced by documents filed with the Secretary or
transfer agent of the Corporation.
Section 7.4. Stockholders of Record. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock
as the holder in fact thereof and accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or
shares notwithstanding any express or other notice thereof, except as
otherwise provided by the laws of Oklahoma.
ARTICLE VIII
General Provisions
Section 8.1. Fiscal Year. The fiscal year of the Corporation shall be
the 52 or 53 week period ending on the last Saturday in December in
each year and beginning on the following Sunday.
Section 8.2. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, and the words "Corporate Seal" and
"Oklahoma" or an abbreviation thereof; and it shall otherwise be in the
form approved by the Board of Directors. Such seal may be used by
causing it, or a facsimile thereof, to be impressed or affixed or
otherwise reproduced.
Section 8.3. Indemnification. (a) The Corporation shall indemnify
any director or officer of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a
director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another
corporation, partnership, joint venture or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such
action, suit or proceeding if the director or officer acted in good
faith and in a manner reasonably believed to be in or not opposed to
the best interest of the Corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that such
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of the
Corporation and with respect to any criminal action or proceeding have
reasonable cause to believe that such conduct was unlawful.
(b) The Corporation shall indemnify any director or officer of the
Corporation who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason
of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as
a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if the director or
officer acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interest of the Corporation; except that
no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in performance of duty to the Corporation
unless and only to the extent that the court in which such action or
suit was brought shall determine, upon application, that despite the
adjudication of liability, but in the view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for such expenses which the court shall deem proper.
(c) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized herein.
(d) The Corporation may purchase (upon resolution duly adopted by
the Board of Directors) and maintain insurance on behalf of any person
who is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred in any such capacity, or arising out of the status as such,
whether or not the Corporation would have the power to indemnify the
director or officer against such liability.
(e) To the extent that a director or officer of the Corporation
has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to herein or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.
(f) Every director or officer shall be entitled, without demand
upon the Corporation or any action by the Corporation, to enforce such
person's right to such indemnity in an action at law against the
Corporation. The right of indemnification hereinabove provided shall
not be deemed exclusive of any rights to which any such person may now
or hereafter be otherwise entitled and specifically, without limiting
the generality of the foregoing, shall not be deemed exclusive of any
rights pursuant to statute or otherwise, of any such person in any such
action, suit or proceeding to have assessed or allowed against the
Corporation or otherwise, costs and expenses incurred therein or in
connection therewith or any part thereof.
(g) Any indemnification hereinabove provided, unless ordered by a
court, shall be made by the Corporation only as authorized in a
specific case because the Corporation has determined that the
indemnitee has met the requisite standards of conduct as set forth in
sub-sections (a) and (b) above. Such determination is to be made by
the Board of Directors by majority vote of a quorum consisting of
directors who are not parties to such action, suit or proceeding; or if
such a quorum is not obtainable, or even if obtainable should a quorum
of disinterested directors so direct, by independent legal counsel in
a written opinion; or by the shareholders.
ARTICLE IX
Amendments
Section 9.1. In General. Any provision of these Bylaws may be
altered, amended or repealed from time to time by the affirmative vote
of a majority of the stock having voting power present in person or by
proxy at any annual or special meeting of shareholders at which a
quorum is present, if notice of the proposed alteration, amendment or
repeal is contained in the notice of such meeting, or by the
affirmative vote of a majority of the directors then qualified and
acting at any meeting of the Board at which a quorum is present, if
notice of the proposed alteration, amendment or repeal has been given
to each director.
ARTICLE X
Shareholders' Rights Plan
Section 10.1 Minimum Requirements. The Corporation shall not adopt or
maintain a poison pill, shareholder rights plan, rights agreement or
any other form of "poison pill" which is designed to or has the effect
of making acquisition of large holdings of the Corporations's shares of
stock more difficult or expensive (such as the 1986 "Rights
Agreement"), unless such a plan is first approved by A MAJORITY
shareholder vote. The company shall redeem any such rights now in
effect. The affirmative vote of a majority of shares voted shall
suffice to approve such a plan.
Section 10.2 Effective Immediately. The article shall be effective
immediately and automatically as of the date it is approved by the
affirmative vote of the holders of a majority of the shares, present in
person or by proxy at a regular or special meeting of the shareholders.
Section 10.3 Amendment. Notwithstanding any other provision of these
bylaws, this Article may not be amended, altered, deleted or modified
in any way by the Board of Directors without prior shareholder
approval.
Exhibit 10.49
AMENDMENT NO. 3
TO
FLEMING COMPANIES, INC.
1990 STOCK INCENTIVE PLAN
WHEREAS, Fleming Companies, Inc. (the "Company")
presently has in existence the 1990 Stock Incentive Plan (the
"Plan"); and
WHEREAS, the Compensation and Organization Committee of
the Board of Directors has recommended that the following
amendment to the Plan be made in order to provide that
outstanding awards under the Plan will terminate by their
respective terms and not upon termination of the Plan; and
WHEREAS, the Board of Directors has authorized and
approved this Amendment No. 3 to the Plan at a meeting held on
March 2, 1999.
NOW, THEREFORE, the Plan is hereby amended as follows:
Section 11.2. The last sentence of Section
11.2 is hereby amended by deleting it in its
entirety and replacing it with the following:
Provided further, the termination of the
Plan shall not cause a termination of any
previously granted Award.
