UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 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)
Registrant's telephone number, including area code (405) 840-7200
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, $2.50 Par Value New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
The aggregate market value of the common shares (based upon the
closing price on March 2, 2000 of these shares on the New York
Stock Exchange) of Fleming Companies, Inc. held by nonaffiliates
was approximately $569 million.
As of March 3, 2000, 39,212,000 common shares were outstanding.
Documents Incorporated by Reference
A portion of Part III has been incorporated by reference from the
registrant's proxy statement in connection with its annual
meeting of shareholders to be held on May 10, 2000.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Fleming Companies, Inc. ("Fleming" or the "company") began
operations in 1915 in Topeka, Kansas as a small food wholesaler.
Today, Fleming's distribution operation ("distribution") is one
of the largest food and general merchandise distributors in the
United States supplying supermarket, supercenter, discount,
convenience, limited assortment, drug, specialty and other retail
stores and businesses in 41 states. Fleming's retail operation
("retail") is a major food and general merchandise retailer in
the United States, operating approximately 240 supermarkets in 8
states.
Business Strategy. At the end of 1998, Fleming completed a
comprehensive study of all facets of its operations which
resulted in a strategic plan to be implemented over the next two
years. During 1999, the company's strategic plan continued to be
refined providing additional focus. Today, the company has three
primary objectives for continued growth: rationalize assets;
reduce costs; and focus on core competencies to grow sales
aggressively.
Rationalize assets. Assets have and will continue to be
rationalized to divest or close under-performing and non-
strategic business distribution operating units and retail
stores.
In the distribution segment, the closing of twelve operating
units is in varying stages of completion. By closing these
twelve operating units the company has the potential to
optimize other distribution operations and more effectively
and efficiently support the company's retail customers. During
1998, the company completed the closing of two operating
units: El Paso, TX and Portland, OR. By mid-1999, six
operating units were closed: Houston, TX; Huntingdon, PA;
Laurens, IA; Johnson City, TN; Sikeston, MO; and Peoria, IL.
By mid-2000, four additional operating units will be closed:
San Antonio, TX; Philadelphia, PA; York, PA; and Buffalo, NY.
The customers at eleven of the twelve closed operating units
will be transferred and serviced primarily by the operating
units located in Nashville, TN; Memphis, TN; Massillon, OH;
Lincoln, NE; Kansas City, MO; La Crosse, WI; Garland, TX;
Lubbock, TX; and North East, MD. During 1998, the Portland
operating unit was sold to Associated Grocers of Seattle (AG)
as part of the formation of a joint venture marketing company.
In the retail segment, the divestiture or closing of seven
retail chains and groups has been completed or is underway.
During 1999, the company completed the divestiture or closing
of 75 stores: six from the Hyde Park Market(trademark) chain
in Florida; 21 from the Consumers Food & Drug(trademark) chain
headquartered in Missouri; 24 from the Boogaarts(registered
trademark) Food Stores chain which operated in Kansas and
Nebraska; 10 from the New York Retail chain in New York and
Pennsylvania; and 14 other stores. During 2000, the company
expects to divest or close an additional 60 stores comprised
of: 19 additional stores from the New York Retail chain; 18
from the Penn Retail group which operates in Pennsylvania and
Maryland; seven Baker's(trademark) stores located in Oklahoma;
and 16 other stores.
Reduce costs. To support improved operating efficiency,
overhead expenses were reduced during 1999 with additional
reductions expected during 2000. Staff functions at all levels
of the organization have and will continue to be examined and
appropriately reset to reflect the configuration of the
distribution and retail segments. In addition, the "low cost
pursuit" program was developed during 1999 covering five areas
of the company. These five areas are: merchandising and
procurement; logistics and distribution; shared services and
finance; retail operations; and customer relations. In the
merchandising and procurement functions, the company is
focusing on lowering cost of goods and administrative costs by
moving to a centralized versus local procurement system. The
logistics and distribution functions are attempting to remove
costs associated with back-haul, in-bound transportation and
other logistics functions. Within the shared services and
finance organizations, many functions are being centralized to
reduce costs and improve effectiveness. Centralization is
occurring in areas such as non-merchandise procurement,
certain employee benefit programs, accounting and information
technology services. Retail operations are implementing best
demonstrated practices to reduce labor costs and reduce store
operating costs. Certain administrative functions are also
being centralized for retail operations. Customer relations
is establishing a single point of contact for each customer to
eliminate many paper-based processes and improve customer
communications.
Focus on core competencies to grow sales aggressively. By
focusing on the company's core competencies and engaging in a
continuous improvement program the company expects to foster
growth. These core competencies consist of the following:
case-pick distribution; piece-pick distribution; flow-through
distribution; procurement; retail services; value oriented
price impact retail operations ("value retail"); and e-
commerce. The company's strategy for growth will focus around
its core competencies to take advantage of growth
opportunities in distribution, value retail and e-commerce.
In 1999, asset rationalization activities resulted in lower
sales compared to 1998.
Strategic growth in distribution consists of the continuous
implementation of an aggressive business development program
that will leverage the power of Fleming's consolidated
distribution operations to earn a greater share of business
from existing customers and to attract new customers including
non-traditional retailers. The growth strategies for each
targeted market are based on detailed market-by-market
studies, the competitive advantages anticipated from the
consolidations, cost reduction initiatives, and improvement in
buying efficiencies and cost of goods resulting from the
centralization of the majority of procurement.
In retail operations, the company will concentrate growth in
its Food 4 Less(registered trademark) and other value-
oriented retail operations. In addition, the company will
be focusing on improving the performance of its strong
regional players which includes Baker's(trademark), Rainbow
Foods(registered trademark), Sentry(registered trademark)
Foods and ABCO Foods(trademark). To strengthen the top-
performing retail operations, the company will spend
additional capital for new store development and remodels.
Fleming also expects growth through supply arrangements with e-
commerce grocers.
Fleming generated net sales of $14.6 billion, $15.1 billion and
$15.4 billion for 1999, 1998 and 1997, respectively. The net
loss for fiscal 1999 was $45 million which was largely due to
a $137 million pre-tax charge related to the strategic
plan. Fleming generated net earnings before strategic plan
charges and one-time adjustments of $43 million, $32 million and
$25 million for fiscal 1999, 1998 and 1997, respectively.
Additionally, the company generated net cash flows from
operations of $168 million, $148 million and $113 million for the
same periods, respectively, before payments related to the
strategic plan. The combined businesses generated $411 million,
$431 million and $460 million of adjusted EBITDA for fiscal 1999,
1998 and 1997, respectively. "Adjusted EBITDA" is earnings
before extraordinary items, interest expense, income taxes,
depreciation and amortization, equity investment results, LIFO
provision and one-time adjustments (e.g., strategic plan charges
and specific litigation charges). Adjusted EBITDA should not be
considered as an alternative measure of the company's net income,
operating performance, cash flow or liquidity. It is provided as
additional information related to the company's ability to
service debt; however, conditions may require conservation of
funds for other uses. Although the company believes adjusted
EBITDA enhances a reader's understanding of the company's
financial condition, this measure, when viewed individually, is
not necessarily a better indicator of any trend as compared to
conventionally computed measures (e.g., net sales, net earnings,
net cash flows, etc.). Finally, amounts presented may not be
comparable to similar measures disclosed by other companies. The
following table sets forth the calculation of adjusted EBITDA (in
millions):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) $ (45) $(511) $25
Add back:
Extraordinary charge - - 13
Taxes on income (loss) (18) (88) 44
Depreciation/amortization 158 180 173
Interest expense 165 162 163
Equity investment results 10 12 17
LIFO provision 11 8 6
------ ----- ------
EBITDA 281 (237) 441
Add back non-cash strategic plan
charges and one-time items 92 594 -
------ ----- ------
EBITDA excluding non-cash
strategic plan charges 373 357 441
Add back strategic plan charges and
one-time items ultimately requiring
cash 38 74 19
------ ----- ------
Adjusted EBITDA $411 $431 $460
====== ===== ======
</TABLE>
The company expects adjusted EBITDA for 2000 to be at least $450
million. The adjusted EBITDA amount represents cash flow from
operations excluding unusual or infrequent items. In the
company's opinion, adjusted EBITDA is the best starting point
when evaluating the company's ability to service debt. In
addition, the company believes it is important to identify the
cash flows relating to unusual or infrequent charges and
strategic plan charges, which should also be considered in
evaluating the company's ability to service debt.
DISTRIBUTION SEGMENT
The distribution segment sells food and non-food products to
retail grocers and other retail operators. A variety of retail
support services are offered to independently-owned and company-
owned retail stores. Net sales for the distribution segment were
$10.9 billion for fiscal 1999, excluding sales to the company's
retail segment. Sales to the retail segment totaled $2.2 billion
during 1999.
Customers Served. During 1999 the distribution segment served a
wide variety of retail operations located in 41 states. The
segment's customers range from small convenience outlets to large
supercenters with the format of the retail stores being a
function of size and marketing approach. The segment serves
customers operating as conventional supermarkets (averaging
approximately 23,000 total square feet), superstores
(supermarkets of 30,000 square feet or more), supercenters (a
combination of discount store and supermarket encompassing
110,000 square feet or more), warehouse stores ("no-frills"
operations of various large sizes), combination stores (which
have a high percentage of non-food offerings) and convenience
stores (generally under 4,000 square feet and offering only a
limited assortment of products). The company is continuing to
diversify its customer base to include non-traditional retailers
such as drug stores and mass merchandisers.
The company also licenses or grants franchises to retailers to
use certain registered trade names such as Piggly
Wiggly(registered trademark), Food 4 Less(registered trademark)
(a registered servicemark of Food 4 Less Supermarkets, Inc.),
Sentry(registered trademark) Foods, Super 1 Foods(registered
trademark), Festival Foods(registered trademark), Jubilee
Foods(registered trademark), Jamboree Foods(registered
trademark), MEGAMARKET(registered trademark), Shop 'N
Kart(registered trademark), American Family(registered
trademark), Big Star(registered trademark), Big T(registered
trademark), Buy for Less(registered trademark), County Pride
Markets(registered trademark), Buy Way(registered trademark), Pic-
Pac(registered trademark), Shop N Bag(registered trademark),
Super Save(registered trademark), Super Duper(registered
trademark), Super Foods(trademark), Super Thrift(registered
trademark), Thriftway(registered trademark), and Value
King(registered trademark).
The company is working to encourage independents and small chains
to join one of the Fleming Banner Groups to receive many of the
same marketing and procurement efficiencies available to larger
chains. The Fleming Banner Groups are retail stores operating
under the IGA(registered trademark) (IGA(registered trademark) is
a registered trademark/servicemark of IGA, Inc.) or Piggly
Wiggly(registered trademark) banner or under one of a number of
banners representing a price impact retail format. Fleming Banner
Group stores are owned by customers, many of which license their
store banner from Fleming.
The company's top 10 external customers accounted for
approximately 16% of total net sales during 1999. Kmart
Corporation, the company's largest customer, represented
approximately 4.5% of total net sales. No single other customer
represented more than 2.3% of total net sales during 1999.
Pricing. The distribution segment uses market research and cost
analyses as a basis for pricing its products and services. In
all operating units, Retail Services are individually and
competitively priced. The company has three marketing programs
for its distribution business: FlexMate(trademark),
FlexPro(trademark) and FlexStar(trademark).
The FlexMate(trademark) marketing program has a presentation to
customers of a quoted sell price. The quoted sell price is
generally a selling price that includes a mark-up. The
FlexMate(trademark) marketing program is available as an option
in all operating units for grocery, frozen and dairy products. In
all operating units, a price plus mark-up method is applied for
meat, produce, bakery goods, delicatessen products, tobacco
supplies, general merchandise and health and beauty care
products. Under FlexMate(trademark) a distribution fee is added
to the product price for various product categories. Under some
marketing programs, freight charges are also added to offset in
whole or in part Fleming's cost of delivery services provided.
Any cash discounts, certain allowances, and service income earned
from vendors may be retained by the distribution segment. This
has generally been referred to as the "traditional pricing"
method.
Under FlexPro(trademark), grocery, frozen and dairy products are
listed at a price generally comparable to the net cash price paid
by the distribution segment. Dealer allowances and service income
are passed through to the customer. Service charges are
established using the principles of activity-based pricing
modified by market research. Activity-based pricing attempts to
identify Fleming's cost of providing certain services in
connection with the sale of products such as transportation,
storage, handling, etc. Based on these identified costs, and with
a view to market responses, Fleming establishes charges for these
activities designed to recover Fleming's cost and provide the
company with a reasonable profit. These charges are then added to
aggregate product price. A fee is also charged for administrative
services provided to arrange and manage certain allowances and
service income offered by vendors and earned by the distribution
segment and its customers.
FlexStar(trademark) is very similar to FlexPro(trademark), but
generally uses a less complex presentation for distribution
service charges by using customer-specific average charges. This
averaging mechanism lessens the volatility of charges to the
retailer but does not permit the retailer to manage his own
product costs as fully as with FlexPro(trademark).
Fleming Brands. Fleming Brands are store brands which include
both private labels and controlled labels. Private labels are
offered only in stores operating under specific banners (which
may or may not be controlled by Fleming). Controlled labels are
Fleming-owned brands which are offered to all distribution
customers. Fleming Brands are targeted to three market segments:
premium, national quality and value. Each Fleming Brand offers
consumers high quality products within each pricing tier. Fleming-
controlled labels include: Living Well(trademark) and Nature's
Finest(registered trademark), which are premium brands;
BestYet(registered trademark), SuperTru(registered trademark) and
Marquee(registered trademark), which are national quality brands;
and Rainbow(registered trademark), Fleming's value brand. Fleming
offers two private labels, IGA(registered trademark) and Piggly
Wiggly(registered trademark), which are national quality brands.
Fleming shares the benefit of reduced acquisition costs of store
brand products with its customers, permitting both the
distribution segment and the retailer to earn higher margins from
the sale of Fleming Brands.
Retail Services. Retail Services are separately marketed, priced
and delivered from other distribution operations. Retail Services
marketing and sales personnel look for opportunities to cross-
sell additional retail services as well as other distribution
segment products to their customers. The company offers
consulting, administrative and information technology services to
its distribution segment customers (including retail segment
operating units) and non-customers.
Consulting Services include: the advertising service group, one
of the largest retail advertising agencies in the United States;
the retail development group, which offers market analysis,
surveys and store development services; the pricing group, which
assists retailers in developing pricing strategy programs; the
store operations group, which offers assistance in quality
control, standards monitoring, audit training, and other general
supermarket management; and insurance services for reviewing,
pricing and coordinating retail insurance portfolios.
Administrative Services include: the financial group, which helps
retailers track their financial performance by providing full
accounting services, operating statements, payroll and accounts
payable systems and tax return preparation; the category
management group, which offers retailers more effective product
management selection, shelf management, perpetual inventory and
computer-assisted ordering capability; and the promotion group,
which offers numerous promotional tools to assist retail
operators in improving store traffic, such as frequent shopper
programs, kiosk use and instant savings programs.
Information Technology Services include: the technology group,
which provide POS equipment purchasing and leasing programs with
the three largest vendors of scanning equipment; electronic
payment systems; credit/debit/EBT; direct store delivery and
receiving systems; electronic shelf labels; in-store file
managers; total store technology solutions; and
Visionet(registered trademark), which is the company's
proprietary interactive internet-based electronic information
network giving retailers access to inventory information,
financial data, vendor promotions, retail support services and on-
line ordering.
Facilities and Transportation. At the end of 1999 the
distribution segment operated twenty-five full-line food product
supply centers which are responsible for the distribution of
national brands and Fleming Brands, including groceries, meat,
dairy and delicatessen products, frozen foods, produce, bakery
goods and a variety of related food and non-food items. Six
general merchandise and specialty food operating units distribute
health and beauty care items and other items of general
merchandise and specialty foods. Two operating units serve
convenience stores. All facilities are equipped with modern
material handling equipment for receiving, storing and shipping
large quantities of merchandise. Upon the completion of the
closing of the four operating units scheduled during 2000, the
distribution segment will operate twenty-two full-line operating
units. The Philadelphia and York operating units scheduled to
be closed will be merged into the expanded North East, MD facility
which currently serves as a perishables facility for the
Philadelphia operating unit.
The distribution segment's operating units comprise more than
16.5 million square feet of warehouse space. Additionally, the
distribution segment rents, on a short-term basis, approximately
four million square feet of off-site temporary storage space.
Upon the completion of the closing of the four operating units
scheduled during 2000, the distribution segment facilities in
operation will comprise approximately 15 million square feet of
warehouse space and will continue to rent approximately 4 million
square feet of off-site temporary storage space. Distribution
productivity and efficiencies increase dramatically as the
company merges smaller operating units into large volume
operating units. The benefit is twofold: customers benefit from
improved economics and the company improves sales per operating
unit. Average sales volume per operating unit increased 24% from
1998 to 1999 and an additional 22% increase is expected by year-
end 2000.
Transportation arrangements and operations vary by operating unit
and may vary by customer. Some customers prefer to handle product
delivery themselves, others prefer the company to deliver
products, and still others ask the company to coordinate delivery
with a third party. Accordingly, many operating units maintain a
truck fleet to deliver products to customers, and several centers
also engage dedicated contract carriers to deliver products. The
company increases the utilization of its truck fleet by back-
hauling products from suppliers and others, thereby reducing the
number of empty miles traveled. To further increase its fleet
utilization, the company has made its truck fleet available to
other firms on a for-hire carriage basis.
Capital Invested in Customers. As part of its services to
retailers, the company provides capital to certain customers by
extending credit for inventory purchases, by becoming primarily
or secondarily liable for store leases, by leasing equipment to
retailers, by making secured loans and by making equity
investments in customers:
o Extension of Credit for Inventory Purchases. Customary trade
credit terms are usually the day following statement date for
customers on FlexPro(trademark) or FlexStar(trademark) and up
to seven days for other marketing plan customers.
o Store and Equipment Leases. The company leases stores for
sublease to certain customers. At year-end 1999, the company
was the primary lessee of more than 680 retail store locations
subleased to and operated by customers. Fleming also leases a
substantial amount of equipment to retailers.
o Secured Loans and Lease Guarantees. Loans are approved by the
company's business development committee following written
approval standards. The company makes loans to customers
primarily for store expansions or improvements. These loans
are typically secured by inventory and store fixtures, bear
interest at rates above the prime rate, and are for terms of
up to 10 years. During fiscal year 1997, the company sold,
with limited recourse, $29 million of notes evidencing such
loans. No loans were sold in 1998 or 1999. The company
believes its loans to customers are illiquid and would not be
investment grade if rated. From time to time, the company also
guarantees the lease obligations of certain of its customers.
o Equity Investments. The company has equity investments in
operators referred to as Equity Stores. Certain Equity Store
participants may retain the right to purchase the company's
investment over a five to ten year period. Many of the
customers in which the company has equity investments are
highly leveraged, and the company believes its equity
investments are highly illiquid.
In making credit and investment decisions, Fleming considers many
factors, including estimated return on capital, risk and the
benefits to be derived.
At year-end 1999, Fleming had loans outstanding to customers
totaling $114 million ($12 million of which were to retailers in
which the company had an equity investment) and equity
investments in customers totaling $4 million. The company also
has investments in customers through direct financing leases,
lease guarantees, operating leases or credit extensions for
inventory purchases. The present values of the company's
obligations under direct financing leases and lease guarantees
were $214 million and $53 million, respectively, at year-end
1999. Fleming's credit loss expense from receivables as well as
from investments in customers was $25 million in 1999, $23
million in 1998 and $24 million in 1997. See "Investments and
Notes Receivable" and "Lease Agreements" in the notes to the
consolidated financial statements.
RETAIL SEGMENT
The retail segment presently operates approximately 240
supermarkets in eight states. Sixty of the stores are in the
process of being divested or closed, resulting in continuing
operations of approximately 180 supermarkets operated as five
distinct local chains in six states with an aggregate of
approximately 8.9 million square feet. Each chain has its own
local management and localized marketing skills. The retail
segment's supermarkets are all served by distribution segment
operating units. Net sales of the retail segment were $3.7
billion in fiscal 1999.
The company operates two basic retail formats: conventional and
value retail. Conventional retail stores are designed and
equipped to offer a broad selection of both national brands as
well as Fleming Brands at attractive prices while maintaining
high levels of service. Most of these stores have extensive
produce sections and complete meat departments, together with one
or more specialty departments such as in-store bakeries,
delicatessens, seafood or floral departments. Specialty
departments generally produce higher gross margins per selling
square foot than general grocery sections. Value retail stores
are designed and equipped to offer a reduced assortment of
products at reduced prices resulting in increased volumes which
is enabled by a lower cost structure.
The retail segment consisted of the following local trade names
and number of stores as of year-end 1999:
Value Retail Operations.
Food 4 Less(registered trademark) is a group of 25 food
warehouse stores operating in the Northern California, Salt
Lake City and Phoenix market areas with an average size of
approximately 54,500 square feet. The supermarkets use a price
impact pricing strategy. "Price impact" stores seek to
minimize the retail price of goods by a reduced variety of
product offerings, lower levels of customer services and
departments, low overhead and minimal decor and advertising.
Conventional Retail Operations.
ABCO Foods(trademark). Located in Phoenix and Tucson, ABCO
operates 58 stores, of which a majority are "Desert Market"
format conventional supermarkets, averaging approximately
37,700 square feet.
Baker's(trademark), Nebraska. Located primarily in Omaha,
Nebraska, Baker's operates 15 stores which are primarily
superstores in format. Baker's stores average approximately
56,900 square feet.
Rainbow Foods(registered trademark). With 44 stores in
Minnesota, primarily Minneapolis/St. Paul, and two stores in
Wisconsin, Rainbow Foods operates in a large store format. The
average store size for Rainbow Foods is approximately 59,500
square feet.
Sentry(registered trademark) Foods. Located in Wisconsin,
Sentry operates 41 stores, 38 of which are conventional-format
supermarkets with an average size of approximately 46,200
square feet. The remaining three stores are liquor or drug
stores.
Other.
New York Retail. This is a 19 store group consisting primarily
of Jubilee Foods(registered trademark) stores, operating in
western New York and Pennsylvania. As a result of Fleming's
asset rationalization, New York Retail is in the process of
being divested or closed.
Penn Retail. This group is made up of 18 conventional
supermarkets which includes Festival Foods(registered
trademark) and Jubilee Foods(registered trademark) operating
primarily in Pennsylvania with several located in Maryland. As
a result of Fleming's asset rationalization, Penn Retail is in
the process of being divested or closed.
Thompson Food Basket(registered trademark). Located in
Illinois and Iowa, these 13 stores average approximately
38,500 square feet. As a result of Fleming's asset rationali-
zation, Thompson Food Basket is in the process of being
divested or closed.
Baker's(trademark), Oklahoma. This is a seven store group
which as a result of Fleming's asset rationalization is in the
process of being divested.
Fleming retail segment supermarkets provide added purchasing
power as they enable Fleming to commit to certain promotional
efforts at the retail level. The company, through its owned
supermarkets, is able to retain many of the promotional savings
offered by vendors in exchange for volume increases.
Additional information regarding the company's two operating
segments is contained in "Segment Information" in the notes to
the consolidated financial statements which are included in Item
8 of this report.
E-COMMERCE SEGMENT
Fleming has assets in place and is well positioned to play a
major role in the e-commerce industry. The company is already
involved in e-commerce by supplying internet-based grocers
(including NetGrocer.com, GroceryWorks.com, Pinkdot.com,
AmericanGrocer.com and Webvan.com) and through our proprietary
Visionet(registered trademark) system. Visionet unites retailers,
traditional and non-traditional vendors, and Fleming operations.
Visionet provides a way to communicate orders, promotions,
marketing bulletins and related information among Fleming,
vendors, and retailers. For example, retail customers
regularly avail themselves of the cost savings inherent in
special manufacturer promotions via Visionet. In addition to
serving as a high-velocity informational interchange for
promotional purchasing, Visionet offers a bid/auction capability
for case pricing and inventory liquidation. This proprietary
portal also enables Fleming to communicate with independent
retail stores on category management, item price guides, order
status, and other issues. In addition, Visionet is proving to be
a valuable tool for replacing paper-based communications. To
date, this segment has been immaterial and included as part of
the distribution segment, but rapid growth is anticipated in the
future.
PRODUCTS
The distribution segment and the retail segment supply Fleming's
customers with a full line of national brands and Fleming Brands,
including groceries, meat, dairy and delicatessen products,
frozen foods, produce, bakery goods and a variety of general
merchandise, health and beauty care and other related items.
During 1999 the average number of stock keeping units ("SKUs")
carried in full-line distribution operating units was
approximately 15,200 including approximately 2,500 perishable
products. General merchandise and specialty food operating units
carried an average of approximately 18,200 SKUs. Food and food-
related product sales account for over 93 percent of the
company's consolidated sales. During 1999, the company's product
mix as a percentage of product sales was approximately 51%
groceries, 42% perishables and 7% general merchandise. The
company is in the process of centralizing over 60% of all
merchandise procurement which should make more efficient use of
procurement staff, improve buying effectiveness, and
substantially reduce the cost of goods.
SUPPLIERS
Fleming purchases its products from numerous vendors and growers.
As a large customer, Fleming is able to secure favorable terms
and volume discounts on many of its purchases, leading to lower
unit costs. The company purchases products from a diverse group
of suppliers and believes it has adequate sources of supply for
substantially all of its products.
COMPETITION
The distribution segment faces significant competition. The
company's primary competitors are regional and local food
distributors, national chains which perform their own
distribution, and national food distributors. The principal
competitive factors include price, quality and assortment of
product lines, schedules and reliability of delivery, and the
range and quality of customer services.
The primary competitors of retail segment supermarkets and
distribution segment customers are national, regional and local
grocery and drug chains, as well as supercenters, independent
supermarkets, convenience stores, restaurants and fast food
outlets. Principal competitive factors include product price,
quality and assortment, store location and format, sales
promotions, advertising, availability of parking, hours of
operation and store appeal.
EMPLOYEES
At year-end 1999, the company had approximately 36,300 full-time
and part-time employees, with approximately 10,900 employed by
the distribution segment, approximately 23,600 by the retail
segment and approximately 1,800 employed in shared services,
customer support and other functions.
Approximately half of the company's associates are covered by
collective bargaining agreements with the International
Brotherhood of Teamsters; Chauffeurs, Warehousemen and Helpers of
America; the United Food and Commercial Workers; the
International Longshoremen's and Warehousemen's Union; and the
Retail Warehouse and Department Store Union. Most of such
agreements expire at various times throughout the next five
years.
RISK FACTORS
All statements other than statements of historical facts included
in this report including, without limitation, statements under
the captions "Risk Factors," "Management's Discussion and
Analysis" and "Business," regarding the company's financial
position, business strategy and plans and objectives of
management of the company for future operations, constitute
forward-looking statements. Although the company believes that
the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to have been correct. Cautionary statements describing
important factors that could cause actual results to differ
materially from the company's expectations are disclosed
hereunder and elsewhere in this report. All subsequent written
and oral forward-looking statements attributable to the company
or persons acting on its behalf are expressly qualified in their
entirety by such cautionary statements.
Changing Environment.
The distribution and retail segments are undergoing accelerated
change as distributors and retailers seek to lower costs and
increase services in an increasingly competitive environment. An
example of this is the growing trend of large self-distributing
chains to consolidate to reduce costs and gain efficiencies.
Eating away from home and alternative format food stores (such as
warehouse stores and supercenters) have taken market share from
traditional supermarket operators, including independent grocers,
many of whom are Fleming customers. Vendors, seeking to ensure
that more of their promotional fees and allowances are used by
retailers to increase sales volume, increasingly direct
promotional dollars to large self-distributing chains. The
company believes that these changes have led to reduced sales,
reduced margins and lower profitability among many of its
customers and, consequently, at the company itself. Failure to
implement the company's strategies, developed in response to
these changing market conditions, could have a material adverse
effect on the financial condition and prospects of the company.
Sales Growth.
Net sales have declined each year since 1995; however, the
decline slowed and turned during 1999 with the fourth quarter
reflecting positive net sales growth. The company anticipates
that net sales for 2000 will be higher than in 1999 due to growth
in sales to non-traditional distribution customers, higher sales
for continuing retail stores and growing sales to internet-based
companies. See Item 7. Management's Discussion and Analysis.
Although Fleming has taken steps to reverse sales declines and to
enhance its overall profitability (see -General), no assurance
can be given that the company will be successful in these
efforts.
Employee Relations.
Approximately one-half of the company's associates are covered by
collective bargaining agreements. Successful execution of the
company's strategic plan is subject to maintaining satisfactory
relationships with its unions.
Leverage.
The company has substantial indebtedness in relation to its
shareholders' equity. The degree to which the company is
leveraged could have important consequences including the
following: (i) the company's ability to obtain other financing in
the future may be impaired; (ii) a substantial portion of the
company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness; and (iii)
a high degree of leverage may make the company more vulnerable to
economic downturns and may limit its ability to withstand
competitive pressures. Fleming's ability to make scheduled
payments on or refinance its indebtedness depends on its
financial and operating performance, which may fluctuate
significantly from quarter to quarter and is subject to
prevailing economic conditions and to financial, business and
other factors beyond the company's control.
If Fleming is unable to generate sufficient cash flow to meet its
debt obligations, the company may be required to renegotiate the
payment terms or refinance all or a portion of its indebtedness,
to sell assets or to obtain additional financing. If Fleming
could not satisfy its obligations related to such indebtedness,
substantially all of the company's long-term debt could be in
default and could be declared immediately due and payable. There
can be no assurance that the company could repay all such
indebtedness in such event.
The company's credit agreement and the indentures for certain of
its outstanding indebtedness contain numerous restrictive
covenants which limit the discretion of the company's management
with respect to certain business matters. These covenants place
significant restrictions on, among other things, the ability of
the company and its subsidiaries to incur additional
indebtedness, to create liens or other encumbrances, to pay
dividends, to make certain payments, investments, loans and
guarantees and to sell or otherwise dispose of a substantial
portion of assets to, or merge or consolidate with, another
entity which is not wholly owned by the company.
Competition.
The distribution segment is in a highly competitive market. The
company faces competition from local, regional and national food
distributors on the basis of price, quality and assortment,
schedules and reliability of deliveries and the range and quality
of services provided. The company also competes with retail
supermarket chains that provide their own distribution functions,
purchasing directly from producers and distributing products to
their supermarkets for sale to the consumer. Consolidation of
self-distributing chains may produce even stronger competition
for the distribution segment.
In its retail segment, Fleming competes with other food outlets
on the basis of price, quality and assortment, store location and
format, sales promotions, advertising, availability of parking,
hours of operation and store appeal. Traditional mass
merchandisers have gained a growing foothold in food marketing
and distribution with alternative store formats, such as
warehouse stores and supercenters, which depend on concentrated
buying power and low-cost distribution technology. Market share
of stores with alternative formats is expected to continue to
grow in the future. Retail consolidations not only produce
stronger competition in the retail segment, but may also result
in declining sales in the distribution segment due to customers
being acquired by self-distributing chains.
To meet the challenges of a rapidly changing and highly
competitive environment, the company must maintain operational
flexibility and effectively implement its strategies across many
market segments. The company's failure to successfully respond to
these competing pressures or to implement its strategies
effectively could have a material adverse effect on the financial
condition and prospects of the company.
Certain Litigation.
Fleming is involved in substantial litigation which exposes the
company to material loss contingencies. See Item 7. Management's
Discussion and Analysis-Contingencies, Item 3. Legal Proceedings
and "Litigation Charges" and "Contingencies" in the notes to the
consolidated financial statements.
Potential Losses From Investments in Retailers.
The company provides subleases and extends loans to and makes
investments in many of its retail customers, often in conjunction
with the establishment of long-term supply contracts. Loans to
customers are generally not investment grade and, along with
equity investments in customers, are highly illiquid. The company
also makes investments in customers through direct financing
leases, lease guarantees, operating leases, credit extensions for
inventory purchases and the recourse portion of notes sold
evidencing such loans. See "-Capital Invested in Customers", Item
7. Management's Discussion and Analysis, and Fleming's
consolidated financial statements and the notes thereto included
elsewhere in this report. The company also invests in real estate
to assure market access or to secure supply points. See "Lease
Agreements" in the notes to the consolidated financial
statements. Although the company has strict credit policies and
applies cost/benefit analyses to loans to and investments in
customers, there can be no assurance that credit losses from
existing or future investments or commitments will not have a
material adverse effect on the company's results of operations or
financial condition.
ITEM 2. PROPERTIES
The following table sets forth facilities information with
respect to Fleming's Distribution segment.
Approximate
Square Feet Owned or
Location (in 000's) Leased
-------- ----------- --------
Distribution:
Altoona, PA (1) 172 Owned
Buffalo, NY (2) 417 Leased
Ewa Beach, HI 196 Leased
Fresno, CA 326 Owned
Garland, TX 1,180 Owned
Geneva, AL 345 Leased
Kansas City, KS 929 Leased
La Crosse, WI 907 Owned
Lafayette, LA 437 Owned
Lincoln, NE 304 Leased
Lubbock, TX 400 Owned
Marshfield, WI (1) 157 Owned
Massillon, OH 855 Owned
Memphis, TN 765 Owned
Miami, FL 764 Owned
Milwaukee, WI 600 Owned
Minneapolis, MN 480 Owned
Nashville, TN 803 Leased
North East, MD 108 Owned
Oklahoma City, OK 410 Leased
Philadelphia, PA (3) 832 Leased
Phoenix, AZ 912 Owned
Sacramento, CA 719 Owned
Salt Lake City, UT 433 Owned
San Antonio, TX (4) 514 Leased
Superior, WI 371 Owned
Warsaw, NC 334 Owned/Leased
York, PA (3) 450 Owned
------
15,120
General Merchandise Group:
Dallas, TX 262 Owned/Leased
King of Prussia, PA 377 Leased
La Crosse, WI 163 Owned
Memphis, TN 339 Owned/Leased
Sacramento, CA 294 Leased
Topeka, KS 179 Leased
------
1,614
Outside Storage:
Outside storage facilities -
Typically rented on a
Short-term basis 4,240
------
Total for Distribution 20,974
======
(1) Convenience store distribution operations.
(2) In process of merging into Massillon distribution operation.
(3) In process of merging into North East distribution operation
(which currently serves as a perishables facility for the
Philadelphia distribution operation).
(4) In process of merging into Garland distribution operation.
In addition to the above, the company has closed six facilities
in various states and is actively marketing them.
The following table sets forth general information with respect
to Fleming's Retail segment. These retail stores are primarily
leased.
Approximate
Combined
Retail Chain Location Number Square Feet
or Group of Stores of Stores (in 000's)
------------ --------- --------- -----------
ABCO Foods AZ 58 2,187
Baker's NE NE 15 853
Food 4 Less AZ, CA, UT 25 1,364
Rainbow Foods MN, WI 46 2,735
Sentry Foods WI 38 1,755
--- -----
Total Retail Segment 182 8,894
=== =====
In addition to the above stores, the company is also in the
process of divesting or closing 60 stores in various states.
Fleming's shared service and customer support center offices are
located in Oklahoma City, Oklahoma in leased office space
totaling approximately 356,000 square feet. During 2000, Fleming
will move its customer support services from the Oklahoma City
office and field locations to leased space totaling approximately
136,000 square feet in Lewisville, Texas.
Fleming owns and leases other significant assets, such as
inventories, fixtures and equipment, capital leases, etc., which
are reflected in the company's consolidated balance sheets which
are included in Item 8 of this report.
For information regarding lease commitments and long-term debt
relating to properties or other assets, see "Lease Agreements"
and "Long-term Debt" in the notes to the consolidated financial
statements which are included in Item 8 of this report.
ITEM 3. LEGAL PROCEEDINGS
The following describes various pending legal proceedings to
which Fleming is subject. For additional information see
"Litigation Charges" and "Contingencies" in the notes to the
consolidated financial statements which are included in Item 8 of
this report.
(1) Class Action Suits. In 1996, the company and certain of its
present and former officers and directors (Robert E. Stauth, R.
Randolph Devening, Harry L. Winn, Kevin J. Twomey and Donald N.
Eyler) were named as defendants in nine purported class action
suits filed by certain stockholders (Kenneth Steiner, Lawrence B.
Hollin, Ronald T. Goldstein, General Telcom Money Purchase Plan &
Trust, Bright Trading, Inc., City of Philadelphia, Gerald Pindus,
Charles Hinton and Lawrence M. Wells, among others) and one
purported class action suit filed by a noteholder (Robert Mark),
each in the U.S. District Court for the Western District of
Oklahoma (Mr. Devening was not named in the noteholder case). 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 1999 the consolidated case was also dismissed, each
without prejudice. The court gave the plaintiffs the opportunity
to restate their claims in each case.
The complaint filed in the consolidated cases asserted liability
for the company's alleged failure to properly account for and
disclose the contingent liability created by the David's
litigation and by the company's alleged "deceptive business
practices." The plaintiffs claimed that these alleged practices
led to the David's litigation and to other material contingent
liabilities, caused the company to change its manner of doing
business at great cost and loss of profit, and materially
inflated the trading price of the company's common stock. The
company denied each of these allegations. On February 4, 2000,
the stockholder case was dismissed with prejudice by the district
court. On March 3, 2000, the plaintiffs filed an appeal. The
motion to dismiss in the noteholder case has not yet been decided.
The plaintiffs seek undetermined but significant damages. However,
if the district court ruling described below is upheld, the company
believes the litigation will not have a material adverse effect on
the company.
In 1997, the company won a declaratory judgment in the U.S.
District Court for the Western District of Oklahoma against
certain of its insurance carriers regarding policies issued to
Fleming for the benefit of its officers and directors ("D&O
policies"). On motion for summary judgment, the court ruled that
the company's exposure, if any, under the class action suits is
covered by D&O policies written by the insurance carriers
(aggregating $60 million in coverage) and that the "larger
settlement rule" will be applicable to the case. According to
the trial court, under the larger settlement rule a D&O insurer
is liable for the entire amount of coverage available under a
policy even if there is some overlap in the liability created by
the insured individuals and the uninsured corporation. If a
corporation's liability is increased by uninsured parties beyond
that of the insured individuals, then that portion of the
liability is the sole obligation of the corporation. The court
also held that allocation is not available to the insurance
carriers as an affirmative defense. The insurance carriers
appealed. In 1999, the appellate court affirmed the decision that
the class actions were covered by D&O policies aggregating $60
million on coverage but reversed the trial court's decision on
allocation as being premature.
(2) Tobacco Cases. Notices of suit or intention to sue have been
filed by 27 individuals in the Court of Common Pleas of
Philadelphia County, and by 3 individuals in the Court of Common
Pleas of Dauphin County, Pennsylvania; and one individual brought
suit in the 38th Judicial District Court, Cameron Parish,
Louisiana. Each case named as co-defendants at least one major
manufacturer of tobacco products and the company or a current or
former company subsidiary, among others. 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.
