UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Fleming Companies, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
[FLEMING COMPANIES, INC. LOGO] A GREAT PLACE TO WORK
A GREAT PLACE TO TRADE
A GREAT PLACE TO INVEST
FLEMING COMPANIES, INC. NOTICE OF 2002 ANNUAL MEETING
1945 Lakepointe Drive AND PROXY STATEMENT
Lewisville, Texas 75057
Dear Fellow Shareholders:
Please come to our annual meeting on May 14, 2002. We are holding this
year's meeting at 10:00 a.m. Central Time at our Customer Support Center, 1945
Lakepointe Drive, Lewisville, Texas. You will hear about our performance for
fiscal 2001 and have the opportunity to ask questions. Enclosed with this proxy
statement are your proxy card, our 2001 Form 10-K, and our 2001 annual report.
We first mailed these materials to shareholders on April 2, 2002.
I look forward to seeing you at our annual meeting.
Sincerely,
Mark S. Hansen
Chairman and Chief Executive Officer
April 2, 2002
FLEMING COMPANIES, INC.
1945 LAKEPOINTE DRIVE
LEWISVILLE, TEXAS 75057
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------
TIME.................................. 10:00 a.m. on Tuesday, May 14, 2002
PLACE................................. Customer Support Center
1945 Lakepointe Drive
Lewisville, Texas
ITEMS OF BUSINESS..................... (1) To elect seven members to the board
of directors to serve for one year
terms.
(2) To ratify the selection of Deloitte
& Touche LLP as our independent
auditors for the 2002 fiscal year.
(3) To approve our 2002 Stock Incentive
Plan.
(4) To approve our 2002 Associate Stock
Purchase Plan.
(5) To approve our 2002 Aim High
Incentive Plan.
(6) To approve our 2002 Aim High Plus
Incentive Plan.
(7) To transact such other business as
may properly come before the meeting
and any adjournment or postponement.
RECORD DATE........................... You can vote if you are a shareholder of
record on March 21, 2002.
LIST OF SHAREHOLDERS.................. A list of shareholders entitled to vote
at the meeting will be made available
for examination by any shareholder, for
any purpose germane to the meeting,
during ordinary business hours, for a
period of ten days prior to the meeting
at the Customer Support Center, 1945
Lakepointe Drive, Lewisville, Texas.
PROXY VOTING.......................... It is important that your shares be
represented and voted at the meeting.
Please vote in one of these ways:
PLEASE NOTE THAT ALL VOTES CAST VIA
TELEPHONE
OR THE INTERNET MUST BE CAST BEFORE
12:00 A.M. EASTERN DAYLIGHT SAVINGS
TIME
ON TUESDAY, MAY 14, 2002. (1) MARK, SIGN, DATE AND PROMPTLY
RETURN the enclosed proxy card in
the postage-paid envelope, or
(2) CALL 1-877-PRX-VOTE (1-877-779-8683)
from the U.S. and Canada, or
(3) LOG ON to the following web address:
http://www.eproxyvote.com/flm
Any proxy may be revoked at any time
prior to its exercise at the meeting.
APRIL 2, 2002 Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: You are voting on six things:
- election of seven directors (Herbert M. Baum, Kenneth M. Duberstein,
Archie R. Dykes, Carol B. Hallett, Robert S. Hamada, Mark S. Hansen and
Alice M. Peterson),
- ratification of Fleming's independent auditors for the 2002 fiscal year,
and
- approval of our 2002 Stock Incentive Plan. (A copy of the plan is attached
as Exhibit A.)
- approval of our 2002 Associate Stock Purchase Plan. (A copy of the plan is
attached as Exhibit B.)
- approval of our Aim High Incentive Plan. (A copy of the plan is attached
as Exhibit C.)
- approval of our Aim High Plus Incentive Plan. (A copy of the plan is
attached as Exhibit D.)
Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on March 21, 2002 (the record
date). Each share of common stock is entitled to one vote.
Q: HOW DO I VOTE?
A: In addition to attending the meeting and casting your vote in person, you
may either:
- Mark your selection on the enclosed proxy card, date and sign the card,
and return the card in the enclosed envelope; or
- Dial 1-877-PRX-VOTE (1-877-779-8683) from the U.S. and Canada, enter your
control number (found on your proxy card) and follow the voice prompts; or
- Go to the following website: http://www.eproxyvote.com/flm, enter your
control number and follow the simple instructions on the screen.
Q: IF I VOTE BY TELEPHONE OR INTERNET, DO I NEED TO RETURN MY PROXY CARD?
A: No.
Q: WHAT IS THE DIFFERENCE BETWEEN VOTING VIA TELEPHONE OR THE INTERNET OR
RETURNING A PROXY CARD AND VOTING IN PERSON?
A: Voting by proxy, regardless of whether it is via telephone or the internet
or by returning your proxy card by mail, appoints Mark S. Hansen, our
chairman and chief executive officer, Neal J. Rider, our executive vice
president and chief financial officer, and Carlos M. Hernandez, our senior
vice president, general counsel and secretary, as your proxies. They will be
required to vote on the six proposals exactly as you voted. However, if any
other matter requiring a shareholder vote is properly raised at the meeting,
then Messrs. Hansen, Rider and Hernandez are authorized to use their
discretion to vote on the issues on your behalf.
Q: HOW DOES DISCRETIONARY AUTHORITY APPLY?
A: If you sign your proxy card, but do not make any selections, you give
authority to Mark S. Hansen, Neal J. Rider or Carlos M. Hernandez to vote on
the proposals and any other matter that may arise at the annual meeting.
Q: IF I VOTE VIA TELEPHONE OR THE INTERNET OR BY MAILING MY PROXY CARD, MAY I
STILL ATTEND THE MEETING?
A: Yes.
Q: WHAT IF I WANT TO CHANGE MY VOTE?
A: You can revoke your vote at any time before the meeting.
Q: IS MY VOTE CONFIDENTIAL?
A: Yes, only EquiServe Trust Company, N.A., the
inspector of election, Morrow & Co., our proxy solicitor, and certain
employees of Fleming will have access to your voting information. All
comments will remain confidential, unless you ask that your name be
disclosed.
Q: WHO WILL COUNT THE VOTES?
A: EquiServe Trust Company, N.A. will tabulate the votes and act as inspector
of election.
2
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares are probably registered differently or are in more than one
account. Vote all proxy cards to ensure that all your shares are voted.
Contact our transfer agent, EquiServe Trust Company, N.A. (1-800-317-4445)
to have your accounts registered in the same name and address.
Q: WHAT CONSTITUTES A QUORUM?
A: As of March 21, 2002, 44,516,965 shares of Fleming common stock were issued
and outstanding and entitled to one vote per share at the annual meeting. A
majority of the shares entitled to vote, present in person or represented by
proxy, constitutes a quorum. If you vote by telephone or the internet or by
returning your proxy card, you will be considered part of the quorum. The
inspector of election will treat shares represented by a properly executed
proxy as present at the meeting. Abstentions and broker non-votes are
counted for purposes of determining a quorum. A broker non-vote occurs when
a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
Q: WHEN ARE THE SHAREHOLDER PROPOSALS DUE FOR THE YEAR 2003 ANNUAL MEETING?
A: To be included in next year's proxy statement, shareholder proposals must be
received in writing by December 1, 2002 by our corporate secretary. We will
include a proposal in next year's proxy statement if it complies with the
rules of the Securities and Exchange Commission and those rules require us
to include the proposal in our proxy statement. In accordance with our
bylaws, if a shareholder wishes to present a proposal for consideration at
the 2003 annual meeting, but not have it included in our proxy statement, he
or she must send written notice of the proposal to our corporate secretary.
To be timely, the notice must be delivered to, or mailed and received at,
our principal executive offices during the period beginning February 13,
2003 and ending March 15, 2003.
Q: HOW DOES A SHAREHOLDER NOMINATE A DIRECTOR OF FLEMING?
A: Submit a written recommendation (accompanied by the written consent of the
nominee to serve as a director if elected and a list of the nominee's
principal occupations or employment over the past five years) to our
corporate secretary. To be timely, the notice must be delivered to, or
mailed and received at, our principal executive offices during the period
beginning February 13, 2003 and ending March 15, 2003. You can contact our
corporate secretary at Fleming Companies, Inc., 1945 Lakepointe Drive,
Lewisville, Texas 75057.
Q: WHO PAYS THE SOLICITATION EXPENSES?
A: The accompanying proxy is being solicited on behalf of the Fleming board of
directors, and Fleming pays the cost of solicitation. We generally solicit
proxies by mail, but certain officers or associates of Fleming may solicit
proxies by telephone or in person without additional compensation. We hired
Morrow & Co. to assist in the distribution of proxy materials and
solicitation of votes for $7,500 plus out-of-pocket expenses. Upon request,
we will reimburse stockbrokers and other custodians, nominees, and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy
material to the beneficial owners of shares of our common stock.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce voting results at the meeting, and we will publish final
results in our quarterly report on Form 10-Q for the first quarter of 2002.
We will file that report with the Securities and Exchange Commission. You
can get a copy by contacting either our investor relations department
(972-906-8592) or the Securities and Exchange Commission at 1-800-SEC-0330
or www.sec.gov.
3
PROPOSALS
1. ELECTION OF DIRECTORS
The individuals named below are nominated for re-election as directors to serve
one year terms.
- Herbert M. Baum (director since 1998)
- Kenneth M. Duberstein (director since 2001)
- Archie R. Dykes (director since 1981)
- Carol B. Hallett (director since 1993)
- Robert S. Hamada (director since 2001)
- Mark S. Hansen (director since 1998)
- Alice M. Peterson (director since 1998)
Each has consented to serve a one year term. (See pages 5-6 for biographical
information.)
If any nominee is unable to stand for re-election, the board may provide for a
lesser number of directors or designate a substitute. In the latter event,
shares represented by proxies may be voted for a substitute nominee.
The seven nominees receiving the highest number of "yes" votes will be elected
as directors. This number is called a plurality. Abstentions and broker
non-votes are not counted for purposes of the election of directors. OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
2. RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR 2002
Our board of directors, upon recommendation of the audit and compliance
committee, has selected Deloitte & Touche LLP to serve as our independent
auditors for the 2002 fiscal year and is soliciting your ratification of that
selection. Representatives of Deloitte & Touche LLP will attend the annual
meeting, have the opportunity to make a statement if they so desire, and be
available to answer appropriate questions.
The affirmative vote of a quorum is required to ratify Deloitte & Touche LLP as
independent auditors for 2002. For purposes of approving this proposal,
abstentions are counted as a vote against the proposal and broker non-votes are
not counted. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR 2002.
3. APPROVAL OF THE FLEMING COMPANIES, INC. 2002 STOCK INCENTIVE PLAN.
Subject to shareholder approval, our board of directors has adopted the Fleming
Companies, Inc. 2002 Stock Incentive Plan. A description of the plan begins on
page 31. A copy of the plan is attached as Exhibit A.
The affirmative vote of a quorum is required to approve the 2002 Stock Incentive
Plan. For purposes of approving the plan, abstentions are counted as a vote
against the proposal and broker non-votes are not counted. OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2002 STOCK INCENTIVE PLAN.
4. APPROVAL OF THE FLEMING COMPANIES, INC. 2002 ASSOCIATE STOCK PURCHASE PLAN
Subject to shareholder approval, our board of directors has adopted the Fleming
Companies, Inc. 2002 Associate Stock Purchase Plan. A description of the plan
begins on page 36. A copy of the plan is attached as Exhibit B.
The affirmative vote of a quorum is required to approve the 2002 Associate Stock
Purchase Plan. For purposes of approving the plan, abstentions are counted as a
vote against the proposal and broker non-votes are not counted. OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2002 ASSOCIATE STOCK
PURCHASE PLAN.
5. APPROVAL OF THE FLEMING COMPANIES, INC. 2002 AIM HIGH INCENTIVE PLAN
Subject to shareholder approval, our board of directors has adopted the Fleming
Companies, Inc. 2002 Aim High Incentive Plan. A description of the plan begins
on page 39. A copy of the plan is attached as Exhibit C.
The affirmative vote of a quorum is required to approve the 2002 Aim High
Incentive Plan. For purposes of approving the plan, abstentions are counted as a
vote against the proposal and broker non-votes are not counted. OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2002 AIM HIGH INCENTIVE
PLAN.
6. APPROVAL OF THE FLEMING COMPANIES, INC. 2002 AIM HIGH PLUS INCENTIVE PLAN
Subject to shareholder approval, our board of directors has adopted the Fleming
Companies, Inc. 2002 Aim High Plus Incentive Plan. A description of the plan
begins on page 42. A copy of the plan is attached as Exhibit D.