Except as provided in this Amendment No. 3, in all
other respects the Plan is hereby ratified and confirmed. The
effective date of this Amendment No. 3 shall be March 2, 1999.
Exhibit 10.50
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 17, 1999, by and between
FLEMING COMPANIES, INC., an Oklahoma corporation (the "Company")
and JOHN T. STANDLEY ("Executive").
IN CONSIDERATION of the premises and the mutual
covenants set forth below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ
Executive as Executive Vice President and Chief Financial Officer
of the Company, and Executive hereby accepts such employment, on
the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by
the Company hereunder (the "Employment Period") shall commence on
May 17, 1999 (the "Commencement Date") and shall continue through
May 16, 2004. The Employment Period may be sooner terminated in
accordance with Section 6 of this Agreement.
3. Position and Duties. During the Employment
Period, Executive shall report directly to the board of directors
of the Company (the "Board"). Executive shall have those powers
and duties normally associated with the positions of Executive
Vice President and Chief Financial Officer. Executive shall
devote substantially all of his working time, attention and
energies (other than absences due to illness or vacation) to the
performance of his duties for the Company. Notwithstanding the
above, Executive shall be permitted, to the extent such
activities do not interfere with the performance by Executive of
his duties and responsibilities hereunder or violate Sections
10(a), (b) or (c) of this Agreement, to (i) manage Executive's
personal, financial and legal affairs, (ii) serve on civic or
charitable boards or committees and (iii) subject to the Board's
approval (which approval shall not be unreasonably withheld),
serve on the board of directors or other similar governing body
of any other corporation or other business entity or trade
organization.
4. Place of Performance. The principal place of
employment of Executive shall be at the Company's principal
executive offices.
5. Compensation and Related Matters.
(a) Base Salary. During the Employment Period
the Company shall pay Executive a base salary at the rate of not
less than $450,000 per year ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in
accordance with the Company's customary payroll practices.
Executive's Base Salary shall be subject to increase, but not
decrease, pursuant to annual review by the Compensation and
Organization Committee of the Board (the "Compensation
Committee"). Such increased Base Salary shall then constitute
the Base Salary for all purposes of this Agreement.
(b) Company Stock Option. The Company has
granted to Executive, on the Commencement Date, (i) a stock
option to purchase 100,000 shares of the common stock of the
Company, par value $2.50 per share (the "Company Stock"), at an
exercise price of $9.1563 per share, pursuant to the Company's
1990 Stock Option Plan, (ii) a stock option to purchase 100,000
shares of Company Stock at an exercise price of $9.0625 per
share, pursuant to the Company's 1996 Stock Incentive Plan, and
(iii) a stock option to purchase 150,000 shares of Company Stock
at an exercise price of $9.1563 per share, pursuant to the
Company's 1999 Stock Incentive Plan (the "New Plan"), subject to
the receipt of approval of the New Plan by the shareholders of
the Company (collectively, the "Company Options"). The Company
shall, at the next annual meeting of the shareholders of the
Company following the Commencement Date, submit the New Plan,
together with the Company's recommendation that its shareholders
approve the New Plan, to its shareholders for their approval and
shall use its reasonable efforts to obtain such shareholder
approval. Each of the Company Options has a scheduled 10-year
term and, subject to the terms of the applicable stock option
agreements between the Company and Executive, shall vest and
become exercisable (i) with respect to 25% of the shares of
Company Stock subject to such Company Options on each of the
first four anniversaries of the Commencement Date and (ii) upon
the occurrence of a Change of Control (as such term is defined in
that certain Change of Control Employment Agreement, dated as of
the date of this Agreement, between the Company and Executive)
with respect to 100% of the Company Stock subject to Company
Options.
(c) Annual Bonus. Executive shall have a target
annual bonus of 65% of Base Salary and a maximum annual bonus of
130% of Base Salary, based upon meeting performance goals
established by the Compensation Committee. The performance goals
and corresponding bonus amounts during the Employment Period
shall be established by the Compensation Committee after detailed
consultation with Executive.
(d) Expenses. The Company shall promptly
reimburse Executive for all reasonable business expenses upon the
presentation of reasonably itemized statements of such expenses
in accordance with the Company's policies and procedures now in
force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company. In
addition, the Company shall reimburse Executive for all legal
fees and expenses reasonably incurred by Executive in connection
with the negotiation and review of this Agreement and the
agreements contemplated hereby, in an amount not to exceed
$2,000.
(e) Vacation. Executive shall be entitled to
the number of weeks of vacation per year provided to the
Company's senior executive officers.
(f) Restricted Stock Grant. The Company has
granted to Executive, on the Commencement Date, twenty thousand
(20,000) shares of restricted Company Stock (the "Restricted
Stock") pursuant to the Company's 1990 Stock Incentive Plan. In
connection with the grant of the Restricted Stock, Executive
shall make an election prior to June 16, 1999 to include in gross
income the value of the Restricted Stock on the date of grant
pursuant to Section 83(b) of the Internal Revenue Code of 1986,
as amended (the "Code"). Upon notification from Executive that
he has made such election, the Company shall pay to Executive an
additional payment in an amount necessary to cause the net amount
of such payment that is retained by Executive after the
calculation and deduction of any and all federal, state and local
income taxes and employment taxes on such payment to be equal to
Executive's income taxes attributable to the Restricted Stock and
Executive's election under Section 83(b) of the Code in
connection with the Restricted Stock.