During the fourth quarter of 1999, the court set a trial date in
one of the cases pending in the Court of Common Pleas,
Philadelphia County, Pennsylvania for October 1, 2000. Two cases
are now set for trial in that court. The second case is set for
trial March 4, 2001. In addition, counsel for the parties
amended the tolling agreement, by which three of the cases were
withdrawn from the tolling agreement. In January, 2000, counsel
for the parties agreed to an amendment to the tolling agreement
by which counsel for the plaintiffs withdrew from representing
the plaintiffs in 21 of the cases, and one case was withdrawn
from the tolling agreement. These plaintiffs have until March
31, 2000 to file a case, after which the company can assert the
defenses of statute of limitations and laches. As to the case
formerly pending in Cameron Parish, Louisiana, plaintiffs have
appealed to the Fifth Circuit Court of Appeals the decision of
the federal district court refusing to remand the case, which
appeal is pending. Oral argument occurred in September, 1999 and
no decision has been rendered.
(3) Don's United Super (and related cases). The company and two
retired executives have been named in a suit filed in 1998 in the
United States District Court for the Western District of Missouri
by several current and former customers of the company (Don's
United Super, et al. v. Fleming, et al.). The eighteen
plaintiffs operate retail grocery stores in the St. Joseph and
Kansas City metropolitan areas. The plaintiffs in this suit
allege product overcharges, breach of contract, breach of
fiduciary duty, misrepresentation, fraud, and RICO violations,
and they are seeking actual, punitive and treble damages, as well
as a declaration that certain contracts are voidable at the
option of the plaintiffs.
During the fourth quarter of 1999, plaintiffs produced reports of
their expert witnesses calculating alleged actual damages of
approximately $112 million. During the first quarter of 2000,
plaintiffs revised a portion of these damage calculations, and
although plaintiffs have not finalized these calculations, it
appears that their revised damage calculations will result in a
claim of approximately $120 million, exclusive of any punitive or
treble damages.
In October 1998, the company and the same two retired executives
were named in a suit filed by another group of retailers in the
same court as the Don's suit. (Coddington Enterprises, Inc., et
al. v. Fleming, et al.). Currently, sixteen plaintiffs are
asserting claims in the Coddington suit. All of the plaintiffs
except for one have arbitration agreements with Fleming. The
plaintiffs assert claims virtually identical to those set forth
in the Don's suit, and although plaintiffs have not yet
quantified the damages in their pleadings, it is anticipated that
they will claim actual damages approximating the damages claimed
in the Don's suit.
In July 1999, the court ordered two of the plaintiffs in the
Coddington case to arbitration, and otherwise denied arbitration
as to the remaining plaintiffs. The company has appealed the
district court's denial of arbitration to the Eighth Circuit
Court of Appeals. The two plaintiffs that were ordered to
arbitration have filed motions asking the district court to
reconsider the arbitration ruling.
Two other cases had been filed before the Don's case in the same
district court (R&D Foods, Inc., et al. v. Fleming, et al. and
Robandee United Super, Inc., et al. v. Fleming, et al.) by ten
customers, some of whom are also 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 proceedings in these cases have been
stayed pending the arbitration of the claims of those plaintiffs
who have arbitration agreements with the company.
The company intends to vigorously defend against the claims in
these related cases, but is currently unable to predict the
outcome. An unfavorable outcome could have a material adverse
effect on the financial condition and prospects of the company.
(4) Storehouse Markets. In 1998, the company and one of its
division officers were named in a suit filed in the United States
District Court for the District of Utah by several current and
former customers of the company (Storehouse Markets, Inc., et al.
v. Fleming Companies, Inc., et al.). The plaintiffs have alleged
product overcharges, fraudulent misrepresentation, fraudulent non-
disclosure and concealment, breach of contract, breach of duty of
good faith and fair dealing, and RICO violations, and they are
seeking actual, punitive and treble damages. On March 7, 2000
the court stated that this case will be certified as a class action.
The class will include current and former customers of Fleming's
Salt Lake City division covering a four state region. A formal order
has not yet been received. The company is considering an appeal
of this ruling pending receipt of this order. Damages have not been
quantified by the plaintiffs; however, the company anticipates
that substantial damages will be claimed. The company intends to
vigorously defend against these claims, but is currently unable
to predict the outcome. An unfavorable outcome could have a
material adverse effect on the financial condition and prospects
of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
executive officers of the company as of March 1, 2000:
Year
First Became
Name (age) Present Position An Officer
- ---------- ---------------- ------------
Mark S. Hansen (45) Chairman and 1998
Chief Executive Officer
E. Stephen Davis (59) Executive Vice President and 1981
President, Wholesale
Dennis C. Lucas (52) Executive Vice President and 1999
President, Retail
William H. Marquard Executive Vice President, 1999
(40) Business Development and
Chief Knowledge Officer
Scott M. Northcutt (38) Executive Vice President, 1999
Human Resources
Neal J. Rider (38) Executive Vice President and 2000
Chief Financial Officer
David R. Almond (59) Senior Vice President, 1989
Administration
Mark K. Batenic (51) Senior Vice President, Sales 1994
and Business Development -
Food Distribution
Lenore T. Graham (44) Senior Vice President, 2000
General Counsel and Secretary
Charles L. Hall (49) Senior Vice President, Real 1999
Estate and Store Development
Richard C. Judd (48) Senior Vice President, Supply 1999
Dixon E. Simpson (57) Senior Vice President, 1993
e-Commerce Fulfillment
John M. Thompson (58) Senior Vice President, 1982
Business Development Finance
and Assistant Secretary
Kevin J. Twomey (49) Senior Vice President, 1995
Finance and Controller
No family relationship exists among any of the executive officers
listed above.
Executive officers are elected by the Board of Directors for a
term of one year beginning with the annual meeting of
shareholders held in April or May of each year.
Each of the executive officers has been employed by the company
or its subsidiaries for the preceding five years except for
Messrs. Hansen, Lucas, Marquard, Northcutt, Rider and Hall and
Mrs. Graham.
Mr. Hansen joined the company in his present position in November
1998. From 1997 until joining the company, he was Chairman and
Chief Executive Officer of SAM's Club, a division of Wal-Mart
Stores, Inc. From 1989 to 1997, he served in multiple capacities
at PETsMART, Inc., including President and Chief Executive
Officer.
Mr. Lucas joined the company in his present position in July
1999. From 1992 until joining the company, he served in multiple
capacities at Albertson's, including Vice President positions and
Regional President.
Mr. Marquard joined the company in his present position in June
1999. From 1991 until joining the company, he was a partner in
the consulting practice of Ernst & Young.
Mr. Northcutt joined the company in his present position in
January 1999. From 1997 until joining the company, he was Vice
President-People Group at SAM's Club, a division of Wal-Mart
Stores, Inc. From 1988 to 1996, he served as Vice President-Human
Resources and later as Vice President-Store Operations at Dollar
General Corporation.
Mr. Rider joined the company in his present position in January
2000. From 1999 until joining the company, he was Executive Vice
President and Chief Financial Officer at Regal Cinemas, Inc.
From 1980 to 1999, Mr. Rider served in multiple capacities at
American Stores Company, including Treasurer and Controller
responsibilities before becoming Chief Financial Officer.
Mr. Hall joined the company in his present position in June 1999.
From 1998 until joining the company, he was Senior Vice President-
Real Estate and Store Development at Eagle Hardware and Garden,
Inc. From 1992 to 1998, he served as Vice President of Real
Estate Development at PETsMART, Inc.
Mrs. Graham joined the company in her present position in January
2000. From 1995 until joining the company, she was a stockholder
with the Oklahoma City law firm McAfee & Taft A Professional Corporation.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Fleming common stock is traded on the New York, Chicago and
Pacific stock exchanges. The ticker symbol is "FLM". As of March
3, 2000, 39.2 million outstanding shares were owned by 16,100
shareholders of record and approximately 9,500 beneficial owners
whose shares are held in street name by brokerage firms and
financial institutions. According to the New York Stock Exchange
Composite Transactions tables, the high and low prices of Fleming
common stock during each calendar quarter of the past two years
are shown below.
1999 1998
--------------------- -------------------
Quarter High Low High Low
------- --------- ------- -------- -------
First $11.88 $7.19 $20.75 $13.38
Second 12.00 8.31 20.06 17.25
Third 12.50 9.81 18.00 11.06
Fourth 13.44 9.25 12.69 8.63
Cash dividends on Fleming common stock have been paid for 83
consecutive years. Dividends are generally declared on a
quarterly basis with holders as of the record date being entitled
to receive the cash dividend on the payment date. Record and
payment dates for 2000 are as shown below:
Record Dates: Payment Dates:
------------- --------------
February 18 March 10
May 19 June 9
August 18 September 11
November 20 December 8
Cash dividends of $.02 per share were paid on or near each of the
above four payment dates in 1999 and 1998.
ITEM 6. SELECTED FINANCIAL DATA
1999(a) 1998(b) 1997(c) 1996(d) 1995(e)
------- ------- ------- ------- -------
(In millions, except per share amounts)
Net sales $14,646 $15,069 $15,373 $16,487 $17,502
Earnings (loss) before
extraordinary charge (45) (511) 39 27 42
Net earnings (loss) (45) (511) 25 27 42
Diluted net earnings (loss)
per common share before
extraordinary charge (1.17) (13.48) 1.02 .71 1.12
Diluted net earnings (loss)
per share (1.17) (13.48) .67 .71 1.12
Total assets 3,573 3,491 3,924 4,055 4,297
Long-term debt and
capital leases 1,602 1,503 1,494 1,453 1,717
Cash dividends declared
per common share .08 .08 .08 .36 1.20
See Item 3. Legal Proceedings, notes to consolidated financial
statements in Item 8., and the financial review included in Item 7.
(a) The results in 1999 reflect an impairment/restructuring
charge with related costs totaling $137 million ($92 million
after-tax) related to the company's strategic plan. 1999 also
reflected one-time items ($31 million charge to close 10
conventional retail stores, income of $22 million from
extinguishing some workers' compensation liability at a discount,
interest income of $9 million related to refunds in federal
income taxes from prior years, and $6 million in gains from the
sale of distribution facilities) netting to $6 million of income
($3 million after-tax).
(b) The results in 1998 reflect an impairment/restructuring
charge with related costs totaling $668 million ($543 million
after-tax) related to the company's newly adopted strategic plan.
(c) The results in 1997 reflect a charge of $19 million ($9
million after-tax) related to the settlement of a lawsuit against
the company. 1997 also reflected an extraordinary charge of $22
million ($13 million after-tax) related to the recapitalization
program.
(d) Results in 1996 include a charge of $20 million ($10 million
after-tax) related to the settlement of two related lawsuits
against the company.
(e) In 1995, management changed its estimates with respect to
the general merchandising portion of the 1993 reengineering plan
and reversed $9 million ($4 million after-tax) of the related
provision.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
In early 1998 the Board of Directors and senior management began
an extensive strategic planning process that evaluated all
aspects of Fleming's business. With the help of a consulting
firm, the evaluation and planning process was completed late in
1998. In December 1998, the strategic plan was approved and
implementation efforts began.
The strategic plan consists of the following four major
initiatives:
o Consolidate distribution operations. The strategic plan
initially included closing eleven operating units (El Paso,
TX; Portland, OR; Houston, TX; Huntingdon, PA; Laurens, IA;
Johnson City, TN; Sikeston, MO; San Antonio, TX; Buffalo, NY;
an unannounced operating unit still to be closed; and an
unannounced operating unit scheduled for 1999 closure, but due
to increased cash flows from new business it will not be
closed). Of the nine announced, all but San Antonio and
Buffalo have been completed. San Antonio should be closed by
the end of the first quarter of 2000 and Buffalo by the end of
the second quarter of 2000. Three additional closings were
announced which were not originally part of the strategic plan
which brings the total operating units to be closed to
thirteen. The closing of Peoria was added to the plan in the
first quarter of 1999 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. Recently, the closings of York
and Philadelphia were announced as part of an effort to grow
in the northeast by consolidating distribution operations and
expand the Maryland facility. Total 1998 sales from the 13
operating units closed or to be closed were approximately $3.1
billion. Most of these sales have been or are expected to be
retained by transferring customer business to its higher
volume, better utilized facilities. The company believes that
this consolidation process benefits customers with better
product variety and improved buying opportunities. The
company has also benefited with better coverage of fixed
expenses. The closings result in savings due to reduced
depreciation, payroll, lease and other operating costs, and
the company begins recognizing these savings immediately upon
closure. The capital returned from the divestitures and
closings has been and will continue to be reinvested in the
business.
o Grow distribution sales. Higher volume, better-utilized
distribution operations and the dynamics of the market place
represent an opportunity for sales growth. The improved
efficiency and effectiveness of the remaining distribution
operations enhances their competitiveness and the company
intends to capitalize on these improvements. During 1999,
significant new customers were added in the distribution
segment, including increased business with Kmart Corporation,
which is expected to result in approximately $1 billion in
annualized new sales.
o Improve retail performance. This not only requires divestiture
or closing of under-performing company-owned retail chains,
but also requires increased investments in market leading
chains. The strategic plan includes the divestiture or
closing of seven retail chains (including the recently
announced letters of intent to sell the Baker's Oklahoma
stores in the first half of 2000). The chains
divested or closed (or to be divested or closed) are Hyde
Park, Consumers, Boogaarts, New York Retail, Pennsylvania
Retail, Baker's Oklahoma, and a chain not yet announced. The
sale of Baker's Oklahoma as well as the divestiture or closing
of the chain not yet announced were not in the original
strategic plan, but no longer fit into the current business
strategy. Total 1998 sales from the divested or closed (or to
be divested or closed) chains was approximately $844 million.
The sale or closing of these chains is expected to be
substantially completed by the end of the second quarter of
2000. Also during 1999, the company built or acquired more
than 25 retail stores that are expected to fit in well
strategically with the existing chains. Sixteen remodels of
existing retail stores were also completed during 1999.
o Reduce overhead and operating expenses. Overhead has been and
will continue to be reduced through the low cost pursuit
program which includes organization and process changes, such
as a reduction in workforce through productivity improvements
and elimination of work, centralization of administrative and
procurement functions, and reduction in the number of
management layers. The low cost pursuit program also includes
other initiatives to reduce complexity in business systems and
remove non-value-added costs from operations, such as reducing
the number of SKU's, creating a single point of contact with
customers, reducing the number of decision points within the
company, and centralizing vendor negotiations. These
initiatives are well underway and have reflected reduced costs
for the company which ultimately reflect improved
profitability and competitiveness.
Implementation of the strategic plan is expected to continue
through 2000. This time frame accommodates the company's limited
resources and customers' seasonal marketing requirements. Thus
far, the implementation has proceeded as planned other than
changes to the plan described above. Additional expenses will
continue for some time beyond 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 $935 million ($239 million cash and $696 million non-
cash). The plan originally announced in December 1998 had an
estimated pre-tax charge totaling $782 million. The increase is
due primarily to closing the Peoria, York and Philadelphia
divisions ($59 million), updating impairment amounts on certain
retail chains ($25 million), the divestiture of the Baker's chain
in Oklahoma ($17 million), increasing costs associated with
initiatives to reduce overhead and complexity in business systems
($60 million), and decreasing costs related to a scheduled
closing no longer planned ($8 million). Updating the impairment
amounts was necessary as decisions to close additional operating
units were made. Additionally, sales negotiations provided more
current information regarding the fair value on certain chains.
The cost of severance, relocation and other periodic expenses
relating to reducing overhead and business complexities was more
than expected. Also, there were changes in the list of operating
units to be divested or closed due to their failure to fit
into the current business strategy as described above. The
pre-tax charge recorded to-date is $805 million ($137 million
in 1999 and $668 million recorded in 1998). After tax, the
expense for 1999 was $92 million or $2.39 per share.
Of the $137 million charge in 1999, $58 million is expected to
require cash expenditures. The remaining $79 million consisted
of non-cash items. The $137 million charge consisted of the
following components:
o Impairment of assets of $62 million. The impairment components
were $36 million for goodwill and $26 million for other long-
lived assets. The entire $62 million impairment related to
assets to be sold or closed.
o Restructuring charges of $41 million. The restructuring
charges consisted primarily of severance related expenses and
pension withdrawal liabilities for the divested or closed
operating units announced during 1999. The restructuring
charges also consisted of operating lease liabilities for
divestitures or closings decided in 1999 that weren't part of
the original plan and professional fees incurred during the
year related to the restructuring process.
o Other disposition and related costs of $34 million. These
costs consisted primarily of inventory valuation adjustments,
impairment of an investment, disposition related costs
recognized on a periodic basis and other costs.
Additional pre-tax expense of approximately $130 million is
expected in 2000 relating to the continuing implementation of the
strategic plan. Approximately $107 million of these future
expenses are expected to require cash expenditures. The
remaining $23 million of the future expense relates to non-cash
items. These future expenses will consist primarily of
severance, real estate-related expenses, pension withdrawal
liabilities and other costs expensed when incurred.
The pre-tax charge relating to the strategic plan for 1998
totaled $668 million and is described in the Form 10-K and Form
10-K/A for 1998.
The expected benefits of the plan are increased sales and
improved earnings. Sales are expected to increase in 2000 due to
new customers added in the distribution segment. Based on
management's plan, earnings are expected to improve and exceed $3
per share by or before the year 2003.
The company has assessed the strategic significance of all
operating units. Under the plan, the sale or closing of certain
operating units has been announced and is planned as described
above. The company anticipates the improved performance of
several strategic operating units. However, in the event that
performance is not improved, the strategic plan will be revised
and additional operating units could be sold or closed.
In addition to the strategic plan related charges mentioned
above, other significant one-time items included in 1999 were: a
$31 million charge to close certain retail stores; income of $22
million from extinguishing a portion of the company's self-
insured workers' compensation liability at a discount through
insurance coverage; interest income of $9 million related to
refunds in federal income taxes from prior years; and income of
$6 million in gains from the sale of distribution facilities.
This results in a net one-time income of approximately $6 million
($3 million after-tax or $.09 per share). The net effect of the
strategic plan charges and one-time adjustments was a $131
million pre-tax charge. Net earnings for 1999 after excluding
these charges was $43 million or $1.12 per share. The company
expects net earnings after excluding strategic plan charges and
one-time items for 2000 to be at least $1.46 per share.
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:
1999 1998 1997
------- ------- -------
Net Sales 100.00% 100.00% 100.00%
Gross margin 9.81 9.62 9.16
Less:
Selling and administrative 8.62 8.30 7.62
Interest expense 1.13 1.07 1.06
Interest income (.28) (.24) (.30)
Equity investment results .07 .08 .11
Litigation charges - .05 .13
Impairment/restructuring charge .70 4.33 -
----- ----- -----
Total expenses 10.24 13.59 8.62
----- ----- -----
Earnings (loss) before taxes (.43) (3.97) .54
Taxes on income (loss) (.12) (.58) .29
----- ----- -----
Earnings (loss) before
extraordinary charge (.31) (3.39) .25
Extraordinary charge - - (.09)
----- ----- -----
Net earnings (loss) (.31)% (3.39)% .16%
===== ===== =====
1999 and 1998
Net Sales. Sales for 1999 decreased by $.4 billion, or 3%, to
$14.65 billion from $15.07 billion for 1998.
Net sales for the distribution segment were $10.9 billion in 1999
compared to $11.5 billion in 1998. The sales decrease was
primarily due to the previously announced loss of sales to Furr's
(in 1998) and Randall's (in 1999) and the disposition of the
Portland division (in 1999). These sales losses were partially
offset by the increase in sales to Kmart Corporation. Sales
during 1999 were also impacted by the planned closing and
consolidation of certain distribution operating units. These
sales losses plus the prospective loss of sales to United in 2000
will be partially offset by the increase in sales to Kmart
Corporation. In 1999 and 1998, sales to Furr's, Randall's and
United accounted for approximately 4% and 8%, respectively, of
the company's sales.
Retail segment sales were $3.7 billion in 1999 compared to $3.6
billion in 1998. The increase in sales was due primarily to new
stores added in 1999. This was offset partially by a 1.9%
decrease in same-store sales and closing non-performing stores.
The company measures inflation using data derived from the
average cost of a ton of product sold by the company. For 1999,
food price inflation was 1.0%, compared to 2.1% in 1998.
The company anticipates that net sales for 2000 will be
approximately $15 billion and will be higher than in 1999 due to
growth in sales to non-traditional distribution customers, higher
sales for continuing retail stores and growing sales to internet-
based companies.
Gross Margin. Gross margin for 1999 decreased by $13 million, or
1%, to $1.44 billion from $1.45 billion for 1998, and increased
as a percentage of net sales to 9.81% from 9.62% for 1998. After
excluding the strategic plan charges and one-time items, gross
margin dollars still decreased compared to the same period in
1998 and gross margin as a percentage of net sales still
increased compared to the same period in 1998. The decrease in
dollars was due primarily to the overall sales decrease, but was
partly offset by positive results from leveraging the company's
buying power and cutting costs. The increase in percentage to
net sales was due to the impact of the growing retail segment
compared to the distribution segment. The retail segment has the
higher margins of the two segments. This increase was partly
offset by lower margins in the retail segment due to competitive
pricing at company-owned new stores.
Selling and Administrative Expenses. Selling and administrative
expenses for 1999 increased by $10 million, or 1%, to $1.26
billion from $1.25 billion for 1998, and increased as a
percentage of net sales to 8.62% for 1999 from 8.30% for 1998.
The increase in both dollars and percentage of net sales was
primarily due to one-time items recorded in 1999: a charge to
close conventional retail stores which was partially offset by
income from extinguishing a portion of the company's self-insured
workers' compensation liability at a discount. The increase in
percentage to net sales was also partly due to the impact of the
growing retail segment compared to the distribution segment - the
retail segment has higher operating expenses as a percent to
sales compared to the distribution segment.
The company has a significant amount of credit extended to
certain customers through various methods. These methods include
customary and extended credit terms for inventory purchases and
equity investments in and secured and unsecured loans to certain
customers. Secured loans generally have terms up to ten years.
Credit loss expense is included in selling and administrative
expenses and for 1999 increased to $25 million from $23 million
for 1998.
Operating Earnings. Operating earnings for the distribution
segment increased by $31 million, or 12%, to $290 million from
$259 million for 1998, and increased as a percentage of
distribution net sales to 2.65% from 2.26%. Excluding the costs
relating to the strategic plan and one-time items, operating
earnings still increased by $29 million to $302 million from $273
million for the same period of 1998. Operating earnings improved
primarily due to the benefits of the consolidation of
distribution operating units and cost reduction.
Operating earnings for the retail segment decreased by $64
million to a loss of $2 million from earnings of $62 million for
1998. Excluding the costs relating to the strategic plan and one-
time items (primarily a charge to close conventional retail
stores), operating earnings still decreased, but by $20 million
to $42 million from $62 million for the same period of 1998. The
decrease was due to the impact of new store start-up expenses
plus expenses related to the divestiture and closing of stores.
Operating earnings for the retail segment were also adversely
affected by a 1.9% decrease in same-store sales.
Corporate expenses decreased in 1999 to $112 million compared to
$122 million for 1998. Excluding the costs relating to the
strategic plan and one-time items (primarily income from
extinguishing a portion of the company's self-insured workers'
compensation liability at a discount), corporate expenses
increased in 1999 to $132 million compared to $121 million for
1998. The increase was due primarily to an increase in lease
termination and real estate disposition expenses and higher
incentive compensation.
Interest Expense. Interest expense in 1999 was $4 million higher
than 1998 due primarily to 1998's low interest expense as a
consequence of a favorable settlement of tax assessments. The
higher 1999 expense was also due to higher average debt balances.
The company's derivative agreements consist of simple "floating-
to-fixed rate" interest rate swaps. For 1999, interest rate hedge
agreements contributed $4.8 million of net interest expense
compared to $4.3 million in 1998, or $0.5 million higher. This
was due to slightly higher average net interest rates underlying
the hedge agreements. For a description of these derivatives see
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk and "Long-Term Debt" in the notes to the consolidated
financial statements.
Interest Income. Interest income for 1999 was $4 million higher
than 1998 due to a one-time item related to refunds in federal
income taxes from prior years. This was partially offset by
lower average balances for the company's investment in direct
financing leases.
Equity Investment Results. The company's portion of operating
losses from equity investments for 1999 decreased by
approximately $2 million to $10 million from $12 million for
1998. The reduction in losses is due to improved results of
operations in certain of the underlying equity investments.
Litigation Charges. In October 1997, the company began paying
Furr's $800,000 per month as part of a settlement agreement which
ceased in October 1998. Payments to Furr's totaled $7.8 million
in 1998.
Impairment/Restructuring Charge. The pre-tax charge for the
strategic plan recorded in the Consolidated Statements of
Operations totaled $137 million for 1999 and $668 million for
1998. Of these totals, $103 million and $653 million were
reflected in the Impairment/restructuring charge line with the
balance of the charges reflected in other financial statement
lines. See "General" above and the notes to the consolidated
condensed financial statements for further discussion regarding
the strategic plan.
Taxes On Income. The effective tax rates used for 1999 and 1998
were 28.5% and 14.6%, respectively, both representing a tax
benefit. These are blended rates taking into account operations
activity, strategic plan activity, write-offs of non-deductible
goodwill and the timing of these transactions during the year.
Certain Accounting Matters. The Financial Accounting Standards
Board issued SFAS No. 133 - Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and is effective for 2001. The company will adopt
SFAS No. 133 by the required effective date. The company has not
determined the impact on its financial statements from adopting
the new standard.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 - Revenue Recognition ("SAB No.
101"). SAB No. 101 provides guidance on recognition,
presentation, and disclosure of revenue in financial statements.
The company has determined the impact on earnings is not
material.
Other. Several factors negatively affecting earnings in 1999 are
likely to continue for the near term. The company believes that
these factors include costs related to the strategic plan,
negative same-store sales and operating losses in certain
company-owned retail stores.
1998 and 1997
Net Sales. Sales for 1998 decreased by $.3 billion, or 2%, to
$15.07 billion from $15.37 billion for 1997.
Net sales for the distribution segment were $11.5 billion in 1998
compared to $11.9 billion in 1997. The loss of sales from
customers moving to self-distribution, Furr's (in 1998),
Randall's (in 1999) and United (in 2000), will result in sales
comparisons to prior periods being negative for some time. In
1998, sales to these three customers accounted for approximately
8% of the company's sales.
Retail segment sales were $3.6 billion in 1998 compared to $3.5
billion in 1997. The increase in sales was due primarily to new
stores added in 1998. This was offset partially by a decrease in
same-store sales in 1998 compared to 1997 of 3.6% and closing non-
performing stores.
The company measures inflation using data derived from the
average cost of a ton of product sold by the company. For 1998,
food price inflation was 2.1%, compared to 1.3% in 1997.
Gross Margin. Gross margin for 1998 increased by $42 million, or
3%, to $1.45 billion from $1.41 billion for 1997, and increased
as a percentage of net sales to 9.62% from 9.16% for 1997. The
increase was due, in part, to an overall increase in the retail
segment, which has the better margins of the two segments, net of
the unfavorable impact of gains from dispositions that occurred
in 1997, but not in 1998. Gross margin also reflects favorable
adjustments for closed stores due to better-than-expected lease
buyouts. These increases in gross margin were partly offset by
costs relating to the strategic plan in 1998 primarily relating
to inventory valuation adjustments. Product handling expenses,
consisting of warehouse, transportation and building expenses,
were lower as a percentage of net sales in 1998 compared to 1997,
reflecting continued productivity improvements.
Selling and Administrative Expenses. Selling and administrative
expenses for 1998 increased by $79 million, or 7%, to $1.25
billion from $1.17 billion for 1997, and increased as a
percentage of net sales to 8.30% for 1998 from 7.62% in 1997. The
increase was partly due to increased operating expense in the
retail segment. Selling expense was higher than the previous year
as the company continues to work at reversing recent sales
declines. The increase was also partly due to costs relating to
the strategic plan.
The company has a significant amount of credit extended to
certain customers through various methods. These methods include
customary and extended credit terms for inventory purchases and
equity investments in and secured and unsecured loans to certain
customers. Secured loans generally have terms up to ten years.
Credit loss expense is included in selling and administrative
expenses and for 1998 decreased by approximately $1 million to
$23 million from $24 million for 1997.
Operating Earnings. Operating earnings for the distribution
segment decreased by $24 million, or 8%, to $259 million from
$283 million for 1997, and decreased as a percentage of
distribution net sales to 2.26% from 2.38%. 1998 operating
earnings were adversely affected by inventory valuation
adjustments and other costs related to the strategic plan as well
as lower sales.
Operating earnings for the retail segment decreased by $18
million, or 23%, to $62 million from $80 million for 1997, and
decreased as a percentage of retail sales to 1.73% from 2.31%.
Operating earnings for the retail segment were adversely affected
primarily by a 3.6% decrease in same-store sales and by higher
labor costs.
Corporate expenses decreased in 1998 compared to 1997 due to
lower incentive compensation, which was partially offset by
severance expense and professional fees under the strategic plan
as well as an increase in the LIFO charge.
Interest Expense. Interest expense in 1998 was $1 million lower
than 1997 due primarily to a reduction of interest accruals
relating to a favorable settlement of tax assessments. Without
this reduction, interest expense in 1998 would have been $2
million greater than 1997 due to higher average fixed-rate debt
balances.
The company's derivative agreements consist of simple "floating-
to-fixed rate" interest rate swaps. For 1998, interest rate hedge
agreements contributed $4.3 million of interest expense compared
to $7.2 million in 1997, or $2.9 million lower. This was due to a
lower average amount of notional principal of debt referenced by
the hedge agreements. For a description of these derivatives see
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk and "Long-Term Debt" in the notes to the consolidated
financial statements.
Interest Income. Interest income for 1998 was $10 million lower
than 1997 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 for 1998 decreased by
approximately $5 million to $12 million from $17 million for
1997. The reduction in losses is due to improved results of
operations in certain of the underlying equity investments.
Litigation Charges. In October 1997, the company began paying
Furr's $800,000 per month as part of a settlement agreement which
ceased in October 1998. Payments to Furr's totaled $7.8 million
in 1998. In the first quarter of 1997, the company expensed $19.2
million in settlement of the David's litigation. See "Litigation
Charges" in the notes to the consolidated financial statements.
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 improve the company's performance by building stronger
operations that can better support long-term growth. The pre-tax
charge recorded in 1998 for the plan was $668 million. After tax,
the expense was $543 million in 1998 or $14.33 loss per share.
The $114 million of costs relating to the strategic plan not yet
charged against income will be recorded over the next 2 years at
the time such costs are accruable.
Taxes On Income. The effective tax rate for 1998 is 14.6% versus
58.0% for 1997. The 1998 effective rate is low due primarily to
the impairment of non-deductible goodwill written off as part of
the strategic plan. The presentation of the 1997 tax is split by
reflecting a tax benefit at the statutory rate of 40% for the
extraordinary charge and reflecting the balance of the tax amount
on the taxes on income line. See "Income Taxes" in the notes to
the consolidated financial statements.
Extraordinary Charge From Early Retirement of Debt. During 1997,
the company undertook a recapitalization program which culminated
in an $850 million senior secured credit facility and the sale of
$500 million of senior subordinated notes. The recapitalization
program resulted in an extraordinary charge of $13.3 million,
after income tax benefits of $8.9 million, or $.35 per share, in
the company's third quarter 1997. Almost all of the charge
represents a non-cash write-off of unamortized financing costs
related to debt which was prepaid.
Other. During 1998 and 1997, activity was booked against the
facilities consolidation and restructuring reserve set up in
1993. In 1998, the primary activity was the reversal of a $4
million reserve originally set up to close a facility. In 1997,
$11 million of severance expense was recorded which related to
corporate headcount reductions, outsourcing certain
transportation operations and an early retirement program;
additionally, $2 million was recorded to reimburse customers of
the company's general merchandise and distribution operations for
expenses they incurred to conform to a change in our standard
product codes. The implementation of the 1993 plan was slowed by
the acquisition of Scrivner in mid-1994, disruptions caused by
the David's lawsuit and other litigation developments in 1996 and
1997, and other unforeseen difficulties.
LIQUIDITY AND CAPITAL RESOURCES
In the year ended December 25, 1999, the company's principal
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, during this period were
banks and lessors.
Net cash provided by operating activities.
Operating activities generated $118 million of net cash flows for
the year ended December 25, 1999, compared to $141 million for
the same period in 1998. Included in 1999 net operating cash
flows were $78 million from an increase in receivables and
inventories, $36 million reduction in accounts payable, and $50
million in payments for strategic plan-related restructuring
charges.
Cash requirements related to the implementation and completion of
the strategic plan (on a pre-tax basis) are estimated to be a
total of $130 million in 2000 and $56 million thereafter. Total
expected cash requirements (pre-tax) have increased by $85
million since the end of 1998 due to the cost of additional
divestitures and closings added to the strategic plan plus
increasing costs associated with initiatives to reduce overhead
and complexity in business systems. Management believes working
capital reductions, proceeds from the sale of assets, and
increased after-tax earnings related to the successful
implementation of the strategic plan are expected to provide
adequate cash flows to cover all of these costs.
Net cash used in investing activities.
Total net investment expenditures were $213 million for the year
ended December 25, 1999, compared to $163 million in net
investment expenditures for the same period in 1998. Included in
1999 net investment expenditures were $166 million for capital
expenditures, $78 million for acquisitions of retail stores and a
total of $52 million in loans and equity investments in
customers. Offsetting these expenditures in part were sales of
assets and investments totaling $45 million and collections on
notes receivable totaling $35 million.
Capital expenditures are estimated to be a total of $180 million
for 2000. The company intends to increase its retail operations
by making investments in its existing stores and by adding new
stores through store construction or acquisitions. Acquisitions
of supermarket groups or chains or distribution operations will
be made only on a selective basis. The focus of retail
investment is expected to shift towards the company's value-
oriented stores. The company's strategic plan involves divesting
or closing certain distribution and retail facilities and other
assets, and focusing resources on the remaining distribution and
retail operations.
Net cash provided by financing activities.
Net cash provided by financing activities was $96 million for the
year ended December 25, 1999, compared to $2 million in net cash
used in financing activities for the same period in 1998.
Included in 1999 net cash provided by financing activities was a
net increase in long-term debt of $120 million since the end of
1998. The increase in long-term debt reflects net cash required
from external sources to finance net cash used in investment
activities and certain financing activities such as $22 million
of principal payments on capital lease obligations and $3 million
of dividends paid, offset in part by $1 million from the sale of
common stock under stock ownership plans. Approximately $30
million in net capital value has been provided by lessors through
capital lease obligations since the end of 1998.
At the end of 1999, borrowings under the credit facility totaled
$198 million in term loans and $255 million of revolver
borrowings, and $40 million of letters of credit had been issued.
Based on actual borrowings and letters of credit issued, the
company could have borrowed an additional $305 million under the
revolver.
For the foreseeable future, the company's principal sources of
liquidity and capital are expected to be cash flows from
operating activities, the company's ability to borrow under its
credit facility, and asset sale proceeds. In addition, lease
financing may be employed for new retail stores and certain
equipment. Management believes these sources will be adequate to
meet working capital needs, capital expenditures, expenditures
for acquisitions (if any), strategic plan implementation costs
and other capital needs for the next 12 months. Three of the
company's largest customers (Furr's, Randall's and United) have
announced they are moving or have moved to self-distribution,
which together represented approximately 4% and 8% of the
company's sales in 1999 and 1998, respectively. This is expected
to have no significant future impact on the company's liquidity
due to the implementation of cost cutting measures and the new
business gained in 1999 and so far in 2000.
In December 2001, the company's $300 million of 10 5/8% senior
notes are scheduled to mature. While management believes future
cash flows from operating activities, the company's ability to
borrow under its credit facility, and asset sale proceeds may be
adequate to cover this debt service requirement, alternative
means of refinancing this debt maturity are being explored (such
as accessing the long-term capital markets).
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
"Contingencies" in the notes to the consolidated 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 Item 3. 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. In
1996, management implemented a program to comply with year-2000
requirements on a system-by-system basis, which included
extensive systems testing. Conversion efforts were complete at
December 31, 1999. The company has not experienced any
significant difficulties to date relating to year-2000 issues,
and management does not expect year-2000 issues to have a
significant impact on the company's operations. Although the
company believes contingency plans will not be necessary,
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. In
addition, the company has not experienced any significant
difficulties to date relating to its vendors' and customers' year-
2000 readiness.
Program costs to comply with year-2000 requirements were expensed
as incurred. Through the year end 1999, total expenditures to
third parties were $8.4 million since the beginning of 1997. To
compensate for the dilutive effect on results of operations, the
company delayed other non-critical development and support
initiatives. Accordingly, the company's annual information
technology expenses did 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 projections and assumptions which may
prove to have been inaccurate, including expectations for years
2000 and beyond, 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 expand
portions of its business or enter new facets of its business; and
the company's expectations regarding the adequacy of capital and
liquidity. The management of the company has prepared the financial
projections included in this Form 10-K on a reasonable basis, and such
projections reflect the best currently available estimates and judgments
and present, to the best of management's knowledge and belief, the
expected course of action and the expected future financial performance
of the company. However, this information is not fact and should not
be relied upon as necessarily indicative of future results, and readers
of this Form 10-K are cautioned not to place undue reliance on the
projected financial information. These projections, 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 labor
disruptions; 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; 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 this report under Item 1. Business -- Risk Factors
and in other periodic reports available from the Securities and
Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company's exposure to pricing risk in the financial markets
consists of changes in interest rates related to its investment
in notes receivable, the balance of debt obligations outstanding,
and derivatives employed to hedge interest rate changes on
variable rate debt. The company does not use foreign currency
exchange rate forward contracts or commodity contracts and does
not have any material foreign currency exposure. The company does
not use financial instruments or derivatives for any trading
purposes. Fleming uses derivatives, currently consisting of
simple floating-to-fixed interest rate swap transactions, to
hedge its exposure to changing interest rates for its variable
interest rate debt obligations.
In the normal course of business Fleming carries notes receivable
because the company makes long-term loans to certain retail
customers (see "Investments and Notes Receivable" in the notes to
the consolidated financial statements). A portion of the notes
receivable carries a variable interest rate, which is based on a
prime rate index published in a major financial publication and
is reset quarterly. The remaining portion carries fixed interest
rates negotiated with each retail customer. No derivatives have
been employed to hedge the company's exposure to variable
interest rates on notes receivable primarily because these notes
are considered to be a partial hedge for debt with variable
interest rates.
In order to help maintain liquidity and finance business
operations, Fleming obtains long-term credit commitments from
banks and other financial institutions under which term loans and
revolving loans are made. Such loans carry variable interest
rates based on the London interbank offered interest rate
("LIBOR") plus a borrowing margin for different interest periods,
such as one week, one month, and other periods up to one year. To
assist in managing its debt maturities and diversify its sources
of debt capital, Fleming also uses long-term debt which carries
fixed interest rates.