The affirmative vote of a quorum is required to approve the 2002 Aim High Plus
Incentive Plan. For purposes of approving the plan, abstentions are counted as a
vote against the proposal and broker non-votes are not counted. OUR BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2002 AIM HIGH PLUS
INCENTIVE PLAN.
4
BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE.
The persons named on your proxy card intend to vote in favor of the seven
nominees listed below. Should any of these nominees become unavailable for
election, the proxy will be voted for a substitute nominee. If the nominees are
elected, our board will be comprised of seven members, of which six are
non-management directors and one is an officer of Fleming.
NOMINEES FOR RE-ELECTION AS DIRECTORS
NAME (AGE), YEAR FIRST BECAME A DIRECTOR
HERBERT M. BAUM (65), 1998
Chairman, president and chief executive officer of The Dial
Corporation (a consumer products company). Prior to joining The
Dial Corporation in August 2000, Mr. Baum served as president and
chief operating officer of Hasbro, Inc. from January 1999. From
1993 to 1998, Mr. Baum served as chairman and chief executive
officer of Quaker State Corporation. From 1978 to 1993, Mr. Baum
served in a variety of positions for Campbell Soup Company where
his last position held was president Campbell North and South
America. Mr. Baum is a director of Grocery Manufacturers of
America, The Dial Corporation, Midas, Inc., Meredith Corporation,
PepsiAmericas, Inc. (formerly Whitman Corporation), and Action
Performance Companies, Inc.
KENNETH M. DUBERSTEIN (57), 2001
Chairman and chief executive officer of The Duberstein Group, Inc.
(an independent strategic planning and consulting company). Mr.
Duberstein previously served as Chief of Staff to President Ronald
Reagan in 1988-1989. During President Reagan's two terms in
office, he also served in the White House as Deputy Chief of Staff
(1987), as well as both the Assistant and the Deputy Assistant to
the President for Legislative Affairs (1981-1983).
Mr. Duberstein is a director of The Boeing Company, Classic
Vacation Group, Conoco, Inc., Fannie Mae, GVG, The St. Paul
Companies, Inc. and on the Board of Governors for the American
Stock Exchange and the National Association of Securities Dealers.
He serves on a wide range of educational, cultural and volunteer
boards: Vice Chairman of the Kennedy Center for Performing Arts,
Chairman of Ethics Oversight Committee for U.S. Olympics
Committee, trustee of Franklin & Marshall College and Johns
Hopkins University, the Council on Foreign Relations, the
Institute of Politics at Kennedy School and National Alliance to
End Homelessness.
ARCHIE R. DYKES (71), 1981
Chairman and chief executive officer of Capital City Holdings,
Inc. (a venture capital organization). He is senior chairman and a
director of PepsiAmericas, Inc. (formerly Whitman Corporation),
Midas, Inc. and the Employment Corporation. A former chancellor of
the University of Kansas and of the University of Tennessee, Mr.
Dykes also serves as a trustee of the Kansas University Endowment
Association and of the William Allen White Foundation.
5
CAROL B. HALLETT (64), 1993
President and chief executive officer of the Air Transport
Association of America, Washington, D.C. (the nation's oldest and
largest airline trade organization, carrying 97% of the passengers
and cargo in the United States). Prior to joining the Air
Transport Association in April 1995, Mrs. Hallett served as senior
government relations advisor with Collier, Shannon, Rill & Scott
from February 1993 to March 1995. From November 1989 through
January 1993, Mrs. Hallett served as the Commissioner of the
United States Customs Service. From September 1986 to May 1989,
she served as the U.S. Ambassador to The Commonwealth of the
Bahamas. From July 1983 to August 1986, Mrs. Hallett served as the
national vice chairman and field director of Citizens for America.
Mrs. Hallett also served three terms in the California legislature
and as minority leader in the State Assembly. Mrs. Hallett is a
director of Mutual of Omaha Insurance Company. She is a trustee
for the Junior Statesmen of America. Mrs. Hallett also serves on
the President's Cabinet of California Polytechnic State
University.
ROBERT S. HAMADA (64), 2001
The Edward Eagle Brown Distinguished Service Professor of Finance
at the University of Chicago Graduate School of Business and CEO
of Merchants' Exchange. An internationally known authority in
finance, Mr. Hamada has been a member of the faculty of the
University of Chicago since 1966, during which time he has served
as dean from 1993 through June 2001, director of the Center for
International Business and Research from 1992 to 1993, as deputy
dean for the faculty at the Graduate School of Business from 1985
to 1990, and as director of the Center for Research in Security
Prices from 1980 to 1985. Mr. Hamada is a director of Northern
Trust Corporation, A.M. Castle & Co., Flying Food Fare, Window to
the World Communications, Inc. (WTTW Channel 11), Terra Foundation
for the Arts, the National Bureau of Economic Research, and
Merchants' Exchange.
MARK S. HANSEN (47), 1998
Chairman and chief executive officer. Mr. Hansen served as
president and chief executive officer of SAM'S Club, a division of
Wal-Mart Stores, Inc., from 1997 through 1998. Prior to joining
Wal-Mart, Mr. Hansen served in multiple capacities from 1989 to
1997 including as president and chief executive officer of
PETsMART, Inc., a retailer of pet food, pet supplies and related
products. Prior to 1989, Mr. Hansen served in various management
capacities in the supermarket industry. He serves as an executive
advisory board member of Swander Pace Capital and is a director of
Applebee's Restaurants and Amazon.com.
ALICE M. PETERSON (49), 1998
Alice Peterson is the president of Loretto Group, a finance and
strategy consulting firm. She served as president of RIM Finance,
LLC. (a wholly-owned subsidiary of the Canadian company, Research
In Motion Limited, the maker of the BlackBerry wireless handheld
devices), from December 2000 to September 2001. From April 2000 to
September 2000, Ms. Peterson served as Chief Executive Officer of
GuidanceResources.com (an Internet-based service that employers
provide as a value-added benefit to enhance employee
productivity). From October 1998 to February 2000, Ms. Peterson
served as vice president and general manager of Sears Online, the
unit of Sears, Roebuck and Co. where all business-to-consumer
Internet activities are conducted, including interactive
marketing. Ms. Peterson was vice president and treasurer of Sears,
Roebuck and Co. from 1993 to 1998. She joined that company in 1989
as corporate director of finance, became managing
director -- corporate finance in 1992, and vice
president -- treasurer in 1993. Prior to joining Sears, Ms.
Peterson served as assistant treasurer of Kraft, Inc. from 1988 to
1989. From 1984 to 1988, Ms. Peterson served in a variety of
financial positions for PepsiCo, Inc. where her last position held
was director of capital markets. Ms. Peterson is a director of RIM
Finance, LLC and she serves on the Ravinia Festival Board of
Trustees.
6
Information regarding our executive officers is contained in the company's
annual report on Form 10-K for the company's fiscal year ended December 29, 2001
under the heading "Executive Officers of the Registrant." The following
description updates and supplements the information contained in our 2001 annual
report.
Thomas G. Dahlen joined us as our executive vice president and
president, retail and corporate marketing in April 2001. From 1999
until joining us, Mr. Dahlen served as president and chief
executive officer of Furrs Supermarkets, Inc. Mr. Dahlen was
president and chief executive officer of Furrs Supermarkets, Inc.
when it filed for Chapter 11 Bankruptcy Protection in February
2001. From 1994 until 1999, Mr. Dahlen served in multiple
capacities at Ralph's Supermarkets Division of the Yucaipa
Companies, including executive vice president from 1998 to 1999,
and senior vice president, sales and marketing from 1994 to 1998.
7
BOARD AND COMMITTEE MEETINGS
Our board of directors met 9 times in 2001.
-----------------------------------------------------------------------------------------------
NUMBER OF
MEETINGS IN
COMMITTEE AND MEMBERS FUNCTIONS OF COMMITTEE 2001
-----------------------------------------------------------------------------------------------
AUDIT AND COMPLIANCE - Considers selection of independent
Carol B. Hallett auditors and recommends appointment
Edward C. Joullian III - Reviews scope of annual audit and
Alice M. Peterson* auditors' annual report and discusses
reviews of interim financial
information
- Oversees internal audit programs and 4
policies, as well as programs related
to ethical standards and compliance
- Addresses independent auditors'
relationships with, and non-audit
services provided to, Fleming
- See Exhibit E to this proxy statement
-----------------------------------------------------------------------------------------------
COMPENSATION AND ORGANIZATION - Oversees all compensation and benefits
Herbert M. Baum policies and programs
Carol B. Hallett - Reviews objectives, structure, cost
Edward C. Joullian III and administration of major compensation 3
Guy A. Osborn* and benefits policies and programs
- Administers stock option and incentive
plans
-----------------------------------------------------------------------------------------------
CORPORATE GOVERNANCE/NOMINATING - Considers matters relating to
Archie R. Dykes* corporate governance
Kenneth M. Duberstein - Establishes standards, subject to
Robert S. Hamada annual review, for governing operation
Guy A. Osborn of Fleming by the board through
management
- Assesses board and committee
effectiveness on an annual basis
- See Exhibit F to this proxy statement 1
- Develops and recommends guidelines and
criteria for selecting directors
- Recommends nominees
- Considers shareholder recommendations
and makes recommendations on board
composition
- See Exhibits G-1 and G-2 to this proxy
statement
-----------------------------------------------------------------------------------------------
EXECUTIVE COMMITTEE - Oversees executive and company matters
Herbert M. Baum - Manages the business of Fleming as
Mark S. Hansen* delegated by the board 8
Edward C. Joullian III
-----------------------------------------------------------------------------------------------
FINANCE - Reviews all financial matters not
Herbert M. Baum* under the authority of the audit and
Archie R. Dykes compliance committee or indenture
Robert S. Hamada committee
Alice M. Peterson - Oversees pension plans, funds and 3
trusts
- Oversees investment policy with
respect to pension trust assets
- Reviews long-term financial strategy
-----------------------------------------------------------------------------------------------
* Chairperson
8
REPORT OF THE AUDIT & COMPLIANCE COMMITTEE
The audit and compliance committee is appointed by the board and operates
pursuant to a written charter that was adopted by the board in May 2000. The
Audit and Compliance Committee Charter is attached as Exhibit E to this proxy
statement.
Under the terms of its charter, the audit and compliance committee approves
fees paid by Fleming to its independent auditor. For the fiscal year ending
December 29, 2001, Fleming paid the following fees to Deloitte & Touche LLP:
AUDIT FEES. The aggregate fees for professional services rendered by
Deloitte & Touche in connection with their audit of our consolidated
financial statements and reviews of the consolidated financial statements
included in our Quarterly Reports on Form 10-Q for 2001 was approximately
$1 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were
no professional services rendered by Deloitte & Touche in 2001 relating to
financial information systems design and implementation.
ALL OTHER FEES. The aggregate fees for all other services rendered by
Deloitte & Touche in 2001 was approximately $2.2 million and can be
sub-categorized as follows:
Attestation Fees. The aggregate fees for attestation services rendered
by Deloitte & Touche for matters such as comfort letters and consents
related to SEC and other registration statements, audits of employee
benefit plans, agreed-upon procedures, due diligence pertaining to
acquisitions and consultation on accounting standards or transactions
was approximately $400,000.
Other Fees. The aggregate fees for all other services, such as
consultation related to tax planning and compliance, improving business
and operational processes and regulatory matters, rendered by Deloitte &
Touche in 2001 was approximately $1.8 million.
The decision of the board to appoint Deloitte & Touche LLP as independent
auditors of the company in 2002 is based on the recommendation of the audit and
compliance committee. Before making its recommendation to the board, the audit
and compliance committee carefully considered Deloitte & Touche's qualifications
as independent auditors for Fleming. This included a review of the
qualifications of the engagement team, the quality control procedures
established by Deloitte & Touche, any issues raised by the most recent quality
control review of the auditors, and the auditor's reputation for integrity and
competence in the fields of accounting and auditing. The audit and compliance
committee also reviewed matters required to be considered under the rules on
auditor independence, and as described below. The audit and compliance committee
expressed its satisfaction with Deloitte & Touche in all of these respects. The
board and the audit and compliance committee in their discretion may change the
appointment of the Company's auditors at any time during the year if they
determine that such change would be in the best interest of the Company and its
shareholders.