(g) Welfare, Pension and Incentive Benefit
Plans. During the Employment Period, Executive (and his spouse
and dependents to the extent provided therein) shall be entitled
to participate in and be covered under all the welfare benefit
plans or programs maintained by the Company from time to time for
the benefit of its senior executives including, without
limitation, all medical, life, hospitalization, dental,
disability, accidental death and dismemberment and travel
accident insurance plans and programs. In addition, during the
Employment Period, Executive shall be eligible to participate in
all pension, retirement, savings and other employee benefit plans
and programs maintained from time to time by the Company for the
benefit of its senior executives or any annual incentive or long-
term performance plans.
(h) Offices. Executive shall serve, without
additional compensation, as a director or trustee of the
Company's wholly-owned subsidiaries, (and as a member of any
committees of the board of directors of any such entities), and
in one or more executive positions of any of such subsidiaries,
provided that Executive is indemnified for serving in any and all
such capacities on a basis no less favorable than is then
provided to any other director of such entity.
(i) Relocation. The Company shall purchase the
Executive's current house in Beaverton, Oregon at a purchase
price equal to the greater of its appraised value (as set forth
in an appraisal performed by an appraiser selected by Executive
and approved by the Company) or Executive's invested cost in such
house. In addition, the Executive shall be provided with the
Company's standard relocation program for senior executive
officers in order to relocate to the Company's principal
executive offices, including travel costs, temporary housing,
moving costs of automobiles and household belongings, storage
costs for up to one year, and any other expenses necessary to
efficiently effect Executive's relocation.
(j) Indemnification and Insurance. Executive
shall be indemnified and held harmless by the Company during the
term of this Agreement and following any termination of this
Agreement for any reason whatsoever in the same manner as would
any other key management associate of the Company with respect to
acts or omissions occurring prior to the termination of
employment of the Executive under this Agreement. In addition,
during the Employment Period and for a period of five years
following the termination of employment of the Executive under
this Agreement for any reason whatsoever, the Executive shall be
covered by a Company-held directors and officers liability
insurance policy covering acts or omissions occurring prior to
the termination of employment of the Executive under this
Agreement.
6. Termination. Executive's employment hereunder
may be terminated during the Employment Period under the
following circumstances:
(a) Death. Executive's employment hereunder
shall terminate upon his death.
(b) Disability. If, as a result of Executive's
incapacity due to physical or mental illness, Executive shall
have been substantially unable to perform his duties hereunder
for an entire period of six (6) consecutive months, and within
thirty (30) days after written Notice of Termination is given
after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-
time basis, the Company shall have the right to terminate
Executive's employment hereunder for "Disability", and such
termination in and of itself shall not be, nor shall it be deemed
to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to
terminate Executive's employment for Cause, and such termination
shall not be, nor shall it be deemed to be, a breach of this
Agreement. For purposes of this Agreement, the Company shall
have "Cause" to terminate Executive's employment upon:
(i) Executive's conviction of a felony by
a federal or state court of competent
jurisdiction; or
(ii) an act or acts of dishonesty taken by
Executive and intended to result in substantial
personal enrichment of Executive at the expense
of the Company; or
(iii) Executive's "willful" failure to
follow a direct, reasonable and lawful order from
the Board and/or the Chairman and Chief Executive
Officer, within the reasonable scope of
Executive's duties, which failure is not cured
within thirty (30) days.
For purposes of this Section 6(c), no act, or failure to act, by
Executive shall be considered "willful" unless done, or omitted
to be done, by Executive not in good faith and without a
reasonable belief that the act or omission was in the best
interests of the Company. Cause shall not exist under paragraphs
(i), (ii) or (iii) above unless and until the Company has
delivered to Executive a copy of a resolution duly adopted by not
less than three-fourths (3/4ths) of the Board (excluding
Executive) at a meeting of the Board called and held for such
purpose (after reasonable notice to Executive and an opportunity
for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraphs
(i),(ii) or (iii) and specifying the particulars thereof in detail.
(d) Good Reason. Executive may terminate his
employment for "Good Reason" by providing Notice of Termination
(as defined in Section 7(a)) to the Company within one hundred
and twenty (120) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of
the events set forth below. Executive's Date of Termination for
Good Reason shall be fifteen (15) days after Notice of
Termination, unless the basis for Good Reason has been cured by
the Company prior to such date:
(i) the assignment to Executive of duties
materially and adversely inconsistent with
Executive's status as Executive Vice President
and Chief Financial Officer of the Company or a
material and adverse alteration in the nature of
Executive's duties and/or responsibilities,
reporting obligations, titles or authority;
(ii) a reduction by the Company in
Executive's Base Salary;
(iii) the relocation of (a) the Company's
principal executive offices or Executive's own
office location to a location more than twenty
five (25) miles from Oklahoma City except with
respect to one relocation during the term of this
Agreement, provided such relocation is pursuant
to recommendation of the Chairman and Chief
Executive Officer or an action by the Board
concurred in by the Chairman and Chief Executive
Officer, as evidenced by his vote, or (b)
Executive's office location to a place other than
the Company's principal executive offices except
to the extent Executive accepts operating line
responsibilities which would require him to
relocate in the judgment of the Chief Executive
Officer;
(iv) the Company's failure to provide any
material employee benefits due to be provided to
Executive (other than any such failure which
affects all senior executive officers); or
(v) the failure of any successor to the
Company to assume this Agreement pursuant to
Section 12(a).