Fleming management maintains a written policy statement which
governs its financial risk management activities including the
use of financial derivatives. The policy statement says that the
company will engage in a financial risk management process to
manage its defined exposures to uncertain future changes in
interest rates and foreign exchange rates which impact net
earnings. The primary purpose of this process is to control and
limit the volatility of net earnings according to pre-established
targets for exposure to such changes in a manner which does not
result in unreasonable or unmanageable additional risks or
expense. The financial risk management process works under the
oversight of a special management group to ensure certain policy
objectives are achieved. Such objectives include, and are not
limited to, the following: to act in accordance with authority
granted by resolution of the Board of Directors, which
specifically permits the use of derivatives to hedge interest
rate or foreign exchange rate risks and which prohibits the use
of derivatives for the purpose of speculation; to define and
measure the company's financial risks associated with interest
and foreign exchange rates as well as with derivative
instruments to be used for hedging; and to establish exposure
targets and to manage performance against those targets.
Changes in interest rates may have a material impact on Fleming's
interest expense and interest income, as well as to the fair
values for its investment in notes receivable, outstanding debt
obligations and financial derivatives used. The table below
presents a summary of the categories of Fleming's financial
instruments according to their respective interest rate profiles.
For notes receivable, the table shows the principal amount of
cash the company expects to collect each year according to the
scheduled maturities, as well as the average interest rates
applicable to such maturities. For debt obligations, the table
shows the principal amount of cash the company expects to pay
each year according to the scheduled maturities, as well as the
average interest rates applicable to such maturities. For
derivatives, the table shows when the notional principal
contracts terminate.
SUMMARY OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
Maturities of Principal by Fiscal Year
-----------------------------------------
(In millions, Fair Value Fair Value There-
except rates) at 12/26/98 at 12/25/99 2000 2001 2002 2003 2004 after
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes Receivable with
Variable Interest Rates
Principal receivable $72 $93 $20 $14 $12 $11 $11 $25
Average variable rate
receivable 10.6% 11.0% Based on the referenced Prime Rate plus a margin
Notes Receivable with
Fixed Interest Rates
Principal receivable $51 $28 $9 $3 $4 $2 $2 $8
Average fixed rate
receivable 5.2% 6.0% 4.6% 4.3% 2.1% 2.1% 4.6% 7.6%
Debt with Variable
Interest Rates
Principal payable $313 $428 $35 $35 $40 $295 $49 $ -
Average variable rate
payable 6.8% 7.1% Based on LIBOR plus a margin
Debt with Fixed Interest Rates
Principal payable $846 $808 $37 $303 $10 $5 $250 $250
Average fixed rate
payable 10.3% 6.6% 10.6% 8.9% 8.8% 10.5% 10.6%
Variable-To-Fixed Rate Swaps
Amount payable $10 $3 $250 (notional, not payable)
Average fixed rate
payable 7.2% 7.2% 7.2%
Average variable rate
receivable 5.2% 6.2% Based on LIBOR
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14(a) 1. Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 10,
2000. Information concerning Executive Officers of the company is included
in Part I herein which is incorporated in this Part III by reference.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 10,
2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 10,
2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the company's proxy statement in
connection with its annual meeting of shareholders to be held on May 10,
2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
o Consolidated Statements of Operations -
For the years ended December 25, 1999,
December 26, 1998, and December 27, 1997
o Consolidated Balance Sheets -
At December 25, 1999 and December 26, 1998
o Consolidated Statements of Cash Flows -
For the years ended December 25, 1999,
December 26, 1998, and December 27, 1997
o Consolidated Statements of Shareholders' Equity -
For the years ended December 25, 1999,
December 26, 1998, and December 27, 1997
o Notes to Consolidated Financial Statements -
For the years ended December 25, 1999,
December 26, 1998, and December 27, 1997
o Independent Auditors' Report
o Quarterly Financial Information (Unaudited)
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
For the years ended December 25, 1999, December 26, 1998 and December 27, 1997
(In thousands, except per share amounts)
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $14,645,566 $15,069,335 $15,372,666
Costs and expenses (income):
Costs of sales 13,208,399 13,618,961 13,963,972
Selling and administrative 1,261,631 1,251,592 1,172,436
Interest expense 165,180 161,581 162,506
Interest income (40,318) (36,736) (46,638)
Equity investment results 10,243 11,622 16,746
Litigation charges - 7,780 20,959
Impairment/restructuring charge 103,012 652,737 -
----------- ----------- -----------
Total costs and expenses 14,708,147 15,667,537 15,289,981
----------- ----------- -----------
Earnings (loss) before taxes (62,581) (598,202) 82,685
Taxes on income (loss) (17,853) (87,607) 43,963
----------- ----------- -----------
Earnings (loss) before
extraordinary charge (44,728) (510,595) 38,722
Extraordinary charge from early
retirement of debt (net of taxes - - (13,330)
----------- ----------- -----------
Net earnings (loss) $(44,728) $(510,595) $25,392
=========== =========== ===========
Earnings (loss) per share:
Basic and diluted before
extraordinary charge $(1.17) $(13.48) $1.02
Extraordinary charge - - (.35)
------ ------- -------
Basic and diluted net earnings
(loss) $(1.17) $(13.48) $ .67
====== ======= =======
Weighted average shares outstanding:
Basic 38,305 37,887 37,803
====== ====== ======
Diluted 38,305 37,887 37,862
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
<TABLE>
CONSOLIDATED BALANCE SHEETS
At December 25, 1999 and December 26, 1998
(In Thousands)
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $6,683 $5,967
Receivables, net 496,159 450,905
Inventories 997,805 984,287
Other current assets 228,103 146,757
---------- ----------
Total current assets 1,728,750 1,587,916
Investments 108,895 119,468
Investment in direct financing leases 126,309 177,783
Property and equipment:
Land 45,507 49,494
Buildings 389,651 408,739
Fixtures and equipment 636,501 663,724
Leasehold improvements 236,570 225,010
Leased assets under capital leases 231,236 207,917
---------- ----------
1,539,465 1,554,884
Less accumulated depreciation and amortization (701,289) (734,819)
---------- ----------
Net property and equipment 838,176 820,065
Deferred income taxes 54,754 51,497
Other assets 150,214 154,524
Goodwill, net 566,120 579,579
---------- ----------
TOTAL ASSETS $3,573,218 $3,490,832
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $981,219 $945,475
Current maturities of long-term debt 70,905 41,638
Current obligations under capital leases 21,375 21,668
Other current liabilities 210,220 272,573
---------- ----------
Total current liabilities 1,283,719 1,281,084
Long-term debt 1,234,185 1,143,900
Long-term obligations under capital leases 367,960 359,462
Other liabilities 126,652 136,455
Commitments and contingencies
Shareholders' equity:
Common stock, $2.50 par value, authorized -
100,000 shares, issued and outstanding -
38,856 and 38,542 shares 97,141 96,356
Capital in excess of par value 511,447 509,602
Reinvested earnings (deficit) (22,326) 23,155
Accumulated other comprehensive income:
Additional minimum pension liability (25,560) (57,133)
---------- ----------
Accumulated other comprehensive income (25,560) (57,133)
Less ESOP note - (2,049)
---------- ----------
Total shareholders' equity 560,702 569,931
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,573,218 $3,490,832
========== ==========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 25, 1999, December 26, 1998, and December 27, 1997
(In thousands)
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(44,728) $(510,595) $25,392
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 162,379 185,368 181,357
Credit losses 24,704 23,498 24,484
Deferred income taxes 3,357 (117,239) 40,301
Equity investment results 9,412 11,622 16,746
Impairment/restructuring and
related charges 136,868 668,028 -
Cash payments on impairment/
restructuring and related charges (50,340) (7,408) -
Cost of early debt retirement - - 22,227
Consolidation and restructuring
reserve activity 423 (1,008) (12,724)
Change in assets and liabilities,
excluding effect of acquisitions:
Receivables (55,692) (156,822) (41,347)
Inventories (22,049) 6,922 31,315
Accounts payable 35,744 114,136 (117,219)
Other assets and liabilities (77,113) (71,058) (53,116)
Other adjustments, net (5,348) (4,365) (4,448)
-------- -------- --------
Net cash provided by operating activities 117,617 141,079 112,968
-------- -------- --------
Cash flows from investing activities:
Collections on notes receivable 34,798 38,076 59,011
Notes receivable funded (43,859) (28,946) (37,537)
Notes receivable sold - - 29,272
Businesses acquired (78,440) (30,225) (9,572)
Proceeds from sale of businesses 7,042 32,277 13,093
Purchase of property and equipment (166,339) (200,211) (129,386)
Proceeds from sale of property
and equipment 35,487 17,056 15,845
Investments in customers (8,115) (1,009) (1,694)
Proceeds from sale of investments 2,745 3,529 4,970
Other investing activities 3,337 6,141 1,895
-------- -------- --------
Net cash used in investing activities (213,344) (163,312) (54,103)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term borrowings 126,000 170,000 914,477
Principal payments on long-term debt (6,178) (159,651) (982,982)
Principal payments on capital
lease obligations (21,533) (13,356) (20,102)
Sale of common stock under incentive
stock and stock ownership plans 1,267 4,830 593
Dividends paid (3,082) (3,048) (3,007)
Other financing activities (31) (891) (1,195)
-------- -------- --------
Net cash provided by (used in)
financing activities 96,443 (2,116) (92,216)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 716 (24,349) (33,351)
Cash and cash equivalents,
beginning of year 5,967 30,316 63,667
-------- -------- --------
Cash and cash equivalents, end of year $6,683 $5,967 $30,316
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 25, 1999, December 26, 1998 and December 27, 1997
(In thousands, except per share amounts)
<CAPTION>
Accumulated
Capital Reinvested Other
Common Shares in excess Earnings Comprehensive Comprehensive ESOP
Total Shares Amount of par value (Deficit) Income Income Note
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996 $1,075,958 37,798 $94,494 $503,595 $514,408 $(29,597) $(6,942)
Comprehensive income
Net earnings 25,392 25,392 $25,392
Other comprehensive income,
net of tax
Currency translation
adjustment (net of $0 taxes) (222) (222) (222)
Minimum pension liability
adjustment (net of $8,556
of taxes) (12,818) (12,818) (12,818)
-------
Comprehensive income $12,352
=======
Incentive stock and stock
ownership plans 2,022 466 1,166 856
Cash dividends, $0.08 per share (3,008) (3,008)
ESOP note payments 2,348 2,348
---------- ------ ------- -------- -------- ------- -------
Balance at December 27, 1997 1,089,672 38,264 95,660 504,451 536,792 (42,637) (4,594)
Comprehensive income
Net loss (510,595) (510,595) $(510,595)
Other comprehensive income,
net of tax
Currency translation
adjustment (net of $0 taxes) 4,922 4,922 4,922
Minimum pension liability
adjustment (net of $12,914
of taxes) (19,418) (19,418) (19,418)
---------
Comprehensive income $(525,091)
=========
Incentive stock and stock
ownership plans 5,847 278 696 5,151
Cash dividends, $0.08 per share (3,042) (3,042)
ESOP note payments 2,545 2,545
---------- ------ ------- -------- -------- ------- ------
Balance at December 26, 1998 569,931 38,542 96,356 509,602 23,155 (57,133) (2,049)
Comprehensive income
Net loss (44,728) (44,728) $(44,728)
Other comprehensive income,
net of tax
Minimum pension liability
adjustment (net of $21,049
of taxes) 31,573 31,573 31,573
--------
Comprehensive income $(13,155)
========
Incentive stock and stock
ownership plans 4,955 314 785 4,170
Cash dividends, $0.08 per share (3,078) (2,325) (753)
ESOP note payments 2,049 2,049
---------- ------ ------- --------
Balance at December 25, 1999 $560,702 38,856 $97,141 $511,447 $(22,326) $(25,560) $ -
========== ====== ======= ======== ======== ======== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 25, 1999, December 26, 1998 and December 27, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: The company markets food and related
products and offers retail services to supermarkets in 41 states.
The company also operates more than 240 company-owned stores in
several geographic areas. The company's activities encompass two
major businesses: distribution and retail operations. Food and
food-related product sales account for over 90 percent of the
company's consolidated sales. No one customer accounts for 4.5
percent or more of consolidated sales.
Fiscal Year: The company's fiscal year ends on the last Saturday
in December.
Basis of Presentation: The preparation of the consolidated
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Principles of Consolidation: The consolidated financial
statements include all subsidiaries. Material intercompany items
have been eliminated. The equity method of accounting is usually
used for investments in certain entities in which the company has
an investment in common stock of between 20% and 50% or such
investment is temporary. Under the equity method, original
investments are recorded at cost and adjusted by the company's
share of earnings or losses of these entities and for declines in
estimated realizable values deemed to be other than temporary.
Reclassifications: Certain reclassifications have been made to
prior year amounts to conform to current year classifications.
Basic and Diluted Net Earnings (Loss) Per Share: Both basic and
diluted earnings per share are computed based on net earnings
(loss) divided by weighted average shares as appropriate for each
calculation subject to anti-dilution limitations.
Taxes on Income: Deferred income taxes arise from temporary
differences between financial and tax bases of certain assets and
liabilities.
Cash and Cash Equivalents: Cash equivalents consist of liquid
investments readily convertible to cash with an original maturity
of three months or less. The carrying amount for cash equivalents
is a reasonable estimate of fair value.
Receivables: Receivables include the current portion of customer
notes receivable of $25 million in 1999 and $17 million in 1998.
Receivables are shown net of allowance for doubtful accounts of
$32 million in 1999 and $28 million in 1998. The company extends
credit to its retail customers located over a broad geographic
base. Regional concentrations of credit risk are limited.
Interest income on impaired loans is recognized only when
payments are received.
Inventories: Inventories are valued at the lower of cost or
market. Grocery and certain perishable inventories, aggregating
approximately 70% of total inventories in 1999 and 1998 are
valued on a last-in, first-out (LIFO) method. The cost for the
remaining inventories is determined by the first-in, first-out
(FIFO) method. Current replacement cost of LIFO inventories was
greater than the carrying amounts by approximately $54 million at
year-end 1999 ($4 million of which is recorded in assets held for
sale in other current assets) and $44 million at year-end 1998.
In 1999 and 1998, the liquidation of certain LIFO layers related
to business closings decreased cost of products sold by
approximately $2 million and $3 million, respectively.
Property and Equipment: Property and equipment are recorded at
cost or, for leased assets under capital leases, at the present
value of minimum lease payments. Depreciation, as well as
amortization of assets under capital leases, is based on the
estimated useful asset lives using the straight-line method. The
estimated useful lives used in computing depreciation and
amortization are: buildings and major improvements - 20 to 40
years; warehouse, transportation and other equipment - 3 to 10
years; and data processing equipment and software - 3 to 7 years.
Goodwill: The excess of purchase price over the fair value of net
assets of businesses acquired is amortized on the straight-line
method over periods not exceeding 40 years. Goodwill is shown net
of accumulated amortization of $184 million and $176 million in
1999 and 1998, respectively.
Impairment: Asset impairments are recorded when the carrying
amount of assets are not recoverable. Impairment is assessed and
measured, by asset type, as follows: notes receivable - fair
value of the collateral for each note; and, long-lived assets,
goodwill and other intangibles - estimate of the future cash
flows expected to result from the use of the asset and its
eventual disposition aggregated to the operating unit level for
distribution and store level for retail.
Financial Instruments: Interest rate hedge transactions and other
financial instruments are utilized to manage interest rate
exposure. The methods and assumptions used to estimate the fair
value of significant financial instruments are discussed in the
"Investments and Notes Receivable" and "Long-term Debt" notes.
Stock-Based Compensation: The company applies APB Opinion No. 25
- - Accounting for Stock Issued to Employees and related
Interpretations in accounting for its plans.
Comprehensive Income: Comprehensive income is reflected in the
Consolidated Statements of Shareholders' Equity. Other
comprehensive income is comprised of foreign currency translation
adjustments and minimum pension liability adjustments. The
cumulative effect of other comprehensive income is reflected in
the Shareholders' Equity section of the Consolidated Balance
Sheets.
IMPAIRMENT/RESTRUCTURING CHARGE AND RELATED COSTS
In December 1998, the company announced the implementation of a
strategic plan designed to improve the competitiveness of the
retailers the company serves and improve the company's
performance by building stronger operations that can better
support long-term growth. The following reflect the four major
initiatives and their current status:
o Consolidate distribution operations. The strategic plan
initially included closing eleven operating units (El Paso,
TX; Portland, OR; Houston, TX; Huntingdon, PA; Laurens, IA;
Johnson City, TN; Sikeston, MO; San Antonio, TX; Buffalo, NY;
an unannounced operating unit still to be closed; and an
unannounced operating unit scheduled for 1999 closure, but due
to increased cash flows from new business it will not be
closed). Of the nine announced, all but San Antonio and
Buffalo have been completed. San Antonio should be closed by
the end of the first quarter of 2000 and Buffalo by the end of the
second quarter of 2000. Three additional closings were announced
which were not originally part of the strategic plan which
brings the total operating units to be closed to thirteen.
The closing of Peoria was added to the plan in the first
quarter of 1999 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. Recently, the closings of York
and Philadelphia were announced as part of an effort to grow
in the northeast by consolidating distribution operations and
expand the Maryland facility. Total 1998 sales from the 13
operating units closed or to be closed were approximately $3.1
billion. Most of these sales have been or are expected to be
retained by transferring customer business to its higher
volume, better utilized facilities. The company believes that
this consolidation process benefits customers with better
product variety and improved buying opportunities. The
company has also benefited with better coverage of fixed
expenses. The closings result in savings due to reduced
depreciation, payroll, lease and other operating costs, and
the company begins recognizing these savings immediately upon
closure. The capital returned from the divestitures and
closings has been and will continue to be reinvested in the
business.
o Grow distribution sales. Higher volume, better-utilized
distribution operations and the dynamics of the market place
represent an opportunity for sales growth. The improved
efficiency and effectiveness of the remaining distribution
operations enhances their competitiveness and the company
intends to capitalize on these improvements.
o Improve retail performance. This not only requires divestiture
or closing of under-performing company-owned retail chains,
but also requires increased investments in market leading chains.
The strategic plan includes the divestiture or closing of seven
retail chains (including the recently announced letters of intent
to sell the Baker's Oklahoma stores in the first half of 2000).
The chains divested or closed (or to be divested or closed) are Hyde
Park, Consumers, Boogaarts, New York Retail, Pennsylvania
Retail, Baker's Oklahoma, and a chain not yet announced. The
sale of Baker's Oklahoma as well as the divestiture or closing
of the chain not yet announced were not in the original
strategic plan, but no longer fit into the current business
strategy. Total 1998 sales from the divested or closed (or to
be divested or closed) chains that have been announced were
approximately $844 million. The sale or closing of these
chains is expected to be substantially completed by the end of
the second quarter of 2000. Also during 1999, the company
built or acquired more than 25 retail stores that are expected
to fit in well strategically with the existing chains.
Sixteen remodels of existing retail stores were also completed
during 1999.
o Reduce overhead and operating expenses. Overhead has been and
will continue to be reduced through the low cost pursuit
program which includes organization and process changes, such
as a reduction in workforce through productivity improvements
and elimination of work, centralization of administrative and
procurement functions, and reduction in the number of
management layers. The low cost pursuit program also includes
other initiatives to reduce complexity in business systems and
remove non-value-added costs from operations, such as reducing
the number of SKU's, creating a single point of contact with
customers, reducing the number of decision points within the
company, and centralizing vendor negotiations. These
initiatives are well underway and have reflected reduced costs
for the company which ultimately reflect improved
profitability and competitiveness.
The total pre-tax charge of the strategic plan is presently
estimated at $935 million ($239 million cash and $696 million non-
cash). The plan originally announced in December 1998 had an
estimated pre-tax charge totaling $782 million. The increase is
due primarily to closing the Peoria, York and Philadelphia
divisions ($59 million), updating impairment amounts on certain
retail chains ($25 million), the divestiture of the Baker's chain
in Oklahoma ($17 million), increasing costs associated with
initiatives to reduce overhead and complexity in business systems
($60 million), and decreasing costs related to a scheduled
closing no longer planned ($8 million). Updating the impairment
amounts was necessary as decisions to close additional operating
units were made. Additionally, sales negotiations provided more
current information regarding the fair value on certain chains.
The cost of severance, relocation and other periodic expenses
relating to reducing overhead and business complexities was more
than expected. Also, there were changes in the list of operating
units to be divested or closed due to no longer fitting into the
current business strategy as described above. The pre-tax charge
recorded to-date is $805 million ($137 million in 1999 and $668
million recorded in 1998). After tax, the expense for 1999 was
$92 million or $2.39 per share. The $130 million of costs
relating to the strategic plan not yet charged against income
will primarily be recorded throughout 2000 at the time such costs
are accruable.
The $137 million charge in 1999 was included on several lines of
the Consolidated Statements of Operations as follows: $18 million
was included in cost of sales and was primarily related to
inventory valuation adjustments; $16 million was included in
selling and administrative expense and equity investment results
as disposition related costs recognized on a periodic basis; and
the remaining $103 million was included in the impairment/
restructuring charge line. The 1999 charge consisted of the
following components:
o Impairment of assets of $62 million. The impairment components
were $36 million for goodwill and $26 million for other long-
lived assets. Of the goodwill charge of $36 million, $22
million related to the 1994 "Scrivner" acquisition with the
remaining amount related to two retail acquisitions.
o Restructuring charges of $41 million. The restructuring
charges consisted primarily of severance related expenses and
pension withdrawal liabilities for the divested or closed
operating units announced during 1999. The restructuring
charges also consisted of operating lease liabilities and
professional fees incurred related to the restructuring
process.
o Other disposition and related costs of $34 million. These
costs consisted primarily of inventory valuation adjustments,
impairment of an investment, disposition related costs
recognized on a periodic basis and other costs.
The 1999 charge relates to the company's segments as follows: $48
million relates to the distribution segment and $70 million
relates to the retail segment with the balance relating to
corporate overhead expenses.
The charges related to workforce reductions are as follows:
($'s in thousands) Amount Headcount
------ ---------
1998 Activity:
Charge $25,441 1,430
Terminations (3,458) (170)
------- -----
1998 Ending Liability 21,983 1,260
1999 Activity:
Charge 12,029 1,350
Terminations (24,410) (1,950)
------- -----
1999 Ending Liability $9,602 660
======= =====
The breakdown of the 1,350 headcount reduction recorded during
1999 is: 275 from the distribution segment; 925 from the retail
segment; and 150 from corporate.
Additionally, the strategic plan includes charges related to
lease obligations which will be utilized as operating units or
retail stores close, but ultimately reduced over remaining lease
terms ranging from 1 to 20 years. The charges and utilization
have been recorded to-date as follows:
($'s in thousands) Amount
------
1998 Activity:
Charge $28,101
Utilized (385)
-------
1998 Ending Liability 27,716
1999 Activity:
Charge 4,153
Utilized (10,281)
-------
1999 Ending Liability $21,588
=======
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.
Assets held for sale included in other current assets at the end
of 1999 were approximately $69 million, consisting of $8 million
of distribution operating units and $61 million of retail stores.
During 1999, gains on the sale of facilities totaled
approximately $6 million and were included in net sales. Also
during 1999, the company recorded a charge of approximately $31
million related to the closing of certain retail stores which was
included in selling and administrative expense.
LITIGATION CHARGES
Furr's Supermarkets, Inc. ("Furr's") filed suit against the
company in 1997 claiming it was overcharged for products. During
1997, Fleming and Furr's reached an agreement dismissing all
litigation between them. Pursuant to the settlement, Furr's
purchased Fleming's El Paso product supply center in 1998,
together with related inventory and equipment. As part of the
settlement, Fleming paid Furr's $1.7 million in 1997 and $7.8
million in 1998 as a refund of fees and charges.
The company was sued by David's Supermarkets, Inc. ("David's") in
1993 for allegedly overcharging for products. In 1996, judgment
was entered against the company for $211 million; the judgment
was subsequently vacated and a new trial granted. At the end of
1996 the company had an accrual of $650,000. The company denied
the plaintiff's allegations; however, to eliminate the
uncertainty and expense of protracted litigation, the company
paid $19.9 million to the plaintiff in April 1997 in exchange for
dismissal, with prejudice, of all plaintiff's claims against the
company, resulting in a charge to first quarter 1997 earnings of
$19.2 million.
EXTRAORDINARY CHARGE
During 1997, the company undertook a recapitalization program
which culminated in an $850 million senior secured credit
facility and the sale of $500 million of senior subordinated
notes. The recapitalization program resulted in an extraordinary
charge of $13.3 million, after income tax benefits of $8.9
million, or $.35 per share. Almost all of the charge represents a
non-cash write-off of unamortized financing costs related to debt
which was prepaid. See the "Long-term Debt" note for further
discussion of the recapitalization program.
PER SHARE RESULTS
The following table sets forth the basic and diluted per share
computations for income (loss) before extraordinary charge.
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1999 1998 1997
- ---------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Numerator:
Basic and diluted earnings (loss)
before extraordinary charge
$(44,728) $(510,595) $38,722
======== ========= =======
Denominator:
Weighted average shares for
basic earnings per share 38,305 37,887 37,803
Effect of dilutive securities:
Employee stock options - - 21
Restricted stock compensation - - 38
------ ------ ------
Dilutive potential common shares - - 59
------ ------ ------
Weighted average shares for
diluted earnings per share 38,305 37,887 37,862
====== ====== ======
Basic and diluted earnings (loss) per
share before extraordinary charge $(1.17) $(13.48) $1.02
====== ======= ======
</TABLE>
The company did not reflect 364,000 weighted average potential
shares for the 1999 diluted calculation or 172,000 weighted
average potential shares for the 1998 diluted calculation because
they would be antidilutive. Other options with exercise prices
exceeding market prices consisted of 3.8 million shares in 1999
and 2.4 million shares in 1998 of common stock at a weighted
average exercise price of $ 14.71 and $19.37 per share,
respectively, that were not included in the computation of
diluted earnings per share because the effect would be
antidilutive.
SEGMENT INFORMATION
The company derives over 90% of its net sales and operating
profits from the sale of food and food-related products. Further,
over 90% of the company's assets are based in and net sales
derived from 41 states and no single customer amounts to 4.5% or
more of net sales for any of the years reported. Considering the
customer types and the processes for meeting the needs of
customers, senior management manages the business as two
segments: distribution and retail operations.
The distribution segment represents the aggregation of retail
services and the distribution and marketing of the following
products: food, general merchandise, health and beauty care, and
Fleming Brands. The aggregation is based primarily on the common
customer base and the interdependent marketing and distribution
efforts.
The company's senior management utilizes more than one
measurement and multiple views of data to assess segment
performance and to allocate resources to the segments. However,
the dominant measurements are consistent with the company's
consolidated financial statements and, accordingly, are reported
on the same basis herein. Interest expense, interest income,
equity investments, corporate expenses, other unusual charges and
income taxes are managed separately by senior management and
those items are not allocated to the business segments.
Intersegment transactions are reflected at cost.
The following table sets forth the composition of the segment's
and total company's net sales, operating earnings, depreciation
and amortization, capital expenditures and identifiable assets.
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
- ------------- ---- ---- ----
<S> <C> <C> <C>
Net Sales
Distribution $13,131 $13,561 $13,864
Intersegment elimination (2,204) (2,081) (1,950)
------- ------- -------
Net distribution 10,927 11,480 11,914
Retail 3,719 3,589 3,459
------- ------- -------
Total $14,646 $15,069 $15,373
======= ======= =======
Operating Earnings
Distribution $290 $259 $283
Retail (2) 62 80
Corporate (112) (122) (127)
------- ------- -------
Total operating earnings 176 199 236
Interest expense (165) (161) (162)
Interest income 40 37 47
Equity investment results (10) (12) (17)
Litigation charges - (8) (21)
Impairment/restructuring charge (103) (653) -
------- ------- -------
Earnings (loss) before taxes $(62) $(598) $83
------- ------- -------
Depreciation and Amortization
Distribution $88 $107 $105
Retail 64 61 55
Corporate 10 17 21
------- ------- -------
Total $162 $185 $181
======= ======= =======
Capital Expenditures
Distribution $53 $81 $51
Retail 112 118 77
Corporate 1 1 1
------- ------- -------
Total $166 $200 $129
======= ======= =======
Identifiable Assets
Distribution $2,517 $2,502 $2,864
Retail 823 683 708
Corporate 233 306 352
------- ------- -------
Total $3,573 $3,491 $3,924
======= ======= =======
</TABLE>
<TABLE>
INCOME TAXES
Components of taxes on income (loss) are as follows:
<CAPTION>
(In thousands) 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Current:
Federal $(17,287) $ 23,896 $ (4,761)
State (3,924) 5,737 (474)
-------- -------- --------
Total current (21,211) 29,633 (5,235)
-------- -------- --------
Deferred:
Federal 2,552 (94,254) 32,519
State 806 (22,986) 7,782
-------- -------- --------
Total deferred 3,358 (117,240) 40,301
-------- -------- --------
Taxes on income (loss) $(17,853) $(87,607) $ 35,066
======== ======== ========
</TABLE>
Taxes on income in the above table includes a tax benefit of
$8,897,000 in 1997 which is reported net in the extraordinary
charge from the early retirement of debt in the consolidated
statements of operations.
Deferred tax expense (benefit) relating to temporary differences
includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Depreciation and amortization $ (9,603) $ (64,132) $(4,818)
Inventory 7,019 (6,839) (6,228)
Capital losses (4,825) 251 (357)
Asset valuations and reserves (18,114) 9,302 22,498
Equity investment results (172) (403) 821
Credit losses (4,527) (7,825) 23,184
Lease transactions 7,996 (34,718) (757)
Associate benefits 31,700 3,200 2,727
Note sales (139) (217) (1,843)
Acquired loss carryforwards - - -
Other (5,977) (15,859) 5,074
-------- --------- -------
Deferred tax expense (benefit) $ 3,358 $(117,240) $40,301
======== ========= =======
</TABLE>
Temporary differences that give rise to deferred tax assets and
liabilities as of year-end 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------- ---- ----
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ 23,002 $ 76,175
Asset valuations and reserve activities 48,559 34,238
Associate benefits 54,457 111,591
Credit losses 28,263 21,656
Equity investment results 9,983 9,196
Lease transactions 40,325 48,340
Inventory 26,342 31,328
Acquired loss carryforwards 67 4,997
Capital losses 9,372 4,549
Other 30,847 29,865
--------- --------
Gross deferred tax assets 271,217 371,935
Less valuation allowance - (4,929)
--------- --------
Total deferred tax assets 271,217 367,006
--------- --------
Deferred tax liabilities:
Depreciation and amortization 52,103 114,878
Equity investment results 3,482 2,867
Lease transactions 1,532 1,551
Inventory 56,867 54,835
Associate benefits 29,424 33,809
Asset valuations and reserve activities 2,772 6,565
Note sales 3,387 3,418
Prepaid expenses 3,874 3,421
Capital losses 1,088 1,090
Other 28,225 31,703
--------- --------
Total deferred tax liabilities 182,754 254,137
--------- --------
Net deferred tax asset $ 88,463 $112,869
========= ========
</TABLE>
The change in net deferred tax asset from 1998 to 1999 is
allocated $3.4 million to deferred income tax expense and $21.0
million expense to stockholders' equity.
The valuation allowance in 1998 relates to $4.9 million of
acquired loss carryforwards. The valuation allowance is not
needed in 1999 and management believes it is more likely than not
that all of the company's deferred tax assets will be realized.
The effective income tax rates are different from the statutory
federal income tax rates for the following reasons:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
federal tax benefit 5.1 6.8 7.9
Acquisition-related differences 0.0 12.3 14.5
Other (3.1) (.4) .6
---- ---- ----
Effective rate on operations 37.0% 53.7% 58.0%
Impairment/restructuring and
related charges (8.5) (39.1) -
---- ---- ----
Effective rate after impairment/
restructuring and related charges 28.5% 14.6% 58.0%
==== ==== ====
</TABLE>
During 1999, the company recorded interest income of $9 million
related to refunds in federal income taxes from prior years.
INVESTMENTS AND NOTES RECEIVABLE
Investments and notes receivable consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------- ---- ----
<S> <C> <C>
Investments in and advances to customers $ 14,136 $ 30,371
Notes receivable from customers 83,354 71,751
Other investments and receivables 11,405 17,346
-------- --------
Investments and notes receivable $108,895 $119,468
======== ========
</TABLE>
Investments and notes receivable are shown net of reserves of $23
million and $27 million in 1999 and 1998, respectively. Sales to
customers accounted for under the equity method were
approximately $0.3 billion, $0.6 billion and $0.9 billion in
1999, 1998 and 1997, respectively. Receivables include $8
million and $5 million in 1999 and 1998, respectively, due from
customers accounted for under the equity method.
The company extends long-term credit to certain retail customers.
Loans are primarily collateralized by inventory and fixtures.
Interest rates are above prime with terms up to 10 years. The
carrying amount of notes receivable approximates fair value
because of the variable interest rates charged on certain notes
and because of the allowance for credit losses.
The company's impaired notes receivable (including current
portion) are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------- ---- ----
<S> <C> <C>
Impaired notes with related allowances $ 57,657 $ 55,031
Credit loss allowance on impaired notes (25,811) (26,260)
Impaired notes with no related allowances 4,613 366
-------- --------
Net impaired notes receivable $ 36,459 $ 29,137
======== ========
</TABLE>
Average investments in impaired notes were as follows: 1999-$65
million; 1998-$59 million; and 1997-$13 million.
Activity in the allowance for credit losses is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
<S> <C> <C> <C>
Balance, beginning of year $ 47,232 $ 43,848 $ 49,632
Charged to costs and expenses 24,704 23,498 24,484
Uncollectible accounts written off,
net of recoveries (16,408) (20,114) (32,655)
Asset impairment - - 2,387
-------- -------- --------
Balance, end of year $ 55,528 $ 47,232 $ 43,848
======== ======== ========
</TABLE>
The company sold certain notes receivable at face value with
limited recourse during 1997. The outstanding balance at year-end
1999 on all notes sold is $15 million, of which the company is
contingently liable for $4 million should all the notes become
uncollectible.
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------- ---- ----
<S> <C> <C>
10.625% senior notes due 2001 $ 300,000 $ 300,000
10.5% senior subordinated notes due 2004 250,000 250,000
10.625% senior subordinated notes due 2007 250,000 250,000
Revolving credit, average interest rates of
6.5% for both years, due 2003 255,000 89,000
Term loans, due 2000 to 2004, average
interest rate of 7.3% and 7.0% 197,594 224,269
Other debt 52,496 71,999
---------- ----------
1,305,090 1,185,268
Less current maturities (70,905) (41,368)
---------- ----------
Long-term debt $1,234,185 $1,143,900
========== ==========
</TABLE>
Five-year Maturities: Aggregate maturities of long-term debt for
the next five years are as follows: 2000-$71 million; 2001-$337
million; 2002-$50 million; 2003-$300 million; and 2004-$299
million.
The 10.625% $300 million senior notes were issued in 1994 and
mature December 15, 2001. The senior notes are unsecured senior
obligations of the company, ranking the same as all other
existing and future senior indebtedness and senior in right of
payment to the subordinated notes. The senior notes are
effectively subordinated to secured senior indebtedness of the
company with respect to assets securing such indebtedness,
including loans under the company's senior secured credit
facility. The senior notes are guaranteed by substantially all of
the company's subsidiaries (see -Subsidiary Guarantee of Senior
Notes below).
The senior subordinated notes consist of two issues: $250 million
of 10.5% Notes due December 1, 2004 and $250 million of 10.625%
Notes due July 31, 2007. The subordinated notes are general
unsecured obligations of the company, subordinated in right of
payment to all existing and future senior indebtedness of the
company, and senior to or of equal rank with all future
subordinated indebtedness of the company. The company currently
has no other subordinated indebtedness outstanding.
The company's $850 million senior secured credit facility
consists of a $600 million revolving credit facility, with a
final maturity of July 25, 2003, and a $250 million amortizing
term loan, with a maturity of July 25, 2004. Up to $300 million
of the revolver may be used for issuing letters of credit.
Borrowings and letters of credit issued under the new credit
facility may be used for general corporate purposes and are
secured by a first priority security interest in the accounts
receivable and inventories of the company and its subsidiaries
and in the capital stock or other equity interests owned by the
company in its subsidiaries. In addition, this credit facility is
guaranteed by substantially all company subsidiaries. The stated
interest rate on borrowings under the credit agreement is equal
to a referenced index interest rate, normally the London
interbank offered interest rate ("LIBOR"), plus a margin. The
level of the margin is dependent on credit ratings on the
company's senior secured bank debt.
The 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, up to $72 million at year-end 1999, based on
a formula tied to net earnings and equity issuances. Under the
credit agreement, new issues of certain kinds of debt must have a
maturity after January 2005. 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 of control. Under the company's indentures, noteholders
may require the company to repurchase notes in the event of a
defined change of control coupled with a defined decline in
credit ratings.
At year-end 1999, borrowings under the credit facility totaled
$198 million in term loans and $255 million of revolver
borrowings, and $40 million of letters of credit had been issued.
Letters of credit are needed primarily for insurance reserves
associated with the company's normal risk management activities.
To the extent that any of these letters of credit would be drawn,
payments would be financed by borrowings under the credit
agreement.
At year-end 1999, the company would have been allowed to borrow
an additional $305 million under the revolving credit facility
contained in the credit agreement based on the actual borrowings
and letters of credit outstanding.
Medium-term Notes: Medium-term notes are included in other debt
in the above table. Between 1990 and 1993, the company
registered $565 million in medium-term notes with a total of $275
million issued. The company has no plans to issue additional
medium-term notes at this time. The balances due at year-end
1999 and 1998 were $53 million and $69 million, respectively,
with average interest rates of 7.2% for both years. The notes
mature from 2000 to 2003.
Credit Ratings: On August 24, 1999, Moody's Investors Service
("Moody's") announced it had confirmed its ratings for the
company's various issues of long-term debt, and that it had
changed its outlook from negative to positive.
On September 9, 1999, Standard & Poor's rating group ("S&P")
announced it had lowered its ratings one notch and confirmed its
stable outlook on the company.
Giving effect to these changes, the table below summarizes the
company's credit ratings:
<TABLE>
<CAPTION>
Moody's S&P
------- ---
<S> <C> <C>
Credit agreement loan Ba3 BB
Senior implied debt B1 BB-
Senior unsecured debt B1 B+
Subordinated notes B3 B
Outlook Positive Stable
</TABLE>
Average Interest Rates: The average interest rate for total debt
(including capital lease obligations) before the effect of
interest rate hedges was 10.2% for 1999, versus 10.1% for 1998.
Including the effect of interest rate hedges, the interest rate
of debt was 10.5% and 10.4% at the end of 1999 and 1998,
respectively.