Specifically, in fulfilling its duties for the 2001 fiscal year, the audit
and compliance committee has done each of the following:
- reviewed Fleming's audited financial statements for 2001 and discussed
the financial statements with Fleming's management;
- discussed with Deloitte & Touche the matters required to be discussed
with the auditor by the Auditing Standards Board Statement on Auditing
Standards No. 61;
- received written disclosure from Deloitte & Touche about any
relationships between Deloitte & Touche and Fleming which the auditor
believes may affect its independence;
9
- received a confirmation letter from Deloitte & Touche that the auditor is
independent of Fleming;
- discussed Deloitte & Touche's independence with the auditor; and
- considered whether the provision of services by Deloitte & Touche, other
than audit services, are compatible with maintaining Deloitte & Touche's
independence.
Based on the review and discussions above, the audit and compliance
committee recommended to the board that the audited financial statements for
2001 be included in Fleming's 10-K filed with the Securities and Exchange
Commission.
Ms. Peterson and Mrs. Hallett are "independent" in accordance with the New
York Stock Exchange listing standards. Mr. Joullian served as Fleming's interim
chairman for a brief period in 1998. The board of directors determined that, in
its opinion, Mr. Joullian is independent of management and has no relationship
that would interfere with the exercise of his independent judgment as a member
of the audit and compliance committee. In reaching its determination, the board
took into consideration the brevity of Mr. Joullian's tenure as an officer of
Fleming, his previous service as an independent director, the fact that he
served as interim chairman only during the process of identifying a new chairman
and the fact that more than two years had passed since he was an officer of the
company.
Alice M. Peterson, Chairperson
Carol B. Hallett
Edward C. Joullian III
10
DIRECTORS' COMPENSATION
Directors who are also associates of Fleming do not receive compensation
for serving on the board of directors or its committees other than their normal
salaries. For 2001, directors who are not associates of Fleming were entitled to
receive the compensation set forth below.
STOCK BASED COMPENSATION
- 3,500 shares of restricted stock - Prior to vesting, shares have voting and
CASH COMPENSATION dividend rights.
- annual retainer of $10,000 to be paid quarterly - Shares will vest one year from March 15,
2001 if adjusted net earnings from
- $1,000 for each board or committee meeting attended* operations for the fiscal year preceding
the date of such determination exceed
- $5,000 annual retainer for chairing a committee to be paid adjusted net earnings from operations
quarterly for the fiscal year prior to the date of
the award by at least 5%.
- reimbursement of travel expenses for attending meetings
- Shares are held in escrow by Fleming's
--------------- corporate secretary, pending vesting.
* No fees are paid for telephone board meetings unless they
are longer than thirty minutes and are meetings for which - Shares that do not vest or are not
an agenda has been set. otherwise accelerated will be forfeited.
STOCK OWNERSHIP REQUIREMENTS
- If, on a date prior to the end of the
In February 2001, the board adopted stock ownership first year vesting period, a director
requirements for directors. Directors who are not also ceases to be a member of the board,
associates of Fleming must own $100,000 of Fleming common under certain conditions, vesting can be
stock within four years of initially being elected. accelerated.
The board also adopted stock ownership requirements for
corporate officers which are described on page 20.
11
BENEFICIAL OWNERSHIP
This table indicates how much Fleming common stock and stock equivalent
units were beneficially owned as of March 21, 2002 by the directors, nominees
and each of the named executive officers listed in the Summary Compensation
Table who retained his position as of March 21, 2002 and by beneficial owners of
more than 5% as of the dates indicated in the footnotes. Beneficial ownership of
directors and executive officers as a group (24 persons) represents 4.85% of the
total outstanding shares. No director or executive officer owns in excess of 1%
of the outstanding shares except for Mr. Hansen. As of March 21, 2002,
44,516,965 shares of Fleming common stock were issued and outstanding.
-------------------------------------------------------------------------------------------------------------
EXECUTIVE
SHARES OF DIRECTORS' OFFICERS'
COMMON STOCK STOCK STOCK
BENEFICIALLY EQUIVALENT EQUIVALENT PERCENT
NAME OWNED(1) UNITS(2) UNITS(3) OF CLASS
-------------------------------------------------------------------------------------------------------------
Mark S. Hansen(4)(5) 990,649 -- 100,000 2.19%
-------------------------------------------------------------------------------------------------------------
Herbert M. Baum(5)(6) 6,250 1,631 -- --
-------------------------------------------------------------------------------------------------------------
Archie R. Dykes(6) 14,984 5,314 -- --
-------------------------------------------------------------------------------------------------------------
Kenneth M. Duberstein(5) -- -- -- --
-------------------------------------------------------------------------------------------------------------
Carol B. Hallett(5)(6) 8,439 5,612 -- --
-------------------------------------------------------------------------------------------------------------
Robert S. Hamada(5) 4,000 306 --
-------------------------------------------------------------------------------------------------------------
Edward C. Joullian(6)(7) 29,105 14,337 -- --
-------------------------------------------------------------------------------------------------------------
Alice M. Peterson(6) 13,750 2,250 -- --
-------------------------------------------------------------------------------------------------------------
Thomas G. Dahlen(4)(5) 144,993 -- 66,000 --
-------------------------------------------------------------------------------------------------------------
E. Stephen Davis(4)(5)(6)(7) 198,593 -- 66,000 --
-------------------------------------------------------------------------------------------------------------
William H. Marquard(4) 156,000 -- 50,000 --
-------------------------------------------------------------------------------------------------------------
Neal J. Rider(4)(7) 289,217 -- 66,000 --
-------------------------------------------------------------------------------------------------------------
All directors and executive officers as a
group(4)(5)(6)(7) 2,228,184 29,450 918,000 4.85%
-------------------------------------------------------------------------------------------------------------
FMR Corp.(8)
82 Devonshire Street
Boston, Massachusetts 02109 5,744,152 -- -- 7.62%
-------------------------------------------------------------------------------------------------------------
Mellon Financial Corporation(9)
One Mellon Center
Pittsburgh, Pennsylvania 15258 6,222,897 -- -- 13.99%
-------------------------------------------------------------------------------------------------------------
Southeastern Asset Management, Inc.(10)
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119 7,790,900 -- -- 11.58%
-------------------------------------------------------------------------------------------------------------
---------------
(1) This column includes Fleming common stock held by directors and officers or
by certain members of their families (for which the directors and executive
officers have sole or shared voting or investment power), Fleming common
stock which the officers have the right to acquire within 60 days of March
21, 2002 under Fleming's stock option and stock incentive plans and shares
of Fleming restricted common stock, subject to forfeiture, awarded under
Fleming's stock incentive plans.
(2) These stock equivalent units are payable in cash only when a director
ceases to be a member of the board.
12
(3) In November of 2001, Fleming converted the following stock equivalent units
to stock options:
Hansen 200,000 stock equivalent units
Dahlen 134,000 stock equivalent units
Davis 134,000 stock equivalent units
Marquard 100,000 stock equivalent units
Rider 134,000 stock equivalent units
All officers as a group (including those named above): 992,000 stock
equivalent units converted into stock options
(4) The amounts shown include shares which the following persons have the right
to acquire within 60 days of March 21, 2002 under the company's stock
option and stock incentive plans:
Hansen 699,999 shares
Dahlen 142,000 shares
Davis 131,750 shares
Marquard 112,500 shares*
Rider 242,000 shares
All directors and officers as a group (including those named above):
1,652,999
* Includes 6,250 securities underlying options as to which Mr. Marquard can
only exercise upon instructions from a third party for shares that Mr.
Marquard will not beneficially own upon exercise.
(5) The following shares have been excluded from the share totals for
individuals named in the table and all directors and officers as a group as
they do not have voting or investment power with respect to such shares:
Hansen 100,000 shares of restricted stock
Baum 3,500 shares of restricted stock
Duberstein 3,500 shares of restricted stock
Hallett 3,500 shares of restricted stock
Hamada 3,500 shares of restricted stock
Dahlen 25,000 shares of restricted stock
Davis 100,000 shares of restricted stock
All directors and officers as a group (including those named above):
295,666 shares of restricted stock
(6) The individuals and group named in the table have sole voting power with
respect to the following shares of restricted stock:
Baum 5,250 shares
Dykes 8,750 shares
Hallett 5,250 shares
Joullian 8,750 shares
Peterson 8,750 shares
Davis 8,000 shares
All directors and officers as a group (including those named above): 45,550
shares
13
(7) The individuals and group named in the table have shared voting and
investment power with respect to the following shares of common stock:
Joullian 20,355 shares
Davis 9,000 shares
Rider 20,000 shares
All directors and officers as a group (including those named above): 85,611
shares
(8) In a Schedule 13G filed February 11, 2002, FMR Corp. disclosed that it held
5,744,152 shares of Fleming common stock, had sole power to vote or direct
the vote of 416,500 of the shares and had sole power to dispose of, or
direct the disposition of, all shares.
(9) In a Schedule 13G filed January 9, 2002, Mellon Financial Corporation
disclosed that it held 6,222,897 shares of Fleming common stock and that it
shared voting power with respect to 385,400 shares with The Boston Company,
Inc. and The Boston Company Asset Management L.L.C. and shared dispositive
power with respect to 9,700 shares with The Boston Company, Inc. In the
same Schedule 13G, Mellon Financial Corporation disclosed that it had sole
voting power with respect to 5,202,597 shares and sole dispositive power
with respect to 6,196,622 shares.
(10) In a Schedule 13G filed March 7, 2002, Southeastern Asset Management, Inc.
disclosed that it held 7,790,900 shares of Fleming common stock and that it
shared voting and dispositive power with respect to 6,419,000 of the held
shares with Longleaf Partners Small-Cap Fund. In the same Schedule 13G,
Southeastern Asset Management disclosed that it had sole power to vote
694,900 shares, had sole power to dispose of 1,371,900 shares, and had no
voting power with regard to 677,000 shares. The Schedule 13G identifies Mr.
O. Mason Hawkins as Chairman of the Board and Chief Executive Officer of
Southeastern Asset Management, but Mr. Hawkins does not claim any voting or
dispositive power with regard to the shares of Fleming common stock held by
Southeastern.
14
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
--------------------------- -----------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP
(SALARY) BONUS COMPENSATION AWARDS OPTIONS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#) ($)(4)
------------------------------------------------------------------------------------------------------------------------------
Mark S. Hansen 2001 850,179 2,618,000 90 -- 200,000 850,000
Chairman and Chief 2000 847,115 1,700,000 90 4,481,250 -- --
Executive Officer 1999 750,000 980,813 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Thomas G. Dahlen 2001 365,384 1,220,871 -- 629,375 434,000 500,000
Executive Vice President- 2000 -- -- -- -- -- --
President of Retail and 1999 -- -- -- -- -- --
Corporate Marketing
------------------------------------------------------------------------------------------------------------------------------
E. Stephen Davis 2001 481,562 1,650,000 396 -- 134,000 --
Executive Vice President- 2000 393,654 600,000 396 -- -- --
President of Wholesale 1999 330,858 342,104 570 690,000 25,000 --
------------------------------------------------------------------------------------------------------------------------------
William H. Marquard 2001 420,313 1,109,194 60 -- 100,000 425,000
Executive Vice President- 2000 407,692 600,000 60 -- 25,000(6) --
Chief Knowledge Officer 1999 229,231 261,550 -- 418,750 200,000(7) --
------------------------------------------------------------------------------------------------------------------------------
Neal J. Rider 2001 490,456 1,150,000 36 -- 134,000 500,000
Executive Vice President- 2000 516,735 675,000 36 223,438 350,000 --
Chief Financial Officer 1999 -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(5)
------------------------------------- --------------
Mark S. Hansen 157,989
Chairman and Chief 65,335
Executive Officer 90,818
-----------------------------------------------------
Thomas G. Dahlen 500,108
Executive Vice President- --
President of Retail and --
Corporate Marketing
-----------------------------------------------------
E. Stephen Davis 52,337
Executive Vice President- 6,029
President of Wholesale --
-----------------------------------------------------
William H. Marquard 117,930
Executive Vice President- 156,082
Chief Knowledge Officer 232,270
-----------------------------------------------------
Neal J. Rider 34,811
Executive Vice President- 446,974
Chief Financial Officer --
-----------------------------------------------------
---------------
(1) Mr. Hansen's bonus includes $850,000 earned under the Key Executive
Performance Plan. Mr. Dahlen's bonus includes $500,000 earned under the Key
Executive Performance Plan. Mr. Marquard's bonus includes $425,000 earned
under the Key Executive Performance Plan. Mr. Rider's bonus includes
$500,000 earned under the Key Executive Performance Plan. Mr. Davis' bonus
includes $1,000,000 which is contingent upon his continuous employment with
the company through June 30, 2002.