Executive's right to terminate his employment hereunder for Good
Reason shall not be affected by his incapacity due to physical or
mental illness. Executive's continued employment during the one
hundred and twenty (120) day period referred to above in this
paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting
Good Reason hereunder.
(e) Without Cause. The Company shall have the
right to terminate Executive's employment hereunder without Cause
by providing Executive with a Notice of Termination, and such
termination shall not in and of itself be, nor shall it be deemed
to be, a breach of this Agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of
Executive's employment by the Company or by Executive during the
Employment Period (other than termination pursuant to Section
6(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13. For
purposes of this Agreement, a "Notice of Termination" shall mean
a written notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of Executive's employment under the
provision so indicated.
(b) Date of Termination. "Date of Termination"
shall mean (i) if Executive's employment is terminated by his
death, the date of his death, (ii) if Executive's employment is
terminated pursuant to Section 6(b), thirty (30) days after
Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-
time basis during such thirty (30) day period), (iii) if
Executive's employment is terminated pursuant to Section 6(d),
the date provided in such Section, and (iv) if Executive's
employment is terminated for any other reason, the date on which
a Notice of Termination is given or any later date (within thirty
(30) days after the giving of such notice) set forth in such
Notice of Termination.
8. Compensation Upon Termination or During
Disability. In the event Executive is disabled or his employment
terminates during the Employment Period, the Company shall
provide Executive with the payments and benefits set forth below.
Executive acknowledges and agrees that the payments set forth in
this Section 8, and the other agreements and plans referenced in
this Agreement, constitute the sole and liquidated damages for
termination of his employment during the Employment Period.
(a) Termination By Company without Cause or By
Executive for Good Reason. If Executive's employment is
terminated by the Company without Cause or by Executive for Good
Reason:
(i) the Company shall pay to Executive
(A) his Base Salary and accrued vacation pay
through the Date of Termination, as soon as
practicable following the Date of Termination,
and (B) continued Base Salary (as provided for in
Section 5(a)) for a period of twenty-four (24)
months following the Date of Termination;
(ii) the Company shall maintain in full
force and effect, for the continued benefit of
Executive, his spouse and his dependents for a
period of twenty-four (24) months following the
Date of Termination the medical, hospitalization,
dental, and life insurance programs in which
Executive, his spouse and his dependents were
participating immediately prior to the Date of
Termination at the level in effect and upon
substantially the same terms and conditions
(including without limitation contributions
required by Executive for such benefits) as
existed immediately prior to the Date of
Termination; provided, that if Executive, his
spouse or his dependents cannot continue to
participate in the Company programs providing
such benefits, the Company shall arrange to
provide Executive, his spouse and his dependents
with the economic equivalent of such benefits
which they otherwise would have been entitled to
receive under such plans and programs ("Continued
Benefits"); provided, that if Executive becomes
reemployed with another employer and is eligible
to receive medical or other welfare benefits
under another employer provided plan, the medical
and other welfare benefits described herein shall
be secondary to those provided under such other
plan during such applicable period;
(iii) the Company shall reimburse Executive
pursuant to Section 5(d) for reasonable expenses
incurred, but not paid, prior to such termination
of employment; and
(iv) Executive shall be entitled to any
other rights, compensation and/or benefits as may
be due to Executive following such termination to
which he is otherwise entitled in accordance with
the terms and provisions of any agreements, plans
or programs of the Company.
(b) Cause or By Executive Without Good Reason.
If Executive's employment is terminated by the Company for Cause
or by Executive (other than for Good Reason):
(i) the Company shall pay Executive his
Base Salary and his accrued vacation pay (to the
extent required by law or the Company's vacation
policy) through the Date of Termination, as soon
as practicable following the Date of Termination;
(ii) the Company shall reimburse Executive
pursuant to Section 5(d) for reasonable expenses
incurred, but not paid, prior to such termination
of employment, unless such termination resulted
from a misappropriation of Company funds; and
(iii) Executive shall be entitled to any
other rights, compensation and/or benefits as may
be due to Executive following such termination to
which he is otherwise entitled in accordance with
the terms and provisions of any agreements, plans
or programs of the Company.
(c) Disability. During any period that
Executive fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness ("Disability
Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is
terminated pursuant to Section 6(b). In the event Executive's
employment is terminated for Disability pursuant to Section 6(b):
(i) the Company shall pay to Executive
(A) his Base Salary and accrued vacation pay
through the Date of Termination, as soon as
practicable following the Date of Termination,
and (B) provide Executive with disability
benefits pursuant to the terms of the Company's
disability programs;
(ii) the Company shall reimburse Executive
pursuant to Section 5(d) for reasonable expenses
incurred, but not paid, prior to such termination
of employment; and
(iii) Executive shall be entitled to any
other rights, compensation and/or benefits as may
be due to Executive following such termination to
which he is otherwise entitled in accordance with
the terms and provisions of any agreements, plans
or programs of the Company.