Interest Expense: Components of interest expense are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Interest costs incurred:
Long-term debt $127,271 $123,054 $121,356
Capital lease obligations 36,768 37,542 36,414
Other 2,258 1,589 5,922
-------- -------- --------
Total incurred 166,297 162,185 163,692
Less interest capitalized (1,117) (604) (1,186)
-------- -------- --------
Interest expense $165,180 $161,581 $162,506
======== ======== ========
</TABLE>
Derivatives: The company enters into interest rate hedge
agreements with the objective of managing interest costs and
exposure to changing interest rates. The classes of derivative
financial instruments used have included interest rate swaps and
caps. The company's policy regarding derivatives is to engage in
a financial risk management process to manage its defined
exposures to uncertain future changes in interest rates which
impact net earnings.
Strategies for achieving the company's objectives have resulted
in the company maintaining interest rate swap agreements covering
$250 million aggregate principal amount of floating rate
indebtedness at year-end 1999. The agreements all mature in 2000.
The counterparties to these agreements are three major U.S. and
international financial institutions.
The interest rate applicable to most of the company's floating
rate indebtedness is equal to LIBOR, plus a margin. The average
fixed interest rate paid by the company on the interest rate
swaps at year-end 1999 was 7.22%, covering $250 million of
floating rate indebtedness. The interest rate swap agreements,
which were implemented through three counterparty banks, and
which had an average remaining life of 0.4 years at year-end
1999, provide for the company to receive substantially the same
LIBOR that the company pays on its floating rate indebtedness.
The notional amounts of interest rate swaps did not represent
amounts exchanged by the parties and are not a measure of the
company's exposure to credit or market risks. The amounts
exchanged are calculated on the basis of the notional amounts and
the other terms of the hedge agreements. Notional amounts are not
included in the consolidated balance sheet.
The company believes its exposure to potential loss due to
counterparty nonperformance is minimized primarily due to the
relatively strong credit ratings of the counterparty banks for
their unsecured long-term debt (A- or higher from S&P or A3 or
higher from Moody's) and the size and diversity of the
counterparty banks. The hedge agreements are subject to market
risk to the extent that market interest rates for similar
instruments decrease and the company terminates the hedges prior
to maturity.
Fleming's financial risk management policy requires that any
interest rate hedge agreement be matched to designated interest-
bearing assets or debt instruments. All of the company's hedge
agreements have been matched to its floating rate indebtedness.
At year-end 1999, the company's floating rate indebtedness
consisted of the term loans and revolver loans under the credit
agreement.
Accordingly, all outstanding swaps are matched swaps and the
settlement accounting method is employed. Derivative financial
instruments are reported in the balance sheet where the company
has made or received a cash payment upon entering into or
terminating the transaction. The carrying amount is amortized
over the shorter of the initial life of the hedge agreement or
the maturity of the hedged item. The company had a financial
basis of $2.2 million and $2.6 million at year-end 1999 and 1998,
respectively, including accrued interest payable or receivable
for the interest rate agreements included in the balance sheet.
Payments made or received under interest rate swap agreements are
included in interest expense.
Fair Value of Financial Instruments: The fair value of long-term
debt was determined using valuation techniques that considered
market prices for actively traded debt, and cash flows discounted
at current market rates for management's best estimate for
instruments without quoted market prices. At year-end 1999, the
carrying value of debt was higher than the fair value by $69
million, or 5.3% of the carrying value. At year-end 1998, the
carrying value of debt was higher than the fair value by $26
million, or 2.2% of the carrying value. The fair value of notes
receivable is comparable to the carrying value because of the
variable interest rates charged on certain notes and because of
the allowance for credit losses.
For derivatives, the fair value was estimated using termination
cash values. At year-end 1999 and 1998, interest rate hedge
agreement values would represent an obligation of $3 million and
$9 million, respectively.
The Financial Accounting Standards Board issued SFAS No. 133 -
Accounting for Derivative Instruments and Hedging Activities
("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and is effective
for 2001. The company will adopt SFAS No. 133 by the required
effective date. The company has not determined the impact on its
financial statements from adopting the new standard.
Subsidiary Guarantee of Senior Notes: The senior notes are
guaranteed by all direct and indirect subsidiaries of the company
(except for certain inconsequential subsidiaries), all of which
are wholly-owned. The guarantees are joint and several, full,
complete and unconditional. There are currently no restrictions
on the ability of the subsidiary guarantors to transfer funds to
the company in the form of cash dividends, loans or advances.
Financial statements for the subsidiary guarantors are not
presented herein because the operations and financial position of
such subsidiaries are not material.
The summarized financial information, which includes allocations
of material corporate-related expenses, for the combined
subsidiary guarantors may not necessarily be indicative of the
results of operations or financial position had the subsidiary
guarantors been operated as independent entities.
<TABLE>
<CAPTION>
(In millions) 1999 1998
---- ----
<S> <C> <C>
Current assets $256 $30
Noncurrent assets 462 52
Current liabilities 102 14
Noncurrent liabilities 144 7
</TABLE>
<TABLE>
<CAPTION>
(In millions) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $899 $362 $379
Costs and expenses 913 393 388
Net loss (9) (10) (4)
</TABLE>
The 1999 and 1998 losses include impairment/restructuring and other
costs related to the strategic plan totaling $2 million pre-tax ($1
million after-tax) and $19 million pre-tax ($15 million after-tax),
respectively.
LEASE AGREEMENTS
Capital And Operating Leases: The company leases certain distribution
facilities with terms generally ranging from 20 to 35 years, while
lease terms for other operating facilities range from 1 to 15 years.
The leases normally provide for minimum annual rentals plus executory
costs and usually include provisions for one to five renewal options of
five years each.
The company leases company-owned store facilities with terms generally
ranging from 15 to 20 years. These agreements normally provide for
contingent rentals based on sales performance in excess of specified
minimums. The leases usually include provisions for one to four renewal
options of two to five years each. Certain equipment is leased under
agreements ranging from two to eight years with no renewal options.
Accumulated amortization related to leased assets under capital leases
was $59 million and $70 million at year-end 1999 and 1998,
respectively.
Future minimum lease payment obligations for leased assets under
capital leases as of year-end 1999 are set forth below:
<TABLE>
<CAPTION>
(In thousands) Lease
Years Obligations
- ----- -----------
<S> <C>
2000 $ 37,620
2001 36,257
2002 35,129
2003 35,308
2004 35,134
Later 154,297
--------
Total minimum lease payments 333,745
Less estimated executory costs (49,613)
--------
Net minimum lease payments 284,132
Less interest (108,492)
--------
Present value of net minimum lease payments 175,640
Less current obligations (7,457)
--------
Long-term obligations $168,183
========
</TABLE>
Future minimum lease payments required at year-end 1999 under operating
leases that have initial noncancelable lease terms exceeding one year
are presented in the following table:
<TABLE>
<CAPTION>
(In thousands)
Facility Facilities Equipment Net
Years Rentals Subleased Rentals Rentals
- ----- -------- ---------- --------- -------
<S> <C> <C> <C> <C>
2000 $ 155,034 $ (68,706) $ 12,393 $ 98,721
2001 137,336 (59,646) 9,698 87,388
2002 128,369 (50,606) 4,061 81,824
2003 118,077 (42,974) 458 75,561
2004 104,305 (35,343) 156 69,118
Later 323,963 (100,080) - 223,883
--------- --------- -------- ---------
Total lease
payments $ 967,084 $(357,355) $ 26,766 $ 636,495
========= ========= ======== =========
</TABLE>
The following table shows the composition of annual net rental expense
under noncancelable operating leases and subleases with initial terms
of one year or greater:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Operating activity:
Rental expense $ 95,760 $100,238 $108,694
Contingent rentals 1,329 1,971 2,002
Less sublease income (9,868) (7,349) (7,064)
-------- -------- --------
87,221 94,860 103,632
-------- -------- --------
Financing activity:
Rental expense 64,107 70,914 76,973
Less sublease income (68,442) (63,920) (75,445)
-------- -------- --------
(4,335) 6,994 1,528
-------- -------- --------
Net rental expense $82,886 $101,854 $105,160
======== ======== ========
</TABLE>
The company reflects net financing activity, as shown above, as a
component of net sales.
Direct Financing Leases: The company leases retail store facilities
with terms generally ranging from 15 to 20 years which are subsequently
subleased to customers. Most leases provide for a percentage rental
based on sales performance in excess of specified minimum rentals. The
leases usually contain provisions for one to four renewal options of
five years each. The sublease to the customer is normally for an
initial five-year term with automatic five-year renewals at Fleming's
discretion, which corresponds to the length of the initial term of the
prime lease.
The following table shows the future minimum rentals receivable under
direct financing leases and future minimum lease payment obligations
under capital leases in effect at year-end 1999:
<TABLE>
<CAPTION>
(In thousands) Lease Rentals Lease
Years Receivable Obligations
- ----- ------------- -----------
<S> <C> <C>
2000 $ 34,239 $ 31,023
2001 30,611 29,466
2002 27,092 29,242
2003 23,597 28,212
2004 21,169 27,456
Later 67,482 95,072
--------- ---------
Total minimum lease payments 204,190 240,471
Less estimated executory costs (17,365) (21,124)
--------- ---------
Net minimum lease payments 186,825 219,347
Less interest (45,758) (5,652)
--------- ---------
Present value of net minimum lease payments 141,067 213,695
Less current portion (14,758) (13,918)
--------- ---------
Long-term portion $ 126,309 $ 199,777
========= =========
</TABLE>
Contingent rental income and contingent rental expense are not
material.
SHAREHOLDERS' EQUITY
The company offers a Dividend Reinvestment and Stock Purchase Plan
which provides shareholders the opportunity to automatically reinvest
their dividends in common stock at a 5% discount from market value.
Shareholders also may purchase shares at market value by making cash
payments up to $5,000 per calendar quarter. Such programs resulted in
issuing 54,000 and 33,000 new shares in 1999 and 1998, respectively.
The company's employee stock ownership plan (ESOP) established in 1990
allows substantially all associates to participate. In 1990, the ESOP
entered into a note with a bank to finance the purchase of the shares.
In 1994, the company paid off the note and received a note from the
ESOP. The ESOP completed payments of the loan balance to the company in
1999.
The company made contributions to the ESOP based on fixed debt service
requirements of the ESOP note. Such contributions were approximately $2
million in 1999, $2.5 million in 1998, and $2 million in 1997.
Dividends used by the ESOP for debt service and interest and
compensation expense recognized by the company were not material.
The company issues shares of restricted stock to key employees under
plans approved by the stockholders. Periods of restriction and/or
performance goals are established for each award.
The fair value of the restricted stock at the time of the grant is
recorded as unearned compensation - restricted stock which is netted
against capital in excess of par within shareholders' equity.
Compensation is amortized to expense when earned. At year-end 1999,
568,742 shares remained available for award under all plans.
Subsequent to year end, approximately 363,000 shares were awarded.
Information regarding restricted stock balances is as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Awarded restricted shares outstanding 441 420
=== ===
Unearned compensation - restricted stock $ 3,503 $ 6,199
======= =======
</TABLE>
The company may grant stock options to key employees through stock
option plans, providing for the grant of incentive stock options and
non-qualified stock options. The stock options have a maximum term
of 10 years and have time and/or performance based vesting
requirements. At year-end 1999, there were 1,472,000 shares available
for grant under the unrestricted stock option plans. Subsequent to
year end, approximately 826,000 stock options were granted. Also
subsequent to year end, the Board of Directors approved, subject to
shareholder approval, a new stock option plan reserving 1.9 million
shares for future grants.
Stock option transactions for the three years ended December 25, 1999
are as follows:
<TABLE>
<CAPTION>
Weighted Average
(Shares in thousands) Shares Exercise Price Price Range
- --------------------- ------ ---------------- -----------
<S> <C> <C> <C>
Outstanding, year-end 1996 2,631 $23.93 $16.38-42.13
Granted 80 $17.58 $17.50-18.13
Exercised (8) $16.38 $16.38-16.38
Canceled and forfeited (437) $28.48 $16.38-42.13
------ ------ ------------
Outstanding, year-end 1997 2,266 $22.65 $16.38-38.38
Granted 550 $10.18 $9.72-18.19
Exercised (3) $16.38 $16.38-16.38
Canceled and forfeited (403) $25.40 $16.38-37.06
------ ------ ------------
Outstanding, year-end 1998 2,410 $19.35 $9.72-38.38
Granted 2,337 9.80 $7.53-12.25
Exercised (0) 0.00 $0.00- 0.00
Canceled and forfeited (968) 16.53 $7.53-38.38
------ ------ ------------
Outstanding, year end 1999 3,799 $14.19 $7.53-38.38
====== ====== ============
</TABLE>
Information regarding options outstanding at year-end 1999 is as follows:
<TABLE>
<CAPTION>
All Options
(Shares in thousands) Outstanding Currently
- --------------------- Options Exercisable
----------- -----------
<S> <C> <C>
Option price $28.38 - $38.38:
Number of options 129 121
Weighted average exercise price 36.25 36.77
Weighted average remaining life in years 1 -
Option price $18.19 - $26.44:
Number of options 594 283
Weighted average exercise price 24.57 24.33
Weighted average remaining life in years 4 -
Option price $7.53 - $17.50:
Number of options 3,057 649
Weighted average exercise price 11.17 14.30
Weighted average remaining life in years 9 -
</TABLE>
In the event of a change of control, the vesting of all awards will
accelerate.
The company applies APB Opinion No. 25 - Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its plans.
Total compensation cost recognized in income for stock based employee
compensation awards was $1,378,000, $3,160,000 and $1,493,000 for 1999,
1998 and 1997, respectively. If compensation cost had been recognized
for the stock-based compensation plans based on fair values of the
awards at the grant dates consistent with the method of SFAS No. 123 -
Accounting for Stock-Based Compensation, reported net earnings (loss)
and earnings (loss) per share, both before extraordinary charge, would
have been $(47.4) million and $(1.24) for 1999, $(511.7) million and
$(13.48) for 1998, $37.9 million and $1.00 for 1997, respectively. The
weighted average fair value on the date of grant of the individual
options granted during 1999, 1998 and 1997 was estimated at $4.62,
$4.82 and $8.81, respectively.
Significant assumptions used to estimate the fair values of awards
using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1999, 1998 and 1997 are: risk-free
interest rate - 4.50% to 7.00%; expected lives of options - 10 years;
expected volatility - 30% to 50%; and expected dividend yield of 0.5%
to 0.8%.
ASSOCIATE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
The company sponsors pension and postretirement benefit plans for
substantially all non-union and some union associates.
Benefit calculations for the company's defined benefit pension plans
are primarily a function of years of service and final average earnings
at the time of retirement. Final average earnings are the average of
the highest five years of compensation during the last 10 years of
employment. The company funds these plans by contributing the
actuarially computed amounts that meet funding requirements.
Substantially all the plans' assets are invested in listed securities,
short-term investments, bonds and real estate.
The company also has unfunded nonqualified supplemental retirement
plans for selected associates.
The company offers a comprehensive major medical plan to eligible
retired associates who meet certain age and years of service
requirements. This unfunded defined benefit plan generally provides
medical benefits until Medicare insurance commences.
The following table provides a reconciliation of benefit obligations,
plan assets and funded status of the plans mentioned above.
<TABLE>
<CAPTION>
Other
(In thousands) Pension Benefits Postretirement Benefits
- -------------- ---------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Balance at beginning of year $418,604 $350,993 $16,503 $16,441
Service cost 14,163 12,981 177 139
Interest cost 26,511 25,334 1,020 1,052
Plan participants' contributions - - 837 851
Actuarial gain/loss (53,098) 50,009 2,006 2,932
Amendments - 1,132 - -
Benefits paid (30,577) (21,892) (5,330) (4,911)
SFAS #88 curtailment - 47 - -
-------- -------- ------- -------
Balance at end of year $375,603 $418,604 $15,213 $16,504
======== ======== ======= =======
Change in plan assets:
Fair value at beginning of year $316,539 $262,484 $- $-
Actual return on assets 39,608 31,415 - -
Employer contribution 6,292 44,532 5,330 4,911
Benefits paid (30,577) (21,892) (5,330) (4,911)
-------- -------- ------- -------
Fair value at end of year $331,862 $316,539 $- $-
======== ======== ======= =======
Funded status $(43,741) $(102,065) $(15,213) $(16,504)
Unrecognized actuarial loss 53,401 127,984 5,564 3,781
Unrecognized prior service cost 1,190 1,481 - -
Unrecognized net transition asset (320) (588) - -
-------- --------- -------- --------
Net amount recognized $ 10,530 $ 26,812 $ (9,649) $(12,723)
======== ========= ======== ========
Amounts recognized in the
consolidated balance sheet:
Prepaid benefit cost $- $- $- $-
Accrued benefit liability (6,714) (69,714) (9,649) (12,723)
Intangible asset 958 1,304 - -
Accumulated other
comprehensive income 16,286 95,222 - -
-------- -------- -------- --------
Net amount recognized $ 10,530 $ 26,812 $ (9,649) $(12,723)
======== ======== ======== ========
</TABLE>
The following year-end assumptions were used for the plans mentioned
above.
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate (weighted average) 7.50% 6.50% 7.50% 6.50%
Expected return on plan assets 8.50% 9.50% - -
Rate of compensation increase 4.50% 4.00% - -
</TABLE>
Net periodic pension and other postretirement benefit costs include the
following components:
<TABLE>
<CAPTION>
Other
Pension Benefits Postretirement Benefits
---------------- -----------------------
(In thousands) 1999 1998 1997 1999 1998 1997
- -------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $14,163 $12,981 $11,359 $177 $139 $137
Interest cost 26,511 25,334 23,525 1,020 1,052 1,185
Expected return
on plan assets (29,257) (25,234) (28,008) - - -
Amortization of
actuarial loss 11,134 9,105 11,533 222 - (44)
Amortization of
prior service
cost 291 354 549 - - -
Amortization of
net transition
asset (268) (268) (220) - - -
Cost of termina-
benefits - - - - - 15
------- ------- ------- ------ ------ ------
Net periodic
benefit cost $22,574 $22,272 $18,738 $1,419 $1,191 $1,293
======= ======= ======= ====== ====== ======
The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $376 million, $341
million, and $332 million, respectively, as of December 25, 1999, and
$419 million, $385 million, and $317 million, respectively, as of
December 26, 1998.
For measurement purposes in 1999 and 1998, a 9% annual rate of increase
in the per capita cost of covered medical care benefits was assumed. In
1999, the rate for 2000 was assumed to remain at 9%, then decrease to
5% by the year 2008, then remain level. In 1998, the rate for 2000 was
assumed to be 8.5%, then decrease to 5% by the year 2007, then remain
level.
The effect of one-percentage point increase in assumed medical cost
trend rates would have increased the accumulated postretirement benefit
obligation as of December 31, 1999 from $15.2 to $16.0 million, and
increased the total of the service cost and interest cost components of
the net periodic cost from $1.19 million to $1.25 million. The effect
of one-percentage point decrease in assumed medical cost trend rates
would have decreased the accumulated postretirement benefit obligation
as of December 31, 1999 from $15.2 to $14.5 million, and decreased the
total of the service cost and interest cost components of the net
periodic cost from $1.19 million to $1.15 million.
In some of the retail operations, contributory profit sharing plans are
maintained by the company for associates who meet certain types of
employment and length of service requirements. Company contributions
under these defined contribution plans are made at the discretion of
the Board of Directors and totaled $3 million in both 1999 and 1998 and
$4 million in 1997.
Beginning in 2000, the company changed its benefit plans to offer a
matching 401(k) plan to associates in addition to the pension plan
previously offered. The pension plan was continued, but with a
reduced benefit formula. The new plan offerings were also offered to
an increased number of associates.
Certain associates have pension and health care benefits provided under
collectively bargained multi-employer agreements. Expenses for these
benefits were $77 million, $80 million and $81 million for 1999, 1998
and 1997, respectively.
SUPPLEMENTAL CASH FLOWS INFORMATION
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------- ---- ---- ----
<S> <C> <C> <C>
Acquisitions:
Fair value of assets acquired $ 78,607 $ 32,080 $ 9,572
Less:
Liabilities assumed or created - (1,792) -
Existing company investment (167) (63) -
-------- -------- --------
Cash paid, net of cash acquired $ 78,440 $ 30,225 $ 9,572
======== ======== ========
Cash paid during the year for:
Interest, net of amounts
capitalized $165,676 $182,449 $179,180
======== ======== ========
Income taxes, net of refunds $ 14,863 $ 23,822 $ 30,664
======== ======== ========
Direct financing leases and
related obligations $ 45,645 $ 9,349 $ 5,092
======== ======== ========
Property and equipment additions
by capital leases $ 45,220 $ 70,684 $ 28,990
======== ======== ========
</TABLE>
CONTINGENCIES
In accordance with applicable accounting standards, the company records
a charge reflecting contingent liabilities (including those associated
with litigation matters) when management determines that a material
loss is "probable" and either "quantifiable" or "reasonably estimable."
Additionally, the company discloses material loss contingencies when
the likelihood of a material loss is deemed to be greater than "remote"
but less than "probable." Set forth below is information regarding
certain material loss contingencies:
Class Action Suits. In 1996, the company and certain of its present
and former officers and directors were named as defendants in nine
purported class action suits filed by certain stockholders and one
purported class action suit filed by a noteholder. In 1997, the court
consolidated the stockholder cases (the noteholder case was also
consolidated, but only for pre-trial purposes). During 1998 the
noteholder case was dismissed and during 1999 the consolidated case was
also dismissed, each without prejudice. The court gave the plaintiffs
the opportunity to restate their claims in each case.
The complaint filed in the consolidated cases asserted liability for
the company's alleged failure to properly account for and disclose the
contingent liability created by the David's litigation and by the
company's alleged "deceptive business practices." The plaintiffs claim
that these alleged practices led to the David's litigation and to other
material contingent liabilities, caused the company to change its
manner of doing business at great cost and loss of profit, and
materially inflated the trading price of the company's common stock.
The company denied each of these allegations. On February 4, 2000 the
shareholder case was dismissed with prejudice by the district court.
The plaintiffs filed an appeal on March 3, 2000. The motion to dismiss
in the noteholder case has not yet been decided. The plaintiffs seek
undetermined but significant damages. However, if the district court
ruling described below is upheld, Fleming believes the litigation will
not have a material adverse effect on the company.
In 1997, the company won a declaratory judgment against certain of its
insurance carriers regarding policies issued to Fleming for the benefit
of its officers and directors ("D&O policies"). On motion for summary
judgment, the court ruled that the company's exposure, if any, under
the class action suits is covered by D&O policies written by the
insurance carriers (aggregating $60 million in coverage) and that the
"larger settlement rule" will be applicable to the case. According to
the trial court, under the larger settlement rule a D&O insurer is
liable for the entire amount of coverage available under a policy even
if there is some overlap in the liability created by the insured
individuals and the uninsured corporation. If a corporation's
liability is increased by uninsured parties beyond that of the insured
individuals, then that portion of the liability is the sole obligation
of the corporation. The court also held that allocation is not
available to the insurance carriers as an affirmative defense. The
insurance carriers appealed. In 1999, the appellate court affirmed
the decision that the class actions were covered by D&O policies
aggregating $60 million in coverage but reversed the trial court's
decision as to allocation as being premature.
Tru Discount Foods. Fleming brought suit in 1994 on a note and an open
account against its former customer, Tru Discount Foods. The case was
initially referred to arbitration but later restored to the trial
court; Fleming appealed. In 1997, the defendant amended its counter
claim against the company alleging fraud, overcharges for products and
violations of the Oklahoma Deceptive Trade Practices Act. In 1998, the
appellate court reversed the trial court and directed that the matter
be sent again to arbitration. On September 28, 1999, the arbitration
panel entered its award in favor of Fleming against Tru Discount Foods
and its principals in the net amount of $579,443 plus interest at the
rate of six percent per annum from October 29, 1999, and fees and
expenses. On December 27, 1999, Tru Discount Foods and its principals
filed a motion in the trial court to vacate the arbitration award, on
the grounds, among others, that the arbitration panel prevented them
from asserting a RICO counterclaim for treble damages, and refused to
admit alleged new evidence relating thereto. The company objected to
the motion and moved to confirm the arbitration award. On February 28,
2000, the trial court confirmed the award and entered judgment against
the defendants. The defendants have until April 5, 2000 to appeal the
judgment.
Don's United Super (and related cases). The company and two retired
executives have been named in a suit filed in 1998 in the United States
District Court for the Western District of Missouri by several current
and former customers of the company (Don's United Super, et al. v.
Fleming, et al.). The eighteen plaintiffs operate retail grocery
stores in the St. Joseph and Kansas City metropolitan areas. The
plaintiffs in this suit allege product overcharges, breach of
contract, breach of fiduciary duty, misrepresentation, fraud, and RICO
violations, and they are seeking actual, punitive and treble damages,
as well as a declaration that certain contracts are voidable at the
option of the plaintiffs.
During the fourth quarter of 1999, plaintiffs produced reports of their
expert witnesses calculating alleged actual damages of approximately
$112 million. During the first quarter of 2000, plaintiffs revised a
portion of these damage calculations, and although plaintiffs have not
finalized these calculations, it appears that their revised damage
calculations will result in a claim of approximately $120 million,
exclusive of any punitive or treble damages.
In October 1998, the company and the same two retired executives were
named in a suit filed by another group of retailers in the same court
as the Don's suit. (Coddington Enterprises, Inc., et al. v. Fleming,
et al.). Currently, sixteen plaintiffs are asserting claims in the
Coddington suit. All of the plaintiffs except for one have arbitration
agreements with Fleming. The plaintiffs assert claims virtually
identical to those set forth in the Don's suit, and although plaintiffs
have not yet quantified the damages in their pleadings, it is
anticipated that they will claim actual damages approximating the
damages claimed in the Don's suit.
In July 1999, the court ordered two of the plaintiffs in the Coddington
case to arbitration, and otherwise denied arbitration as to the
remaining plaintiffs. The company has appealed the district court's
denial of arbitration to the Eighth Circuit Court of Appeals. The two
plaintiffs that were ordered to arbitration have filed motions asking
the district court to reconsider the arbitration ruling.
Two other cases had been filed before the Don's case in the same district
court (R&D Foods, Inc., et al. v. Fleming, et al. and Robandee United
Super, Inc., et al. v. Fleming, et al.) by ten customers, some of whom
are also 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 proceedings in
these cases have been stayed pending the arbitration of the claims of
those plaintiffs who have arbitration agreements with the company.
The company intends to vigorously defend against the claims in these
related cases, but is currently unable to predict the outcome.
An unfavorable outcome could have a material adverse effect on the
financial condition and prospects of 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 several current and former customers of the company
(Storehouse Markets, Inc., et al. v. Fleming Companies, Inc., et al.).
The plaintiffs have alleged product overcharges, fraudulent
misrepresentation, fraudulent non-disclosure and concealment, breach of
contract, breach of duty of good faith and fair dealing, and RICO
violations, and they are seeking actual, punitive and treble damages.
On March 7, 2000 the court stated that this case will be certified
as a class action. The class will include current and former customers
of Fleming's Salt Lake City division covering a four-state region. A
formal order has not yet been received. The company is considering
an appeal of this ruling pending receipt of this order. Damages
have not been quantified by the plaintiffs; however, the company
anticipates that substantial damages will be claimed. The company
intends to vigorously defend against these claims, but is currently
unable to predict the outcome. An unfavorable outcome could have a
material adverse effect on the financial condition and prospects of the
company.
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.
During 1999, the company recorded income of $22 million from
extinguishing a portion of the company's self-insured workers'
compensation liability at a discount through insurance coverage.
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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Fleming Companies, Inc.
We have audited the accompanying consolidated balance sheets of Fleming
Companies, Inc. and subsidiaries as of December 25, 1999 and December
26, 1998, and the related consolidated statements of operations, cash
flows, and shareholders' equity for each of the three years in the
period ended December 25, 1999. Our audits also included the financial
statement schedule listed in the index at item 14. These financial
statements and financial statement schedule are the responsibility of
the company's management. Our responsibility is to express an opinion
on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Fleming Companies, Inc. and subsidiaries at December 25, 1999, and
December 26, 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 25,
1999, in conformity with generally accepted accounting principles.
Also, in our opinion such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
February 18, 2000
<PAGE>
<TABLE>
QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
1999 First Second Third Fourth Year
- ---- ----- ------ ----- ------ ----
<S> <C> <C> <C> <C> <C>
Net sales $4,465,246 $3,349,362 $3,243,192 $3,587,766 $14,645,566
Costs and expenses
(income):
Cost of sales 4,036,868 3,022,154 2,906,749 3,242,628 13,208,399
Selling and
administrative 376,995 286,565 291,990 306,081 1,261,631
Interest expense 51,606 38,647 36,987 37,940 165,180
Interest income (9,350) (6,894) (7,075) (16,999) (40,318)
Equity investment
results 3,556 2,415 2,431 1,841 10,243
Litigation charges - - - - -
Impairment/
restructuring charge 37,036 6,169 36,151 23,656 103,012
---------- ---------- ---------- ---------- -----------
Total costs and expenses 4,496,711 3,349,056 3,267,233 3,595,147 14,708,147
---------- ---------- ---------- ---------- -----------
Earnings (loss)
before taxes (31,465) 306 (24,041) (7,381) (62,581)
Taxes on income (loss) (7,224) 2,644 (9,695) (3,578) (17,853)
---------- ---------- ---------- ---------- -----------
Net earnings (loss) $ (24,241) $ (2,338) $ (14,346) $ (3,803) $ (44,728)
========== ========== ========== ========== ===========
Basic and diluted net
income (loss) per share $(.64) $(.06) $(.37) $(.10) $(1.17)
===== ===== ===== ===== ======
Dividends paid
per share $.02 $.02 $.02 $.02 $.08
==== ==== ==== ==== ====
Weighted average
shares outstanding:
Basic 38,143 38,204 38,459 38,470 38,305
====== ====== ====== ====== ======
Diluted 38,143 38,204 38,459 38,470 38,305
====== ====== ====== ====== ======
1998 First Second Third Fourth Year
- ---- ----- ------ ----- ------ ----
Net sales $4,567,126 $3,505,943 $3,438,766 $3,557,500 $15,069,335
Costs and expenses
(income):
Cost of sales 4,124,858 3,164,174 3,115,371 3,214,558 13,618,961
Selling and
administrative 364,720 284,146 284,497 318,229 1,251,592
Interest expense 51,202 35,861 37,348 37,170 161,581
Interest income (11,305) (8,308) (8,559) (8,564) (36,736)
Equity investment
results 3,589 3,248 2,669 2,116 11,622
Litigation charges 2,954 2,216 2,215 395 7,780
Impairment/
restructuring charge (267) 916 6,038 646,050 652,737
---------- ---------- ---------- ---------- -----------
Total costs and expenses 4,535,751 3,482,253 3,439,579 4,209,954 15,667,537
---------- ---------- ---------- ---------- -----------
Earnings (loss)
before taxes 31,375 23,690 (813) (652,454) (598,202)
Taxes on income (loss) 16,105 10,051 1,512 (115,275) (87,607)
---------- ---------- ---------- ---------- -----------
Net earnings (loss) $15,270 $13,639 $(2,325) $(537,179) $(510,595)
========== ========== ========== ========== ===========
Basic and diluted net
income (loss) per share $.40 $.36 $(.06) $(14.11) $(13.48)
==== ==== ===== ======= =======
Dividends paid
per share $.02 $.02 $.02 $.02 $.08
==== ==== ==== ==== ====
Weighted average
shares outstanding:
Basic 37,804 37,859 38,039 38,084 37,887
====== ====== ====== ====== ======
Diluted 37,972 38,027 38,039 38,084 37,887
====== ====== ====== ====== ======
</TABLE>
Each quarter of 1999 includes charges related to the company's
strategic plan: quarter 1 - $46 million pre-tax, $32 million
after-tax, $.84 per share; quarter 2 - $16 million pre-tax, $12
million after-tax, $.31 per share; quarter 3 - $45 million pre-
tax, $28 million after-tax, $.73 per share; quarter 4 - $30
million pre-tax, $20 million after-tax, $.50 per share; full year
- - $137 million pre-tax, $92 million after-tax, $2.39 per share.
The third quarter also includes a one-time item for gains on the
sale of facilities of approximately $6 million pre-tax ($3
million after-tax or $.09 per share).
Each quarter of 1998 has been restated to reclassify certain
operations expenses from selling and administrative expenses to
cost of sales to conform with 1999 reporting. Each quarter of
1999 includes charges related to the company's strategic plan,
but the fourth quarter reflects the significant portion for the
year: quarter 4 - $661 million pre-tax, $540 million after-tax,
$14.17 per share; full year - $668 million pre-tax, $543 million
after-tax, $14.33 per share.
The first quarter of both years consists of 16 weeks; all other
quarters are 12 weeks.
(a) 2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
(a) 3. Exhibits:
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation by
Number Reference to
------- ----------------
<S> <C> <C>
3.1 Certificate of Incorporation Exhibit 3.1 to Form 10-Q
for quarter ended April
17, 1999
3.2 By-Laws Exhibit 3.2 to Form
10-Q for quarter ended
April 17, 1999
4.0 Credit Agreement, dated as of Exhibit 4.16 to
July 25, 1997, among Fleming Form 10-Q for
Companies, Inc., the Lenders quarter ended
party thereto, BancAmerica July 12, 1997
Securities, Inc., as
syndication agent, Societe
Generale, as documentation
agent and The Chase Manhattan
Bank, as administrative agent
4.1 Security Agreement dated as Exhibit 4.17 to Form 10-Q
of July 25, 1997, between for quarter ended
Fleming Companies, Inc., the July 12, 1997
company subsidiaries party
thereto and The Chase
Manhattan Bank, as collateral
agent
4.2 Pledge Agreement, dated as of Exhibit 4.18 to Form 10-Q
July 25, 1997, among Fleming for quarter ended
Companies, Inc., the company July 12, 1997
subsidiaries party thereto
and The Chase Manhattan Bank,
as collateral agent
4.3 Guarantee Agreement among the Exhibit 4.19 to Form 10-Q
company subsidiaries party for quarter ended
thereto and The Chase July 12, 1997
Manhattan Bank, as collateral
agent
4.4 Indenture dated as of Exhibit 4.5 to Registration
December 15, 1994, among Statement No. 33-55369
Fleming, the Subsidiary
Guarantors named therein and
Texas Commerce Bank National
Association, as Trustee,
regarding $300 million of 10-
5/8% Senior Notes
4.5 Indenture, dated as of July Exhibit 4.20 to Form 10-Q
25, 1997, among Fleming for quarter ended
Companies, Inc., the July 12, 1997
Subsidiary Guarantors named
therein and Manufacturers and
Traders Trust Company, as
Trustee, regarding 10-5/8%
Senior Subordinated Notes due
2007
4.6 Indenture, dated as of July Exhibit 4.21 to Form 10-Q
25, 1997, among Fleming for quarter ended
Companies, Inc., the July 12, 1997
Subsidiary Guarantors named
therein and Manufacturers and
Traders Trust Company
regarding 10-1/2% Senior
Subordinated Notes due 2004
4.7 First Amendment, dated as of Exhibit 4.8 to Form 10-Q
October 5, 1998, to Credit for quarter ended October
Agreement dated July 25, 1997 3, 1998
4.8 Agreement to furnish copies
of other long-term debt
instruments
10.0 Dividend Reinvestment and Exhibit 28.1 to
Stock Purchase Plan, as Registration Statement No.
amended 33-26648 and Exhibit 28.3
to Registration Statement
No. 33-45190
10.1* 1990 Stock Option Plan Exhibit 28.2 to
Registration Statement No.
33-36586
10.2* Form of Option Agreement for
1990 Stock Option Plan
10.3* Form of Restricted Stock Exhibit 10.5 to Form 10-K
Award Agreement for 1990 for year ended December
Stock Option Plan (1997) 27, 1997
10.4* Fleming Management Incentive Exhibit 10.4 to
Compensation Plan Registration Statement No.
33-51312
10.5* Form of Amended and Restated
Severance Agreement between
the Registrant and certain of
its officers
10.6* Fleming Companies, Inc. 1996 Exhibit A to Proxy
Stock Incentive Plan dated Statement for year ended
February 27, 1996 December 30, 1995
10.7* Form of Restricted Award Exhibit 10.12 to Form 10-K
Agreement for 1996 Stock for year ended December
Incentive Plan (1997) 27, 1997
10.8* Phase III of Fleming
Companies, Inc. Stock
Incentive Plan
10.9* Amendment No. 1 to the Exhibit 10.16 to Form 10-K
Fleming Companies, Inc. 1996 for year ended December
Stock Incentive Plan 28, 1996
10.10* Supplemental Income Trust
10.11* First Amendment to Fleming Exhibit 10.19 to Form 10-K
Companies, Inc. Supplemental for year ended December
Income Trust 28, 1996
10.12* Form of Change of Control
Employment Agreement
between Registrant and
certain of the employees
10.13* Economic Value Added Exhibit A to Proxy Statement
Incentive Bonus Plan for year ended December 31,
1994
10.14* Agreement between the Exhibit 10.24 to Form 10-K
Registrant and William J. for year ended December
Dowd 30, 1995
10.15* Amended and Restated Exhibit 10.23 to Form 10-K
Supplemental Retirement for year ended December
Income Agreement for Robert 28, 1996
E. Stauth
10.16* Executive Past Service Exhibit 10.23 to Form 10-K
Benefit Plan (November 1997) for year ended December
27, 1997
10.17* Form of Agreement for Exhibit 10.24 to Form 10-K
Executive Past Service for year ended December
Benefit Plan (November 1997) 27, 1997
10.18* Executive Deferred Exhibit 10.25 to Form 10-K
Compensation Plan (November for year ended December
1997) 27, 1997
10.19* Executive Deferred Exhibit 10.26 to Form 10-K
Compensation Trust (November for year ended December
1997) 17, 1997
10.20* Form of Agreement for Exhibit 10.27 to Form 10-K
Executive Deferred for year ended December
Compensation Plan (November 27, 1997
1997)
10.21* Fleming Companies, Inc. Exhibit 10.28 to Form 10-K
Associate Stock Purchase Plan for year ended December
27, 1997
10.22* Settlement Agreement between Exhibit 10.25 to Form 10-Q
Fleming Companies, Inc. and for quarter ended October
Furr's Supermarkets, Inc. 4, 1997
dated October 23, 1997
10.23* Form of Amended and Restated Exhibit 10.30 to Form 10-Q
Agreement for Fleming for quarter ended October
Companies, Inc. Executive 3, 1998
Past Service Benefit Plan
10.24* Form of Amended and Restated Exhibit 10.31 to Form 10-Q
Agreement for Fleming for quarter ended October
Companies, Inc. Executive 3, 1998
Deferred Compensation Plan
10.25* Amended and Restated Exhibit 10.32 to Form 10-Q
Supplemental Retirement for quarter ended October
Income Agreement between 3, 1998
William J. Dowd and Fleming
Companies, Inc. dated August
18, 1998
10.26* Form of Amended and Restated Exhibit 10.33 to Form 10-Q
Restricted Stock Award for quarter ended October
Agreement under Fleming 3, 1998
Companies, Inc. 1996 Stock
Incentive Plan
10.27* Form of Amended and Restated Exhibit 10.34 to Form 10-Q
Non-Qualified Stock Option for quarter ended October
Agreement under the Fleming 3, 1998
Companies, Inc. 1996 Stock
Incentive Plan
10.28* First Amendment to Economic Exhibit 10.36 to Form 10-Q
Value Added Incentive Bonus for quarter ended October
Plan for Fleming Companies, 3, 1998
Inc.