(2) The company provides term life insurance to all associates. There is no
imputed income to the associate with respect to the first $50,000 of
coverage except for highly compensated associates. Accordingly, the company
is required to impute income to the named individuals with respect to the
first $50,000 of coverage and reimburses them for its tax effect. The
amounts shown in this column reflect such tax reimbursement amounts.
15
(3) The following officers received restricted stock awards in connection with
their employment with Fleming which vest as follows based on their
continuous employment through the applicable vesting dates:
Hansen 300,000 shares on 300,000 shares vested on
February 29, 2000 February 28, 2002
Dahlen 25,000 shares on 8,334 shares will vest
April 8, 2001 on April 8, 2002;
8,333 shares will vest
on April 8, 2003;
8,333 shares will vest
on April 8, 2004
Davis 60,000 shares on 60,000 shares vested on
July 20, 1999 September 14, 2001
Marquard 20,000 shares on 10,000 shares vested on
June 1, 1999 June 1, 2000;
10,000 shares vested on
June 1, 2001
20,000 shares on 10,000 shares vested on
December 21, 1999 December 21, 2000;
10,000 shares vested on
December 21, 2001
Rider 25,000 shares on 12,500 shares vested on
January 18, 2000 January 18, 2001;
12,500 shares vested on
January 18, 2002
All shares of restricted stock will vest upon the occurrence of a change
of control and upon termination of the executive's employment due to death
or disability, without cause or by the executive for good reason. As of
December 29, 2001, Fleming's Secretary held in escrow the following shares
of restricted stock for each officer with the following values (based on
the market price per share of $19.11 on December 28, 2001):
Hansen 300,000 shares $5,733,000
Dahlen 25,000 shares $ 477,750
Davis 108,000 shares $2,063,880
Rider 12,500 shares $ 238,875
(4) Amounts earned under the Key Executive Performance Plan are subject to a
3-year vesting schedule. See Long-Term Incentive Plans -- Awards in Last
Fiscal Year.
16
(5) Included in this column are the following amounts:
Mr. Hansen For 2001: $84,708 attributable to personal use of
the company plane (includes reimbursement for his
tax liability associated with such amount) and
$73,281 for relocation expenses. For 2000: $64,200
attributable to personal use of the company plane
(includes reimbursement for his tax liability
associated with such amount) and $1,135 for moving
expenses. For 1999: $52,145 attributable to
personal use of the company plane (includes
reimbursement for his tax liability associated with
such amount) and $38,673 for relocation expenses.
Mr. Dahlen For 2001: $27,850 attributable to personal use of
the company plane (includes reimbursement for his
tax liability associated with such amount), $33,991
for relocation expenses and $438,267 for
reimbursement for taxes incurred in connection with
an 83(b) election.
Mr. Davis For 2001: $35,101 attributable to personal use of
the company plane for commuting (includes
reimbursement for his tax liability associated with
such amount) and $17,236 for temporary living
expenses. For 2000: $1,029 for moving expenses and
$5,000 for loss of company car.
Mr. Marquard For 2001: $68,460 attributable to personal use of
the company plane (includes reimbursement for his
tax liability associated with such amount) for
commuting, $12,815 for transportation allowance and
$36,655 for temporary living expenses. For 2000:
$39,208 attributable to personal use of the company
plane (includes reimbursement for his tax liability
associated with such amount), $36,850 for temporary
living expenses, $67,210 for reimbursement for
taxes incurred in connection with an 83(b) election
and $12,814 for transportation allowance. For 1999:
$196,547 reimbursement for his tax liability
associated with restricted stock awards, $28,248
for temporary living expenses and $7,475 for
transportation allowance.
Mr. Rider For 2001: $34,811 attributable to personal use of
the company plane (includes reimbursement for his
tax liability associated with such amount). For
2000: $26,938 attributable to personal use of the
company plane (includes reimbursement for his tax
liability associated with such amount), $11,226 for
expenses incurred in connection with the sale of
his home, $253,219 for moving expenses and $155,591
for reimbursement for taxes incurred in connection
with an 83(b) election.
(6) Includes 12,500 securities underlying options as to which Mr. Marquard can
only exercise upon instructions from a third party for shares that Mr.
Marquard will not beneficially own upon exercise.
(7) Includes 100,000 securities underlying options as to which Mr. Marquard can
only exercise upon instructions from a third party for shares that Mr.
Marquard will not beneficially own upon exercise.
17
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
COMPENSATION PHILOSOPHY
The company's compensation philosophy is based primarily on "pay for
performance" and a significant portion of our executive compensation is
incentive based. The objectives of the Fleming executive compensation programs
are to motivate executive officers to enhance financial performance by focusing
attention on specific business objectives emphasizing company profitability and
teamwork, and to reward executive officers based on company and individual
performance.
There are three parts to Fleming's executive compensation program:
- Base salary;
- Annual bonuses; and
- Stock based compensation.
The compensation and organization committee, comprised of non-management
directors, administers the executive compensation programs, policies and
practices. The committee decides compensation for all executive officers, except
the chief executive officer, upon recommendation of the chief executive officer.
The committee's decisions are submitted to the full board of directors for its
information and review only. The chief executive officer, who is also a
director, does not participate in the board's review of the committee's
decisions regarding his compensation.
BASE SALARIES
Decisions as to base salary for the named executive officers for 2001, were
determined by the committee in reliance on the company's salary administration
program, the objectives of which are to attract, retain and motivate productive
executive officers. For each job classification, the program requires a written
job description, an evaluation of the job with assigned points based on the
nature of the job, its function and the level of the position, and an assigned
salary range based on the total point value. Mr. Dahlen's base salary was based
on the negotiation of his employment agreement. Decisions as to Mr. Dahlen's
employment agreement were based on the committee's view that the company needed
to attract a top notch candidate to his position, the value of an executive such
as Mr. Dahlen in the market place and the general competition for executives of
his caliber. Annual salaries are adjusted based on individual performance. In
addition, the committee reviews the earnings of the company and the market value
of the company's common stock for the previous fiscal year-end and, based on
these factors, the committee makes a subjective determination of the nature and
extent of salary adjustments. The committee generally establishes target
salaries in the middle of the assigned salary ranges. In order to measure
competitiveness, the committee also considers salary surveys comparing company
jobs with similar jobs held by employees of companies included in the company's
peer group. See "Company Performance."
BONUSES
CORPORATE OFFICER INCENTIVE PLAN
Bonuses are paid to executives under the Corporate Officer Incentive Plan.
The plan has the following primary goals:
- Attain substantial improvement in sales;
- Substantially improve earnings;
- Provide a concrete and understandable linkage between performance, reward
and share value creation for shareholders; and
- Encourage teamwork.
Bonus awards are based on pre-determined performance targets in relation to
adjusted earnings per share, sales and adjusted earnings. In order to be
entitled to a bonus, the adjusted earnings per share target must be met or
exceeded. Then, the bonus will be weighted based on sales and adjusted earnings.
For fiscal 2001, the
18
committee determined that 60% of the bonus would be based on sales and 40% would
be based on adjusted earnings. The bonus for fiscal 2001 was determined and
certified by the committee at its meeting in February 2002. Target percentages
for all executive officers were set based on position and responsibilities,
comparative market place data and internal equity. Since the adjusted earnings
per share target for 2001 was met, all executive officers received a bonus for
2001. These bonuses were paid in March 2002.
KEY EXECUTIVE PERFORMANCE PLAN
Bonuses are also paid to certain executives under the Key Executive
Performance Plan (formerly known as the Key Executive Retention Plan). The
Performance Plan has the following primary goals:
- Improve earnings;
- Encourage certain key executives to remain with the company;
- Provide a concrete and understandable linkage between performance,
rewards and share value creation for shareholders; and
- Encourage teamwork.
Awards are based upon the achievement of predetermined performance targets
based upon earnings per share. In order to be entitled to an award, the earnings
per share for the award year must exceed the prior year's earnings per share by
at least 5%. For fiscal 2001, the committee determined that the executives
participating in the Performance Plan would be eligible to receive an award of
200% of base salary if the target was achieved. During its meeting on February
26, 2002, the committee determined that the awards for fiscal 2001 were earned
and certified that the performance target was met. Because the target for 2001
was achieved, all executive officers selected to participate in the Performance
Plan in 2001 were determined to have earned their award and were eligible to
receive one-half of their earned award. The balance of the earned award is still
subject to a vesting schedule as established in the participants' agreements.
STOCK BASED COMPENSATION
The committee can award restricted stock and stock options to executives
and other key associates under the company's stock option and stock incentive
plans. The committee believes stock based compensation is important in aligning
the interests of executives and shareholders. The committee believes restricted
stock awards build stock ownership and provide a long-term focus since the stock
is restricted from being sold, transferred or assigned and is forfeitable until
vested. The committee believes stock options help to retain and motivate key
associates. All named executive officers received stock option grants during
fiscal 2001. The basis of the grants was not only to provide incentive to these
executives to drive company performance, but also to help retain these
executives in an increasingly competitive market for top talent.
CHIEF EXECUTIVE OFFICER
Mark S. Hansen became chief executive officer of the company on November
30, 1998. His salary for 2001 was determined by the committee considering the
following factors: competitive levels of compensation, his experience in
managing operations of a size and complexity similar to the company, his general
knowledge of the distribution and retail food industry, his track record in
making changes and the committee's belief that Mr. Hansen has the qualifications
necessary to responsibly manage the company. His bonus for 2001 was determined
in accordance with the Corporate Officer Incentive Plan which provides for a
bonus if certain pre-determined levels of adjusted earnings per share, sales and
adjusted earnings are met. The amount of his bonus was based on a percentage of
his salary.
19
MANAGEMENT STOCK OWNERSHIP GUIDELINES
Fleming is committed to strengthening the alignment of its executives'
financial interests with those of its shareholders. Corporate officers are
required to own the following levels of stock:
---------------------------------------------------------------
POSITION STOCK OWNERSHIP LEVEL
---------------------------------------------------------------
Chairman and CEO 3 times base salary
---------------------------------------------------------------
Executive Vice Presidents 2 times base salary
---------------------------------------------------------------
Senior Vice Presidents 1.5 times base salary
---------------------------------------------------------------
Vice Presidents 1 times base salary
---------------------------------------------------------------
Officers must meet the required stock ownership levels by March 2004 or
five years from their election as an officer, whichever is later. Neither
unvested restricted stock nor vested or unvested stock options are counted for
purposes of determining stock ownership. Fleming has a loan program which
provides full recourse loans to executive officers in order to assist them in
meeting their required stock ownership levels. The loans bear interest at an
annual rate of 7%, but such accrued interest is forgiven so long as the
executive remains employed by us. None of the named executive officers
participated in the loan program during 2001. However, Mr. Rider participated in
the loan program in 2000, obtaining a loan for $150,153.94 from the company to
purchase shares of Fleming common stock on March 3, 2000. As of March 21, 2002,
the entire amount of this loan remained outstanding. At March 21, 2002, officers
subject to the stock ownership requirements owned a total of 610,743 shares of
Fleming Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Joullian served as Fleming's interim chairman of the board of directors
for a brief period in 1998.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The committee has adopted and the board of directors has ratified the
following policy regarding Section 162(m) of the Internal Revenue Code of 1986,
as amended:
Section 162(m) limits the deductibility of certain compensation paid by the
company to certain of its executive officers. It is possible that future
circumstances may warrant compensation payments which will not qualify as a tax
deductible expense. It shall be the policy of the committee to compensate
executive officers based on performance, and the committee recognizes that
flexibility with respect to the payment of compensation must be insured in order
to maintain this policy. Accordingly, although the committee will to the extent
possible attempt to qualify all compensation payments for deductibility under
Section 162(m), circumstances may arise which require it to authorize
compensation which is not deductible under Section 162(m).
Guy A. Osborn, Chairman Carol B. Hallett
Herbert M. Baum Edward C. Joullian III
20
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the company, the S&P 500 composite index and an index of peer
companies selected by the company with the investment weighted based on market
capitalization at the beginning of each year.
(PERFORMANCE GRAPH)
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------------
Fleming Companies, Inc. 100 78 61 61 70 114
S&P 500 100 133 171 205 180 162
Peer Group 100 126 138 96 82 139
The total cumulative return on investment (change in the year-end stock
price plus reinvested dividends) for each year for the company, the peer group
and the S&P 500 composite is based on the stock price or composite index at the
end of calendar 1996.