(d) Death. If Executive's employment is
terminated by his death:
(i) the Company shall pay in a lump sum
to Executive's beneficiary, legal representatives
or estate, as the case may be, Executive's Base
Salary through the Date of Termination;
(ii) the Company shall reimburse
Executive's beneficiary, legal representatives,
or estate, as the case may be, pursuant to
Section 5(d) for reasonable expenses incurred,
but not paid, prior to such termination of
employment; and
(iii) Executive's beneficiary, legal
representatives or estate, as the case may be,
shall be entitled to any other rights,
compensation and benefits as may be due to any
such persons or estate following such termination
to which such persons or estate is otherwise
entitled in accordance with the terms and
provisions of any agreements, plans or programs
of the Company.
9. Mitigation. Executive shall not be required to
mitigate amounts payable under this Agreement by seeking other
employment or otherwise, and there shall be no offset against
amounts due Executive under this Agreement on account of
subsequent employment except as specifically provided herein.
10. Confidential Information, Ownership of Documents;
Non-Competition.
(a) Confidential Information. Executive shall
hold in a fiduciary capacity for the benefit of the Company all
trade secrets and confidential information, knowledge or data
relating to the Company and its businesses and investments and
its Affiliates, which shall have been obtained by Executive
during Executive's employment by the Company and which is not
generally available public knowledge (other than by acts by
Executive in violation of this Agreement). Except as may be
required or appropriate in connection with his carrying out his
duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be
required by law or any legal process, or as is necessary in
connection with any adversarial proceeding against the Company
(in which case Executive shall use his reasonable best efforts in
cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction),
communicate or divulge any such trade secrets, information,
knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products;
Other Property. All records, files, drawings, documents, models,
equipment, and the like relating to the Company's business and
its Affiliates, which Executive has control over shall not be
removed from the Company's premises without its written consent,
unless such removal is in the furtherance of the Company's
business or is in connection with Executive's carrying out his
duties under this Agreement and, if so removed, shall be returned
to the Company promptly after termination of Executive's
employment hereunder, or otherwise promptly after removal if such
removal occurs following termination of employment. Executive
shall assign to the Company all rights to trade secrets and other
products relating to the Company's business developed by him
alone or in conjunction with others at any time while employed by
the Company. Executive shall also return to the Company all
Company-provided vehicles in his possession or control.
(c) Protection of Business. During the
Employment Period and until the second anniversary of Executive's
Date of Termination (other than if such termination is by the
Company without Cause or by Executive for Good Reason), the
Executive will not directly or indirectly, alone, in association
with or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization,
engage in the business of the retail sale or wholesale
distribution of food and related products (including, without
limitation, health and beauty care and general merchandise
products and all other products sold to the supermarket industry
(the "Food Distribution Business")) within the Standard
Metropolitan Statistical Areas ("SMSAs") in which the Company or
any of its subsidiaries are conducting material business
operations or actively soliciting business as of the Date of
Termination; provided, however, this Section 10(c) shall not
preclude Executive's employment or other relationship with any
national retail chain engaged in the Food Distribution Business,
regardless of location, such as Kroger, Albertson's, or Safeway.
Notwithstanding the preceding sentence, Executive shall not be
prohibited from owning less than one percent (1%) of any publicly
traded corporation (or from owning any greater percentage if such
ownership is through a mutual fund or other diversified
investment vehicle in which he has a passive and minority
interest), whether or not such corporation is in the Food
Distribution Business. If, at any time, the provisions of this
Section 10(c) shall be determined to be invalid or unenforceable,
by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered
divisible and shall become and be immediately amended to only
such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body
having jurisdiction over the matter; and Executive agrees that
this Section 10(c) as so amended shall be valid and binding as
though any invalid or unenforceable provision had not been
included herein. The parties agree that the duration and
geographic area for which the covenant not to compete set forth
in this Section 10(c) is to be effective are reasonable.
(d) Injunctive Relief. In the event of a breach
or threatened breach of this Section 10, Executive agrees that
the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened
breach, Executive acknowledging that damages would be inadequate
and insufficient.
(e) Continuing Operation. Except as
specifically provided in this Section 10, the termination of
Executive's employment or of this Agreement shall have no effect
on the continuing operation of this Section 10.
11. Arbitration; Legal Fees and Expenses. The
parties agree that Executive's employment and this Agreement
relate to interstate commerce, and that any disputes, claims or
controversies between Executive and the Company which may arise
out of or relate to the Executive's employment relationship or
this Agreement shall be settled by arbitration. This agreement
to arbitrate shall survive the termination of this Agreement.
Any arbitration shall be in accordance with the Rules of the
American Arbitration Association and shall be undertaken pursuant
to the Federal Arbitration Act. Arbitration will be held in
Oklahoma City, Oklahoma unless the parties mutually agree on
another location. The decision of the arbitrator(s) will be
enforceable in any court of competent jurisdiction. The parties
agree that punitive, liquidated or indirect damages shall not be
awarded by the arbitrator(s). Nothing in this agreement to
arbitrate, however, shall preclude the Company from obtaining
injunctive relief from a court of competent jurisdiction
prohibiting any on-going breaches by Executive of this Agreement
including, without limitation, violations of Section 10. If any
contest or dispute shall arise between the Company and Executive
regarding any provision of this Agreement, the Company shall
reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute,
but only if Executive is successful in respect of one or more of
Executive's material claims or defenses brought, raised or
pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the
resolution of such contest or dispute to the extent the Company
receives reasonable written evidence of such fees and expenses.