10.29* Amendment No. 2 to Economic Exhibit 10.37 to Form 10-Q
Value Added Incentive Bonus for quarter ended October
Plan for Fleming Companies, 3, 1998
Inc.
10.30* Form of Amendment to Certain Exhibit 10.38 to Form 10-Q
Employment Agreements for quarter ended October
3, 1998
10.31* Form of First Amendment to Exhibit 10.39 to Form 10-Q
Restricted Stock Award for quarter ended October
Agreement for Fleming 3, 1998
Companies, inc. 1996 Stock
Incentive Plan
10.32* Settlement and Severance Exhibit 10.40 to Form 10-Q
Agreement by and between for quarter ended October
Fleming Companies, Inc. and 3, 1998
Robert E. Stauth dated August
28, 1998
10.33* 1999 Stock Incentive Plan Exhibit 10.38 to Form 10-K
for year ended December
26, 1998
10.34* Form of Non-Qualified Stock Exhibit 10.39 to Form 10-K
Option Agreement for 1999 for year ended December
Stock Incentive Plan 26, 1998
10.35* Corporate Officer Incentive Exhibit 10.40 to Form 10-K
Plan for year ended December
26, 1998
10.36* Employment Agreement for Mark Exhibit 10.41 to Form 10-K
Hansen dated as of November for year ended December
30, 1998 26, 1998
10.37* Restricted Stock Agreement Exhibit 10.42 to Form 10-K
under 1990 Stock Incentive for year ended December
Plan for Mark Hansen dated as 26, 1998
of November 30, 1998
10.38* Form of Amendment to Exhibit 10.43 to Form 10-K
Employment Agreement between for year ended December
Registrant and certain 26, 1998
executives dated as of March
2, 1999
10.39* Amendment No. One to 1990 Exhibit 10.44 to Form 10-K
Stock Option Plan for year ended December
26, 1998
10.40* Fleming Companies, Inc. 1990 Exhibit 10.45 to Form 10-K
Stock Incentive Plan (as for year ended December
amended) 26, 1998
10.41* Fleming Companies, Inc. Exhibit 10.46 to Form 10-K
Amended and Restated for year ended December
Directors' Compensation and 26, 1998
Stock Equivalent Unit Plan
10.42* Severance Agreement for Exhibit 10.47 to Form 10-K
Thomas L. Zaricki dated for year ended December
January 29, 1999 26, 1998
10.43* Severance Agreement for Harry Exhibit 10.48 to Form 10-K
L. Winn, Jr. dated February for year ended December
22, 1999 26, 1998
10.44* Amendment to Fleming Exhibit 10.49 to Form 10-Q
Companies, Inc. 1990 Stock for quarter ended April
Incentive Plan 17, 1999
10.45* Employment Agreement for John Exhibit 10.50 to Form 10-Q
T. Standley dated as of May for quarter ended April
17, 1999 17, 1999
10.46* Restricted Stock Agreement Exhibit 10.51 to Form 10-Q
for John T. Standley dated as for quarter ended April
of May 17, 1999 17, 1999
10.47* Letter Agreement for William Exhibit 10.52 to Form 10-Q
H. Marquard dated as of May for quarter ended April
26, 1999 17, 1999
10.48* Severance Agreement with Exhibit 10.53 to Form 10-Q
William J. Dowd effective as for quarter ended July 10,
of June 17, 1999 1999
10.49* Employment Agreement for Exhibit 10.54 to Form 10-Q
William H. Marquard dated as for quarter ended July 10,
of June 1, 1999 1999
10.50* Restricted Stock Agreement Exhibit 10.55 to Form 10-Q
for William H. Marquard dated for quarter ended July 10,
as of June 1, 1999 1999
10.51* Employment Agreement for Exhibit 10.56 to Form 10-Q
Dennis C. Lucas dated as of for quarter ended July 10,
July 28, 1999 1999
10.52* Restricted Stock Agreement Exhibit 10.57 to Form 10-Q
for Dennis C. Lucas dated as for quarter ended July 10,
of July 28, 1999 1999
10.53* Restricted Stock Agreement Exhibit 10.58 to Form 10-Q
for E. Stephen Davis dated as for quarter ended July 10,
of July 20, 1999 1999
10.54* Form of Loan Agreement Exhibit 10.59 to Form 10-Q
Pursuant to Executive Stock for quarter ended July 10,
Ownership Program 1999
10.55* Restricted Stock Award
Agreement for William H.
Marquard dated as of December
21, 1999
10.56* Restricted Stock Award
Agreement for John M.
Thompson dated as of December
21, 1999, as amended
10.57* Form of Non-qualified Stock
Option Agreement for 1999
Stock Option Plan - Corporate
10.58* Form of Non-qualified Stock
Option Agreement for 1999
Stock Option Plan -
Distribution
10.59* Form of Non-qualified Stock
Option Agreement for 1999
Stock Option Plan - Retail
10.60* Amended and Restated Employ-
ment Agreement for Scott M.
Northcutt effective January
26, 1999
12 Computation of ratio of
earnings to fixed charges
21 Subsidiaries of the
Registrant
23 Consent of Deloitte & Touche
LLP
24 Power of Attorney
27 Financial Data Schedule
</TABLE>
* Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K:
On December 6, 1999, registrant announced the departure of John
Standley and certain finance and accounting promotions.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Fleming has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 14th day of March, 2000.
FLEMING COMPANIES, INC.
MARK S. HANSEN
By: Mark S. Hansen
Chairman and Chief
Executive Officer
(Principal executive
officer)
NEAL RIDER
By: Neal Rider
Executive Vice President
and Chief Financial Officer
(Principal financial officer)
KEVIN TWOMEY
By: Kevin Twomey
Senior Vice President
Finance and Controller
(Principal accounting
officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
the 14th day of March, 2000.
MARK S. HANSEN JACK W. BAKER * HERBERT M. BAUM *
Mark S. Hansen Jack W. Baker Herbert M. Baum
(Chairman of the Board) (Director) (Director)
ARCHIE R. DYKES * CAROL B. HALLETT * EDWARD C. JOULLIAN III *
Archie R. Dykes Carol B. Hallett Edward C. Joullian III
(Director) (Director) (Director)
GUY A. OSBORN * ALICE M. PETERSON * DAVID A. RISMILLER *
Guy A. Osborn Alice M. Peterson David A. Rismiller
(Director) (Director) (Director)
NEAL RIDER
Neal Rider
(Chief Financial Officer)
*A Power of Attorney authorizing Neal Rider to sign the Annual
Report on Form 10-K on behalf of each of the indicated directors
of Fleming Companies, Inc. has been filed herein as Exhibit 24.
SCHEDULE INDEX
<TABLE>
<CAPTION>
Schedule
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
II Valuation and Filed herewith electronically
Qualifying Accounts
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
3.1 Certificate of Incorporation Incorporated herein by
reference
3.2 By-Laws Incorporated herein by
reference
4.0 Credit Agreement, dated as of Incorporated herein by
July 25, 1997, among Fleming reference
Companies, Inc., the Lenders
party thereto, BancAmerica
Securities, Inc., as
syndication agent, Societe
Generale, as documentation
agent and The Chase Manhattan
Bank, as administrative agent
4.1 Security Agreement dated as of Incorporated herein by
July 25, 1997, between Fleming reference
Companies, Inc., the company
subsidiaries party thereto and
The Chase Manhattan Bank, as
collateral agent
4.2 Pledge Agreement, dated as of Incorporated herein by
July 25, 1997, among Fleming reference
Companies, Inc., the company
subsidiaries party thereto and
The Chase Manhattan Bank, as
collateral agent
4.3 Guarantee Agreement among the Incorporated herein by
company subsidiaries party reference
thereto and The Chase
Manhattan Bank, as collateral
agent
4.4 Indenture dated as of Incorporated herein by
December 15, 1994, among reference
Fleming, the Subsidiary
Guarantors named therein and
Texas Commerce Bank National
Association, as Trustee,
regarding $300 million of 10-
5/8% Senior Notes
4.5 Indenture, dated as of July Incorporated herein by
25, 1997, among Fleming reference
Companies, Inc., the
Subsidiary Guarantors named
therein and Manufacturers and
Traders Trust Company, as
Trustee, regarding 10-5/8%
Senior Subordinated Notes due
2007
4.6 Indenture, dated as of July Incorporated herein by
25, 1997, among Fleming reference
Companies, Inc., the
Subsidiary Guarantors named
therein and Manufacturers and
Traders Trust Company
regarding 10-1/2% Senior
Subordinated Notes due 2004
4.7 First Amendment, dated as of Incorporated herein by
October 5, 1998, to Credit reference
Agreement dated July 25, 1997
4.8 Agreement to furnish copies of Filed herewith electronically
other long-term debt
instruments
10.0 Dividend Reinvestment and Incorporated herein by
Stock Purchase Plan, as reference
amended
10.1 1990 Stock Option Plan Incorporated herein by
reference
10.2 Form of Option Agreement for Filed herewith electronically
1990 Stock Option Plan
10.3 Form of Restricted Stock Award Incorporated herein by
Agreement for 1990 Stock reference
Option Plan (1997)
10.4 Fleming Management Incentive Incorporated herein by
Compensation Plan reference
10.5 Form of Amended and Restated Filed herewith electronically
Severance Agreement between
the Registrant and certain of
its officers
10.6 Fleming Companies, Inc. 1996 Incorporated herein by
Stock Incentive Plan dated reference
February 27, 1996
10.7 Form of Restricted Award Incorporated herein by
Agreement for 1996 Stock reference
Incentive Plan (1997)
10.8 Phase III of Fleming Filed herewith electronically
Companies, Inc. Stock
Incentive Plan
10.9 Amendment No. 1 to the Fleming Incorporated herein by
Companies, Inc. 1996 Stock reference
Incentive Plan
10.10 Supplemental Income Trust Filed herewith electronically
10.11 First Amendment to Fleming Incorporated herein by
Companies, Inc. Supplemental reference
Income Trust
10.12 Form of Change of Control Filed herewith electronically
Employment Agreement
between Registrant and certain
of the employees
10.13 Economic Value Added Incentive Incorporated herein by
Bonus Plan reference
10.14 Agreement between the Incorporated herein by
Registrant and William J. Dowd reference
10.15 Amended and Restated Incorporated herein by
Supplemental Retirement Income reference
Agreement for Robert E. Stauth
10.16 Executive Past Service Benefit Incorporated herein by
Plan (November 1997) reference
10.17 Form of Agreement for Incorporated herein by
Executive Past Service Benefit reference
Plan (November 1997)
10.18 Executive Deferred Incorporated herein by
Compensation Plan (November reference
1997)
10.19 Executive Deferred Incorporated herein by
Compensation Trust (November reference
1997)
10.20 Form of Agreement for Incorporated herein by
Executive Deferred reference
Compensation Plan (November
1997)
10.21 Fleming Companies, Inc. Incorporated herein by
Associate Stock Purchase Plan reference
10.22 Settlement Agreement between Incorporated herein by
Fleming Companies, Inc. and reference
Furr's Supermarkets, Inc.
dated October 23, 1997
10.23 Form of Amended and Restated Incorporated herein by
Agreement for Fleming reference
Companies, Inc. Executive Past
Service Benefit Plan
10.24 Form of Amended and Restated Incorporated herein by
Agreement for Fleming reference
Companies, Inc. Executive
Deferred Compensation Plan
10.25 Amended and Restated Incorporated herein by
Supplemental Retirement Income reference
Agreement between William J.
Dowd and Fleming Companies,
Inc. dated August 18, 1998
10.26 Form of Amended and Restated Incorporated herein by
Restricted Stock Award reference
Agreement under Fleming
Companies, Inc. 1996 Stock
Incentive Plan
10.27 Form of Amended and Restated Incorporated herein by
Non-Qualified Stock Option reference
Agreement under the Fleming
Companies, Inc. 1996 Stock
Incentive Plan
10.28 First Amendment to Economic Incorporated herein by
Value Added Incentive Bonus reference
Plan for Fleming Companies,
Inc.
10.29 Amendment No. 2 to Economic Incorporated herein by
Value Added Incentive Bonus reference
Plan for Fleming Companies,
Inc.
10.30 Form of Amendment to Certain Incorporated herein by
Employment Agreements reference
10.31 Form of First Amendment to Incorporated herein by
Restricted Stock Award reference
Agreement for Fleming
Companies, inc. 1996 Stock
Incentive Plan
10.32 Settlement and Severance Incorporated herein by
Agreement by and between reference
Fleming Companies, Inc. and
Robert E. Stauth dated August
28, 1998
10.33 1999 Stock Incentive Plan Incorporated herein by
reference
10.34 Form of Non-Qualified Stock Incorporated herein by
Option Agreement for 1999 reference
Stock Incentive Plan
10.35 Corporate Officer Incentive Incorporated herein by
Plan reference
10.36 Employment Agreement for Mark Incorporated herein by
Hansen dated as of November reference
30, 1998
10.37 Restricted Stock Agreement Incorporated herein by
under 1990 Stock Incentive reference
Plan for Mark Hansen dated as
of November 30, 1998
10.38 Form of Amendment to Incorporated herein by
Employment Agreement between reference
Registrant and certain
executives dated as of March
2, 1999
10.39 Amendment No. One to 1990 Incorporated herein by
Stock Option Plan reference
10.40 Fleming Companies, Inc. 1990 Incorporated herein by
Stock Incentive Plan (as reference
amended)
10.41 Fleming Companies, Inc. Incorporated herein by
Amended and Restated reference
Directors' Compensation and
Stock Equivalent Unit Plan
10.42 Severance Agreement for Thomas Incorporated herein by
L. Zaricki dated January 29, reference
1999
10.43 Severance Agreement for Harry Incorporated herein by
L. Winn, Jr. dated February reference
22, 1999
10.44 Amendment to Fleming Incorporated herein by
Companies, Inc. 1990 Stock reference
Incentive Plan
10.45 Employment Agreement for John Incorporated herein by
T. Standley dated as of May reference
17, 1999
10.46 Restricted Stock Agreement for Incorporated herein by
John T. Standley dated as of reference
May 17, 1999
10.47 Letter Agreement for William Incorporated herein by
H. Marquard dated as of May reference
26, 1999
10.48 Severance Agreement with Incorporated herein by
William J. Dowd effective as reference
of June 17, 1999
10.49 Employment Agreement for Incorporated herein by
William H. Marquard dated as reference
of June 1, 1999
10.50 Restricted Stock Agreement for Incorporated herein by
William H. Marquard dated as reference
of June 1, 1999
10.51 Employment Agreement for Incorporated herein by
Dennis C. Lucas dated as of reference
July 28, 1999
10.52 Restricted Stock Agreement for Incorporated herein by
Dennis C. Lucas dated as of reference
July 28, 1999
10.53 Restricted Stock Agreement for Incorporated herein by
E. Stephen Davis dated as of reference
July 20, 1999
10.54 Form of Loan Agreement Incorporated herein by
Pursuant to Executive Stock reference
Ownership Program
10.55 Restricted Stock Award Filed herewith electronically
Agreement for William H.
Marquard dated as of December
21, 1999
10.56 Restricted Stock Award Filed herewith electronically
Agreement for John M. Thompson
dated as of December 21, 1999,
as amended
10.57 Form of Non-qualified Stock Filed herewith electronically
Option Agreement for 1999
Stock Option Plan - Corporate
10.58 Form of Non-qualified Stock Filed herewith electronically
Option Agreement for 1999
Stock Option Plan -
Distribution
10.59 Form of Non-qualified Stock Filed herewith electronically
Option Agreement for 1999
Stock Option Plan - Retail
10.60 Amended and Restated Employ- Filed herewith electronically
ment Agreement for Scott M.
Northcutt effective January
26, 1999
12 Computation of ratio of Filed herewith electronically
earnings to fixed charges
21 Subsidiaries of the Registrant Filed herewith electronically
23 Consent of Deloitte & Touche Filed herewith electronically
LLP
24 Power of Attorney Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
</TABLE>
SCHEDULE II
FLEMING COMPANIES, INC.
AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 25, 1999
DECEMBER 26, 1998, AND DECEMBER 27, 1997
(In thousands)
<TABLE>
<CAPTION>
Allowance
for
Credit Losses Current Noncurrent
<S> <C> <C> <C>
BALANCE, December 28, 1996 $49,632 $24,659 $24,973
Charged to cost and expenses 24,484 11,989 12,495
Uncollectible accounts written-off,
less recoveries (32,655) (17,636) (15,019)
Asset impairment 2,387 - 2,387
BALANCE, December 27, 1997 $43,848 $19,012 $24,836
Charged to cost and expenses 23,498 9,979 13,519
Uncollectible accounts written-off,
less recoveries (20,114) (9,012) (11,102)
BALANCE, December 26, 1998 $47,232 $19,979 $27,253
Charged to cost and expenses 24,704 20,734 3,970
Uncollectible accounts written-off,
less recoveries (16,408) (8,512) (7,896)
BALANCE, December 25, 1999 $55,528 $32,201 $23,327
</TABLE>
Exhibit 4.8
INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING INDENTURES
The Registrant has various long-term debt agreements which
define the rights of the holders of the related debt
securities of the Registrant. The Registrant agrees to
furnish copies of any unfiled debt agreements to the
Commission upon request.
FLEMING COMPANIES, INC.
(Registrant)
KEVIN TWOMEY
Date: March 14, 2000 By Kevin Twomey
Senior Vice President, Finance
and Controller (Principal
Accounting Officer)
Exhibit 10.2
FLEMING COMPANIES, INC.
_________________________________________________________________
NON-QUALIFIED STOCK OPTION AGREEMENT (1990 STOCK OPTION PLAN)
_________________________________________________________________
Name: ______________ Grant Date: _________________
Option Price: $_____________ Exercise Date: _________________ - 25%
Shares Granted: ______________ _________________ - 50%
Expiration Date: ______________ _________________ - 75%
_________________ - 100%
<PAGE>
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE FLEMING COMPANIES, INC.
1990 STOCK OPTION PLAN
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Option
Agreement"), made as of this ____ day of ________, 199_, at
Oklahoma City, Oklahoma by and between ______________
(hereinafter referred to as the "Participant," and Fleming
Companies, Inc. (hereinafter referred to as the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is a key employee of the
Company, its parent or any subsidiary of the Company, and it is
important to the Company that the Participant be encouraged to
remain in the employ of the Company, its parent or any subsidiary
of the Company; and
WHEREAS, in recognition of such facts, the Company
desires to provide to the Participant an opportunity to purchase
shares of the common stock of the Company, as hereinafter
provided, pursuant to the "Fleming Companies, Inc. 1990 Stock
Option Plan" (the "Plan").
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the Participant and the Company hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants to
the Participant a non-qualified stock option (the "Stock
Options") as described in Sections 83 and 421 of the Code to
purchase all or any part of an aggregate of ____________
________________________________________ (_______) shares of
common stock of the Company, par value $2.50 per share (the
"Stock") under and subject to the terms and conditions of this
Option Agreement and the Plan each of which is incorporated
herein by reference and made a part hereof for all purposes. All
capitalized terms used in this Option Agreement shall have the
same meaning ascribed to them in the Plan unless specifically
denoted otherwise. The purchase price per share for each share
of Stock to be purchased hereunder shall be $__________ (the
"Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. After, and only
after, the conditions of Section 9 hereof have been satisfied,
the Participant shall be eligible to exercise that portion of his
Stock Options pursuant to the schedule set forth hereinafter. If
the Participant's employment with the Company (or its parent or
of any one or more of the subsidiaries of the Company) remains
full-time and continuous at all times prior to any of the
"Exercise Dates" set forth in this Section 2, then the
Participant shall be entitled, subject to the applicable
provisions of the Plan and this Option Agreement having been
satisfied, to exercise on or after the applicable Exercise Date,
on a cumulative basis, the number of shares of Stock determined
by multiplying the aggregate number of shares set forth in
Section 1 of this Agreement by the designated percentage set
forth below.
Percent of Stock
Exercise Dates Option Exercisable
- --------------------------------------------------------------------
On or After _________________ 25%
On or After _________________ 50%
On or After _________________ 75%
On or After _________________ 100%
3. TERM OF STOCK OPTION. Except as specifically provided
to the contrary in this Option Agreement or in the Plan with
regard to the death of a Participant, no Stock Option shall be
exercisable within six months from nor more than ten years after
the date of grant (the "Option Period"). Stock Options shall be
exercisable only by the Participant while actively employed by
the Company or a subsidiary, except that (i) the Stock Options
which are otherwise exercisable, may be exercised by the personal
representative of a deceased Participant within 12 months after
the death of such Participant and (ii) if a Participant
terminates his employment with the Company or a subsidiary, such
Participant may exercise any of the Stock Options which are
otherwise exercisable at any time within three months of such
date of termination. If a Participant should die during the
applicable three month period following the date of such
Participant's termination, the rights of the personal
representative of such deceased Participant as such relate to the
Stock Options shall be governed in accordance with Section 3(i)
of this Agreement.
4. NONTRANSFERABILITY OF STOCK OPTIONS. Except as
otherwise herein provided, the Stock Options shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Stock Options may be exercised, during the
lifetime of the Participant, only by him. More particularly (but
without limiting the generality of the foregoing), the Stock
Options may not be assigned, transferred (except as provided
above), pledged or hypothecated in any way, shall not be
assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition
of the Stock Options contrary to the provisions hereof shall be
null and void and without effect.
5. EMPLOYMENT. So long as the Participant shall continue
to be a full-time and continuous employee of the Company, its
parent or one or more of the subsidiaries of the Company, the
Stock Options shall not be affected by any change of duties or
position. Nothing in the Plan or in this Option Agreement shall
confer upon the Participant any right to continue in the employ
of the Company, its parent or any of the subsidiaries of the
Company, or interfere in any way with the right of the Company,
its parent or any of the subsidiaries of the Company to terminate
such Participant's employment at any time.
6. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With
respect to Stock Options granted hereunder, the following special
rules shall apply:
(a) Acceleration of Otherwise Unexercisable Stock
Option on Termination of Employment or Death. The Committee, in
its sole discretion, may permit (i) a Participant who terminates
employment with the Company or a subsidiary or (ii) the personal
representative of a deceased Participant, to exercise and
purchase (within three months of such date of termination of
employment or 12 months in the case of a deceased Participant)
all or any part of the shares subject to the Stock Options on the
date of the Participant's death or termination, notwithstanding
that all installments, if any, with respect to the Stock Options,
had not accrued on such date. Provided, such discretionary
authority of the Committee may not be exercised with respect to
any Stock Option (or portion thereof) if the applicable six month
waiting period for exercise had not expired except in the event
of the death of the Participant when the personal representative
of the deceased Participant may, with the consent of the
Committee, exercise such Stock Option notwithstanding the fact
that the applicable six month waiting period had not yet expired.
(b) Right to Exercise Upon Company Ceasing to Exist.
Where dissolution or liquidation of the Company or any merger,
consolidation or combination in which the Company is not the
surviving corporation occurs, the Participant shall have the
right immediately prior to such dissolution, liquidation, merger,
consolidation or combination, as the case may be, to exercise, in
whole or in part, his then remaining Stock Options whether or not
then exercisable. Provided, further, that for the purposes of
this Section 6(c), if any merger, consolidation or combination
occurs in which the Company is not the surviving corporation and
is the result of a mere change in identity, form or place of
organization of the Company accomplished in accordance with
Section 368(a) (1) (F) of the Code, then, such event will not
cause an acceleration of the exercisability of such Stock option
granted hereunder.
(c) Assumption of Outstanding Stock Options. To the
extent permitted by the applicable provisions of the Code, any
successor to the Company succeeding to, or assigned the business
of, the Company as the result of or in connection with a
corporate merger, consolidation, combination, reorganization or
liquidation transaction shall assume the Stock Options
outstanding under this Option Agreement or issue new non-
qualified stock options in place of such outstanding Stock
Options. Provided, such assumption of outstanding Stock Options
is to be made on a fair and equivalent basis in accordance with
the applicable provisions of Section 425(a) of the Code;
provided, further, in no event will such assumption result in a
modification of the Stock Options as defined in Section 425(h) of
the Code.
(d) Payment of Withholding Taxes. Upon the exercise
of any Stock Option as provided herein, no such exercise shall be
permitted, nor shall any Stock be issued to any Participant until
the Company receives full payment for the Stock purchased which
shall include any required state and federal withholding taxes.
Further, upon the exercise of any Stock Option the Participant
may direct the Company to retain from the shares of Stock to be
issued upon exercise of the Stock Option that number of initial
shares of Stock (based on "fair market value" as such term is
defined in Section 1.6 of the Plan) that would satisfy the
requirements for withholding any amounts due upon the exercise.
7. METHOD OF EXERCISING STOCK OPTION.
(a) Procedures for Exercise. The manner of exercising
the Stock Options shall be by written notice to the Company at
least two days before the date the Stock Options, or part
thereof, are to be exercised, and in any event prior to the
expiration of the Option Period. Such notice shall state the
election to exercise the Stock Options and the number of shares
of Stock with respect to that portion of the Stock Options being
exercised, and shall be signed by the person or persons so
exercising the Stock Options. The notice shall be accompanied by
payment of the full purchase price of such shares, in which event
the Company shall deliver a certificate or certificates
representing such shares to the person or persons entitled
thereto as soon as practicable after the notices shall be
received.
(b) Form of Payment. Payment for shares of Stock
purchased under this Option Agreement shall be made in full and
in cash or check made payable to the Company. Provided, payment
for shares of Stock purchased under this Option Agreement may
also be made in common stock of the Company or a combination of
cash and common stock of the Company. In the event that common
stock of the Company is utilized in consideration for the
purchase of Stock upon the exercise of the Stock Options, then,
such common stock shall be valued at the "fair market value" as
defined in Section 1.6 of the Plan. In addition to the foregoing
procedure which may be available for the exercise of the Stock
Options, the Participant may deliver to the Company a notice of
exercise including an irrevocable instruction to the Company to
deliver the stock certificate representing the shares subject to
the Stock Options to a broker authorized to trade in the common
stock of the Company. Upon receipt of such notice, the Company
will acknowledge receipt of the executed notice of exercise and
forward this notice to the broker. Upon receipt of the copy of
the notice which has been acknowledged by the Company, and
without waiting for issuance of the actual stock certificate with
respect to the exercise of the Stock Options, the broker may sell
the Stock (or that portion of the Stock necessary to cover the
Option Price and any withholding taxes due, if any). Upon
receipt of the stock certificate from the Company, the broker
will deliver directly to the Company that portion of the sales
proceeds to cover the Option Price and any withholding taxes.
Further, the broker may also facilitate a loan to the Participant
upon advance receipt of the exercise notice for issuance of the
actual stock certificate as an alternative means of financing and
facilitating the exercise of any Stock Option. For all purposes
of effecting the exercise of the Stock Options, the date on which
the Participant gives the notice of exercise to the Company will
be the date he becomes bound contractually to take and pay for
the shares of Stock underlying the Stock Options. No Stock shall
be issued to the Participant until the Company receives full
payment for the Stock purchased under the Stock Options which
shall include any required state and federal withholding taxes.
(c) Further Information. In the event the Stock
Options are exercised, pursuant to the foregoing provisions of
this Section 7, by any person or persons other than the
Participant in the event of the death of the Participant, such
notice shall also be accompanied by appropriate proof of the
right of such person or persons to exercise the Stock Options.
The notice so required shall be given by personal delivery to the
Secretary of the Company or by registered or certified mail,
addressed to the Company at 6301 Waterford Boulevard, Oklahoma
City, Oklahoma 73118, and it shall be deemed to have been given
when it is so personally delivered or when it is deposited in the
United States mail in an envelope addressed to the Company, as
aforesaid, properly stamped for delivery as a registered or
certified letter.
8. ACCELERATION OF OPTIONS UPON CHANGE OF CONTROL.
Notwithstanding anything to the contrary in the Plan, in the
event of a "Change of Control" (as such term is defined in
Section 8 of this Option Agreement and not in the Plan), any and
all Stock Options will become automatically fully vested and
immediately exercisable with such acceleration to occur without
the requirement of any further act by either the Company or the
Participant. For purposes of this Participant and this Option
Agreement, the term "Change of Control" shall mean:
(i) The acquisition by any
individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange
Act) of 20% or more (the "Triggering
Percentage") of either (i) the then
outstanding shares of common stock of the
Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of
the then outstanding voting securities of the
Company entitled to vote generally in the
election of directors (the "Outstanding
Company Voting Securities"); provided,
however, in the event the "Incumbent Board"
(as such term is hereinafter defined)
pursuant to authority granted in any rights
agreement to which the Company is a party
(the "Rights Agreement") lowers the
acquisition threshold percentages set forth
in such Rights Agreement, the Triggering
Percentage shall be automatically reduced to
equal the threshold percentages set pursuant
to authority granted to the board in the
Rights Agreement; and provided, further,
however, that the following acquisitions
shall not constitute a Change of Control:
(i) any acquisition directly from the
Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit
plan (or related trust) sponsored or
maintained by the Company or any corporation
controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a
transaction which complies with clauses (x),
(y), and (z) of subsection (iii) of this
Section 8; or
(ii) Individuals who, as of the
date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board;
provided, however, that any individual
becoming a director subsequent to the date
hereof whose election, appointment or
nomination for election by the Company's
shareholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but excluding,
for purposes of this definition, any such
individual whose initial assumption of office
occurs as a result of an actual or threatened
election contest with respect to the election
or removal of directors or other actual or
threatened solicitation of proxies or
consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders
of the Company of a reorganization, share
exchange, merger or consolidation or
acquisition of assets of another corporation
(a "Business Combination"), in each case,
unless, following such Business Combination,
(x) all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such Business
Combination will beneficially own, directly
or indirectly, more than 50% of,
respectively, the then outstanding shares of
common stock and the combined voting power of
the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the
corporation resulting from such Business
Combination (including, without limitation, a
corporation which as a result of such
transaction will own the Company through one
or more subsidiaries) in substantially the
same proportions as their ownership,
immediately prior to such Business
Combination of the Outstanding Company Common
Stock and Outstanding Company Voting
Securities, as the case may be, (y) no Person
(excluding any employee benefit plan (or
related trust) of the Company or such
corporation resulting from such Business
Combination) will beneficially own, directly
or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock
of the corporation resulting from such
Business Combination or the combined voting
power of the then outstanding voting
securities of such corporation except to the
extent that such ownership existed prior to
the Business Combination, and (z) at least a
majority of the members of the board of
directors of the corporation resulting from
such Business Combination will have been
members of the Incumbent Board at the time of
the execution of the initial agreement, or of
the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders
of the Company of (x) a complete liquidation
or dissolution of the Company or, (y) the
sale or other disposition of all or
substantially all of the assets of the
Company, other than to a corporation, with
respect to which following such sale or other
disposition, (A) more than 50% of,
respectively, the then outstanding shares of
common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such corporation
entitled to vote generally in the election of
directors will be beneficially owned,
directly or indirectly, by all or
substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or
other disposition in substantially the same
proportion as their ownership, immediately
prior to such sale or other disposition, of
the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (B) less than 20% of,
respectively, the then outstanding shares of
common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such corporation
entitled to vote generally in the election of
directors will be beneficially owned,
directly or indirectly, by any Person
(excluding any employee benefit plan (or
related trust) of the Company or such
corporation), except to the extent that such
Person owned 20% or more of the Outstanding
Company Common Stock or Outstanding Company
Voting Securities prior to the sale or
disposition, and (C) at least a majority of
the members of the board of directors of such
corporation will have been members of the
Incumbent Board at the time of the execution
of the initial agreement, or of the action of
the Board, providing for such sale or other
disposition of assets of the Company.
9. SECURITIES LAW RESTRICTIONS. Stock Options shall be
exercised and Stock issued only upon compliance with the
Securities Act of 1933, as amended (the "Act"), and any other
applicable securities law, or pursuant to an exemption therefrom.
10. NOTICES. All notices or other communications relating
to the Plan and this Option Agreement as it relates to the
Participant shall be in writing and shall be mailed (U.S. Mail)
by the Company to the Participant at the then current address as
maintained by the Company or such other address as the
Participant may advise the Company in writing.
IN WITNESS WHEREOF, the Company has caused this Option
Agreement to be duly executed by its officers thereunto duly
authorized, and the Participant has hereunto set his hand and
seal, all on the day and year first above written.
COMPANY: FLEMING COMPANIES, INC., an
Oklahoma corporation
By:________________________________
Scott M. Northcutt, Senior Vice President
- Human Resources
PARTICIPANT: ___________________________________
Exhibit 10.5
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") entered into
between Fleming Companies, Inc., an Oklahoma corporation (the
"Company"), and _________________, an individual (the
"Executive"), dated as of this ___ day of _____________, 1999
(the "Effective Date").
WHEREAS, the Company deems the services of the
Executive to be of great and unique value to the business of the
Company and the Company desires to assure both itself of
continuity of management and the Executive of continued
employment; and
WHEREAS, the Executive is a key management associate of
the Company and is presently making and is expected to continue
making substantial contributions to the Company; and
WHEREAS, it is in the best interests of the Company and
its shareholders to induce the Executive to remain in the employ
of the Company; and
WHEREAS, the Executive presently is serving in his/her
capacity as a ______________ Associate of the Company; and
WHEREAS, the Company desires to provide an additional
inducement for the Executive to remain in the employ of the
Company as hereinafter provided by providing to him/her
additional amounts of compensation as provided in this Agreement
in the event of his/her termination of employment for the reasons
specified herein.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive and the Company hereby agree as
provided below.
1. Operation of Agreement. The purpose of this
Agreement is to provide to the Executive additional amounts of
compensation as provided in this Agreement in the event of
his/her termination of employment for the reasons specified
herein. Accordingly, the Company and the Executive have entered
into this Agreement in accordance with the terms and provisions
herein to provide for such protection to the Executive.
(a) Control Date. The "Control Date" shall be
the date during the "Change of Control Period" (as defined in
Section 1(b)) on which a Change of Control (as defined in Section
1(c)) occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company
is terminated prior to the date on which a Change of Control
occurs, and it is reasonably demonstrated that such termination
(i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Control
Date" shall mean the date immediately prior to the date of such
termination.
(b) Change of Control Period. The "Change of
Control Period" is the period commencing on the Effective Date
and ending on the first to occur of (i) the second anniversary of
such date or (ii) the first day of the month coinciding with or
next following the Executive's attainment of age 65 ("Normal
Retirement Date"); provided, however, that commencing on the date
one year after the date hereof, and on each annual anniversary of
such date (the date one year after the date hereof and each
annual anniversary of such date, is hereinafter referred to as
the "Renewal Date"), the Change of Control Period shall be
automatically extended so as to terminate on the first to occur
of: (i) two years from such Renewal Date or (ii) the first day of
the month coinciding with or next following the Executive's
Normal Retirement Date, unless at least 60 days prior to the
Renewal Date, the Company shall give notice that the Change of
Control Period shall not be so extended, in which event this
Agreement shall continue for the remainder of the term of the
then current Change of Control Period and terminate as provided
herein.
(c) Definition of Change of Control. For the
purpose of this Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more (the "Triggering Percentage") of either (x) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, in
the event the "Incumbent Board" (as such term is hereinafter
defined) pursuant to authority granted in any rights agreement to
which the Company is a party (the "Rights Agreement") lowers the
acquisition threshold percentages set forth in such Rights
Agreement, the Triggering Percentage shall be automatically
reduced to equal the threshold percentages set pursuant to
authority granted to the board in the Rights Agreement; and
provided, further, however, that the following acquisitions shall
not constitute a change of control: (A) any acquisition directly
from the Company, (B) any acquisition by the Company; (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, (D) any acquisition previously
approved by at least a majority of the members of the Incumbent
Board, (E) any acquisition approved by at least a majority of the
members of the Incumbent Board within five (5) business days
after the Company has notice of such acquisition, or (F) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (x), (y), and (z) of subsection (iii) of
this Section 1(c); or
(ii) Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, appointment or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for purposes of this definition, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Approval by the shareholders of the
Company of a reorganization, share exchange, merger or
consolidation (a "Business Combination"), in each case, unless,
following such Business Combination, (x) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 70% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (y) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (z) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination or were
elected, appointed or nominated by the Board; or
(iv) Approval by the shareholders of the
Company of (x) a complete liquidation or dissolution of the
Company or, (y) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, (A) more than 70% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportions as their ownership,
immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by any Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation), except to
the extent that such Person owned 20% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities
prior to the sale or disposition, and (C) at least a majority of
the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such sale or other disposition of assets of the Company or
were elected, appointed or nominated by the Board.
2. Agreement Not Employment Contract. This Agreement
shall be considered solely as a "severance agreement" obligating
the Company to pay to the Executive certain amounts of
compensation in the event and only in the event of his
termination of employment after the Control Date for the reasons
and at the times specified herein.
3. Termination. Except as provided in Section 5
hereof, this Agreement shall terminate upon the first to occur of
the following events.
(a) Death. The date of death of the Executive.
(b) Cause. The termination of the Executive's
employment by the Company for "Cause." For purposes of this
Agreement, termination of the Executive's employment by the
Company for Cause shall mean termination for one of the following
reasons: (i) the conviction of the Executive of a felony by a
federal or state court of competent jurisdiction; (ii) an act or
acts of dishonesty taken by the Executive and intended to result
in substantial personal enrichment of the Executive at the
expense of the Company; or (iii) the Executive's "willful"
failure to follow a direct, reasonable and lawful written order
from his supervisor, within the reasonable scope of the
Executive's duties, which failure is not cured within 30 days.
Further, for purposes of this Section (b):
(1) No act or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission
was in the best interest of the Company.
(2) The Executive shall not be deemed to
have been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths
(3/4ths) of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth in clauses (i), (ii) or
(iii) above and specifying the particulars thereof in detail.
(c) Good Reason. The termination of the
Executive's employment by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" means:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities or any other action by the Company
which results in a diminishment in such position,
compensation, authority, duties or responsibilities,
other than an insubstantial and inadvertent action
which is remedied by the Company promptly after receipt
of written notice thereof given by the Executive
(ii) the Company's requiring the Executive
to be based at any office or location more than 25
miles from where the Executive was employed immediately
prior to the Change of Control, except for periodic
travel reasonably required in the performance of the
Executive's responsibilities; or
(iii) any failure by the Company to comply
with and satisfy Section 10(a) of this agreement.