Companies in the peer group are as follows: SUPERVALU, Inc., Nash Finch
Company, and Richfood Holdings, Inc., which was acquired by SUPERVALU, Inc. in
1999.
21
STOCK OPTION INFORMATION
OPTION GRANTS
This table sets forth information concerning the grant of stock options to
the named executive officers during the fiscal year ended December 29, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR
OPTIONS EMPLOYEES BASE GRANT DATE
GRANTED IN PRICE EXPIRATION PRESENT
NAME (#)(4) FISCAL YEAR ($/SH) DATE VALUE $(5)
----------------------------------------------------------------------------------------------------------
Mark S. Hansen (1) 100,000 4.67% 24.30 11/1/11 1,316,665
----------------------------------------------------------------------------------------------------------
Mark S. Hansen (2) 100,000 4.67% 24.30 11/1/11 1,251,936
----------------------------------------------------------------------------------------------------------
Thomas G. Dahlen (1) 67,000 3.13% 23.85 11/1/11 865,126
----------------------------------------------------------------------------------------------------------
Thomas G. Dahlen (2) 67,000 3.13% 24.30 11/1/11 838,797
----------------------------------------------------------------------------------------------------------
Thomas G. Dahlen (3) 300,000 14.02% 25.175 4/7/11 3,889,175
----------------------------------------------------------------------------------------------------------
E. Stephen Davis (1) 67,000 3.13% 23.85 11/1/11 865,126
----------------------------------------------------------------------------------------------------------
E. Stephen Davis (2) 67,000 3.13% 24.30 11/1/11 838,797
----------------------------------------------------------------------------------------------------------
William H. Marquard (1) 50,000 2.34% 24.30 11/1/11 658,332
----------------------------------------------------------------------------------------------------------
William H. Marquard (2) 50,000 2.34% 24.30 11/1/11 625,968
----------------------------------------------------------------------------------------------------------
Neal J. Rider (1) 67,000 3.13% 24.30 11/1/11 882,165
----------------------------------------------------------------------------------------------------------
Neal J. Rider (2) 67,000 3.13% 24.30 11/1/11 838,797
----------------------------------------------------------------------------------------------------------
---------------
(1) The listed options vest in full and are exercisable on February 27, 2002.
(2) The listed options vest in full and are exercisable on February 27, 2003.
(3) The listed options are exercisable in four twenty-five percent (25%)
increments beginning April 8, 2002.
(4) The vesting of all options accelerates in the case of a change of control of
the company. In the case of Messrs. Hansen and Marquard, if their employment
is terminated within one year following a change of control of the company,
they will each have three years from such termination date to exercise their
stock options. All executives have three years following retirement to
exercise any options which have vested as of their retirement date.
(5) Based on Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
assumptions as to variables such as risk free interest rate, stock price
volatility and future dividend yield as follows: the options are assumed to
be exercised at the end of a ten year term; yield volatility of 42.81%;
annual dividend yield ranging from .22% to .70% and a risk free rate of
return ranging from 3.71% to 5.09%.
22
OPTION EXERCISES
This table sets forth information regarding the value as of the fiscal year
ended December 29, 2001 of any unexercised options held by the named executive
officers who retained their positions with the company as of such date. No stock
options were exercised by any of the named executive officers for their benefit
during the fiscal year ended December 29, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
-----------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---------------------------------------------------------------------------------------------------------
Mark S. Hansen -- -- 599,999/400,001 5,608,934/1,869,658
Thomas G. Dahlen -- -- 0/434,000 0/0
E. Stephen Davis -- -- 58,500/160,500 185,759/144,734
William H. Marquard (2) -- 56,250/218,750(3) 472,203/970,484(4)
Neal J. Rider -- -- 87,500/396,500 888,138/2,664,413
-----------------------------------------------------------------------------------------------------------
---------------
(1) The market price of the company's common stock at 2001 fiscal year-end was
$19.11 per share.
(2) Mr. Marquard exercised options to purchase 25,000 shares upon the
instructions of a third party. Mr. Marquard did not acquire beneficial
ownership of the shares upon exercise of the options.
(3) Includes 3,125/59,375 securities underlying options as to which Mr. Marquard
can only exercise upon instruction from a third party that Mr. Marquard will
not beneficially own upon exercise.
(4) Includes $13,039/485,242 applicable to options which Mr. Marquard can only
exercise upon instruction from a third party and which Mr. Marquard will not
beneficially own upon such exercise.
23
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
PERFORMANCE OR
NUMBER OF SHARES, OTHER PERIOD ------------------------------------
UNITS OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---------------------------------------------------------------------------------------------------------------------
Mark S. Hansen(1) 100,000 2/27/04 -- -- --
Mark S. Hansen(2) -- -- $850,000 $850,000 $850,000
Thomas G. Dahlen(1) 66,000 4/08/04 -- -- --
Thomas G. Dahlen(2) -- -- $500,000 $500,000 $500,000
E. Stephen Davis(1) 66,000 2/27/04 -- -- --
William H. Marquard(1) 50,000 2/27/04 -- -- --
William H. Marquard(2) -- -- $425,000 $425,000 $425,000
Neal J. Rider(1) 66,000 2/27/04 -- -- --
Neal J. Rider(2) -- -- $500,000 $500,000 $500,000
---------------------------------------------------------------------------------------------------------------------
---------------
(1) Executives granted stock units under the 2001 Corporate Officer Long-Term
Incentive Plan receive the opportunity to earn a cash payment equal to the
excess of the fair market value of the company's stock on the date of
exercise over the base amount. The base amount is the fair market value of
the stock on the date of the stock units are granted. Stock units may only
be exercised after time vesting and performance targets established by the
committee have been met.
(2) Executives selected to participate in the Key Executive Performance Plan are
eligible to participate over a five-year award period. During the first
three years of the award period, participants are eligible to receive an
"annual award" of two times their base salary if the performance of the
company is at least 5% greater than the prior year's earnings per share. If
the performance target is met, one-half of the annual award is payable while
the balance, as disclosed in this table, is subject to a vesting schedule
and accrues interest at an annual interest rate of prime plus 1%. In years
four and five of a participant's award period, the participant is eligible
to receive a thrift award of 33% of the participant's prior year account
balance if the performance of the company is at least 5% greater than the
prior year's earnings per share.
24
PENSION PLAN
This table shows the estimated annual retirement benefits payable on a
straight-life annuity basis to covered participants, including the named
executive officers, assuming retirement at age 65 under Fleming's qualified
Pension Plan as well as non-qualified supplemental benefits under the Executive
Deferred Compensation Plan, based on final average earnings formulas and years
of service.
YEARS OF SERVICE
ANNUAL FINAL --------------------------------------------------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35 40 45
------------------------------------------------------------------------------------------------------------------------------------
$ 500,000 $ 83,350 $125,025 $ 166,700 $ 208,375 $ 250,050 $ 275,050 $ 300,050 $ 325,050
750,000 125,025 187,538 250,050 312,563 375,075 412,575 450,075 487,575
1,000,000 166,700 250,050 333,400 416,750 500,100 550,100 600,100 650,100
1,250,000 208,375 312,563 416,750 520,938 625,125 687,625 750,125 812,625
1,500,000 250,050 375,075 500,100 625,125 750,150 825,150 900,150 975,150
1,750,000 291,725 437,588 583,450 729,313 875,175 962,675 1,050,175 1,137,675
2,000,000 333,400 500,100 666,800 833,500 1,000,200 1,100,200 1,200,200 1,300,200
2,250,000 375,075 562,613 750,150 937,688 1,125,225 1,237,725 1,350,225 1,462,725
2,500,000 416,750 625,125 833,500 1,041,875 1,250,250 1,375,250 1,500,250 1,625,250
2,750,000 458,425 687,638 916,850 1,146,063 1,375,275 1,512,775 1,650,275 1,787,775
3,000,000 500,100 750,150 1,000,200 1,250,250 1,500,300 1,650,300 1,800,300 1,950,300
---------------
(1) Under the Executive Deferred Compensation Plan, Annual Final Compensation
is average total compensation earned for the three consecutive calendar
years of employment prior to retirement.
As of December 29, 2001, Messrs. Hansen, Dahlen, Davis, Marquard and Rider
each had 3, 1, 41, 2, and 2 years, respectively, of credited service under
the Pension Plan. All named executive officers participated in the
Executive Deferred Compensation Plan during 2001. Amounts shown in the
table are subject to offset for Social Security and amounts payable under
the Pension Plan. As of December 29, 2001, Annual Final Compensation was
$1,658,629 for Mr. Hansen, $1,015,384 for Mr. Dahlen, $753,842 for Mr.
Davis, $742,709 for Mr. Marquard and $862,626 for Mr. Rider.
25
EQUITY COMPENSATION PLAN INFORMATION
This table gives information about our common stock that may be issued upon
the exercise of options, warrants or rights under our existing equity
compensation plans as of December 29, 2001. The table also includes information
with respect to our outstanding restricted stock that has not vested and
restricted stock available for issuance under our existing equity compensation
plans.
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED AVERAGE FUTURE ISSUANCE UNDER EQUITY
BE ISSUED UPON EXERCISE EXERCISE PRICE OF COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS(1) REFLECTED IN COLUMN(A))
-------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders(2) 5,431,040(4) $15.1028 563,871(5)
Equity compensation
plans not approved by
security holders(3) 220,000 $18.3227 0
Total 5,651,040 $15.2281 563,871
---------------
(1) For purposes of the calculation of the weighted average exercise price, all
shares of restricted stock granted under our existing equity compensation
plans were deemed to have an exercise price of $0.00.
(2) Includes our:
- 1985 Stock Option Plan
- 1990 Stock Option Plan
- 1990 Stock Incentive Plan
- 1996 Stock Incentive Plan
- 1999 Stock Incentive Plan
- 2000 Stock Incentive Plan
(3) Includes an award of 200,000 stock options with an exercise price of
$20.1550 per share which vests in two equal annual installments and the
grant of 20,000 shares of restricted stock which vests in two equal annual
installments.
(4) Includes 617,366 shares of restricted stock that have been issued under our
existing equity compensation plans but have yet to vest.
(5) Includes 151,496 shares which may be issued as either stock options or
restricted stock and 138,050 shares reserved for issuance as restricted
stock for our directors under the 1999 Stock Incentive Plan.
26
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Our named executive officers, except for Mr. Davis, have five-year
employment agreements. Below is a summary of the basic terms of the agreements
followed by a summary of the specific terms for each named executive officer as
of their date of employment. Base salaries and bonus targets are reviewed
annually by the compensation and organization committee and could increase over
the five-year term of the employment agreement.
If Fleming terminates employment without cause or the executive resigns for
good reason, the executive receives:
- Base salary and accrued vacation through termination date;
- Base salary for the next 24 months; and
- Continued coverage under all medical and life insurance programs for the
next 24 months.
If Fleming terminates employment with cause or the executive resigns
without good reason, the executive receives:
- Base salary and accrued vacation through the termination date.
If Fleming terminates employment due to disability, the executive receives:
- Base salary through date of termination;
- Disability benefits under the company's disability program; and
- Accrued vacation through termination date.
Upon death of the executive, his beneficiary receives his base salary
through date of death.
The executive has also agreed to certain restrictions on competition with
Fleming for two years following termination of employment, unless the executive
has been terminated without cause or resigns for good reason.