12. Successors Binding Agreement.
(a) Company's Successors. No rights or
obligations of the Company under this Agreement may be assigned
or transferred except that the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 12 or
which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) Executive's Successors. No rights or
obligations of Executive under this Agreement may be assigned or
transferred by Executive other than his rights to payments or
benefits hereunder, which may be transferred only by will or the
laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to
the extent any such person succeeds to Executive's interests
under this Agreement. Executive shall be entitled to select and
change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by
giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be
deemed, where appropriate, to refer to his beneficiary(ies),
estate or other legal representative(s). If Executive should die
following his Date of Termination while any amounts would still
be payable to him hereunder if he had continued to live, all such
amounts unless otherwise provided herein shall be paid in
accordance with the terms of this Agreement to such person or
persons so appointed in writing by Executive, or otherwise to his
legal representatives or estate.
13. Notice. For the purposes of this Agreement,
notices, demands and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have
been duly given when delivered either personally or by United
States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to Executive:
At his last known address
evidenced on the Company's
payroll records.
With a copy to:
Latham & Watkins
633 W. Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: James D. C. Barrall, Esq.
If to the Company:
Fleming Companies, Inc.
6301 Waterford Boulevard
Oklahoma City, Oklahoma 73126-0647
Attention: General Counsel
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
14. Miscellaneous. No provisions of this Agreement
may be amended, modified, or waived unless such amendment or
modification is agreed to in writing signed by Executive and by a
duly authorized officer of the Company, and such waiver is set
forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the
other party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. The respective rights
and obligations of the parties hereunder shall survive
Executive's termination of employment and the termination of this
Agreement to the extent necessary for the intended preservation
of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed
by the laws of the State of Oklahoma without regard to its
conflicts of law principles.
15. Validity. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect
the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
17. Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in
respect of such subject matter. Any prior agreement of the
parties hereto in respect of the subject matter contained herein
is hereby terminated and cancelled.
18. Withholding. All payments hereunder shall be
subject to any required withholding of Federal, state and local
taxes pursuant to any applicable law or regulation.
19. Section Headings. The section headings in this
Agreement are for convenience of reference only, and they form no
part of this Agreement and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first above written.
FLEMING COMPANIES, INC.
SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior Vice President-
Human Resources
JOHN T. STANDLEY
John T. Standley
Exhibit 10.51
RESTRICTED STOCK AWARD AGREEMENT FOR
THE FLEMING COMPANIES, INC.
1990 STOCK INCENTIVE PLAN
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement")
entered into as of the 17th day of May, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and John T. Standley (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant has entered into an Employment
Agreement with the Company of even date pursuant to which he will
serve the Company as Executive Vice President and Chief Financial
Officer (the "Employment Agreement"); and
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1990 Stock Incentive Plan and certain amendments
thereto (the "Plan"); and
WHEREAS, pursuant to the Employment Agreement, the
Company has awarded the Participant 20,000 shares of common stock
under the Plan subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual promises and covenants herein contained, the Partici
pant and the Company agree as follows (all capitalized terms used
herein, unless otherwise defined, have the meaning ascribed to
such terms as set forth in the Plan):
1. The Plan. The Plan, a copy of which is attached
hereto as Exhibit A, is hereby incorporated by reference herein
and made a part hereof for all purposes, and when taken with this
Agreement shall govern the rights of the Participant and the
Company with respect to the Award (as defined below).
2. Grant of Award. The Company hereby grants to the
Participant an award (the "Award") of twenty thousand (20,000)
shares of Company common stock, par value $2.50 (the "Stock"), on
the terms and conditions set forth herein and in the Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate representing
the shares of Stock subject to the Award (the "Restricted Stock")
shall be issued in the name of the Participant and shall be
escrowed with the Secretary of the Company (the "Escrow Agent")
subject to removal of the restrictions placed thereon or forfei
ture pursuant to the terms of this Agreement.
(b) Vesting. One-half of the shares of Re
stricted Stock will vest based on the Participant's continuous
employment with the Company through May 17, 2000 and the remain
ing one-half of the shares of Restricted Stock will vest based on
the Participant's continuous employment with the Company through
May 17, 2001. In the event the Participant's employment with the
Company is terminated by reason of (i) death, (ii) disability,
(iii) without "Cause" (as such term is defined in the Employment
Agreement), or (iv) by the Participant for "Good Reason" (as such
term is defined in the Employment Agreement), then all remaining
shares of Restricted Stock (including any "Accrued Dividends," as
such term is hereafter defined) which have not yet been vested
shall immediately vest. Once vested pursuant to the terms of
this Agreement, the Restricted Stock shall be deemed Vested
Stock.
(c) Voting Rights and Dividends. The Participant
shall have all of the voting rights attributable to the shares of
Restricted Stock issued to him. Regular quarterly cash dividends
declared and paid by the Company with respect to the shares of
Restricted Stock shall be paid to the Participant. Any
extraordinary dividends declared and paid by the Company with
respect to shares of Restricted Stock ("Accrued Dividends") shall
not be paid to the Participant until such Restricted Stock
becomes Vested Stock. Such Accrued Dividends shall be held by
the Company as a general obligation and paid to the Participant
at the time the underlying Restricted Stock becomes Vested Stock.
(d) Vested Stock - Removal of Restrictions. Upon
Restricted Stock becoming Vested Stock, all restrictions shall be
removed from the certificates representing such Stock and the
Secretary of the Company shall deliver to the Participant
certificates representing such Vested Stock free and clear of all
restrictions together with a check in the amount of all Accrued
Dividends attributed to such Vested Stock without interest
thereon.