(d) Failure to Extend Agreement. The Company
gives notice of its intent not to extend the Change of Control
Period as provided in Section 1(b) hereof.
4. Notice of Termination. Any termination of
employment by the Company for Cause or by the Executive for Good
Reason as provided in Section 3, above, shall be communicated by
Notice of Termination to the other party hereto given in
accordance with Section 13 of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the termination date is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than 15 days after the giving of
such notice).
5. Obligations of the Company Upon Termination
Following Change of Control. If (i) within 24 months of the
Control Date the Company shall terminate the Executive's
employment for any reason other than for Cause or death, or (ii)
within 24 months of the Control Date the employment of the
Executive shall be terminated by the Executive for Good Reason,
then, upon the occurrence of either event as described in clauses
(i) and (ii), the Company shall pay to the Executive in a lump
sum, in cash, within 30 days after the date of termination of
employment an amount equal to 24 times the Base Compensation Rate
(defined below) on the Control Date. "Base Compensation Rate"
shall mean the monthly rate of compensation of the Executive
(before any salary reductions on account of contributions made
pursuant to either Sections 401(k) or 125 of the Code, if
applicable) in effect as of the Effective Date or such rate as
increased but not reduced) from the Effective Date until the
Control Date. The Executive's Base Compensation Rate as of the
Effective Date is the monthly rate of salary, payable bi-weekly.
Provided, in the event the Executive has not attained his Normal
Retirement Date as of the Control Date, and if his Normal
Retirement Date would occur within 24 months of his Control Date
assuming the Executive continued in the employ of the Company
until his Normal Retirement Date and then retired, then, in such
event, the aforesaid factor "24" shall be reduced to equal the
number of months (partial months shall be considered as a whole
month) remaining between the Control Date and the Executive's
Normal Retirement Date. Provided further, if the Executive has
attained his Normal Retirement Date on the Control Date, then,
the factor "24" as used in this Section 5 shall be reduced to
zero, and such Executive shall be entitled to no payment under
this Agreement.
6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of
the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, including, by example and not by way of limitation,
acceleration by the Company of the date of vesting or payment or
rate of payment under any plan, program or arrangement of the
Company (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 6(c),
all determinations required to be made under this Section 6,
including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall be made by Deloitte & Touche LLP
(the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment which would be subject to the Excise
Tax, or such earlier time as is requested by the Company. The
initial Gross-Up Payment, if any, as determined pursuant to this
Section 6(b), shall be paid to the Executive within five days of
the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with an opinion that he
has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 6(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-
Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive knows of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect
to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) permit the Company to participate in
any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 6(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 6(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 6(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 6(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other
plan or program provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any stock option or other agreements
with the Company or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or
any of its affiliated companies at or subsequent to the date of
termination of employment shall be payable in accordance with
such plan or program.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment by way
of mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement.
9. Confidential Information.
(a) Requirement of Executive. The Executive
shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and
their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be public
knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). After
termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by
it. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this
Agreement.
(b) Additional Remedies. The Executive agrees
that the remedy at law for any breach or threatened breach of any
covenant contained in this Section 9 will be inadequate, and that
the Company, in addition to such other remedies as may be
available to it, in law or in equity, shall be entitled to
injunctive relief without bond or other security.
10. Successors and Binding Effect.
(a) Successor Must Assume Agreement. 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. Failure of
the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the
Executive would be entitled to hereunder if the Executive
terminated employment for Good Reason following a Change of
Control, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be
deemed the date of termination of employment. As used in this
Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law
or otherwise.
(b) Binding Effect. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive
should die while any amount would still be payable to the
Executive hereunder if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there is no such
designee, to the Executive's estate.
11. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Oklahoma, without reference to principles of conflict of laws.
12. Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
At his last known address evidenced on the Company's
payroll records
If to the Company:
Fleming Companies, Inc.
6301 Waterford Boulevard
P. O. Box 26647
Oklahoma City, Oklahoma 73126
Attn: Senior Vice President - Human Resources
with a copy to:
Fleming Companies, Inc.
6301 Waterford Boulevard
P.O. Box 26647
Oklahoma City, Oklahoma 73126
Attn: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
13. Taxes to be Withheld. The Company may withhold
from any amounts payable under this Agreement such Federal, state
or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
14. Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject
matter hereof and supersedes any and all prior or contemporaneous
oral and prior written agreements and understandings. There are
no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements
to the execution hereof or in effect among the parties.
15. Amendment. This Agreement may not be amended, and
no provision hereof shall be waived, except by a writing signed
by all parties to this Agreement, or, in the case of a waiver, by
the party waiving compliance therewith, which states that it is
intended to amend or waive a provision of this Agreement. Any
waiver of any rights or failure to act in a specific instance
shall relate only to such instance and shall not be construed as
an agreement to waive any rights or failure to act in any other
instance, whether or not similar.
16. Enforceability. Should any provision of this
Agreement be unenforceable or prohibited by an applicable law,
this Agreement shall be considered divisible as to such provision
which shall be inoperative, and the remainder of this Agreement
shall be valid and binding as though such provision were not
included herein. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
17. Counterparts. This Agreement may be executed in
two or more counterparts with the same effect as if the
signatures to all such counterparts were upon the same
instrument, and all such counterparts shall constitute but one
instrument.
18. Headings. All headings in this Agreement are for
convenience only and are not intended to affect the meaning of
any provision hereof.
19. No Trust. No action under this Agreement by the
Company or its Board of Directors shall be construed as creating
a trust, escrow or other secured or segregated fund, in favor of
the Executive or his beneficiary. The status of the Executive
and his beneficiary with respect to any liabilities assumed by
the Company hereunder shall be solely those of unsecured
creditors of the Company. Any asset acquired or held by the
Company in connection with liabilities assumed by it hereunder,
shall not be deemed to be held under any trust, escrow or other
secured or segregated fund for the benefit of the Executive or
his beneficiary or to be security for the performance of the
obligations of the Company, but shall be, and remain a general,
unpledged, unrestricted asset of the Company at all times subject
to the claims of general creditors of the Company.
20. No Assignability. Neither the Executive nor his
beneficiary, nor any other person shall acquire any right to or
interest in any payments payable under this Agreement, otherwise
than by actual payment in accordance with the provisions of this
Agreement, or have any power to transfer, assign, anticipate,
pledge, mortgage or otherwise encumber, alienate or transfer any
rights hereunder in advance of any of the payments to be made
pursuant to this Agreement or any portion thereof which is
expressly declared to be nonassignable and nontransferable. No
right or benefit hereunder shall in any manner be liable for or
subject to the debts, contracts, liabilities, or torts of the
person entitled to such benefit.
IN WITNESS WHEREOF, the Executive has hereunto set
his/her hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed
in its name on its behalf all as of the day and year first above
written.
"EXECUTIVE"
FLEMING COMPANIES, INC., an
Oklahoma corporation
By
Scott M. Northcutt
Senior Vice President,
Human Resources
"COMPANY"
Exhibit 10.8
FLEMING COMPANIES, INC.
PHASE III OF THE FLEMING COMPANIES, INC.
1990 STOCK INCENTIVE PLAN
WHEREAS, the Board of Directors of Fleming Companies,
Inc. (the "Company") has adopted the "Fleming Companies, Inc.
1990 Stock Incentive Plan" (herein the "Plan"), a copy of which
is attached hereto as Exhibit "A"; and
WHEREAS, the Compensation and Organization Committee
(the "Committee") of the Board of Directors of the Company has
been delegated the responsibility of implementing and adminis
tering the Plan and making Awards to Key Associates of the
Company under the Plan; and
WHEREAS, the Committee has created Phase III of the
Plan to provide for Restricted Stock Awards to certain Key
Associates of the Company.
NOW THEREFORE, BE IT RESOLVED, that the Committee does
hereby create, establish and adopt Phase III of the Plan as
herein described and declare and grant the following awards:
ARTICLE I (PHASE III)
Section 1. Definitions. The following terms as used
herein shall have the following meanings. All other capitalized
terms shall have the meaning ascribed to them in the Plan.
1.01 "Awards Agreement" means the agreement each
of the Participants shall execute as described in Section 2 of
Article II.
1.02 "Participants" means those Key Associates
set forth in Section 3 of this Article I.
1.03 "Phase III Performance Cycle" shall mean a
period of time commencing February 16, 1994, and ending on
February 15, 2004, unless all of the Restricted Stock awarded
under this Phase III shall have become Vested Stock on an earlier
date, in which event the Phase III Performance Cycle shall end on
such date.
1.04 "Restrictions" means as to the Restricted
Stock to be issued to each Participant under this Phase III those
restrictions set forth in Section 7.1 of the Plan.
1.05 "Vested Stock" means Restricted Stock as to
which all Restrictions have been removed in accordance with this
Article I.
Section 2. Objectives. The Committee has determined
the following objectives of Phase III of the Plan:
(i) To reward the creation of shareholder value;
(ii) To emphasize stock ownership by the Key
Associates; and
(iii) To provide strong incentive to the Key
Associates to increase the per share price of the Company's
common stock.
Section 3. Participants. The Participants of Phase
III of the Plan shall be those persons listed on Exhibit "B"
hereto (herein called the "Participant" or "Participants").
Section 4. Phase III Awards. Phase III Awards shall
be made in shares of Restricted Stock to the Participants as
provided in Article II hereof.
4.01 Voting Rights and Dividends. Each Par
ticipant shall have all of the voting rights attributable to the
shares of Restricted Stock issued to him. However, dividends
declared and paid by the Company with respect to the shares of
Restricted Stock (the "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. In accordance with Sec
tion 5.3(b) of the Plan, the right to vote such shares and to
receive the Accrued Dividends shall terminate with respect to
unvested shares of Restricted Stock of any Participants whose
Award has been forfeited as provided in the Plan.
4.02 Escrow. The Restricted Stock issued to each
Participant shall be escrowed with the Secretary of the Company
subject to the removal of the Restrictions placed thereon or
forfeiture pursuant to the terms of this Article I.
4.03 Restrictive Legend. The Restricted Stock
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE RESTRICTED STOCK, HAVING BEEN ISSUED
PURSUANT TO THE 'FLEMING COMPANIES, INC. 1990
STOCK INCENTIVE PLAN' (THE 'PLAN'), ARE SUB
JECT TO THE TERMS AND PROVISIONS OF PHASE III
OF THE PLAN ADOPTED BY THE COMPENSATION AND
ORGANIZATION COMMITTEE OF THE BOARD OF DIREC
TORS ON FEBRUARY 16, 1994, AND BEAR THE RE
STRICTIONS ON ALIENATION SET FORTH IN SECTION
7.1 OF THE PLAN. COPIES OF THE PLAN AND
PHASE III OF THE PLAN MAY BE OBTAINED FROM
THE OFFICE OF THE SECRETARY OF THE COMPANY."
Violation of the foregoing restrictive legend shall result in
immediate forfeiture of all Restricted Stock.
Section 5. Performance Goals. In order for the
Participant to "earn" the Restricted Stock free and clear of the
Restrictions, the following Performance Goals shall have been
attained by the Company.
5.01 Performance Goals - Stock Price Appreciation.
During the Phase III Performance Cycle before any of the
Restricted Stock awarded to the Participants hereunder shall
become Vested Stock, the average of the last reported sales price
of the Common Stock as reported on the New York Stock Exchange
Composite Transactions report for any twenty (20) consecutive
business day period shall have equalled or exceeded the target
stock price set forth below (the "Target Stock Price"). In the
event the Target Stock Price is achieved during the Phase III
Performance Cycle, the Participants will have earned and be
vested with the percentage indicated of the Restricted Stock
awarded to them as set forth in the Performance Vesting Schedule
below:
PERFORMANCE VESTING SCHEDULE
% of Shares Vested Target Stock Prices
20% $43.00
40% $47.00
60% $50.00
80% $53.00
100% $56.00
5.02 Performance Goals - Adjustments. In the case
of a recapitalization, stock split, merger, stock dividend,
reorganization, combination, liquidation or other change in the
Common Stock (an "Adjustment Event"), the Target Stock Prices
shall be automatically adjusted to reflect such Adjustment Event.
The Committee shall promptly notify all Participants of any such
adjustments.
5.03 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 certifi
cates 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 there
on; provided, however, prior to such delivery, the Committee
shall have certified in writing that a Target Stock Price has
been met. In order to fulfil the certification requirement, the
Committee shall meet in person or by telephone or act by unani
mous written consent no later than thirty days after the achieve
ment of a Target Stock Price for the required period.
5.04 Termination. All Restricted Stock awarded to
a Participant under this Phase III that has not become Vested
Stock shall be forfeited at the end of the Phase III Performance
Cycle, and all Restricted Stock that has not become Vested Stock
shall be forfeited upon the termination from the employ of the
Company of such Participant for any reason except as follows:
(i) Death, Disability or Retirement.
Restricted Stock which achieves the Target Stock Price in accor
dance with Section 5.01 during the year of the death, Disability
or Retirement of a Participant may become Vested Stock and pay
able to the Participant or to his estate, as the case may be, at
the discretion of the Committee. All other Restricted Stock
shall be forfeited.
(ii) Change of Control.
(a) In the event of a Change of
Control all Restricted Stock and Accrued Dividends shall be
forfeited, but the Participant shall have earned and be paid by
the Company a sum of money equal to his then current annual base
salary if such event occurs in the first year of the Phase III
Performance Cycle; two-thirds of his then current annual base
salary if such event occurs in the second year of the Phase III
Performance Cycle; and one-third of his then current annual base
salary if such event occurs in the third year of the Phase III
Performance Cycle.
(b) In addition to the payment pro
vided for in Section 5.04(ii)(a) above, the Company shall also
pay to the Participant any Gross-Up Payment determined in accor
dance with Section 9.2 of the Plan.
Section 6. The Plan. The Plan and all of its terms
and provisions attached hereto as Exhibit "A" are herein in
corporated by reference. In the event there is a conflict
between this Phase III and the Plan, the Plan shall control.
ARTICLE II (THE AWARDS)
Section 1. The Awards. The Committee hereby makes the
Awards to the Participants listed on Exhibit "B" hereto in the
number of restricted shares set forth opposite the names of the
Participants listed on Exhibit "B" hereto.
Section 2. Awards Agreement. Each of the Participants
shall execute and deliver to the Secretary of the Company a copy
of the Awards Agreement in the form attached hereto as Exhibit
"C" upon delivery to the Secretary of the shares of Restricted
Stock set opposite his name in Section 1 above.
Dated this 16th day of February, 1994.
"Committee"
JAMES G. HARLOW, JR.
James G. Harlow, Jr., Chairman
RICHARD D. HARRISON
Richard D. Harrison
EDWARD C. JOULLIAN III
Edward C. Joullian III
HOWARD H. LEACH
Howard H. Leach
JOHN A. MCMILLAN
John A. McMillan
Exhibit 10.10
FIRST AMENDMENT TO
FLEMING COMPANIES, INC.
SUPPLEMENTAL INCOME TRUST
This First Amendment to Fleming Companies, Inc.
Supplemental Income Trust dated as of this 25th day of February,
1997 (the "Amendment"), by and among Fleming Companies, Inc., an
Oklahoma corporation (the "Company"), and BANCOKLAHOMA TRUST
COMPANY, an Oklahoma corporation (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Trustee entered into that
certain Fleming Companies, Inc. Supplemental Income Trust dated
as of March 16, 1995 (the "Trust Agreement").
WHEREAS, the Company and the Trustee desire to amend
the Trust Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, the Company
and the Trustee hereby amend the Trust Agreement as follows:
1. The Amendments.
(a) Exhibit "A". Exhibit "A" to the Trust
Agreement is hereby amended by adding the following:
"5. The Supplemental Retirement Income
Agreement by and between William J. Dowd and
the Company, dated as of February 25, 1997."
(b) Section 1(f). Section 1(f) of the Trust
Agreement is hereby amended to read in its entirety as follows:
"(f) Upon a Change of Control, Company shall,
as soon as possible, but in no event longer
than sixty (60) days following the Change of
Control, make an irrevocable contribution to
the Trust in an amount that is sufficient to
pay the Participants or their beneficiaries
the benefits to which the Participants or
their beneficiaries would be entitled
pursuant to the terms of the Amended and
Restated Supplemental Retirement Income Plan
of Fleming Companies, Inc. and Its
subsidiaries (the "Supplemental Plan") and
the Supplemental Retirement Income Agreement
between the Company and William J. Dowd dated
as of February 25, 1997 (the "Dowd
Agreement") as of the date on which the
Change of Control occurred assuming the
Participants have each been terminated other
than for "cause" (as such term is defined in
the Supplemental Plan and in the Dowd
Agreement), death or disability or the
Participants terminate their employment for
"good reason" as such term is defined in the
Supplemental Plan and in the Dowd Agreement."
2. The Agreement. The term "Agreement", as used in
the Trust Agreement and in this Amendment shall hereafter mean
the Trust Agreement as amended by this Amendment. The Trust
Agreement, as amended hereby, shall continue in full force and
effect in accordance with the terms thereof.
3. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of
Oklahoma.
4. Counterparts. This Amendment may be executed in
one or more counterparts, all of which shall be considered one
and the same instrument, and shall become effective when one or
more of the counterparts have been signed by each of the parties
and delivered to the other parties.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed on the date first above written.
FLEMING COMPANIES, INC., an Oklahoma
corporation
LARRY A. WAGNER
By Larry A. Wagner
Senior Vice President -
Associate Support
BANCOKLAHOMA TRUST COMPANY
ELLEN D. FLEMING
By Ellen D. Fleming
Senior Vice President &
Senior Trust Officer
Exhibit 10.12
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS CHANGE OF CONTROL EMPLOYMENT AGREEMENT (the
"Agreement") entered into between FLEMING COMPANIES, INC., an
Oklahoma corporation (the "Company"), and __________________, an
individual (the "Executive"), dated as of the ____ day of
_______, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat, or occurrence of a "Change of Control" (as
defined in Section 2 of this Agreement) of the Company. The
Board believes it is important to diminish the inevitable
distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control, and to encourage the Executive's full attention and
dedication to the affairs of the Company during the term of this
Agreement and upon the occurrence of such event. The Board also
believes the Company is best served by providing the Executive
with compensation arrangements upon a Change of Control which
provide the Executive with individual financial security and
which are competitive with those of other corporations. In order
to accomplish these objectives, the Board has caused the Company
to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined in Section 1(b)
of this Agreement) on which a Change of Control (as defined
below) occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company
is terminated prior to the date on which a Change of Control
occurs, and it is reasonably demonstrated that such termination
(i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination.
(b) Subject to the provisions of Section 11 of
this Agreement, the "Change of Control Period" is the period
commencing on the date hereof and ending on the earlier to occur
of (i) the third anniversary of such date or (ii) the first day
of the month next following the Executive's attainment of age 65
("Normal Retirement Date"); provided, however, that commencing on
the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary
thereof is hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended so as to
terminate on the earlier of (i) three years from such Renewal
Date or (ii) the first day of the month coinciding with or next
following the Executive's Normal Retirement Date, unless at least
60 days prior to the Renewal Date, the Company shall give notice
that the Change of Control Period shall not be so extended in
which event this Agreement shall continue for the remainder of
its then current term and terminate as provided herein.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more (the
"Triggering Percentage") of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, in the event the
"Incumbent Board" (as such term is hereinafter defined) pursuant
to authority granted in any rights agreement to which the Company
is a party (the "Rights Agreement") lowers the acquisition
threshold percentages set forth in such Rights Agreement, the
Triggering Percentage shall be automatically reduced to equal the
threshold percentages set pursuant to authority granted to the
board in the Rights Agreement; and provided, further, however,
that the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (x), (y), and (z) of subsection (iii) of
this Section 2; or
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, appointment or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for purposes of this
definition, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, share exchange, merger or consolidation or
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (x) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination will
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction will own the Company through one
or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (y) no Person (excluding
any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) will
beneficially own, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (z) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination will have
been members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of (x)
a complete liquidation or dissolution of the Company or, (y) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors will be beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
less than 20% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors will be
beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation), except to the extent that such
Person owned 20% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities prior to the sale or
disposition, and (C) at least a majority of the members of the
board of directors of such corporation will have been members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such sale
or other disposition of assets of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company, for the period
commencing on the Effective Date and ending on the earlier to
occur of (a) the third anniversary of such date or (b) the first
day of the month coinciding with or next following the
Executive's Normal Retirement Date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, secretarial and
administrative support, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 90-
day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date
or any office or location less than 25 miles from such location.
(ii) During the Employment Period, and
excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During
the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an associate of the Company in accordance
with this Agreement. It is expressly understood and agreed that
to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Base
Salary") at least equal to the greater of (i) his annual base
salary in effect immediately prior to the Effective Date or (ii)
the highest average annual base salary paid or payable to the
Executive by the Company and its subsidiaries during the five
fiscal years immediately preceding the fiscal year in which the
Effective Date occurs; provided, however, that the three (which
need not be consecutive) highest annual base salaries paid or
payable during the past five fiscal years which yield the highest
annual base salary payable shall be utilized to compute the
highest average annual base salary. Such Base Salary shall be
payable monthly in cash. Base Salary shall be computed prior to
any reductions for (i) any deferrals of compensation made
pursuant to Sections 125 or 401(c) of the Code and (ii) any
withholding, income or employment taxes. During the Employment
Period, the Base Salary shall be reviewed at least annually and
shall be increased at any time and from time to time as shall be
substantially consistent with increases in base salary awarded in
the ordinary course of business to other key management
associates of the Company and its subsidiaries. Any increase in
Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Base Salary
shall not be reduced after any such increase.
(ii) Annual Bonus. In addition to Base
Salary, the Executive shall be paid, for each fiscal year during
the Employment Period, an annual bonus in cash at least equal to
the greater of (x) the middle target level bonus payable,
regardless of whether any specified targets are met, under the
Company's incentive compensation plan applicable to the Executive
for the Executive's position, on the Effective Date (provided,
however, if no middle target level has been set as of the
Effective Date, the middle target level set for the fiscal year
immediately preceding the Effective date shall be utilized, and
(y) the maximum aggregate bonus paid (under the Company's
incentive compensation plan applicable to the Executive or
otherwise) during any of the five fiscal years immediately
preceding the fiscal year in which the Effective Date occurs.
The greater of the amounts described in clauses (x) and (y) of
this Section 4(b)(ii) shall hereafter be called the "Annual
Bonus."
(iii) Incentive, Savings and Retirement Plans.
In addition to Base Salary and Annual Bonus, the Executive shall
be entitled to participate during the Employment Period in all
incentive, savings and retirement plans, practices, supplemental
retirement plan policies and programs applicable to other key
management associates of the Company and its subsidiaries, in
each case providing benefits which are the economic equivalent to
those in effect immediately preceding the Effective Date or as
subsequently amended. Such plans, practices, policies and
programs, in the aggregate, shall provide the Executive with
compensation, benefits and reward opportunities at least as
favorable as the most favorable of such compensation, benefits
and reward opportunities provided by the Company for the
Executive under such plans, practices, policies and programs as
in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as provided at any time thereafter with respect to
other key management associates of the Company and its
subsidiaries.
(iv) Welfare Benefit Plans. During the
Employment Period, the Executive and/or the Executive's family,
as the case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its
subsidiaries (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident insurance
plans and programs), at least as favorable as the most favorable
of such plans, practices, policies and programs in effect at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with
respect to other key management associates of the Company and its
subsidiaries.
(v) Expenses. During the Employment Period,
the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and
procedures of the Company and its subsidiaries in effect at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect at any
time thereafter with respect to other key management associates
of the Company and its subsidiaries.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits,
including use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs
and policies of the Company and its subsidiaries in effect at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect at any
time thereafter with respect to other key management associates
of the Company and its subsidiaries.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the
Company and its subsidiaries at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as provided at any time thereafter with respect to
other key management associates of the Company and its
subsidiaries.
(viii) Vacation. During the Employment Period,
the Executive shall be entitled to paid vacation in accordance
with the most favorable plans, policies, programs and practices
of the Company and its subsidiaries as in effect at any time
during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any time
thereafter with respect to other key management associates of the
Company and its subsidiaries.
(ix) Effect of Increases. Any increase in
Base Salary, Annual Bonus or any other benefit or perquisite
described in the foregoing Sections (i)-(viii) shall in no way
diminish any obligation of the Company under the Agreement.
5. Termination.
(a) Death or Disability. This Agreement shall
terminate automatically upon the Executive's death. If the
Company determines in good faith that the Disability of the
Executive has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Executive
written notice of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after the date
of such notice (the "Disability Effective Date"), provided that,
within such time period, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" means disability (either physical or
mental) which, at least 26 weeks after its commencement, is
determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or
the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the
Executive's employment for "Cause." For purposes of this
Agreement, termination of the Executive's employment by the
Company for Cause shall mean termination for one of the following
reasons: (i) the conviction of the Executive of a felony by a
federal or state court of competent jurisdiction; (ii) an act or
acts of dishonesty taken by the Executive and intended to result
in substantial personal enrichment of the Executive at the
expense of the Company; or (iii) the Executive's "willful"
failure to follow a direct, reasonable and lawful written order
from his supervisor, within the reasonable scope of the
Executive's duties, which failure is not cured within 30 days.
Further, for purposes of this Section (b):
(1) No act or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission
was in the best interest of the Company.
(2) The Executive shall not be deemed to
have been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths
(3/4ths) of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth in clauses (i), (ii) or
(iii) above and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may
be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, compensation,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply
with any of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than that described in
Section 4(a)(i)(B) hereof, except for periodic travel reasonably
required in the performance of the Executive's responsibilities;
(iv) any purported termination by the Company
of the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply
with and satisfy Section 12(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a
termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by
the Company for Cause or by the Executive for Good Reason shall
be communicated by Notice of Termination to the other party
hereto given in accordance with Section 14(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provisions in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
15 days after the giving of such notice). The failure by the
Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall
not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing
his rights hereunder.
(e) Date of Termination. "Date of Termination"
means the date of receipt of the Notice of Termination by either
the Company or the Executive as the case may be or any later date
specified therein; provided, however, that if the Executive's
employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is
terminated by reason of the Executive's death, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than those
obligations accrued or earned and vested (if applicable) by the
Executive as of the Date of Termination, including, for this
purpose (i) the Executive's annual full Base Salary through the
Date of Termination at the rate in effect on the Date of
Termination or, if higher, at the highest annual rate in effect
at any time from the thirty-six month period preceding the
Effective Date through the Date of Termination (the "Highest Base
Salary"), (ii) the product of the Annual Bonus (defined in
Section 4(b)(ii)) paid to the Executive for the last full fiscal
year and a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (iii) any compensation
previously deferred by the Executive (together with any accrued
interest thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (such amounts specified
in clauses (i), (ii) and (iii) are hereinafter referred to as
"Accrued Obligations"). All such Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in
a lump sum in cash within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the
Executive's family shall be entitled to receive benefits at least
equal to the most favorable benefits provided by the Company and
any of its subsidiaries to surviving families of other key
management associates of the Company and such subsidiaries under
such plans, programs, practices and policies relating to family
death benefits, if any, in accordance with the most favorable
plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect on the
date of the Executive's death with respect to other key
management associates of the Company and its subsidiaries and
their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, this
Agreement shall terminate without further obligations to the
Executive, other than those obligations accrued or earned and
vested (if applicable) by the Executive as of the Date of
Termination, including for this purpose, all Accrued Obligations.
All such Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled after the Disability Effective Date
to receive disability and other benefits at least equal to the
most favorable of those provided by the Company and its
subsidiaries to disabled key management associates and/or their
families in accordance with such plans, programs, practices and
policies relating to disability, if any, in accordance with the
most favorable plans, programs, practices and policies of the
Company and its subsidiaries in effect at any time during the 90-
day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in
effect at any time thereafter with respect to other key
management associates of the Company and its subsidiaries and
their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive the
Highest Base Salary through the Date of Termination plus the
amount of any compensation previously deferred by the Executive
(together with accrued interest thereon). If the Executive
terminates employment other than for Good Reason, this Agreement
shall terminate without further obligations to the Executive,
other than those obligations accrued or earned and vested (if
applicable) by the Executive through the Date of Termination,
including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
(d) Good Reason; Termination Other Than for Cause
or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause,
Disability, or death or if the Executive shall terminate his
employment for Good Reason:
(i) the Company shall pay to the Executive
in a lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. to the extent not theretofore paid,
the Executive's Highest Base Salary through the Date of
Termination; and
B. the product of (i) the Annual Bonus
or, if higher, an amount equal to the middle target level bonus
payable, regardless of whether specified targets are met, under
the Company's incentive compensation plan applicable to the
Executive for his position on the Date of Termination (as
applicable, the "Highest Bonus") and (ii) a fraction, the
numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which
is 365; and
C. the product obtained by multiplying
2.99 times the sum of (i) the Highest Base Salary and (ii) the
Highest Bonus; and
D. in the case of compensation
previously deferred by the Executive, all amounts previously
deferred (together with any accrued interest thereon) and not yet
paid by the Company, and any accrued vacation pay not yet paid by
the Company; and
(ii) for the remainder of the Employment
Period, or such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section
4(b)(iv) of this Agreement if the Executive's employment had not
been terminated, including health insurance and life insurance,
in accordance with the most favorable plans, practices, programs
or policies of the Company and its subsidiaries during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter
with respect to other key management associates and their
families and for purposes of eligibility for retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day
of such period.
7. Non-Exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices, provided by the Company
or any of its subsidiaries and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other
agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of the Company or any of its subsidiaries at or subsequent to the
Date of Termination shall be payable in accordance with such
plan, policy, practice or program.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the month of any
payment pursuant to Section 9 of this Agreement), plus in each
case interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of
the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, including, by example and not by way of limitation,
acceleration by the Company of the date of vesting or payment or
rate of payment under any plan, program or arrangement of the
Company (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9,
including whether a Gross-Up Payment is required and the amount
of such Gross-Up Payment, shall be made by Deloitte & Touche LLP
(the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment which would be subject to the Excise
Tax, or such earlier time as is requested by the Company. The
initial Gross-Up Payment, if any, as determined pursuant to this
Section 9(b), shall be paid to the Executive within five days of
the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with an opinion that he
has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-
Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive knows of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date
on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect
to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith
in order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its subsidiaries, and their respective
businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its
subsidiaries and which shall not be or become public knowledge
(other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Termination of Employment Agreement. The
Executive and the Company are parties to that certain Employment
Agreement dated as of __________, 1999 (the "Employment
Agreement"). Effective as of the Effective Date of this
Agreement, the Employment Agreement shall be terminated and of no
further force and effect. In the event the Effective Date is
prior to _______ __, 2001, the term of this Agreement shall be
extended by the number of days between the Effective Date and
__________, 2001.
12. Successors.
(a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.
(c) 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 assume expressly 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 which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
13. Indemnification and Insurance. The 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 (a) the termination of this
Agreement or (b) the termination of employment of the Executive.
In addition, during the term of this Agreement and for a period
of five years following the termination of 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 (a) the termination of this
Agreement or (b) the termination of employment of the Executive.
Provided, in no event will the obligation of the Company to
indemnify the Executive or provide Directors and Officers
insurance to the Executive under this Section 13 be less than the
obligation and insurance coverage which the Company had to the
Executive immediately prior to the occurrence of a Change of
Control.
14. Miscellaneous.
(a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma,
without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications
hereunder shall be in writing and shall be given by hand delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
At his last known address evidenced
on the Company's payroll records
If to the Company: Fleming Companies, Inc.
6301 Waterford Boulevard
P. O. Box 26647
Oklahoma City, Oklahoma 73126-0647
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts
payable under this Agreement such federal, state or local taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
(f) This Agreement contains the entire
understanding of the Company and the Executive with respect to
the subject matter hereof.
(g) The Executive and the Company acknowledge
that the employment of the Executive by the Company is "at will,"
and, prior to the Effective Date, may be terminated by either the
Executive or the Company at any time. Upon a termination of the
Executive's employment or upon the Executive's ceasing to be an
officer of the Company, in each case, prior to the Effective
Date, there shall be no further rights under this Agreement.
15. No Trust. No action under this Agreement by the
Company or its Board of Directors shall be construed as creating
a trust, escrow or other secured or segregated fund, in favor of
the Executive or his beneficiary. The status of the Executive
and his beneficiary with respect to any liabilities assumed by
the Company hereunder shall be solely those of unsecured
creditors of the Company. Any asset acquired or held by the
Company in connection with liabilities assumed by it hereunder,
shall not be deemed to be held under any trust, escrow or other
secured or segregated fund for the benefit of the Executive or
his beneficiary or to be security for the performance of the
obligations of the Company, but shall be, and remain a general,
unpledged, unrestricted asset of the Company at all times subject
to the claims of general creditors of the Company.
16. No Assignability. Neither the Executive nor his
beneficiary, nor any other person shall acquire any right to or
interest in any payments payable under this Agreement, otherwise
than by actual payment in accordance with the provisions of this
Agreement, or have any power to transfer, assign, anticipate,
pledge, mortgage or otherwise encumber, alienate or transfer any
rights hereunder in advance of any of the payments to be made
pursuant to this Agreement or any portion thereof which is
expressly declared to be nonassignable and nontransferable. No
right or benefit hereunder shall in any manner be liable for or
subject to the debts, contracts, liabilities, or torts of the
person entitled to such benefit.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed
in its name on its behalf, all as of the day and year first above
written.
_______________________________
"EXECUTIVE"
FLEMING COMPANIES, INC., an
Oklahoma corporation
By
Scott M. Northcutt, Senior Vice
President - Human Resources
Exhibit 10.55
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 21st day of December, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and William H. Marquard (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1990 Stock Incentive Plan and certain amendments
thereto (the "Plan");
WHEREAS, in recognition of his contribution to the
Company, the Company has awarded the Participant 20,000 shares of
common stock under the Plan subject to the terms and conditions
of this Agreement; and
WHEREAS, the Participant has previously entered into an
Employment Agreement with the Company dated as of June 1, 1999
(the "Employment Agreement").
NOW, THEREFORE, in consideration of the premises and
the mutual promises and covenants herein contained, the
Participant and the Company agree as follows (all capitalized
terms used herein, unless otherwise defined, have the meaning
ascribed to such terms as set forth in the Plan):
1. The Plan. The Plan, a copy of which is attached
hereto as Exhibit A, is hereby incorporated by reference herein
and made a part hereof for all purposes, and when taken with this
Agreement shall govern the rights of the Participant and the
Company with respect to the Award (as defined below).
2. Grant of Award. The Company hereby grants to the
Participant an award (the "Award") of 20,000 shares of Company
common stock, par value $2.50 per share (the "Stock"), on the
terms and conditions set forth herein and in the Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate representing
the shares of Stock subject to the Award (the "Restricted Stock")
shall be issued in the name of the Participant and shall be
escrowed with the Secretary of the Company (the "Escrow Agent")
subject to removal of the restrictions placed thereon or
forfeiture pursuant to the terms of this Agreement.
(b) Vesting. One-half of the shares of
Restricted Stock will vest based on the Participant's continuous
employment with the Company or a "Subsidiary" (as such term is
defined in Section 14(i) of this Agreement) through December 21,
2000 and the remaining one-half of the shares of Restricted Stock
will vest based on the Participant's continuous employment with
the Company or a Subsidiary through December 21, 2001. In the
event the Participant's employment with the Company or a
Subsidiary 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, except for any applicable securities laws
restrictions, together with a check in the amount of all Accrued
Dividends attributed to such Vested Stock without interest
thereon.
(e) Forfeiture. Restricted Stock that does not
become Vested Stock pursuant to the terms of this Agreement shall
be absolutely forfeited and the Participant shall have no future
interest therein of any kind whatsoever. In the event the
Participant's employment with the Company or a Subsidiary is
terminated prior to all shares of Restricted Stock becoming
Vested Stock for any reason other than (i) death, (ii)
disability, (iii) without Cause, or (iv) by the Participant for
Good Reason, then all remaining shares of Restricted Stock which
have not yet been vested (including any Accrued Dividends) shall
be absolutely forfeited and the Participant shall have no further
interest therein of any kind whatsoever.
4. Change of Control.
(a) In the event of a Change of Control prior to
December 21, 2001, 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,
except for any applicable securities law 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 21st DAY OF
DECEMBER, 1999. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT
SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE
AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF FLEMING
COMPANIES, INC."
6. Stock Powers. The Participant hereby agrees to
execute and deliver to the Secretary of the Company a stock power
(endorsed in blank) in the form of Exhibit B hereto covering his
Award and authorizes the Secretary to deliver to the Company any
and all shares of Restricted Stock that are forfeited under the
provisions of this Agreement. The Participant further authorizes
the Company to hold as a general obligation of the Company any
Accrued Dividends and to pay such dividends to the Participant at
the time the underlying Restricted Stock becomes Vested Stock.
7. Nontransferability of Award. The Participant
shall not have the right to sell, assign, transfer, convey,
dispose, pledge, hypothecate, burden, encumber or charge any
shares of Restricted Stock or any interest therein in any manner
whatsoever.
8. Notices. All notices or other communications
relating to the Plan and this Agreement as it relates to the
Participant shall be in writing, shall be deemed to have been
made if personally delivered in return for a receipt, or if
mailed, by regular U.S. mail, postage prepaid, by the Company to
the Participant at his last known address evidenced on the
payroll records of the Company.
9. Binding Effect and Governing Law. This Agreement
shall be (i) binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and assigns except
as may be limited by the Plan and (ii) governed and construed
under the laws of the State of Texas.
10. Withholding. The Company and the Participant
shall comply with all federal and state laws and regulations with
respect to the withholding, deposit and payment of any income,
employment or other taxes relating to the Award (including
Accrued Dividends).
11. Award Subject to Claims or Creditors. The
Participant shall not have any interest in any particular assets
of the Company, its parent, if applicable, or any Subsidiary by
reason of the right to earn an Award (including Accrued
Dividends) under the Plan and this Agreement; and the Participant
or any other person shall have only the rights of a general
unsecured creditor of the Company, its parent, if applicable, or
a Subsidiary with respect to any rights under the Plan or this
Agreement.
12. Captions. The captions of specific provisions of
this Agreement are for convenience and reference only, and in no
way define, describe, extend or limit the scope of this Agreement
or the intent of any provision hereof.
13. Counterparts. This Agreement may be executed in
any number of identical counterparts, each of which shall be
deemed an original for all purposes, but all of which taken
together shall form but one agreement.