HANSEN AGREEMENT
- Agreement term is from November 30, 1998 to November 29, 2003
- Annual base salary of $750,000, subject to increase but not decrease
- Bonus target of 75% of base salary with a maximum annual of 150% of base
salary subject to annual adjustment by the compensation and organization
committee
- 32,000 shares of restricted stock (vests at 50% per year) plus $299,105
to reimburse him for his tax liability associated with the award
- 800,000 nonqualified stock options which vest at 25% per year on the
first four anniversary dates of the award
DAHLEN AGREEMENT
- Agreement term is from April 8, 2001 to April 7, 2006
- Annual base salary of $500,000 subject to increase but not decrease
- Bonus target of 75% of base salary with a maximum annual of 150% of base
salary subject to annual adjustment by the compensation and organization
committee
- 25,000 shares of restricted stock (vests at 33 1/3% per year) plus
$438,267 to reimburse him for his tax liability associated with the award
- 300,000 nonqualified stock options which vest at 25% per year on the
first four anniversary dates of the award
27
- Key Executive Performance Award of two times base salary for each of the
first three years of employment and a Thrift Award for the next two years
subject to achievements of performance goals and vesting schedule
- 200,000 Stock Equivalent Units which vest at 33 1/3% per year on the
first three anniversary dates subject to achievement of performance goals
MARQUARD AGREEMENT
- Agreement term is from June 1, 1999 to May 31, 2004
- Annual base salary of $400,000, subject to increase but not decrease
- Bonus target of 65% of base salary with a maximum annual of 130% of base
salary subject to annual adjustment by the compensation and organization
committee
- 20,000 shares of restricted stock (vests at 50% per year) plus $196,547
to reimburse him for his tax liability associated with the award
- 200,000 nonqualified stock options which vest at 25% per year on the
first four anniversary dates of the award
RIDER AGREEMENT
- Agreement term is from January 18, 2000 to January 17, 2005
- Annual base salary of $450,000, subject to increase but not decrease
- Bonus target of 65% of base salary with a maximum annual of 130% of base
salary subject to annual adjustment by the compensation and organization
committee
- 25,000 shares of restricted stock (vests at 50% per year) plus $155,591
to reimburse him for his tax liability associated with the award
- 350,000 nonqualified stock options which vest at 25% per year on the
first four anniversary dates of the award
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Since 1995, we have entered into change of control employment agreements
with our senior executives. The purpose of these agreements is to assure
objective judgment and to keep the loyalties of key executives if Fleming is
ever faced with a potential change of control by providing for a continuation of
salary, bonus, health and other benefits for a maximum period of three years. If
Mr. Dahlen, Mr. Marquard or Mr. Rider is terminated during the three years
following the change of control or in anticipation of the change of control for
other than cause, death, disability, or he terminates for good reason, then he
will receive a lump sum payment comprised of:
- Base salary through the date of termination at the annual rate in effect
on the date of termination or, if higher, at the highest annual rate paid
or payable during the three out of the five years preceding the change of
control date which yield the highest base salary (the "Highest Base
Salary");
- The pro-rated portion of his annual bonus or, if higher, an amount equal
to the middle target level bonus payable, regardless of whether specified
targets are met, under the company's incentive compensation plan
applicable to the executive for his position on the date his employment
is terminated (the "Highest Bonus");
- The product obtained by multiplying 2.99 times the sum of the Highest
Base Salary and the Highest Bonus; and
- Any amounts previously deferred by the executive (plus any accrued
interest thereon) and any accrued vacation pay.
In addition, there are provisions for the "gross up" of certain payments to
cover certain taxes on these termination payments and for extension of
indemnification and insurance coverage for five years following the termination
date. For a period of 30 days following the first year after a change of
control, the executive can terminate his employment for any reason and receive
all the benefits of the agreement as if he had terminated for good reason.
28
If Mr. Hansen or Mr. Davis is terminated during the three years following
the change of control or in anticipation of the change of control for other than
cause, death, disability, or he terminates for good reason, then he will receive
a lump sum payment comprised of:
- Base salary through the date of termination at the annual rate in effect
on the date of termination or, if higher, at the highest annual rate paid
or payable during the three out of the five years preceding the change of
control date which yield the Highest Base Salary;
- The product of his annual bonus for the last fiscal year or, if higher,
his annual bonus for the last full fiscal year prior to the change of
control 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 (the "Recent Bonus");
- The product obtained by multiplying 2.99 times the sum of the Highest
Base Salary and Recent Bonus; and
- Any amounts previously deferred by Mr. Hansen or Mr. Davis (plus any
accrued interest thereon) and any accrued vacation pay.
In addition, there are provisions for the "gross up" of certain payments to
cover certain taxes on these termination payments and for extension of
indemnification and insurance coverage for five years following the termination
date. For a period of 30 days following the first year after a change of
control, the executive can terminate his employment for any reason and receive
all the benefits of the agreement as if he had terminated for good reason.
OTHER CHANGE OF CONTROL ARRANGEMENTS
SUPPLEMENTAL TRUSTS. Fleming has two trust agreements to provide for the
payment of its obligations under the Change of Control Employment Agreements,
severance and employment agreements available to certain associates who are not
named executive officers, to former associates receiving benefits under the
company's former supplemental retirement income plan and to participants in the
Past Service Plan and the Executive Deferred Compensation Plan. These trusts
include provisions which require full funding in the event of a change of
control.
KEY EXECUTIVE PERFORMANCE PLAN. Fleming adopted the Key Executive
Performance Plan (formerly known as the Key Executive Retention Plan) to improve
earnings, encourage certain key executives to remain with the company, provide a
concrete linkage between performance, rewards and share value creation for the
company stockholders, and encourage team work. The performance plan is designed
to provide additional bonus opportunity if the executives remain in the employ
of the company for a required period of time and certain performance goals are
met. If the executive is involuntarily terminated without cause or resigns for
"good reason" as defined in the change of control agreements after the
occurrence of a change of control, the executive will be fully vested in his
benefit calculated as if he remained in the continuous employ of the company for
the entire five-year award period based upon current base pay, and assuming that
all applicable targets have been met. The executive will be credited earnings
for the entire award period. Payment will be made in a single lump sum within 30
days following termination of employment. This amount will include a "gross up"
payment equal to the executive's liability for income, excise and employment
taxes attributable to the account.
2001 CORPORATE OFFICER LONG-TERM INCENTIVE PLAN. Benefits under the
Long-Term Incentive Plan are based in future company stock appreciation above
the fair market value of the company's stock as of a date of award. The
committee has discretion to provide that awards will be fully earned, vested and
exercisable upon the occurrence of a change of control, and the award agreements
provide for such acceleration to automatically occur.
EXECUTIVE MEDICAL CONTINUATION SAVINGS PLAN. The company's Executive
Medical Savings Plan is designed to provide a source of future funding for
post-termination medical insurance benefits under the Fleming Companies, Inc.
Executive Medical Continuation Plan for certain eligible executives. Upon
termination of employment, the company will pay to the eligible executive a
monthly amount to assist the executive with the cost of the premium for such
healthcare coverage. The cost will be determined on a
29
reasonable actuarial basis and may be adjusted from time to time. Coverage will
continue until the executive and/or his spouse attain age 65 or the executive
becomes employed by another employer and is eligible for medical coverage from
such employer. Employment with a public sector employer, an educational
institution or a not-for-profit entity exempt from federal income taxation will
not result in loss of coverage under the plan. Upon a change of control and
termination of employment, the company will continue to assist the executive
with the cost of the premium to continue coverage for both the executive and his
then current spouse until age 65 under the Health Continuation Plan and the
limitation on the executive's subsequent employment and health care coverage is
not applicable.
RETENTION AGREEMENT. The company has a Retention Agreement with Mr. Davis,
designed to encourage Mr. Davis to remain with the company. If Mr. Davis remains
continuously employed with the company through June 30, 2002 and the company's
earnings per share for the company's fiscal year ended 2001 exceeds the
company's earnings per share for the fiscal year 2000 by at least 5% (the
"Earnings Target"), then Mr. Davis will receive a bonus of two times his base
salary. Upon a change of control and an involuntary termination of employment
without cause or resignation for "good reason," as defined in Mr. Davis' change
of control employment agreement, Mr. Davis will be fully vested in his award as
if he remained continuously employed by the company through June 30, 2002 and
the Earnings Target was met.
EXECUTIVE DEFERRED COMPENSATION PLAN. Under the company's Executive
Deferred Compensation Plan, which supplements retirement benefits under the
Pension Plan, each participant will be fully vested in his benefit upon a change
of control. Benefits will be paid by the Executive Deferred Compensation Plan
immediately following termination of employment and no reduction will be made
for any early retirement adjustment factors.
OTHER ARRANGEMENTS. Provisions of Fleming's stock option and stock
incentive plans permit the committee administering the plan to provide in award
agreements for the acceleration of vesting upon a change of control. The vesting
of all stock options held by the named executive officers will accelerate upon a
change of control. All shares of restricted stock awarded to directors and the
named executive officers will become fully vested and nonforfeitable in the
event of a change of control.
30
PROPOSAL NO. 3
2002 STOCK INCENTIVE PLAN
Subject to shareholder approval, our board of directors has adopted the
Fleming Companies, Inc. 2002 Stock Incentive Plan. The 2002 Stock Incentive Plan
authorizes Fleming's compensation and organization committee to grant
non-qualified and incentive stock options and award shares of restricted stock
to key associates. The 2002 Stock Incentive Plan also authorizes the board of
directors to grant non-qualified stock options to members of the board who are
not associates. A total of 3,500,000 shares of common stock have been reserved
to be issued under the 2002 Stock Incentive Plan.
BACKGROUND
In 1999 and 2000, Fleming's shareholders approved stock incentive plans
which reserved in the aggregate 4,400,000 shares of Fleming common stock to be
issued to key associates. Since the adoption of the plans, Fleming has granted a
large number of options in order to attract top industry talent. The group of
potential optionees includes over 400 associates. Additionally, Fleming has
granted options to its senior executives instead of raising their base pay, and
has also granted options in order to reward and retain top management. Our board
of directors recommends approval of the 2002 Stock Incentive Plan in order to
provide the additional shares of Fleming stock necessary to attract new
associates and to retain and provide incentives for current associates. The
ability to grant non-qualified stock options to directors will assist in
attracting and retaining highly qualified persons to serve as non-management
directors and to more closely align directors' compensation with the interests
of the shareholders.
PURPOSE AND KEY FEATURES OF THE PLAN
The purpose of the 2002 Stock Incentive Plan is to emphasize the company's
pay for performance philosophy and create incentives designed to motivate
Fleming associates to significantly contribute toward the growth and
profitability of the company. The shares available to be issued under the 2002
Stock Incentive Plan will enable Fleming to attract and retain experienced
associates who, by their positions, abilities and diligence, are able to make
important contributions to Fleming's success.
Key features of the plan include:
- A prohibition against the repricing of stock options;
- A prohibition against granting options with an exercise price less than
the fair market value of our common stock on the date of grant;
- Of the 3,500,000 shares reserved, only 1,000,000 may be granted as
restricted stock under the plan;
- Limit on the number of shares (300,000) that may be granted as options to
any key associate under the plan in any year;
- Limit on the number of shares (300,000) that may be granted as restricted
stock to any key associate under the plan;
- Minimum vesting period of one year for options and three years for
restricted stock awarded to associates;
- The compensation committee (composed entirely of outside directors)
administers the grant of options and restricted stock to executive
officers of the company; and
- Recipients include over 400 associates of the company.
- Directors are only eligible to receive non-qualified stock options.
31
ADMINISTRATION
Fleming's 2002 Stock Incentive Plan consists of two separate stock plans
that are almost identical.
- Non-executive officer plan: This aspect of the plan is limited to
participants who are not subject to Section 16 of the Securities Exchange
Act of 1934 because they are not executive officers of Fleming.
Approximately 400 associates are eligible to receive options under this
plan.
- Executive officer plan: This aspect of the plan is limited to
participants who are executive officers of Fleming and who, therefore,
are subject to the reporting requirements of Section 16 of the Securities
Exchange Act of 1934. Approximately 21 executive officers are eligible to
receive options under this plan.
Except for administration and the category of participants eligible to
receive awards, the terms of the non-executive officer plan and the executive
officer plan are identical.
The executive officer plan is administered exclusively by the compensation
and organization committee. The non-executive officer plan is administered by
two committees: the regular award committee and the compensation and
organization committee. Our chief executive officer is the sole member of the
regular award committee. Although the regular award committee is authorized to
administer the non-executive officer plan, it can only make awards within
guidelines set by the compensation and organization committee.
When we refer to the non-executive officer plan in this discussion, "the
committee" means the regular award committee and the compensation and
organization committee; when we refer to the executive officer plan, "the
committee" means the compensation and organization committee. In the case of
either plan, the committee is authorized and has complete discretion to
formulate policies and to establish rules and regulations in connection with the
plan.
The grant of awards to directors will only be made by the board. The
compensation committee will administer other aspects of awards made to
directors.
ELIGIBILITY FOR PARTICIPATION
All of Fleming's key associates, and all of the key associates of Fleming's
subsidiaries and affiliated entities, are eligible to participate in the 2002
Stock Incentive Plan. Subject to the provisions of the plan, the committee has
exclusive power in selecting participants from among the eligible associates.
Members of Fleming's board of directors are eligible to receive grants of
non-qualified stock options under the 2002 Stock Incentive Plan.
TYPES OF AWARDS
The 2002 Stock Incentive Plan provides that any or all of the following
types of awards may be granted:
- Stock options: Including non-qualified stock options and stock options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code; and
- Restricted stock.