(e) Forfeiture. In the event the Participant's
employment with the Company is terminated for any reason other
than (i) death, (ii) disability, (iii) without Cause, or (iv) by
the Participant for Good Reason prior to all shares of Restricted
Stock becoming Vested Stock, then, all remaining shares of
Restricted Stock which have not yet been vested (including any
Accrued Dividends) shall be absolutely forfeited and the Partici
pant shall have no further interest therein of any kind whatsoever.
4. Change of Control.
(a) In the event of a Change of Control, all
Restricted Stock shall become Vested Stock and the Company shall
deliver to the Participant certificates representing the Vested
Stock free and clear of all restrictions, together with any
Accrued Dividends attributable to such Vested Stock without
interest thereon.
(b) The Company shall also pay to the Participant
any Gross-Up Payment determined in accordance with Section 9.2 of
the Plan.
5. Legends. The shares of Stock which are the
subject of the Award shall be subject to the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO AND ARE TRANSFERRABLE ONLY IN ACCORDANCE
WITH THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT FOR
THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN
DATED THE 17TH DAY OF MAY, 1999. ANY ATTEMPTED TRANS
FER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFI
CATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND
VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY
BE OBTAINED FROM THE SECRETARY OF FLEMING COMPANIES,
INC."
6. Stock Powers and the Beneficiary. The Participant
hereby agrees to execute and deliver to the Secretary of the
Company a stock power (endorsed in blank) in the form of Exhibit
B hereto covering his Award and authorizes the Secretary to
deliver to the Company any and all shares of Restricted Stock
that are forfeited under the provisions of this Agreement. The
Participant further authorizes the Company to hold as a general
obligation of the Company any Accrued Dividends and to pay such
dividends to the Participant at the time the underlying Re
stricted Stock becomes Vested Stock. Pursuant to Section 6.2 of
the Plan, the Participant designates his Eligible Spouse as the
Beneficiary under this Agreement.
7. Nontransferability of Award. The Participant
shall not have the right to sell, assign, transfer, convey,
dispose, pledge, hypothecate, burden, encumber or charge any
shares of Restricted Stock or any interest therein in any manner
whatsoever.
8. Notices. All notices or other communications
relating to the Plan and this Agreement as it relates to the
Participant shall be in writing, shall be deemed to have been
made if personally delivered in return for a receipt, or if
mailed, by regular U.S. mail, postage prepaid, by the Company to
the Participant at the address set forth in the Employment
Agreement.
9. Binding Effect and Governing Law. This Agreement
shall be (i) binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and assigns except
as may be limited by the Plan and (ii) governed and construed
under the laws of the State of Oklahoma.
10. Withholding. The Company and the Participant
shall comply with all federal and state laws and regulations
respecting the withholding, deposit and payment of any income,
employment or other taxes relating to the Award (including
Accrued Dividends).
11. Award Subject to Claims or Creditors. The
Participant shall not have any interest in any particular assets
of the Company, its parent, if applicable, or any Subsidiary by
reason of the right to earn an Award (including Accrued Divi
dends) under the Plan and this Agreement, and the Participant or
any other person shall have only the rights of a general unse
cured creditor of the Company, its parent, if applicable, or a
Subsidiary with respect to any rights under the Plan or this
Agreement.
12. Captions. The captions of specific provisions of
this Agreement are for convenience and reference only, and in no
way define, describe, extend or limit the scope of this Agreement
or the intent of any provision hereof.
13. Counterparts. This Agreement may be executed in
any number of identical counterparts, each of which shall be
deemed an original for all purposes, but all of which taken
together shall form but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
"COMPANY" FLEMING COMPANIES, INC., an
Oklahoma corporation
SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior Vice
President - Human Resources
"PARTICIPANT"
JOHN T. STANDLEY
John T. Standley, Participant
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, __________________, an individual,
hereby irrevocably assigns and conveys to
________________________, ______________ AND NO/100 (_____)
shares of the Common Capital Stock of Fleming Companies, Inc., an
Oklahoma corporation, $2.50 par value.
DATED:
__________________________________
Exhibit 10.52
May 26, 1999
Mr. William H. Marquard
417 Greenleaf Avenue
Wilmette, IL 60091
Dear Bill:
I am very pleased to extend to you the following offer of
employment on behalf of Fleming. We are looking forward to
having you join our Company on or about June 1, 1999.
Position: Executive Vice President, Business Development
Base Salary: $400,000 per year paid in accordance with Fleming's
normal payroll practices.
Incentive Compensation: Your incentive will be based upon
Fleming's sales and earnings. Your target bonus potential is 65%
of your base pay, and you will have potential of up to 130%
(prorated for 1999 to reflect start date). Incentive awards are
consistent with the guidelines of the Fleming Incentive
Compensation Program.
Stock Options: A grant of 200,000 shares to be awarded pursuant
to Fleming's stock option plans. The options will vest 25% per
year over four years on grant anniversary dates.
Restricted Stock: You will receive 20,000 shares of restricted
stock, vesting 50% on the first anniversary date of the grant and
the balance on the second anniversary date. The Company will
arrange for an appropriate tax gross-up based on the initial
value of the grant on a mutually acceptable timetable.