14. Protection of Company's Business as Consideration. As
specific consideration to the Company for this Award, the
Participant agrees:
(a) Limitations on Competition. The Participant and the
Company recognize and agree that the in addition to Participant's general
duties with the Company, the Participant has significant duties
related to the Company's Project Grow. Subject to subsection
(g), the Participant will not, without the Company's written
consent, (i) directly or indirectly, in association with or as a
shareholder, principal, agent, partner, officer, director,
employee or consultant of any direct competitor, or of any
subsidiary, affiliate or successor of any direct competitor, of
(x) the Company, any Subsidiary or of the type of business
contemplated by, or developed in connection with, Project Grow,
or (y) any of the limited assortment stores owned by the Company
or any of its Subsidiaries or affiliates or targeted to be
acquired, or developed, by the Company or any of its Subsidiaries
or affiliates or (ii) be employed by any entity to develop the
type of business contemplated by Project Grow (collectively, the
"Competitors").
(b) Confidential Information; No Disparaging Statements.
The Participant acknowledges that during the course of Participant's
employment with the Company or any Subsidiary, he will have
access to and gain knowledge of highly confidential and
proprietary information and trade secrets. The Participant
further acknowledges that the misuse, misappropriation or
disclosure of this information could cause irreparable harm to
the Company and/or a Subsidiary, both during and after the term
of the Participant's employment. Therefore, the Participant
agrees that during his employment and at all times thereafter he
will hold in a fiduciary capacity for the benefit of the Company
and/or a Subsidiary and will not divulge or disclose, directly or
indirectly, to any other person, firm or business, all
confidential or proprietary information, knowledge and data
(including, but not limited to, processes, programs, trade "know
how," ideas, details of contracts, marketing plans, strategies,
business development techniques, business acquisition plans,
personnel plans, pricing practices and business methods and
practices) relating in any way to the business of the Company or
any of its Subsidiaries, customers, suppliers, joint ventures,
licensors, licensees, distributors and other persons and entities
with whom the Company or any of its Subsidiaries do business
("Confidential Data"), except upon the Company's written consent
or as required by his duties with the Company or any of its
Subsidiaries, for so long as such Confidential Data remains
confidential and all such Confidential Data, together with all
copies thereof and notes and other references thereto, shall
remain the sole property of the Company or a Subsidiary. The
Participant agrees, during his employment with the Company or any
of its Subsidiaries and at all times thereafter, not to make
disparaging statements about the Company or any of its
Subsidiaries or their officers, directors, agents, employees,
products or services which he knows, or has reason to know, are
false or misleading.
(c) No Solicitation of Employees or Business. The
Participant agrees that he will not either directly, or in concert with
others, recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company or any of its Subsidiaries
to terminate their employment with the Company or any of its
Subsidiaries and/or become associated with another employer. The
Participant further agrees that he will not either directly, or
in concert with others, solicit, divert or take away or attempt
to divert or take away, the business of any of the customers or
accounts of the Company or any its Subsidiaries or related to the
type of business contemplated by or developed in connection with
Project Grow, or any of the limited assortment stores owned by
the Company or any of its Subsidiaries or targeted to be
acquired, or developed by the Company or any of its Subsidiaries
before or on his date of termination/separation.
(d) Term of the Participant's Promises Under This
Section. The Participant agrees that except as otherwise provided in
subsection (b), his promises contained in this Section 14 shall
continue in effect during his employment with the Company or any
of its Subsidiaries and until the first anniversary of his
termination/separation.
(e) Consequences of Breach of Limitations. Subject
to subsection (g), if at any time within (i) the term of this
Agreement or (ii) within one (1) year following the Participant's
date of termination/separation, but only if such
termination/separation occurs on a date prior to December 21,
2001, or (iii) within one (1) year after vesting any portion of
the Restricted Stock, whichever is latest, the Participant,
without the Company's written consent, directly or indirectly, is
a shareholder, principal, agent, partner, officer, director,
employee or consultant of any of the Competitors, then (x) with
respect to any shares of Restricted Stock, effective the date the
Participant enters into such activity, all such Restricted Stock
(including any Accrued Dividends) shall be absolutely forfeited
and the Participant shall have no further interest therein of any
kind whatsoever (unless forfeited sooner by operation of another
term or condition of this Agreement or the Plan), and (y) with
respect to any shares of Vested Stock, the Participant shall be
required to return to the Company all of the actual shares of
Vested Stock, or other equivalent shares of Company common stock,
within thirty (30) days after the date of written notice from the
Company that pursuant to the provisions of this subsection
delivery of such shares is due and the Participant shall forfeit
all rights to such shares of Vested Stock. This shall be in
addition to any injunctive or other relief to which the Company
may be entitle under subsection (f)
(f) Consequences of Other Breaches of this Section.
The Participant acknowledges that damages which may arise from any
breach of any of his promises contained in this Section 14 may be
impossible to ascertain or prove with certainty. The Participant
agrees if Participant breaches any of his promises contained in
this Section 14, in addition to the remedies provided under
subsection (e), if applicable, and any other legal remedies which
may be available, the Company shall be entitled to immediate
injunctive relief from a court of competent jurisdiction, pending
arbitration under Section 15 or otherwise, to end such breach,
without further proof of damage.
(g) Permitted Ownership. Nothing in this Section 14
shall prohibit the Participant from owning less than one percent (1%)
of any company that is publicly traded on any national securities
exchange.
(h) Severability and Reasonableness. If, at any time,
the provisions of this Section 14 shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to
geographic area, duration or scope of activity or due to any
other restriction or limitation, this Section 14 shall be
considered divisible and shall become and be immediately amended
to only such geographic area, duration and scope of activity
and/or restrictions or limitations as shall be determined to be
reasonable and enforceable by an arbitrator or a court having
jurisdiction over the matter; and the Participant agrees that
this Section 14 as so amended shall be valid and binding as
though any invalid or unenforceable portion had not been included
herein. The parties agree that the geographic area, duration and
scope of the limitations and the restrictions described in
subsections (a) through (e) are reasonable.
(i) Definition of term "Subsidiary". For purposes of
this Agreement, the term "Subsidiary" shall mean any entity with 50%
or more of its voting power being owned, directly or indirectly,
by the Company.
15. Arbitration of Disputes. Any disputes, claims or
controversies between the Participant and the Company which may
arise out of or relate to this Agreement shall be settled by
arbitration. This agreement to arbitrate shall survive the
termination of this Agreement. Any arbitration shall be in
accordance with the Rules of the American Arbitration Association
and shall be undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Dallas, Texas unless the parties
mutually agree on another location. The decision of the
arbitrator(s) will be enforceable in any court of competent
jurisdiction. The arbitrator(s) may, but will not be required,
to award such damages or other monetary relief as either party
might be entitled to receive from a court of competent
jurisdiction. Nothing in this agreement to arbitrate shall
preclude the Company from obtaining injunctive relief from a
court of competent jurisdiction prohibiting any on-going breaches
of the Agreement by the Participant pending arbitration. The
arbitrator(s) may also award costs and attorneys' fees in
connection with the arbitration to the prevailing party; however,
in the arbitrator's(s') discretion, each party may be ordered to
bear its/his own costs and attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
"COMPANY" FLEMING COMPANIES, INC., an
Oklahoma corporation
By SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior
Vice President - Human
Resources
"PARTICIPANT" WILLIAM H. MARQUARD
William H. Marquard
<PAGE>
Exhibit A
[Copy of 1990 Stock Incentive Plan]
Exhibit 10.56
RESTRICTED STOCK AWARD AGREEMENT FOR
THE FLEMING COMPANIES, INC.
1996 STOCK INCENTIVE PLAN
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement")
entered into as of the 21st day of December, 1999, by and between
Fleming Companies, Inc., an Oklahoma corporation (the "Company"),
and John M. Thompson (herein referred to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Fleming
Companies, Inc. 1996 Stock Incentive Plan and certain amendments
thereto (the "Plan"); and
WHEREAS, in connection with his employment with the
Company and anticipated future duties with eMAR.net, Inc., a
Delaware corporation and a wholly owned subsidiary of the Company
(together with its affiliates, successors and assigns hereinafter
referred to as "eMAR"), the Company has awarded the Participant
15,000 shares of common stock under the Plan subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual promises and covenants herein contained, the
Participant and the Company agree as follows (all capitalized
terms used herein, unless otherwise defined, have the meaning
ascribed to such terms as set forth in the Plan):
1. The Plan. The Plan, a copy of which is attached hereto
as Exhibit A, is hereby incorporated by reference herein and made
a part hereof for all purposes, and when taken with this
Agreement shall govern the rights of the Participant and the
Company with respect to the Award (as defined below).
2. Grant of Award. The Company hereby grants to the
Participant an award (the "Award") of 15,000 shares of Company
common stock, par value $2.50 per share (the "Stock"), on the
terms and conditions set forth herein and in the Plan.
3. Terms of Award.
(a) Escrow of Shares. A certificate representing the
shares of Stock subject to the Award (the "Restricted Stock")
shall be issued in the name of the Participant and shall be
escrowed with the Secretary of the Company (the "Escrow Agent")
subject to removal of the restrictions placed thereon or
forfeiture pursuant to the terms of this Agreement.
(b) Vesting. Vesting of the shares of Restricted Stock
is subject to fulfillment of all of the following conditions: (i)
subject to Sections 3(e) and 4, continuous employment by the
Participant with the Company or eMAR (whether or not then owned
50% or more by the Company) through December 20, 2002 and (ii)
subject to Section 3(c), occurrence of the "Valuation Shortfall."
The "Valuation Shortfall" shall occur if on December 20, 2002,
the "Fair Market Value" of Participant's "Equity Awards" in eMAR
does not exceed the Fair Market Value of the shares of Restricted
Stock assuming they were then fully vested.
(c) Occurrence of the Valuation Shortfall. In the
event the Valuation Shortfall has occurred and the Participant
has remained continuously employed by the Company or eMAR through
December 20, 2002, all or a portion of the Restricted Stock shall
vest such that the Fair Market Value of the Vested Stock (rounded
to the nearest whole share) shall equal the difference between
(i) the Fair Market Value of the Restricted Stock assuming the
shares of Restricted Stock were then fully vested and (ii) the
Fair Market value of the Participant's Equity Awards in eMAR.
The remaining shares of Restricted Stock, if any, shall be
absolutely forfeited.
(d) Nonoccurrence of the Valuation Shortfall. In the
event the Valuation Shortfall has not occurred and/or the
Participant has not remained continuously employed by the Company
or eMAR through December 20, 2002, all of the Restricted Stock
shall be absolutely forfeited and the Participant shall have no
interest therein of any kind whatsoever.
(e) Termination of Employment. In the event the
Participant's employment with the Company or eMAR is terminated
prior to December 20, 2002 by reason of (i) death, (ii)
disability, (iii) without "Cause," or (iv) by the Participant for
"Good Reason," then all shares of Restricted Stock (including any
"Accrued Dividends") shall immediately vest. Once vested pursuant
to the terms of this Agreement, the Restricted Stock shall be
deemed "Vested Stock."
(f) 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, but shall be accrued and paid to
the Participant when the Restricted Stock becomes Vested Stock.
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.
(g) Forfeiture. Restricted Stock that does not become
Vested Stock pursuant to the terms of this Agreement shall be
absolutely forfeited and the Participant shall have no further
interest therein of any kind whatsoever. In the event the
Participant's employment with the Company or eMAR is terminated
prior to December 20, 2002 for any reason other than (i) death,
(ii) disability, (iii) without Cause, or (iv) by the Participant
for Good Reason, then, all remaining shares of Restricted Stock
which have not yet been vested (including any Accrued Dividends)
shall be absolutely forfeited and the Participant shall have no
further interest therein of any kind whatsoever.
(h) Certain Definitions.
(i) Cause. For purposes of this Agreement, termination
of the employment for "Cause" shall mean termination for one of the
following reasons: (A) the conviction of the Participant of a
felony by a federal or state court of competent jurisdiction; (B)
an act or acts of dishonesty taken by the Participant and
intended to result in substantial personal enrichment of the
Participant at the expense of the Company or eMAR (the
"Employer"); or (C) the Participant's "willful" failure to follow
a direct, reasonable and lawful written order from his
supervisor, within the reasonable scope of the Participant's
duties, which failure is not cured within 30 days. Further, for
purposes of this Subsection:
(1) No act, or failure to act, on the
Participant's part shall be deemed "willful" unless done, or
omitted to be done, by the Participant not in good faith and
without reasonable belief that the Participant's action or
omission was in the best interest of the Employer.
(2) The Participant shall not be deemed to
have been terminated for Cause unless and until there shall have
been delivered to the Participant a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths
(3/4ths) of the entire membership of the board of directors of
the Employer at a meeting called and held for such purpose (after
reasonable notice to the Participant and an opportunity for the
Participant, together with the Participant's counsel, to be heard
before the board of directors), finding that in the good faith
opinion of the board of directors the Participant was guilty of
conduct set forth in clauses (A), (B) or (C) above and specifying
the particulars thereof in detail.
(ii) Equity Awards. The term "Equity Awards" shall mean
all of the stock options, restricted stock awards, phantom stock units,
stock appreciation rights or any other award of any kind wherein
the value is attributable to, or based on, a "Security,"
including any and all Securities into which such Equity Awards
may have been converted or exchanged together with the proceeds
from any sale, exchange or other disposition thereof.
(iii) Fair Market Value. The term "Fair Market Value"
shall have the following meanings depending upon the type of property
to which the term is applied:
A. In the case of a share of stock as of
any date, the following rules shall apply:
(1) If the principal market for the stock is
a national securities exchange or the Nasdaq National Market (the
"National Market"), then the Fair Market Value as of that date shall
be the average of the lowest and highest reported sale prices of the
stock for the preceding fifteen trading days on the principal
exchange on which the stock is then listed or admitted to trading.
(2) If sale prices are not available or if
the principal market for the stock is not a national securities exchange
or the National Market, then the Fair Market Value as of that date shall
be the average of the highest bid and lowest asked prices for the
stock for the preceding fifteen trading days as reported on the
Nasdaq market, the Nasdaq OTC Bulletin Board Service or by the
National Quotation Bureau, Incorporated or a comparable service.
(3) If paragraphs (1) and (2) next above are
otherwise inapplicable, then the Fair Market Value of the stock shall be
determined in good faith by the Committee.
B. In the case of all other Securities or
property the term Fair Market Value shall mean the value
determined as of a particular date by an independent accounting
firm or other outside consultant selected by the Company.
(iv) Good Reason. For purposes of this Agreement,
"Good Reason" means the assignment to the Participant, without his
consent, of any duties inconsistent in any respect with the Participant's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities or any other
action by the Employer which results in a diminishment in such
position, compensation, authority, duties or responsibilities,
other than an insubstantial and inadvertent action which is
remedied by the Employer promptly after receipt of written notice
thereof given by the Participant.
(v) Security. The term "Security" shall have the
meaning ascribed to it in the Securities Act of 1933, as amended.
(vi) Valuation Shortfall. The term "Valuation Shortfall"
shall be determined as follows:
A. The Participant shall deliver to the Company
a list of all Equity Awards in eMAR he has received during the period
beginning December 21, 1999 and ending December 20, 2002, together
with copies of all related plans, agreements or arrangements.
B. The list will be referred by the Company to an
independent accounting firm or other outside consultant selected
by the Company to determine the Fair Market Value of the Equity Awards.
C. The report of the independent accounting firm or
other outside consultant shall be delivered to the Committee and the
Participant; and the Committee shall make the final determination
of whether the Valuation Shortfall has occurred.
(i) Vested Stock - Removal of Restrictions. Upon
Restricted Stock becoming Vested Stock, all restrictions shall be
removed from the certificates representing such Stock and the
Secretary of the Company shall deliver to the Participant
certificates representing such Vested Stock free and clear of all
restrictions, except for any applicable securities laws
restrictions, together with a check in the amount of all Accrued
Dividends and, to the extent the Accrued Dividends are in the
form of property instead of cash, the property, without interest
thereon.
4. Change of Control. Upon the occurrence of a Change of
Control Event prior to December 20, 2002, 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.
5. Legends. The shares of Stock which are the subject of
the Award shall be subject to the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO AND ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT
CERTAIN RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING
COMPANIES, INC. 1996 STOCK INCENTIVE PLAN DATED THE 21ST DAY OF
DECEMBER, 1999. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT
SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE
AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF FLEMING
COMPANIES, INC."
6. Stock Powers and the Beneficiary. The Participant
hereby agrees to execute and deliver to the Secretary of the
Company a stock power (endorsed in blank) in the form of Exhibit
B hereto covering his Award and authorizes the Secretary to
deliver to the Company any and all shares of Restricted Stock
that are forfeited under the provisions of this Agreement. The
Participant further authorizes the Company to hold as a general
obligation of the Company any Accrued Dividends and to pay such
dividends to the Participant at the time the underlying
Restricted Stock becomes Vested Stock.
7. Nontransferability of Award. The Participant shall not
have the right to sell, assign, transfer, convey, dispose,
pledge, hypothecate, burden, encumber or charge any shares of
Restricted Stock or any interest therein in any manner
whatsoever.
8. Notices. All notices or other communications relating
to the Plan and this Agreement as it relates to the Participant
shall be in writing, shall be deemed to have been made if
personally delivered in return for a receipt, or if mailed, by
regular U.S. mail, postage prepaid, by the Company to the
Participant at his last known address evidenced on the payroll
records of the Company.
9. Binding Effect and Governing Law. This Agreement shall
be (i) binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and assigns except
as may be limited by the Plan and (ii) governed and construed
under the laws of the State of Oklahoma.
10. Withholding. The Company and the Participant shall
comply with all federal and state laws and regulations respecting
the withholding, deposit and payment of any income, employment or
other taxes relating to the Award (including Accrued Dividends).
11. Award Subject to Claims or Creditors. The Participant
shall not have any interest in any particular assets of the
Company, its parent, if applicable, or any Subsidiary by reason
of the right to earn an Award (including Accrued Dividends) under
the Plan and this Agreement, and the Participant or any other
person shall have only the rights of a general unsecured creditor
of the Company, its parent, if applicable, or a Subsidiary with
respect to any rights under the Plan or this Agreement.
12. Captions. The captions of specific provisions of this
Agreement are for convenience and reference only, and in no way
define, describe, extend or limit the scope of this Agreement or
the intent of any provision hereof.
13. Counterparts. This Agreement may be executed in any
number of identical counterparts, each of which shall be deemed
an original for all purposes, but all of which taken together
shall form but one agreement.
14. Protection of Business as Consideration. As specific
consideration to the Company for the Restricted Stock Award:
(a) Confidential Information. The Participant
acknowledges that during the course of his employment with the
Company and/or eMAR, he will have access to and gain knowledge of
highly confidential and proprietary information and trade
secrets. He further acknowledges that the misuse,
misappropriation or disclosure of this information could cause
irreparable harm to the Company and/or eMAR, both during and
after the term of his employment. Therefore, he agrees that
during his employment and at all times thereafter he will hold in
a fiduciary capacity for the benefit of the Company and/or eMAR
and will not divulge or disclose, directly or indirectly, to any
other person, firm or business, all confidential or proprietary
information, knowledge and data (including, but not limited to,
processes, programs, trade "know how," ideas, details of
contracts, marketing plans, strategies, business development
techniques, business acquisition plans, personnel plans, pricing
practices and business methods and practices) relating in any way
to the business of the Company and/or eMAR, customers, joint
ventures, licensors, licensees, distributors and other persons
and entities with whom the and/or eMAR does business
("Confidential Data"), except upon the written consent of the
Company or as required by the Participant's duties with the
Company and/or eMAR, for so long as such Confidential Data
remains confidential and all such Confidential Data, together
with all copies thereof and notes and other references thereto,
shall remain the sole property of the Company and/or eMAR.
(b) No Solicitation of Employees or Business. The
Participant agrees that he will not either directly, or in
concert with others, recruit, solicit or induce, or attempt to
induce, any employees of the Company or eMAR to terminate their
employment with the Company or eMAR and/or become associated with
another employer. The Participant further agrees that he will
not either directly, or in concert with others, solicit, divert
or take away or attempt to divert or take away, the business of
any of the customers or accounts of the Company or eMAR. The
Participant agrees that his promises contained in this Section
14(b) shall continue in effect until the first anniversary of his
termination/separation of employment.
(c) Consequences of Breach of Limitations. The
Participant acknowledges that damages which may arise from a
breach of Section 14 may be impossible to ascertain or prove with
certainty. In addition to the other legal or equitable remedies
which may be available, the parties agree the Company shall be
entitled to an immediate injunction from a court of competent
jurisdiction to end such breach without further proof of damages.
15. Arbitration of Disputes. Any disputes, claims or
controversies between the Participant and the Company which may
arise out of or relate to this Agreement shall be settled by
arbitration. This agreement to arbitrate shall survive the
termination of this Agreement. Any arbitration shall be in
accordance with the Rules of the American Arbitration Association
and shall be undertaken pursuant to the Federal Arbitration Act.
Arbitration will be held in Dallas, Texas unless the parties
mutually agree on another location. The decision of the
arbitrator(s) will be enforceable in any court of competent
jurisdiction. The arbitrator(s) may, but will not be required,
to award such damages or other monetary relief as either party
might be entitled to receive from a court of competent
jurisdiction. Nothing in this agreement to arbitrate shall
preclude the Company from obtaining injunctive relief from a
court of competent jurisdiction prohibiting any on-going breaches
of the Agreement by the Participant pending arbitration. The
arbitrator(s) may also award costs and attorneys' fees in
connection with the arbitration to the prevailing party; however,
in the arbitrator's(s') discretion, each party may be ordered to
bear its/his own costs and attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
"COMPANY" FLEMING COMPANIES, INC., an
Oklahoma corporation
By SCOTT M. NORTHCUTT
Scott M. Northcutt, Senior
Vice President - Human
Resources
"PARTICIPANT" JOHN M. THOMPSON
John M. Thompson
<PAGE>
Exhibit A
[Copy of 1996 Stock Incentive Plan]
<PAGE>
Exhibit B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, __________________, an individual,
hereby irrevocably assigns and conveys to
________________________, ______________ AND NO/100 (_____)
shares of the Common Capital Stock of Fleming Companies, Inc., an
Oklahoma corporation, $2.50 par value.
DATED:
Exhibit 10.57
FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Name: Grant Date:
Option Price: Exercise Date: 25%
Shares Granted: 50%
Expiration Date: 75%
100%
<PAGE>
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Option
Agreement"), made as of this ____ day ______________, _____, at
Oklahoma City, Oklahoma by and between _______________
(hereinafter referred to as the "Participant"), and Fleming
Companies, Inc. (hereinafter referred to as the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is an "Eligible Associate" of
the Company, as such term is defined in the Plan, and it is
important to the Company that the Participant be encouraged to
remain in the employ of the Company and given incentive to
perform while in the employ of the Company; and
WHEREAS, as an ancillary part of this Option Agreement,
it is also important to the Company to protect its legitimate
business interests if the Participant leaves the employ of the
Company; and
WHEREAS, in recognition of such facts, the Company
desires to provide to the Participant an opportunity to purchase
shares of the common stock of the Company, as hereinafter
provided, pursuant to the "Fleming Companies, Inc. 1999 Stock
Incentive Plan" (the "Plan"); and
WHEREAS, the Participant is a "Non-Executive Officer
Participant" as such term is defined in the Plan, and the Regular
Award Committee has made this Award as permitted by Section 3.1
of the Plan.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the Participant and the Company hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants
to the Participant Nonqualified Stock Options (the "Stock
Options") to purchase all or any part of an aggregate of _______
shares of Common Stock under and subject to the terms and
conditions of this Option Agreement and the Plan, which is
incorporated herein by reference and made a part hereof for all
purposes. All capitalized terms used in this Option Agreement
shall have the same meaning ascribed to them in the Plan unless
specifically denoted otherwise. The purchase price per share for
each share of Common Stock to be purchased hereunder shall be
$__________ (the "Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. After, and
only after, the conditions of Section 8 hereof have been
satisfied, the Participant shall be eligible to exercise that
portion of his/her Stock Options pursuant to the schedule set
forth hereinafter. If the Participant's employment with the
Company (or of any one or more of the Subsidiaries of the
Company) remains full-time and continuous at all times prior to
any of the "Exercise Dates" set forth in this Section 2, then the
Participant shall be entitled, subject to the applicable
provisions of the Plan and this Option Agreement having been
satisfied, to exercise on or after the applicable Exercise Date,
on a cumulative basis, the number of shares of Stock determined
by multiplying the aggregate number of shares set forth in
Section 1 of this Option Agreement by the designated percentage
set forth below.
Percent of Stock
Exercise Dates Option Exercisable
- -----------------------------------------------------------------
On or After ______________ 25%
On or After ______________ 50%
On or After ______________ 75%
On or After ______________ 100%
3. TERM OF STOCK OPTION. Except as provided for in
Section 4 of this Option Agreement, none of the Stock Options
shall be exercisable more than ten years from the Date of Grant
(the "Option Period").
4. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With
respect to the Stock Options, the following special rules shall
apply:
(a) Exercise of Exercisable Stock Options on
Termination of Employment. Except as provided to the contrary in
the Plan or in this Option Agreement, if a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period for any reason other than death, he/she may
exercise all or any portion of the Stock Options which are
otherwise exercisable on the date of such termination at any time
within three months from the date of termination; provided,
however, that if the Participant should die during such three
month period, the rights of his/her personal representative shall
be as set forth in Section 4(b) of this Option Agreement.
(b) Exercise of Exercisable Stock Options on
Termination of Employment Due to Death. If a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period due to his/her death, the personal
representative of the deceased Participant may exercise all or
any portion of the Stock Options which are otherwise exercisable
on the date of death within 12 months from the date of death.
(c) Acceleration of Otherwise Unexercisable Stock
Options on Termination of Employment. The Committee, in its sole
discretion, may determine that upon termination of the employment
of a Participant any and all Stock Options shall become
automatically fully vested and immediately exercisable by the
Participant or his/her personal representative as the case may be
for whatever period following such termination as the Committee
shall so decide.
(d) Acceleration of Options Upon Change of
Control. Upon the occurrence of a Change of Control Event, any
and all Stock Options will become automatically fully vested and
immediately exercisable with such acceleration to occur without
the requirement of any further act by either the Company or the
Participant.
(e) Exercise of Exercisable Stock Options on
Termination of Employment Due to Retirement. If a Participant's
employment with the Company or a Subsidiary is terminated due to
retirement in accordance with the Company's retirement policies,
the Participant shall have a period of three years following
his/her date of retirement to exercise the Stock Options which
are otherwise exercisable on his/her date of retirement.
5. NON-TRANSFERABILITY OF STOCK OPTIONS. Except as
provided in Section 11.3 of the Plan regarding certain limited
transferability of Stock Options with the Committee's approval,
Stock Options shall be transferable only by will or the laws of
descent and distribution; however, no such transfer of the Stock
Options by the Participant shall be effective to bind the Company
unless the Company shall have been furnished with written notice
of such transfer and an authenticated copy of the will and/or
such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of such Option.
6. EMPLOYMENT. So long as the Participant shall
continue to be a full-time and continuous employee of the Company
or a Subsidiary, the Stock Options shall not be affected by any
change of duties or position. Nothing in the Plan or in this
Option Agreement shall confer upon the Participant any right to
continue in the employ of the Company, or any of the
Subsidiaries, or interfere in any way with the right of the
Company or any of the Subsidiaries to terminate such
Participant's employment at any time.
7. METHOD OF EXERCISING STOCK OPTION.
(a) Procedures for Exercise. The manner of
exercising the Stock Options shall be by written notice to the
Company at least two days before the date the Stock Option, or
part thereof, is to be exercised, and in any event prior to the
expiration of the Option Period. Such notice shall state the
election to exercise the Stock Options and the number of shares
of Common Stock with respect to that portion of the Stock Options
being exercised, and shall be signed by the person or persons so
exercising the Stock Options. The notice shall be accompanied by
payment of the full purchase price of such shares, in which event
the Company shall deliver a certificate or certificates
representing such shares to the person or persons entitled
thereto as soon as practicable after the notices shall be
received.
(b) Form of Payment. Payment for shares of
Common Stock purchased under this Option Agreement shall be made
in full by the Participant in any manner specified in Section
6.2(b) of the Plan; provided if the Option Price is to be paid by
delivering to the Company shares of Common Stock owned by the
Participant, such shares must have been continuously held by the
Participant for at least six months prior to being used to pay
the Option Price. No Common Stock shall be issued to the
Participant until the Company receives full payment for the
Common Stock purchased under the Stock Options which shall
include any required state and federal withholding taxes.
Withholding taxes may be paid by the Participant in any manner
specified in Section 11.4 of the Plan.
(c) Further Information. In the event the Stock
Options are exercised, pursuant to the foregoing provisions of
this Section 7, by any person or persons other than the
Participant in the event of the death of the Participant, the
notice of election to exercise shall also be accompanied by
appropriate proof of the right of such person or persons to
exercise the Stock Options.
8. SECURITIES LAW RESTRICTIONS. Stock Options shall
be exercised and Common Stock issued only upon compliance with
the Securities Act of 1933, as amended, and any other applicable
securities law, or pursuant to an exemption therefrom.
9. NOTICES. All notices or other communications
relating to the Plan and this Option Agreement as it relates to
the Participant or, in event of the death of the Participant,
his/her personal representative shall be in writing and shall be
mailed (U.S. Mail) by the Company to the Participant or his/her
personal representative, as the case may be, at the then current
address as maintained by the Company or such other address as the
Participant or his/her personal representative may advise the
Company in writing. All other notices shall be given by personal
delivery to the Secretary of the Company or by registered or
certified mail at his/her principal office or at such other
address as the Company may hereafter advise the Participant or
his/her personal representative, and it shall be deemed to have
been given when they are so personally delivered or when they are
deposited in the United States mail in an envelope addressed to
the Company, properly stamped for delivery as a registered or
certified letter.
10. PROTECTION OF COMPANY BUSINESS AS CONSIDERATION.
As specific consideration to the Company for the Stock Options,
the Participant agrees:
(a) Limitations on Competition. Subject to sub-
section (g), the Participant will not, without the Company's written
consent, directly or indirectly, be a shareholder, principal, agent,
partner, officer, director, employee or consultant of SUPERVALU,
Inc., Nash Finch Company or any other direct competitor of the
Company, excluding national retail chains, or any of their
respective subsidiaries, affiliates or successors (collectively,
the "Competitors").
(b) Confidential Information; No Disparaging State-
ments. The Participant acknowledges that during the course of the
Participant's employment with the Company or any Subsidiary,
he/she will have access to and gain knowledge of highly
confidential and proprietary information and trade secrets. The
Participant further acknowledges that the misuse,
misappropriation or disclosure of this information could cause
irreparable harm to the Company and/or a Subsidiary, both during
and after the term of the Participant's employment. Therefore,
the Participant agrees, during his/her employment and at all
times thereafter, he/she will hold in a fiduciary capacity for
the benefit of the Company and/or a Subsidiary and will not
divulge or disclose, directly or indirectly, to any other person,
firm or business, all confidential or proprietary information,
knowledge and data (including, but not limited to, processes,
programs, trade "know how," ideas, details of contracts,
marketing plans, strategies, business development techniques,
business acquisition plans, personnel plans, pricing practices
and business methods and practices) relating in any way to the
business of the Company or any Subsidiary, customers, suppliers,
joint ventures, licensors, licensees, distributors and other
persons and entities with whom the Company or any of its
Subsidiaries do business ("Confidential Data"), except upon the
Company's written consent or as required by his/her duties with
the Company or any of its Subsidiaries, for so long as such
Confidential Data remains confidential and all such Confidential
Data, together with all copies thereof and notes and other
references thereto, shall remain the sole property of the Company
or a Subsidiary. The Participant agrees, during his/her
employment with the Company or any of its Subsidiaries and at all
times thereafter, not to make disparaging statements about the
Company or their officers, directors, agents, employees, products
or services which he/she knows, or has reason to know, are false
or misleading.
(c) No Solicitation of Employees or Business. The
Participant agrees that he/she will not, either directly or in concert
with others, recruit, solicit or induce, or attempt to induce, any
employees of the Company or any of its Subsidiaries to terminate
their employment with the Company or any of its Subsidiaries
and/or become associated with another employer. The Participant
further agrees that he/she will not, either directly or in
concert with others, solicit, divert or take away, or attempt to
divert or take away, the business of any of the customers or
accounts of the Company or any of its Subsidiaries which the
Company or a Subsidiary had or was actively soliciting before
and/or on his/her date of termination/separation.
(d) Term of the Participant's Promises under this
Section. The Participant agrees that except as otherwise provided in
subsection (b), his/her promises contained in this Section 10
shall continue in effect during his/her employment with the
Company or any of its Subsidiaries and until the first
anniversary of his/her termination/separation.
(e) Consequences of Breach of Limitations on Competi-
tion and/or Other Competing Employment. Subject to subsection (g),
if at any time within (i) the term of this Option Agreement or (ii)
within one (1) year following the Participant's date of
termination/separation, but only if such termination/separation
occurs on a date which is prior to ten (10) years from the date
of this Option Agreement, or (iii) within one (1) year after
he/she exercises any portion of the Stock Options, whichever is
latest, the Participant is, without the Company's written
consent, directly or indirectly, a shareholder, principal, agent,
partner, officer, director, employee or consultant of any of the
Competitors, then (iv) the Stock Options shall terminate
effective the date the Participant enters into such activity
(unless terminated sooner by operation of another term or
condition of this Option Agreement or the Plan), and (v) any gain
represented by the Fair Market Value (as defined in the Plan) on
the date the Participant exercised any of the Stock Options over
the Option Price, multiplied by the number of shares the
Participant purchased (the "Option Gain"), shall be paid by the
Participant to the Company within 30 days of written notice from
the Company to the Participant that such payment is due. The
Option Gain shall be calculated without regard to any subsequent
market price decrease or increase. This shall be in addition to
any injunctive or other relief to which the Company may be
entitled under subsection (f).
(f) Consequences of Other Breaches of this Section.
The Participant acknowledges that damages which may arise from any
breach of any of his/her promises contained in this Section 10
may be impossible to ascertain or prove with certainty. The
Participant agrees if the Participant breaches any of his/her
promises contained in this Section 10, in addition to the
remedies provided under subsection (e), if applicable, and any
other legal remedies which may be available, the Company shall be
entitled to immediate injunctive relief from a court of competent
jurisdiction, pending arbitration under Section 11 or otherwise,
to end such breach, without further proof of damage.
(g) Permitted Ownership. Nothing in this Section 10
shall prohibit the Participant from owning less than one percent (1%)
of any company that is publicly traded on any national securities
exchange.
(h) Severability and Reasonableness. If, at any time,
the provisions of this Section 10 shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to
geographic area, duration or scope of activity or due to any
other restriction or limitation, this Section 10 shall be
considered divisible and shall become and be immediately amended
to only such geographic area, duration and scope of activity
and/or restrictions or limitations as shall be determined to be
reasonable and enforceable by an arbitrator or a court having
jurisdiction over the matter; and the Participant agrees that
this Section 10 as so amended shall be valid and binding as
though any invalid or unenforceable portion had not been included
herein. The parties agree that the geographic area, duration and
scope of the limitations and the restrictions described in
subsections (a) through (e) are reasonable.
11. ARBITRATION OF DISPUTES. Any disputes, claims
or controversies between the Participant and the Company which
may arise out of or relate to this Option Agreement shall be
settled by arbitration. This agreement to arbitrate shall
survive the termination of this Option 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 Dallas,
Texas unless the parties mutually agree on another location. The
decision of the arbitrator(s) will be enforceable in any court of
competent jurisdiction. The arbitrator(s) may, but will not be
required, to award such damages or other monetary relief as
either party might be entitled to receive from a court of
competent jurisdiction. Nothing in this agreement to arbitrate
shall preclude the Company from obtaining injunctive relief under
Section 10(f) from a court of competent jurisdiction prohibiting
any on-going breaches of the Option Agreement by the Participant
pending arbitration. The arbitrator(s) may also award costs and
attorneys' fees in connection with the arbitration to the
prevailing party; however, in the arbitrator's(s') discretion,
each party may be ordered to bear its/his/her own costs and
attorneys' fees.
12. CHOICE OF LAW. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Texas, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or
interpretation of the Option Agreement to the substantive law of
another jurisdiction, except as superseded by applicable federal
law and/or as provided in Section 11 hereof.
IN WITNESS WHEREOF, the Company, through a duly
authorized officer, and the Participant have executed this Option
Agreement on the day and year first above written.
COMPANY: FLEMING COMPANIES, INC., an
Oklahoma corporation
By
Scott M. Northcutt
Senior Vice President - Human
Resources
PARTICIPANT:
Exhibit 10.58
FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Name: Grant Date:
Option Price: Exercise Date: 25%
Shares Granted: 50%
Expiration Date: 75%
100%
<PAGE>
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Option
Agreement"), made as of this ____ day of _______________, ____,
at Oklahoma City, Oklahoma by and between _______________
(hereinafter referred to as the "Participant"), and Fleming
Companies, Inc. (hereinafter referred to as the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is an "Eligible Associate" of
the Company, as such term is defined in the Plan, and it is
important to the Company that the Participant be encouraged to
remain in the employ of the Company and given incentive to
perform while in the employ of the Company; and
WHEREAS, as an ancillary part of this Option Agreement,
it is also important to the Company to protect its legitimate
business interests if the Participant leaves the employ of the
Company; and
WHEREAS, in recognition of such facts, the Company
desires to provide to the Participant an opportunity to purchase
shares of the common stock of the Company, as hereinafter
provided, pursuant to the "Fleming Companies, Inc. 1999 Stock
Incentive Plan" (the "Plan"); and
WHEREAS, the Participant is a "Non-Executive Officer
Participant" as such term is defined in the Plan, and the Regular
Award Committee has made this Award as permitted by Section 3.1
of the Plan.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the Participant and the Company hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants
to the Participant Nonqualified Stock Options (the "Stock
Options") to purchase all or any part of an aggregate of ______
shares of Common Stock under and subject to the terms and
conditions of this Option Agreement and the Plan, which is
incorporated herein by reference and made a part hereof for all
purposes. All capitalized terms used in this Option Agreement
shall have the same meaning ascribed to them in the Plan unless
specifically denoted otherwise. The purchase price per share for
each share of Common Stock to be purchased hereunder shall be
$________ (the "Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. After, and
only after, the conditions of Section 8 hereof have been
satisfied, the Participant shall be eligible to exercise that
portion of his/her Stock Options pursuant to the schedule set
forth hereinafter. If the Participant's employment with the
Company (or of any one or more of the Subsidiaries of the
Company) remains full-time and continuous at all times prior to
any of the "Exercise Dates" set forth in this Section 2, then the
Participant shall be entitled, subject to the applicable
provisions of the Plan and this Option Agreement having been
satisfied, to exercise on or after the applicable Exercise Date,
on a cumulative basis, the number of shares of Stock determined
by multiplying the aggregate number of shares set forth in
Section 1 of this Option Agreement by the designated percentage
set forth below.