STOCK OPTIONS. The committee may grant awards under the 2002 Stock
Incentive Plan in the form of options to purchase shares of Fleming common
stock. The committee will have the authority to determine:
- The terms and conditions of each option;
- The number of shares subject to the option; and
- The manner and time of the option's exercise.
Subject to certain adjustment provisions, the committee cannot grant
options for more than 300,000 shares of common stock to any participant in any
fiscal year. As of March 21, 2002, the market value of the common stock
underlying the options available for issuance under the 2002 Stock Incentive
Plan was $79,362,500.
32
EXERCISE PRICE. The exercise price of an option may not be less than the
fair market value of the common stock on the date of grant. The fair market
value of shares of common stock subject to options is determined by averaging
the high and low sales prices as reported on the New York Stock Exchange. As of
March 21, 2002, the average of the high and low sales price of Fleming's common
stock as reported on the exchange was $22.675.
A participant may pay the exercise price of an option in cash, in shares of
Fleming common stock or a combination of both; provided that, if the exercise
price (including required withholding taxes) is paid using shares of Fleming
common stock, the committee will not allow this act to result in an adverse
accounting charge to the company. Accordingly, at the present time, the
committee has determined that a participant using Fleming shares to pay the
exercise price of options granted under the 2002 Stock Incentive Plan must have
held those shares for at least six months. Stock options may also be exercised
through a broker-dealer acting on a participant's behalf. The exercise price is
paid upon settlement by the broker from the proceeds of the sale of the common
stock subject to the stock option.
WHEN AND HOW TO EXERCISE OPTIONS. Stock options are exercisable in
accordance with the schedule set forth in each award agreement. Generally, stock
options vest at the rate of 25% each year over the four years following the date
of grant; however, certain key employees' and directors' options may vest on a
more accelerated basis. Unless sooner terminated, the stock options granted
under the 2002 Stock Incentive Plan expire ten years from the date of the grant.
A participant can exercise all or any portion of a stock option which is
exercisable by giving written notice to Fleming's secretary at least two
business days before the exercise date. When stock options are exercised, a
participant must pay the exercise price to Fleming. In addition, the participant
is responsible for paying any applicable income and employment taxes.
RESTRICTED STOCK AWARDS. Shares of restricted stock awarded under the plan
will be subject to the terms, conditions, restrictions and/or limitations, if
any, that the committee deems appropriate, including restrictions on employment,
transferability and continued employment. If vesting is based upon continued
employment, the restricted stock award must vest over a minimum restriction
period of at least three years from the date of grant. If vesting is based on
performance, the restricted stock award must have a minimum restriction period
of at least one year. Subject to certain adjustment provisions, no more than
300,000 shares of common stock can be awarded to a participant under the 2002
Stock Incentive Plan as restricted stock awards. The committee can accelerate
the vesting of restricted stock awards upon the occurrence of a change of
control event and upon termination of employment due to death, disability,
without cause or by the participant for good reason.
TERMINATION OF EMPLOYMENT
The committee will determine the treatment of a participant's stock option
in the event of death, disability, retirement or termination of employment for
an approved reason. Award agreements covering options granted under the 2002
Stock Incentive Plan provide for the following upon termination of employment:
RETIREMENT. If a participant retires in accordance with Fleming's regular
retirement policies, the participant will have a period of three years from
retirement date to exercise options which are vested on the retirement date. All
unvested options will terminate.
DEATH. If a participant's employment terminates due to death, the
participant's personal representative will have twelve months from the date of
death to exercise options which are vested on the date of death. All unvested
options will terminate.
OTHER TERMINATIONS. If a participant's employment is terminated for any
other reason, the participant will have three months from the date of
termination to exercise the stock options which are vested on the date of
termination. All unvested options will terminate.
33
Directors will have a period of three years from the date they terminate
service with Fleming to exercise vested options. All unvested options will
terminate unless otherwise provided in the director's award agreement or
accelerated by the committee.
Upon granting any award, the committee will, by way of an award agreement,
establish any other terms, conditions, restrictions and/or limitations governing
the awards granted.
AMENDING THE 2002 STOCK INCENTIVE PLAN
Acting through the board, Fleming may amend the 2002 Stock Incentive Plan
at any time. The board of directors, however, may not, without shareholder
approval, (1) adopt any amendment that would increase the maximum number of
shares that may be issued under the plan (except for certain antidilution
adjustments described below), (2) materially modify the plan's eligibility
requirements or (3) materially increase the benefits provided to participants
under the plan. Amendments that would have the effect of repricing participant's
options are prohibited.
CHANGE OF CONTROL EVENT
The committee is authorized to provide in the award agreements for the
acceleration of any unvested portion of any outstanding awards under the 2002
Stock Incentive Plan upon a change of control event.
NEW PLAN BENEFITS
To date, no awards have been made under the 2002 Stock Incentive Plan.
AUTOMATIC ADJUSTMENT FEATURES
The 2002 Stock Incentive Plan provides for the automatic adjustment of:
- the number and kind of shares available under it, and
- the number and kind of shares subject to outstanding awards in the event
the common stock is changed into or exchanged for a different number or
kind of shares of stock or other securities of Fleming or another
corporation, or if the number of shares of common stock is increased
through a stock dividend.
The 2002 Stock Incentive Plan also provides that the committee may adjust
the number of shares available under the plan and the number of shares subject
to any outstanding awards if, in the committee's opinion, any other change in
the number or kind of shares of outstanding common stock equitably requires such
an adjustment.
FEDERAL TAX TREATMENT
INCENTIVE STOCK OPTION GRANT. A participant who is granted an incentive
stock option does not realize any taxable income at the time of the grant or at
the time of exercise (except for alternative minimum tax). Similarly, the
company is not entitled to any deduction at the time of grant or at the time of
exercise. If the participant makes no disposition of the shares acquired
pursuant to an incentive stock option before the later of two years from the
date of grant of such option or one year of the transfer of such shares to the
participant, any gain or loss realized on a subsequent disposition of the shares
will be treated as a long-term capital gain or loss. Under such circumstances,
the company will not be entitled to any deduction for federal income tax
purposes.
NON-QUALIFIED STOCK OPTION GRANT/EXERCISE. A participant who is granted a
non-qualified stock option does not have taxable income at the time of grant.
Taxable income occurs at the time of exercise in an amount equal to the
difference between the exercise price of the shares and the market value of the
shares on the date of exercise. Fleming is entitled to a corresponding deduction
for the same amount.
34
RESTRICTED STOCK AWARD. A participant who has been granted an award in the
form of restricted stock will not realize taxable income at the time of the
grant, and the company will not be entitled to a deduction at the time of the
grant, assuming that the restrictions constitute a substantial risk of
forfeiture for federal income tax purposes. When such restrictions lapse, the
participant will receive taxable income (and have tax basis in the shares) in an
amount equal to the excess of the fair market value of the shares at such time
over the amount, if any, paid for such shares. The company will be entitled to a
corresponding deduction. The participant may elect to include the value of his
restricted stock award as income at the time it is granted under Section 83(b)
of the Code, and the company will take a corresponding income tax deduction at
such time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE FLEMING
COMPANIES, INC. 2002 STOCK INCENTIVE PLAN.
35
PROPOSAL NO. 4
2002 ASSOCIATE STOCK PURCHASE PLAN
Subject to shareholder approval, the board of directors has adopted the
Fleming Companies, Inc. 2002 Associate Stock Purchase Plan. The Stock Purchase
Plan offers eligible associates the opportunity to purchase common stock through
payroll deductions. A maximum of 1,800,000 shares of stock may be issued under
the 2002 Stock Purchase Plan.
BACKGROUND
In 1997, the shareholders approved the Fleming Companies, Inc. Associate
Stock Purchase Plan. This plan terminates June 30, 2002. The purpose of the 2002
Stock Purchase Plan is to continue to provide eligible associates the
opportunity to purchase common stock through payroll deductions for an
additional five-year period. The 2002 Stock Purchase Plan is intended to
encourage participation in the ownership and economic progress of the company.
Eligible associates are those employed by the company continuously for six
months prior to the applicable grant date and whose customary employment is more
than 20 hours per week and more than five months in any calendar year.
Substantially all eligible associates, totaling approximately 22,500, will be
eligible to participate in the 2002 Stock Purchase Plan. The 2002 Stock Purchase
Plan is intended to qualify under Section 423 of the Internal Revenue Code.
ADMINISTRATION
The 2002 Stock Purchase Plan is administered by the compensation and
organization committee. The board of directors may from time to time adopt
amendments to the 2002 Stock Purchase Plan consistent with Sections 421 and 423
of the Internal Revenue Code without the approval of Fleming's shareholders;
shareholder approval is required for any amendments that increase the aggregate
number of shares that may be issued under the 2002 Stock Purchase Plan or change
the class of associates eligible to participate. The board of directors may
terminate the 2002 Stock Purchase Plan at any time. If the 2002 Stock Purchase
Plan is terminated, the company will refund to the participants the sums
credited to their accounts (plus interest on the average balance in the accounts
at the rate of 5% per annum). Unless sooner terminated, the 2002 Stock Purchase
Plan will terminate on June 30, 2007.
ISSUANCE OF OPTIONS
A total of 1,800,000 shares of Fleming's authorized but unissued common
stock have been set aside for purchase under the 2002 Stock Purchase Plan. An
eligible associate may elect to participate in the 2002 Stock Purchase Plan
authorizing payroll deductions from such participant's basic compensation in an
amount equal to either 1%, 2%, 3%, 4%, 5% or 6% of such compensation. A
participant's basic compensation, which excludes any form of extraordinary
compensation such as overtime, prizes, bonuses, commissions, reimbursed
relocation expenses and the like, is determined as of the date which is one
month prior to the applicable granting date and will be annualized for purposes
of the 2002 Stock Purchase Plan. Increases but not decreases in a participant's
basic compensation occurring after the date of determination will be disregarded
for the purchases by a participant during any purchase period.
If on any granting date there are insufficient uncommitted shares available
for stock options out of the shares reserved for the 2002 Stock Purchase Plan
(as a result of prior purchases under the Stock Purchase Plan), future purchase
periods may be cancelled. If there is an over-subscription by participants of
the remaining shares set aside for the 2002 Stock Purchase Plan on any granting
date, a proportionate reduction will be made for that purchase period.
EXERCISE OF OPTIONS
The option price of the common stock to be purchased under any purchase
period will be the lower of 85% of the fair market value of such stock on the
applicable granting date or 85% of the fair market value of such stock on the
applicable exercise date, provided, however, the option price will not be lower
than the par
36
value of the common stock. The fair market value of the common stock as of March
21, 2002, was $22.675 per share. The number of shares purchased at the end of
each purchase period will be determined under the following formula:
Account Balance
------------------- = Total Stock Entitlement
Option Price
Only whole shares of common stock will be issued. The maximum number of
shares a participant will be allowed to purchase during any purchase period is
2,000 shares.
Stock issued under the 2002 Stock Purchase Plan will not exceed 1,800,000
shares subject to certain adjustments to prevent the possible dilution of
participants' interests. As of March 21, 2002, the market value of the common
stock underlying the options available for issuance under the 2002 Stock
Purchase Plan was $40,815,000. Participants are protected against dilution in
the event of a recapitalization, stock split, merger, consolidation,
reorganization, combination, liquidation, stock dividend or similar transaction
by an appropriate adjustment being made to the aggregate number of shares
reserved for purchase under the Stock Purchase Plan and to the option price per
share, except that upon a dissolution or liquidation of the company or a merger
or consolidation in which the company is not the surviving or the resulting
corporation, the 2002 Stock Purchase Plan will terminate. Any option granted
pursuant to the 2002 Stock Purchase Plan will terminate upon the effective date
of such dissolution, liquidation, merger or consolidation, and the balance of
each participant's account will be refunded. Unless sooner terminated, the stock
options granted pursuant to the 2002 Stock Purchase Plan expire ten years from
the date of the grant.