Change of Control: You will receive a Change of Control
Employment Agreement which will provide for three years'
employment following a change of control. In the event you are
terminated during the interim other than for cause, you will
receive 2.99 times a formula comprised of salary and bonus. The
contract also provides a thirty-day window one year after the
change of control during which you may leave for any reason and
still receive the termination compensation. Upon a change of
control, all stock options and restricted stock you hold will
vest. The agreement also provides for a gross-up payment equal
to any excise taxes imposed under Section 4999 of the Internal
Revenue Code in connection with a change of control.
Severance: The Company will provide you 24 months of base salary
and benefit continuation if you are involuntary terminated for
any reason other than cause during your first 60 months of
continuous employment with Fleming. The severance will not apply
in the event of death, disability, termination for cause, or your
voluntary decision to leave the Company.
As a corporate officer, you will be covered, as are all other
corporate officers, under the Company's directors and officers
liability insurance policy.
Relocation: You will receive up to $2,000 per month,
cumulatively, for up to two years (or a maximum of $48,000) to
enable you to secure a furnished apartment. We will also pay to
move your personal belongings to a permanent location.
You will receive a monthly transportation allowance of $700 for
36 months to be grossed up at the end of each month.
Benefits: You will receive the standard benefits provided
through Company programs.
The above serves as our offer on your proposed compensation
package but is not to be considered a contract of employment or a
guarantee of employment. A suitable employment contract
reflecting these terms will be provided in due course.
Bill, we hope you agree that this is an outstanding package. We
believe Fleming has a tremendous future, and we are excited to
have you on the team.
Very truly yours,
MARK S. HANSEN
Mark S. Hansen
MSH/ds
c: David Almond
Dee Jerome
Scott Northcutt
Reviewed and accepted as specified above:
WILLIAM H. MARQUARD
William H. Marquard
June 1, 1999
Date
Exhibit 12
<TABLE>
Fleming Companies, Inc.
Computation of Ratio of Earnings to Fixed Charges
<CAPTION>
=============================================================================
16 Weeks Ended
April 17, April 18,
(In thousands of dollars) 1999 1998
=============================================================================
<S> <C> <C>
Earnings:
Pretax income (loss) $(31,465) $ 31,375
Fixed charges, net 62,079 62,429
- -----------------------------------------------------------------------------
Total earnings $ 30,614 $ 93,804
=============================================================================
Fixed charges:
Interest expense $ 51,606 $ 51,202
Portion of rental charges
deemed to be interest 10,333 11,095
Capitalized interest - -
- -----------------------------------------------------------------------------
Total fixed charges $ 61,939 $ 62,297
=============================================================================
Deficiency $ 31,325 -
=============================================================================
Ratio of earnings to fixed charges .49 1.51
=============================================================================
"Earnings" consists of income before income taxes and fixed charges
excluding capitalized interest. Capitalized interest amortized during
the respective periods is added back to earnings.
"Fixed charges, net" consists of interest expense, an estimated amount
of rental expense which is deemed to be representative of the interest
factor and amortization of capitalized interest.
The pro forma ratio of earnings to fixed charges is omitted as it is not
applicable.
Under the company's long-term debt agreements, "earnings" and "fixed
charges" are defined differently and amounts and ratios differ
accordingly.
</TABLE>
Exhibit 15
Fleming Companies, Inc.
6301 Waterford Boulevard, Box 26647
Oklahoma City, OK 73126
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited
interim financial information of Fleming Companies, Inc. and
subsidiaries for the sixteen weeks ended April 17, 1999 and April 18,
1998, as indicated in our report dated May 5, 1999; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
your Quarterly Report on Form 10-Q for the sixteen weeks ended April 17,
1999, is incorporated by reference in the following:
(i) Registration Statement No. 2-98602 (1985 Stock Option Plan)
on Form S-8;
(ii) Registration Statement No. 33-36586 (1990 Fleming Stock
Option Plan) on Form S-8;
(iii) Registration Statement No. 33-56241 (Dividend Reinvestment
and Stock Purchase Plan) on Form S-3;
(iv) Registration Statement No. 333-11317 (1996 Stock Incentive
Plan) on Form S-8;
(v) Registration Statement No. 333-35703 (Senior Subordinated
Notes) on Form S-4;
(vi) Registration Statement No. 333-28219 (Associate Stock
Purchase Plan) on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part of a
registration statement prepared or certified by an accountant or a
report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
June 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE FISCAL QUARTER ENDED APRIL 17, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> APR-17-1999
<CASH> 42,012
<SECURITIES> 0
<RECEIVABLES> 424,639
<ALLOWANCES> 24,934
<INVENTORY> 869,120
<CURRENT-ASSETS> 1,474,886
<PP&E> 1,553,361
<DEPRECIATION> 745,512
<TOTAL-ASSETS> 3,364,628
<CURRENT-LIABILITIES> 1,116,124
<BONDS> 1,207,307
0
0
<COMMON> 96,224
<OTHER-SE> 450,585
<TOTAL-LIABILITY-AND-EQUITY> 3,364,628
<SALES> 4,465,246
<TOTAL-REVENUES> 4,465,246
<CGS> 4,036,868
<TOTAL-COSTS> 4,437,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,942
<INTEREST-EXPENSE> 51,606
<INCOME-PRETAX> (31,465)
<INCOME-TAX> (7,224)
<INCOME-CONTINUING> (24,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,241)
<EPS-BASIC> (.64)
<EPS-DILUTED> (.64)
</TABLE>