Percent of Stock
Exercise Dates Option Exercisable
- --------------------------------------------------------------------
On or After ________________ 25%
On or After ________________ 50%
On or After ________________ 75%
On or After ________________ 100%
3. TERM OF STOCK OPTION. Except as provided for in
Section 4 of this Option Agreement, none of the Stock Options
shall be exercisable more than ten years from the Date of Grant
(the "Option Period").
4. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With
respect to the Stock Options, the following special rules shall
apply:
(a) Exercise of Exercisable Stock Options on
Termination of Employment. Except as provided to the contrary in
the Plan or in this Option Agreement, if a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period for any reason other than death, he/she may
exercise all or any portion of the Stock Options which are
otherwise exercisable on the date of such termination at any time
within three months from the date of termination; provided,
however, that if the Participant should die during such three
month period, the rights of his/her personal representative shall
be as set forth in Section 4(b) of this Option Agreement.
(b) Exercise of Exercisable Stock Options on
Termination of Employment Due to Death. If a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period due to his/her death, the personal
representative of the deceased Participant may exercise all or
any portion of the Stock Options which are otherwise exercisable
on the date of death within 12 months from the date of death.
(c) Acceleration of Otherwise Unexercisable Stock
Options on Termination of Employment. The Committee, in its sole
discretion, may determine that upon termination of the employment
of a Participant any and all Stock Options shall become
automatically fully vested and immediately exercisable by the
Participant or his/her personal representative as the case may be
for whatever period following such termination as the Committee
shall so decide.
(d) Acceleration of Options Upon Change of
Control. Upon the occurrence of a Change of Control Event, any
and all Stock Options will become automatically fully vested and
immediately exercisable with such acceleration to occur without
the requirement of any further act by either the Company or the
Participant.
(e) Exercise of Exercisable Stock Options on
Termination of Employment Due to Retirement. If a Participant's
employment with the Company or a Subsidiary is terminated due to
retirement in accordance with the Company's retirement policies,
the Participant shall have a period of three years following
his/her date of retirement to exercise the Stock Options which
are otherwise exercisable on his/her date of retirement.
5. NON-TRANSFERABILITY OF STOCK OPTIONS. Except as
provided in Section 11.3 of the Plan regarding certain limited
transferability of Stock Options with the Committee's approval,
Stock Options shall be transferable only by will or the laws of
descent and distribution; however, no such transfer of the Stock
Options by the Participant shall be effective to bind the Company
unless the Company shall have been furnished with written notice
of such transfer and an authenticated copy of the will and/or
such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of such Option.
6. EMPLOYMENT. So long as the Participant shall
continue to be a full-time and continuous employee of the Company
or a Subsidiary, the Stock Options shall not be affected by any
change of duties or position. Nothing in the Plan or in this
Option Agreement shall confer upon the Participant any right to
continue in the employ of the Company, or any of the
Subsidiaries, or interfere in any way with the right of the
Company or any of the Subsidiaries to terminate such
Participant's employment at any time.
7. METHOD OF EXERCISING STOCK OPTION.
(a) Procedures for Exercise. The manner of
exercising the Stock Options shall be by written notice to the
Company at least two days before the date the Stock Option, or
part thereof, is to be exercised, and in any event prior to the
expiration of the Option Period. Such notice shall state the
election to exercise the Stock Options and the number of shares
of Common Stock with respect to that portion of the Stock Options
being exercised, and shall be signed by the person or persons so
exercising the Stock Options. The notice shall be accompanied by
payment of the full purchase price of such shares, in which event
the Company shall deliver a certificate or certificates
representing such shares to the person or persons entitled
thereto as soon as practicable after the notices shall be
received.
(b) Form of Payment. Payment for shares of
Common Stock purchased under this Option Agreement shall be made
in full by the Participant in any manner specified in Section
6.2(b) of the Plan; provided if the Option Price is to be paid by
delivering to the Company shares of Common Stock owned by the
Participant, such shares must have been continuously held by the
Participant for at least six months prior to being used to pay
the Option Price. No Common Stock shall be issued to the
Participant until the Company receives full payment for the
Common Stock purchased under the Stock Options which shall
include any required state and federal withholding taxes.
Withholding taxes may be paid by the Participant in any manner
specified in Section 11.4 of the Plan.
(c) Further Information. In the event the Stock
Options are exercised, pursuant to the foregoing provisions of
this Section 7, by any person or persons other than the
Participant in the event of the death of the Participant, the
notice of election to exercise shall also be accompanied by
appropriate proof of the right of such person or persons to
exercise the Stock Options.
8. SECURITIES LAW RESTRICTIONS. Stock Options shall
be exercised and Common Stock issued only upon compliance with
the Securities Act of 1933, as amended, and any other applicable
securities law, or pursuant to an exemption therefrom.
9. NOTICES. All notices or other communications
relating to the Plan and this Option Agreement as it relates to
the Participant or, in the event of the death of the Participant,
his/her personal representative shall be in writing and shall be
mailed (U.S. Mail) by the Company to the Participant or his/her
personal representative, as the case may be, at the then current
address as maintained by the Company or such other address as the
Participant or his/her personal representative may advise the
Company in writing. All other notices shall be given by personal
delivery to the Secretary of the Company or by registered or
certified mail at his/her principal office or at such other
address as the Company may hereafter advise the Participant or
his/her personal representative, and shall be deemed to have been
given when they are so personally delivered or when they are
deposited in the United States mail in an envelope addressed to
the Company, properly stamped for delivery as a registered or
certified letter.
10. PROTECTION OF COMPANY'S BUSINESS AS CONSIDERATION.
As specific consideration to the Company for the Stock Options,
the Participant agrees:
(a) Limitations on Competition. Subject to sub-
section (g), the Participant will not, without the Company's written
consent, directly or indirectly, in association with or as a share-
holder, principal, agent, partner, officer, director, employee or
consultant of SUPERVALU, Inc., Nash Finch Company or any other
direct competitor of the Company, excluding national retail
chains, or any of their respective subsidiaries, affiliates or
successors (the "Competitors"), engage in the business of the
wholesale of food and related products within the Standard
Metropolitan Statistical Areas (the "SMSA's") in which the
Participant is, and/or on his/her date of termination/separation
was, employed by the Company or one of its Subsidiaries, or in
which the Company or any of its Subsidiaries during his/her
employment is, and/or on his/her date of termination/separation
was, actively soliciting business.
(b) Confidential Information; No Disparaging State-
ments. The Participant acknowledges that during the course of the
Participant's employment with the Company or any Subsidiary,
he/she will have access to and gain knowledge of highly
confidential and proprietary information and trade secrets. The
Participant further acknowledges that the misuse,
misappropriation or disclosure of this information could cause
irreparable harm to the Company and/or a Subsidiary, both during
and after the term of the Participant's employment. Therefore,
the Participant agrees, during his/her employment and at all
times thereafter, he/she will hold in a fiduciary capacity for
the benefit of the Company and/or a Subsidiary and will not
divulge or disclose, directly or indirectly, to any other person,
firm or business, all confidential or proprietary information,
knowledge and data (including, but not limited to, processes,
programs, trade "know how," ideas, details of contracts,
marketing plans, strategies, business development techniques,
business acquisition plans, personnel plans, pricing practices
and business methods and practices) relating in any way to the
business of the Company or any of its Subsidiaries, customers,
suppliers, joint ventures, licensors, licensees, distributors and
other persons and entities with whom the Company or any of its
Subsidiaries do business ("Confidential Data"), except upon the
Company's written consent or as required by his/her duties with
the Company or any of its Subsidiaries, for so long as such
Confidential Data remains confidential and all such Confidential
Data, together with all copies thereof and notes and other
references thereto, shall remain the sole property of the Company
or a Subsidiary. The Participant agrees, during his/her
employment with the Company or any of its Subsidiaries and at all
times thereafter, not to make disparaging statements about the
Company or any of its Subsidiaries or their officers, directors,
agents, employees, products or services which he/she knows, or
has reason to know, are false or misleading.
(c) No Solicitation of Employees or Business. The
Participant agrees that he/she will not, either directly or in concert
with others, recruit, solicit or induce, or attempt to induce, any
employees of the Company or any of its Subsidiaries to terminate
their employment with the Company or any of its Subsidiaries
and/or become associated with another employer. The Participant
further agrees that he/she will not, either directly or in
concert with others, solicit, divert or take away, or attempt to
divert or take away, the business of any of the customers or
accounts of the Company or any of its Subsidiaries within the
SMSA's in which the Participant is, and/or on his/her date of
termination/separation was, employed by the Company or one of its
Subsidiaries, or in which the Company or any of its Subsidiaries
during his/her employment is, and/or on his/her date of
termination/separation was, actively soliciting such business.
(d) Term of the Participant's Promises under this
Section. The Participant agrees that except as otherwise provided
in subsection (b), his/her promises contained in this Section 10
shall continue in effect during his/her employment with the
Company or any of its Subsidiaries and until the first
anniversary of his/her termination/separation.
(e) Consequences of Breach of Limitations on Competi-
tion and/or Other Competing Employment. Subject to subsection (g),
if at any time within (i) the term of this Option Agreement or (ii)
within one (1) year following the Participant's date of termination/
separation, but only if such termination/separation occurs on a
date which is prior to ten (10) years from the date of this
Option Agreement, or (iii) within one (1) year after he/she
exercises any portion of the Stock Options, whichever is latest,
the Participant, without the Company's written consent, directly
or indirectly, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or
consultant of the Competitors, engages in the business of the
wholesale of food and related products within the SMSA's in which
the Participant is, or on his/her date of termination/separation
was, employed by the Company or one of its Subsidiaries, or in
which the Company or any of its Subsidiaries during the
Participant's employment is, and/or on his/her date of
termination/separation was, actively soliciting business, then
(iv) the Stock Options shall terminate effective the date the
Participant enters into such activity (unless terminated sooner
by operation of another term or condition of this Option
Agreement or the Plan), and (v) any gain represented by the Fair
Market Value (as defined in the Plan) on the date the Participant
exercised any of the Stock Options over the Option Price,
multiplied by the number of shares the Participant purchased (the
"Option Gain"), shall be paid by the Participant to the Company
within 30 days of written notice from the Company to the
Participant that such payment is due. The Option Gain shall be
calculated without regard to any subsequent market price decrease
or increase. This shall be in addition to any injunctive or
other relief to which the Company may be entitled under
subsection (f).
(f) Consequences of Other Breaches of this Section.
The Participant acknowledges that damages which may arise from any
breach of any of his/her promises contained in this Section 10
may be impossible to ascertain or prove with certainty. The
Participant agrees if the Participant breaches any of his/her
promises contained in this Section 10, in addition to the
remedies provided under subsection (e), if applicable, and any
other legal remedies which may be available, the Company shall be
entitled to immediate injunctive relief from a court of competent
jurisdiction, pending arbitration under Section 11 or otherwise,
to end such breach, without further proof of damage.
(g) Permitted Ownership. Nothing in this Section 10
shall prohibit the Participant from owning less than one percent (1%)
of any company that is publicly traded on any national securities
exchange.
(h) Severability and Reasonableness. If, at any time,
the provisions of this Section 10 shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to
geographic area, duration or scope of activity or due to any
other restriction or limitation, this Section 10 shall be
considered divisible and shall become and be immediately amended
to only such geographic area, duration and scope of activity
and/or restrictions or limitations as shall be determined to be
reasonable and enforceable by an arbitrator or a court having
jurisdiction over the matter; and the Participant agrees that
this Section 10 as so amended shall be valid and binding as
though any invalid or unenforceable portion had not been included
herein. The parties agree that the geographic area, duration and
scope of the limitations and the restrictions described in
subsections (a) through (e) are reasonable.
11. ARBITRATION OF DISPUTES. Any disputes, claims
or controversies between the Participant and the Company which
may arise out of or relate to this Option Agreement shall be
settled by arbitration. This agreement to arbitrate shall
survive the termination of this Option 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 Dallas,
Texas unless the parties mutually agree on another location. The
decision of the arbitrator(s) will be enforceable in any court of
competent jurisdiction. The arbitrator(s) may, but will not be
required, to award such damages or other monetary relief as
either party might be entitled to receive from a court of
competent jurisdiction. Nothing in this agreement to arbitrate
shall preclude the Company from obtaining injunctive relief under
Section 10(f) from a court of competent jurisdiction prohibiting
any on-going breaches of the Option Agreement by the Participant
pending arbitration. The arbitrator(s) may also award costs and
attorneys' fees in connection with the arbitration to the
prevailing party; however, in the arbitrator's(s') discretion,
each party may be ordered to bear its/his/her own costs and
attorneys' fees.
12. CHOICE OF LAW. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Texas, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or
interpretation of the Option Agreement to the substantive law of
another jurisdiction, except as superseded by applicable federal
law and/or as provided in Section 11 hereof.
IN WITNESS WHEREOF, the Company, through a duly
authorized officer, and the Participant have executed this Option
Agreement on the day and year first above written.
COMPANY: FLEMING COMPANIES, INC., an
Oklahoma corporation
By
Scott M. Northcutt, Senior Vice
President - Human Resources
PARTICIPANT:
Exhibit 10.59
FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
Name: Grant Date:
Option Price: Exercise Date: 25%
Shares Granted: 50%
Expiration Date: 75%
100%
<PAGE>
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE FLEMING COMPANIES, INC.
1999 STOCK INCENTIVE PLAN
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Option
Agreement"), made as of this ____ day of __________, ____, at
Oklahoma City, Oklahoma by and between _______________ (herein-
after referred to as the "Participant"), and Fleming Companies,
Inc. (hereinafter referred to as the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is an "Eligible Associate" of
the Company, as such term is defined in the Plan, and it is
important to the Company that the Participant be encouraged to
remain in the employ of the Company and given incentive to
perform while in the employ of the Company; and
WHEREAS, as an ancillary part of this Option Agreement,
it is also important to the Company to protect its legitimate
business interests if the Participant leaves the employ of the
Company; and
WHEREAS, in recognition of such facts, the Company
desires to provide to the Participant an opportunity to purchase
shares of the common stock of the Company, as hereinafter
provided, pursuant to the "Fleming Companies, Inc. 1999 Stock
Incentive Plan" (the "Plan"); and
WHEREAS, the Participant is a "Non-Executive Officer
Participant" as such term is defined in the Plan, and the Regular
Award Committee has made this Award as permitted by Section 3.1
of the Plan.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth and for good and valuable
consideration, the Participant and the Company hereby agree as
follows:
1. GRANT OF STOCK OPTION. The Company hereby grants
to the Participant Nonqualified Stock Options (the "Stock
Options") to purchase all or any part of an aggregate of
_________ shares of Common Stock under and subject to the terms
and conditions of this Option Agreement and the Plan, which is
incorporated herein by reference and made a part hereof for all
purposes. All capitalized terms used in this Option Agreement
shall have the same meaning ascribed to them in the Plan unless
specifically denoted otherwise. The purchase price per share for
each share of Common Stock to be purchased hereunder shall be
$___________ (the "Option Price").
2. TIMES OF EXERCISE OF STOCK OPTION. After, and
only after, the conditions of Section 8 hereof have been
satisfied, the Participant shall be eligible to exercise that
portion of his/her Stock Options pursuant to the schedule set
forth hereinafter. If the Participant's employment with the
Company (or of any one or more of the Subsidiaries of the
Company) remains full-time and continuous at all times prior to
any of the "Exercise Dates" set forth in this Section 2, then the
Participant shall be entitled, subject to the applicable
provisions of the Plan and this Option Agreement having been
satisfied, to exercise on or after the applicable Exercise Date,
on a cumulative basis, the number of shares of Stock determined
by multiplying the aggregate number of shares set forth in
Section 1 of this Option Agreement by the designated percentage
set forth below.
Percent of Stock
Exercise Dates Option Exercisable
- -----------------------------------------------------------------
On or After _________ 25%
On or After _________ 50%
On or After _________ 75%
On or After _________ 100%
3. TERM OF STOCK OPTION. Except as provided for in
Section 4 of this Option Agreement, none of the Stock Options
shall be exercisable more than ten years from the Date of Grant
(the "Option Period").
4. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With
respect to the Stock Options, the following special rules shall
apply:
(a) Exercise of Exercisable Stock Options on
Termination of Employment. Except as provided to the contrary in
the Plan or in this Option Agreement, if a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period for any reason other than death, he/she may
exercise all or any portion of the Stock Options which are
otherwise exercisable on the date of such termination at any time
within three months from the date of termination; provided,
however, that if the Participant should die during such three
month period, the rights of his/her personal representative shall
be as set forth in Section 4(b) of this Option Agreement.
(b) Exercise of Exercisable Stock Options on
Termination of Employment Due to Death. If a Participant's
employment with the Company or a Subsidiary is terminated during
the Option Period due to his/her death, the personal
representative of the deceased Participant may exercise all or
any portion of the Stock Options which are otherwise exercisable
on the date of death within 12 months from the date of death.
(c) Acceleration of Otherwise Unexercisable Stock
Options on Termination of Employment. The Committee, in its sole
discretion, may determine that upon termination of the employment
of a Participant any and all Stock Options shall become
automatically fully vested and immediately exercisable by the
Participant or his/her personal representative as the case may be
for whatever period following such termination as the Committee
shall so decide.
(d) Acceleration of Options Upon Change of
Control. Upon the occurrence of a Change of Control Event, any
and all Stock Options will become automatically fully vested and
immediately exercisable with such acceleration to occur without
the requirement of any further act by either the Company or the
Participant.
(e) Exercise of Exercisable Stock Options on
Termination of Employment Due to Retirement. If a Participant's
employment with the Company or a Subsidiary is terminated due to
retirement in accordance with the Company's retirement policies,
the Participant shall have a period of three years following
his/her date of retirement to exercise the Stock Options which
are otherwise exercisable on his/her date of retirement.
5. NON-TRANSFERABILITY OF STOCK OPTIONS. Except as
provided in Section 11.3 of the Plan regarding certain limited
transferability of Stock Options with the Committee's approval,
Stock Options shall be transferable only by will or the laws of
descent and distribution; however, no such transfer of the Stock
Options by the Participant shall be effective to bind the Company
unless the Company shall have been furnished with written notice
of such transfer and an authenticated copy of the will and/or
such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of such Option.
6. EMPLOYMENT. So long as the Participant shall
continue to be a full-time and continuous employee of the Company
or a Subsidiary, the Stock Options shall not be affected by any
change of duties or position. Nothing in the Plan or in this
Option Agreement shall confer upon the Participant any right to
continue in the employ of the Company, or any of the
Subsidiaries, or interfere in any way with the right of the
Company or any of the Subsidiaries to terminate such
Participant's employment at any time.
7. METHOD OF EXERCISING STOCK OPTION.
(a) Procedures for Exercise. The manner of
exercising the Stock Options shall be by written notice to the
Company at least two days before the date the Stock Option, or
part thereof, is to be exercised, and in any event prior to the
expiration of the Option Period. Such notice shall state the
election to exercise the Stock Options and the number of shares
of Common Stock with respect to that portion of the Stock Options
being exercised, and shall be signed by the person or persons so
exercising the Stock Options. The notice shall be accompanied by
payment of the full purchase price of such shares, in which event
the Company shall deliver a certificate or certificates
representing such shares to the person or persons entitled
thereto as soon as practicable after the notices shall be
received.
(b) Form of Payment. Payment for shares of
Common Stock purchased under this Option Agreement shall be made
in full by the Participant in any manner specified in Section
6.2(b) of the Plan; provided if the Option Price is to be paid by
delivering to the Company shares of Common Stock owned by the
Participant, such shares must have been continuously held by the
Participant for at least six months prior to being used to pay
the Option Price. No Common Stock shall be issued to the
Participant until the Company receives full payment for the
Common Stock purchased under the Stock Options which shall
include any required state and federal withholding taxes.
Withholding taxes may be paid by the Participant in any manner
specified in Section 11.4 of the Plan.
(c) Further Information. In the event the Stock
Options are exercised, pursuant to the foregoing provisions of
this Section 7, by any person or persons other than the
Participant in the event of the death of the Participant, the
notice of election to exercise shall also be accompanied by
appropriate proof of the right of such person or persons to
exercise the Stock Options.
8. SECURITIES LAW RESTRICTIONS. Stock Options shall
be exercised and Common Stock issued only upon compliance with
the Securities Act of 1933, as amended, and any other applicable
securities law, or pursuant to an exemption therefrom.
9. NOTICES. All notices or other communications
relating to the Plan and this Option Agreement as it relates to
the Participant or, in the event of the death of the Participant,
his/her personal representative shall be in writing and shall be
mailed (U.S. Mail) by the Company to the Participant or his/her
personal representative, as the case may be, at the then current
address as maintained by the Company or such other address as the
Participant or his/her personal representative may advise the
Company in writing. All other notices shall be given by personal
delivery to the Secretary of the Company or by registered or
certified mail at his/her principal office or at such other
address as the Company may hereafter advise the Participant or
his/her personal representative, and shall be deemed to have been
given when they are so personally delivered or when they are
deposited in the United States mail in an envelope addressed to
the Company, properly stamped for delivery as a registered or
certified letter.
10. PROTECTION OF COMPANY'S BUSINESS AS CONSIDERATION.
As specific consideration to the Company for the Stock Options,
the Participant agrees:
(a) Limitations on Competition. Subject to sub-
section (g), the Participant will not, without the Company's written
consent, directly or indirectly, in association with or as a share-
holder, principal, agent, partner, officer, director, employee or
consultant of any other retail chain or any subsidiary or
affiliate of any such retail chain, engage in the business of the
retail sale of food and related products within the Standard
Metropolitan Statistical Areas (the "SMSA's") in which the
Participant is, and/or on his/her date of termination/separation
was, employed by the Company or one of its Subsidiaries, or in
which the Company or any of its Subsidiaries during his/her
employment is, and/or on his/her date of termination/ separation
was, actively soliciting business.
(b) Confidential Information; No Disparaging State-
ments. The Participant acknowledges that during the course of the
Participant's employment with the Company or any Subsidiary,
he/she will have access to and gain knowledge of highly
confidential and proprietary information and trade secrets. The
Participant further acknowledges that the misuse,
misappropriation or disclosure of this information could cause
irreparable harm to the Company and/or a Subsidiary, both during
and after the term of the Participant's employment. Therefore,
the Participant agrees, during his/her employment and at all
times thereafter, he/she will hold in a fiduciary capacity for
the benefit of the Company and/or a Subsidiary and will not
divulge or disclose, directly or indirectly, to any other person,
firm or business, all confidential or proprietary information,
knowledge and data (including, but not limited to, processes,
programs, trade "know how," ideas, details of contracts,
marketing plans, strategies, business development techniques,
business acquisition plans, personnel plans, pricing practices
and business methods and practices) relating in any way to the
business of the Company or any of its Subsidiaries, customers,
suppliers, joint ventures, licensors, licensees, distributors and
other persons and entities with whom the Company or any of its
Subsidiaries do business ("Confidential Data"), except upon the
Company's written consent or as required by his/her duties with
the Company or any of its Subsidiaries, for so long as such
Confidential Data remains confidential and all such Confidential
Data, together with all copies thereof and notes and other
references thereto, shall remain the sole property of the Company
or a Subsidiary. The Participant agrees, during his/her
employment with the Company or any of its Subsidiaries and at all
times thereafter, not to make disparaging statements about the
Company or any of its Subsidiaries or their officers, directors,
agents, employees, products or services which he/she knows, or
has reason to know, are false or misleading.
(c) No Solicitation of Employees or Business. The
Participant agrees that he/she will not, either directly or in concert
with others, recruit, solicit or induce, or attempt to induce, any
employees of the Company or any of its Subsidiaries to terminate
their employment with the Company or any of its Subsidiaries
and/or become associated with another employer. The Participant
further agrees that he/she will not, either directly or in
concert with others, solicit, divert or take away, or attempt to
divert or take away, the business of any of the customers or
accounts of the Company or any of its Subsidiaries within the
SMSA's in which the Participant is, and/or on his/her date of
termination/separation was, employed by the Company or one of its
Subsidiaries, or in which the Company or any of its Subsidiaries
during his/her employment is, and/or on his/her date of
termination/separation was, actively soliciting such business.
(d) Term of the Participant's Promises under this
Section. The Participant agrees that except as otherwise provided
in subsection (b), his/her promises contained in this Section 10
shall continue in effect during his/her employment with the
Company or any of its Subsidiaries and until the first
anniversary of his/her termination/separation.
(e) Consequences of Breach of Limitations on Competi-
tion and/or Other Competing Employment. Subject to subsection (g),
if at any time within (i) the term of this Option Agreement or (ii)
within one (1) year following the Participant's date of termination/
separation, but only if such termination/separation occurs on a
date which is prior to ten (10) years from the date of this
Option Agreement, or (iii) within one (1) year after he/she
exercises any portion of the Stock Options, whichever is latest,
the Participant, without the Company's written consent, directly
or indirectly, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or
consultant of any other retail chain or any subsidiary or
affiliate of any such retail chain, engages in the business of
the retail sale of food and related products within the SMSA's in
which the Participant is, or on his/her date of
termination/separation was, employed by the Company or one of its
Subsidiaries, or in which the Company or any of its Subsidiaries
during the Participant's employment is, and/or on his/her date of
termination/separation was, actively soliciting business, then
(iv) the Stock Options shall terminate effective the date the
Participant enters into such activity (unless terminated sooner
by operation of another term or condition of this Option
Agreement or the Plan), and (v) any gain represented by the Fair
Market Value (as defined in the Plan) on the date the Participant
exercised any of the Stock Options over the Option Price,
multiplied by the number of shares the Participant purchased (the
"Option Gain"), shall be paid by the Participant to the Company
within 30 days of written notice from the Company to the
Participant that such payment is due. The Option Gain shall be
calculated without regard to any subsequent market price decrease
or increase. This shall be in addition to any injunctive or
other relief to which the Company may be entitled under
subsection (f).
(f) Consequences of Other Breaches of this Section.
The Participant acknowledges that damages which may arise from any
breach of any of his/her promises contained in this Section 10
may be impossible to ascertain or prove with certainty. The
Participant agrees if the Participant breaches any of his/her
promises contained in this Section 10, in addition to the
remedies provided under subsection (e), if applicable, and any
other legal remedies which may be available, the Company shall be
entitled to immediate injunctive relief from a court of competent
jurisdiction, pending arbitration under Section 11 or otherwise,
to end such breach, without further proof of damage.
(g) Permitted Ownership. Nothing in this Section 10
shall prohibit the Participant from owning less than one percent (1%)
of any company that is publicly traded on any national securities
exchange.
(h) Severability and Reasonableness. If, at any time,
the provisions of this Section 10 shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to
geographic area, duration or scope of activity or due to any
other restriction or limitation, this Section 10 shall be
considered divisible and shall become and be immediately amended
to only such geographic area, duration and scope of activity
and/or restrictions or limitations as shall be determined to be
reasonable and enforceable by an arbitrator or a court having
jurisdiction over the matter; and the Participant agrees that
this Section 10 as so amended shall be valid and binding as
though any invalid or unenforceable portion had not been included
herein. The parties agree that the geographic area, duration and
scope of the limitations and the restrictions described in
subsections (a) through (e) are reasonable.
11. ARBITRATION OF DISPUTES. Any disputes, claims
or controversies between the Participant and the Company which
may arise out of or relate to this Option Agreement shall be
settled by arbitration. This agreement to arbitrate shall
survive the termination of this Option 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 Dallas,
Texas unless the parties mutually agree on another location. The
decision of the arbitrator(s) will be enforceable in any court of
competent jurisdiction. The arbitrator(s) may, but will not be
required, to award such damages or other monetary relief as
either party might be entitled to receive from a court of
competent jurisdiction. Nothing in this agreement to arbitrate
shall preclude the Company from obtaining injunctive relief under
Section 10(f) from a court of competent jurisdiction prohibiting
any on-going breaches of the Option Agreement by the Participant
pending arbitration. The arbitrator(s) may also award costs and
attorneys' fees in connection with the arbitration to the
prevailing party; however, in the arbitrator's(s') discretion,
each party may be ordered to bear its/his/her own costs and
attorneys' fees.
12. CHOICE OF LAW. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Texas, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or
interpretation of the Option Agreement to the substantive law of
another jurisdiction, except as superseded by applicable federal
law and/or as provided in Section 11 hereof.
IN WITNESS WHEREOF, the Company, through a duly
authorized officer, and the Participant have executed this Option
Agreement on the day and year first above written.
COMPANY: FLEMING COMPANIES, INC., an
Oklahoma corporation
By
Scott M. Northcutt, Senior Vice
President - Human Resources
PARTICIPANT:
Exhibit 10.60
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, amending,
restating and superceding in its entirety that prior Employment
Agreement effective January 26, 1999, by and between FLEMING
COMPANIES, INC., an Oklahoma corporation (the "Company") and
SCOTT M. NORTHCUTT ("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 Senior Vice President of Human Resources 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
January 26, 1999 (the "Commencement Date") and shall continue
through January 25, 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 Chairman and Chief
Executive Officer of the Company. Executive shall have those
powers and duties normally associated with the position of Senior
Vice President of Human Resources. 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 approval
of the board of directors of the Company (the "Board") (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 $245,000 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, 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 $9.00 per share, pursuant to the Company's 1996 Stock
Incentive Plan (the "Company Options"). 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 55% of Base Salary and a maximum annual bonus of
110% 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.
(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.
(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, eight thousand
(8,000) 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 February 26, 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 Executive shall be provided
with the Company's standard relocation program for transferred
senior executive officers in order to relocate to the Company's
principal executive offices in Lewisville, Texas, including
travel costs, temporary housing, moving costs of household
belongings, storage costs for up to one year, and any other
expenses necessary to efficiently effect Executive's relocation
(collectively, the "Relocation Payment"). Also, at the
Executive's option, at any time during up to the first two (2)
years of the employment period, the Company shall purchase the
Executive's residence located in Bentonville, Arkansas, at a
purchase price equal to the greater of its respective appraised
value (as set by an appraiser designated by the Company) or the
Executive's documented invested cost in the residence (the
"Residence Payment"). In addition to these payments, the Company
shall pay the Executive an additional payment in an amount (the
"Tax Gross-Up Amount") necessary to cause the net amount of such
payment that is retained by the Executive after the calculation
and deduction of all federal, state and local income taxes and
employment taxes on such payments to be equal to the Executive's
income tax attributable to such payments for the Relocation
Payment and the Residence Payment. In the event the Executive
voluntarily leaves his employment with the Company, other than
for "Good Reason" (as such term is hereafter defined), prior to
January 26, 2001, the Executive shall repay the Company an amount
equal to the Relocation Payment, plus the Tax Gross-Up Amount
attributable to the Relocation Payment within thirty (30) days
after his termination of employment; provided, however, that this
repayment obligation shall be waived in equal increments each of
one eighth (1/8th) of the total amount, for each three
consecutive months during which the Executive is employed
following January26, 1999.
(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.
(k) Signing Bonus. Within thirty days after the
Commencement Date, the Executive will receive a cash bonus from
the Company ("Signing Bonus") in the gross amount necessary to
cause the net amount of the Signing Bonus, after the calculation
and deduction of any and all federal, state and local income
taxes and employment taxes on the Signing Bonus payment to be
equal to $71,000.
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;
(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. The
Executive also agrees that the Company shall have the right to
deduct any amounts owed by the Executive to the Company for any
reason, including, without limitation, due to the Executive's
misappropriation of Company funds, from the payments set forth in
this Section 8.
(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, notwithstanding Section 8 hereof,
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, be a shareholder,
principal, agent, partner, officer, director, employee or
consultant of SUPERVALU, Inc., Nash Finch Company, Richfood
Holdings, Inc. or any other direct competitor of the Company,
excluding, national retail chains, or any subsidiary, affiliate
or successor of any direct competitor of the Company
(collectively, the "Competitors"). Notwithstanding the preceding
sentence, the 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 a Competitor. 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
Dallas, Texas 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.
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 Texas 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 to amend, restate and supercede in its entirety
their prior Employment Agreement effective on the date first
above written.
FLEMING COMPANIES, INC.
By LENORE T. GRAHAM
Lenore T. Graham, Senior Vice
President, General Counsel and
Secretary
SCOTT M. NORTHCUTT
Scott M. Northcutt
Exhibit 12
FLEMING COMPANIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THE LAST SATURDAY IN DECEMBER
1999 1998 1997 1996 1995
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income (loss) $ (62,581) $(598,202) $ 82,685 $ 54,573 $ 85,892
Fixed charges, net 193,263 195,956 197,923 202,184 209,830
Total earnings (loss) $ 130,682 $(402,246) $ 280,608 $ 256,757 $ 295,722
Fixed charges:
Interest expense $ 165,180 $ 161,581 $ 162,506 $ 163,466 $ 175,390
Portion of rental charges
deemed to be interest 27,626 33,948 35,050 38,356 34,113
Capitalized interest and
debt issuance cost
amortization 1,117 604 1,186 104 708
Total fixed charges $ 193,133 $ 196,133 $ 198,742 $ 201,926 $ 210,211
Deficiency $ 62,451 $ 598,379
Ratio of earnings (loss)
to fixed charges 0.67 (2.05) 1.41 1.27 1.41
</TABLE>
"Earnings" consist of income from continuing operations
before income taxes and fixed charges excluding capitalized
interest. Capitalized interest amortized during the
respective periods is added back to earnings.
"Fixed charges, net" consist of interest expense, an
estimated amount of rental expense which is deemed to be
representative of the interest factor and amortization of
capitalized interest and debt issuance cost.
The pro forma ratio of earnings to fixed charges is omitted
as it is not applicable.
Under the company's long-term debt agreements, "earnings"
and "fixed charges" are defined differently and amounts and
ratios differ accordingly.
Exhibit 21
FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Fleming Companies, Inc. had the following subsidiaries at
year-end 1999:
ABCO Holding, Inc. (incorporated in Delaware),*,#
ABCO Markets Inc. (incorporated in Arizona),*
ABCO Realty Corp. (incorporated in Arizona)*
AG, L.L.C. (incorporated in Oklahoma)*
American Logistics Group, Inc. (incorporated in Delaware)
Arizona Price Impact, L.L.C. (incorporated in Oklahoma),#
Chouteau Development Company, L.L.C. (incorporated in Oklahoma),#
eMar.net, Inc. (incorporated in Delaware)#
FAVAR CONCEPTS, LTD. (incorporated in Delaware)*
Fleming Foods Management Co., L.L.C. (incorporated in Oklahoma)*
Fleming Foods of Texas, L.P. (incorporated in Oklahoma)*,#
Fleming Foreign Sales Corporation (incorporated in Barbados)
Fleming International Ltd. (incorporated in Oklahoma)*
Fleming Supermarkets of Florida, Inc. (incorporated in Florida)
Fleming Transportation Service, Inc. (incorporated in Oklahoma)
Fleming Wholesale, Inc. (incorporated in Nevada)*
Gateway Insurance Agency, Inc. (incorporated in Wisconsin)
LAS, Inc. (incorporated in Oklahoma),*
Northwest Foods, L.L.C. (incorporated in Oklahoma),*,#
Piggly Wiggly Company (incorporated in Oklahoma)
Progressive Realty, Inc. (incorporated in Oklahoma)
Retail Investments, Inc. (incorporated in Nevada)
Retail Supermarkets, Inc. (incorporated in Texas)
RFS Marketing Services, Inc. (incorporated in Oklahoma)
Richmar Foods, Inc. (incorporated in California)
SAV-U-FOODS, Inc. (incorporated in Oklahoma),*,#
Scrivner Transportation, Inc. (incorporated in Oklahoma),*
University Foods, Inc. (incorporated in Utah)
* Inactive corporation
# Not 100% owned by Fleming Companies, Inc. or subsidiary.
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in:
(i) Registration Statement No. 2-98602 (1985 Stock
Option Plan) on Form S-8;
(ii) Registration Statement No. 33-36586 (1990
Fleming Stock Option Plan) on Form S-8;
(iii) Registration Statement No. 33-56241
(Dividend Reinvestment and Stock Purchase Plan) on
Form S-3;
(iv) Registration Statement No. 333-11317 (1996
Fleming Incentive Stock Option Plan) on Form S-8;
(v) Registration Statement No. 333-35703 (Senior
Subordinated Notes) on Form S-4;
(vi) Registration Statement No. 333-28219 (Associate
Stock Purchase Plan) on Form S-8;
(vii) Registration Statement No. 333-80445 (1999
Stock Incentive Plan) on Form S-8; and
(viii) Registration Statement No. 333-89375
(Consolidated Savings Plus and Stock Ownership Plan)
on Form S-8
of our report dated February 18, 2000, appearing in this
Annual Report on Form 10-K of Fleming Companies, Inc. for
the year ended December 25, 1999.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
March 13, 2000
Exhibit 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Fleming
Companies, Inc. (hereinafter the "Company"), hereby
severally constitute Mark S. Hansen, Neal Rider and Lenore
T. Graham, and each of them severally, our true and lawful
attorneys with full power to them and each of them to sign
for us, and in our names as officers or directors, or both,
of the Company, the Annual Report on Form 10-K for the
fiscal year ended December 25, 1999, and any and all
amendments thereto, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
to perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully
do or cause to be done by virtue hereof.
Dated this 29th day of February 2000.
Signature Title
MARK S. HANSEN Chairman and Chief Executive
Mark S. Hansen Officer (principal executive
officer)
NEAL RIDER Executive Vice President and
Neal Rider Chief Financial Officer
(principal financial officer)
KEVIN TWOMEY Senior Vice President, Finance
Kevin Twomey and Controller (principal
accounting officer)
JACK W. BAKER Director
Jack W. Baker
HERBERT M. BAUM Director
Herbert M. Baum
ARCHIE R. DYKES Director
Archie R. Dykes
CAROL B. HALLETT Director
Carol B. Hallett
EDWARD C. JOULLIAN III Director
Edward C. Joullian III
GUY A. OSBORN Director
Guy A. Osborn
ALICE M. PETERSON Director
Alice M. Peterson
DAVID A. RISMILLER Director
David A. Rismiller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-K FOR THE YEAR ENDED DECEMBER 25, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<CASH> 5,967
<SECURITIES> 0
<RECEIVABLES> 528,359
<ALLOWANCES> 32,200
<INVENTORY> 997,805
<CURRENT-ASSETS> 1,728,750
<PP&E> 1,539,465
<DEPRECIATION> 701,289
<TOTAL-ASSETS> 3,573,218
<CURRENT-LIABILITIES> 1,283,719
<BONDS> 1,234,185
0
0
<COMMON> 97,141
<OTHER-SE> 463,561
<TOTAL-LIABILITY-AND-EQUITY> 3,573,218
<SALES> 14,645,566
<TOTAL-REVENUES> 14,645,566
<CGS> 13,208,399
<TOTAL-COSTS> 14,518,263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,704
<INTEREST-EXPENSE> 165,180
<INCOME-PRETAX> (62,581)
<INCOME-TAX> (17,853)
<INCOME-CONTINUING> (44,728)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,728)
<EPS-BASIC> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