TAX AND ACCOUNTING ASPECTS
Fleming has been advised by its counsel with respect to the federal income
tax aspects of options granted under the Stock Purchase Plan as follows:
Stock options granted under the 2002 Stock Purchase Plan will qualify as
options granted under an "employee stock purchase plan" as defined in
Section 423 of the Code and will be taxed in accordance with Sections
421 and 423 thereof and the regulations issued thereunder. The grant of
an option to an associate pursuant to the terms of the 2002 Stock
Purchase Plan will be without federal income tax consequences to the
company and the associate, and the exercise of an option (options are
deemed exercised if an associate is a participant on any exercise date)
would result in neither taxable income to an associate nor a deduction
to the company, provided the associate does not dispose of the shares
within two years after the date of the grant of the option and within
one year after the transfer to him of the shares of common stock
represented by the option. If a disposition occurs within either of said
periods, the associate may realize ordinary income on part or all of the
gain and the company will be entitled to a deduction for the amount
taxed to the associate as ordinary income. If an associate holds the
shares acquired under the option for the required time and a disposition
or the associate's death occurs thereafter, the associate will realize
ordinary income on the excess of (i) the lessor of the fair market value
of the shares on the associate's applicable granting date, the
disposition date, or the date of the associate's death, over (ii) his
option price, and the company will not be entitled to a deduction for
such amount. Any additional gain realized as the result of the
disposition will be taxed to the associate as a capital gain under the
Code.
Under generally accepted accounting principles, assuming an equal
proportionate number of shares of company common stock are sold each fiscal year
under the plan, and the value of the company common stock remains constant over
the life of the plan, the company will recognize a pre-tax charge to earnings
during each fiscal year of the plan.
37
NEW PLAN BENEFITS
Since participation in the 2002 Stock Purchase Plan is at the election of
the associate, the dollar value and number of options granted are not
determinable with respect to the named executive officers, other executives or
non-executive associates. Directors who are not Fleming associates cannot
participate in the 2002 Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE FLEMING
COMPANIES, INC. 2002 ASSOCIATE STOCK PURCHASE PLAN.
38
PROPOSAL NO. 5
2002 AIM HIGH INCENTIVE PLAN
Subject to shareholder approval, the board of directors has adopted the
Fleming Companies, Inc. 2002 Aim High Incentive Plan which will provide a system
for determining incentive compensation to be paid to corporate officers and
selected other key management associates of the company. Bonuses for corporate
officers were determined previously under the Fleming Companies, Inc. Corporate
Officer Incentive Plan. The board of directors terminated the Corporate Officer
Incentive Plan effective February 27, 2002, and desires to replace it with the
2002 Aim High Incentive Plan. Approval by the shareholders is necessary to
qualify for the exception from Section 162(m) of the Internal Revenue Code for
qualified performance-based compensation. Adoption of the 2002 Aim High
Incentive Plan is contingent on shareholder approval.
BACKGROUND
The 2002 Aim High Incentive Plan is designed to provide corporate officers
and selected other key management associates performance incentives by providing
the opportunity to earn a bonus if certain targets are met. The primary goals of
the Aim High Incentive Plan are to:
- attain substantial improvement in sales,
- improve earnings,
- provide a concrete and understandable linkage between performance,
rewards and share value creation for shareholders and
- encourage team work.
DESCRIPTION OF AWARDS
For each year, the compensation and organization committee will determine
the amount of each participant's award by selecting a designated percentage of
each participant's base salary which will be the amount which may be earned as
an award for such year if the middle level targets for the year are met. For
each year, the compensation and organization committee will also determine the
applicable targets. Awards will be determined based on performance of the
company in relation to earnings per share, sales and earnings.
To be entitled to an award, the earnings per share target first must be met
or exceeded; and if that has occurred, the award will be weighted based on sales
and earnings as such weighting is determined each year by the compensation and
organization committee. For the fiscal year ending December 28, 2002, the
committee has determined that 60% of the award will be based on sales and 40%
will be based on earnings. For each year, the committee will also set threshold
levels, middle levels and maximum levels within each target. If actual results
for sales or earnings for a year are between specified target levels, the
committee will interpolate the value of any award on an arithmetic proportionate
basis.
A participant whose employment is terminated during a year due to death,
disability, or retirement will receive the pro rata portion of the award which
he would have otherwise received had he remained in the employ of the company.
Unless the committee otherwise determines, a participant whose employment is
terminated for any other reason shall forfeit all interest in his award. The
maximum award that may be earned in any year by a participant is $3,000,000.
ADMINISTRATION
The Aim High Incentive Plan will be administered by the compensation and
organization committee. The committee is authorized and has complete discretion
to formulate policies and to establish rules and regulations for the
administration of the plan and to set or establish the targets. Awards will be
paid under the plan only upon certification by the committee that the targets
have been attained. The compensation and organization committee can reduce or
eliminate the payment of any award. The committee cannot increase the amount of
any award or change a target once established in a particular year.
39
PARTICIPANTS
The Aim High Incentive Plan provides that key associates are eligible for
selection to participate in the plan. The term "key associates" includes any
employee holding the position of chairman, chief executive officer, president,
executive vice president, senior vice president or vice president, any other
associate who is an officer of the company, its subsidiaries or affiliated
entities or any other selected key management associate. Approximately 1,500 key
associates will be eligible to participate in the Aim High Incentive Plan;
however, it is impossible at this time to determine who among the eligible
associates may be selected to be participants in the Aim High Incentive Plan in
the future. It is expected, however, that these determinations will be made on
the basis of the associate's responsibilities and present and potential
contribution to the success of the company and its subsidiaries as indicated by
the compensation and organization committee's evaluation of such associate's
position.
CHANGE IN CONTROL
Some participants in the Aim High Incentive Plan are parties to change of
control employment agreements with the company. The Aim High Incentive Plan
provides that any provision of the plan which would result in a loss or
reduction of an award will be subject to and superseded by the provisions of the
change of control agreements. For a description of these agreements see
"Employment Agreement, Termination of Employment and Change in Control
Arrangements -- Change of Control Employment Agreements." The Aim High Incentive
Plan also limits the committee's discretion to reduce or eliminate a
participant's award after a change of control. If a participant is terminated
without cause, a prorated award will be calculated and paid for the year in
which the change of control occurred assuming the middle level target was
achieved.
NEW PLAN BENEFITS
The following table sets forth the bonus amounts to be received by the
named executive officers and groups specified below who are participants in the
Aim High Incentive Plan for the fiscal year ending December 28, 2002, assuming
the Aim High Incentive Plan is approved by the shareholders. These amounts have
been calculated assuming that the earnings per share target has been met for
fiscal 2002 and the middle threshold targets on sales and earnings have been
met. The following table is for illustrative purposes only; the company cannot
predict whether any targets will be met for fiscal 2002 or whether any bonuses
will be paid under the Aim High Incentive Plan for fiscal 2002.
----------------------------------------------------------------
NAME AND POSITION DOLLAR VALUE
----------------------------------------------------------------
Mark S. Hansen 1,020,000
----------------------------------------------------------------
Thomas G. Dahlen 375,000
----------------------------------------------------------------
E. Stephen Davis 375,000
----------------------------------------------------------------
William M. Marquard 318,750
----------------------------------------------------------------
Neal J. Rider 375,000
----------------------------------------------------------------
All other executive officers as a group 3,023,800
----------------------------------------------------------------
Non-Executive Director Group --
----------------------------------------------------------------
Non-Executive Officer Employee Group 28,000,000
----------------------------------------------------------------
EFFECTIVE DATE
The effective date of the Aim High Incentive Plan is February 27, 2002,
upon approval of the shareholders at this annual meeting.
40
AMENDMENTS
The Aim High Incentive Plan may be amended, suspended or terminated at any
time at the sole discretion of the committee. The committee may revise the
various rates and percentages as provided in the plan from time to time with
respect to any future year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE FLEMING
COMPANIES, INC. 2002 AIM HIGH INCENTIVE PLAN.
41
PROPOSAL NO. 6
2002 AIM HIGH PLUS INCENTIVE PLAN
Subject to shareholder approval, the board of directors has adopted the
Fleming Companies, Inc. 2002 Aim High Plus Incentive Plan which will provide a
system for determining incentive compensation to be paid to corporate officers
and selected other key management associates of the company. Approval by the
shareholders is necessary to qualify for the exception from Section 162(m) of
the Internal Revenue Code for qualified performance-based compensation. Adoption
of the Aim High Plus Incentive Plan is contingent on shareholder approval.
BACKGROUND AND KEY FEATURES
The Aim High Plus Incentive Plan is designed to provide corporate officers
and selected other key management associates performance incentives by providing
the opportunity to earn a stock bonus if certain targets are met. The primary
goals are to:
- attain substantial improvement in sales,
- improve earnings,
- provide a concrete and understandable linkage between performance,
rewards and share value creation for shareholders and
- encourage team work.
Key features of the plan include:
- Limit on the maximum award ($2,000,000) that may be paid to any
participant under the plan in any year.
- Maximum of 750,000 shares of stock may be distributed under the plan.
- The compensation committee (composed entirely of outside directors)
administers the plan.
DESCRIPTION OF AWARDS
The method for determining targets under the Aim High Plus Incentive Plan
is the same as those utilized under the Aim High Incentive Plan. For each year,
the compensation and organization committee will determine the amount of each
participant's award by selecting a designated percentage of each participant's
base salary which will be the amount which may be earned as an award for such
year if the middle level targets for the year are met. For each year, the
committee will also determine the applicable targets. Awards will be determined
based on performance of the company in relation to earnings per share, sales and
earnings.
To be entitled to an award, the earnings per share target first must be met
or exceeded; and if that has occurred, the award will be weighted based on sales
and earnings as such weighting is determined each year by the committee. For the
fiscal year ending December 28, 2002, the compensation and organization
committee has determined that 60% of the award will be based on sales and 40%
will be based on earnings. For each year, the compensation and organization
committee will also set threshold levels, middle levels and maximum levels
within each target. If actual results for sales or earnings for a year are
between specified target levels, the compensation and organization committee
will interpolate the value of any award on an arithmetic proportionate basis.
Awards will be paid in the form of company common stock. The number of
shares will be determined by dividing the amount of award earned by a
participant by the fair market value of the company's stock on the date the
award is determined to be earned. A maximum of 750,000 shares of stock may be
distributed under the plan.
A participant whose employment is terminated during a year due to death,
disability, or retirement will receive the pro rata portion of the award which
he would have otherwise received had he remained in the
42
employ of the company. Unless the compensation and organization committee
otherwise determines, a participant whose employment is terminated for any other
reason shall forfeit all interest in his award. The maximum award that may be
earned in any year by a participant is $2,000,000 of the company's common stock.
ADMINISTRATION
The Aim High Plus Incentive Plan will be administered by the compensation
and organization committee. The committee is authorized and has complete
discretion to formulate policies and to establish rules and regulations for the
administration of the plan and to set or establish the targets. Awards will be
paid under the plan only upon certification by the compensation and organization
committee that the targets have been attained. The compensation and organization
committee can reduce or eliminate the payment of any award. The compensation and
organization committee cannot increase the amount of any award or change a
target once established in a particular year.
PARTICIPANTS
The Aim High Plus Incentive Plan provides that key associates are eligible
for selection to participate in the plan. The term "key associates" includes any
employee holding the position of chairman, chief executive officer, president,
executive vice president, senior vice president or vice president or any other
associate who is an officer of the company, its subsidiaries or affiliated
entities. Approximately 21 key associates are eligible to participate in the Aim
High Plus Incentive Plan; however, it is impossible at this time to determine
who among the eligible associates may be selected to be participants in the Aim
High Plus Incentive Plan in the future. It is expected, however, that these
determinations will be made on the basis of the associate's responsibilities and
present and potential contribution to the success of the company and its
subsidiaries as indicated by the compensation and organization committee's
evaluation of such associate's position.
CHANGE IN CONTROL
Some participants in the Aim High Plus Incentive Plan are parties to change
of control employment agreements with the company. The Aim High Plus Incentive
Plan provides that any provision of the plan which would result in a loss or
reduction of an award will be subject to and superseded by the provisions of the
change of control agreements. For a description of these agreements see
"Employment Agreement, Termination of Employment and Change in Control
Arrangements -- Change of Control Employment Agreements." The Aim High Plus
Incentive Plan also limits the compensation and organization committee's
discretion to reduce or eliminate a participant's award after a change of
control. If a participant is terminated without cause, a prorated award will be
calculated and paid for the year in which the change of control occurred
assuming the middle level target was achieved.
NEW PLAN BENEFITS
The following table sets forth the bonus amounts and the resulting shares
(assuming current stock prices) to be received by the named executive officers
who are participants in the Aim High Plus Incentive Plan for the fiscal year
ending December 28, 2002, assuming the Aim High Plus Incentive Plan is approved
by the shareholders. These amounts have been calculated assuming that the
earnings per share target has been met for fiscal 2002 and the middle threshold
targets on sales and earnings have been met. The following table is for
illustrative purposes only; the company cannot predict whether any targets will
be met for fiscal 2002 or whether any bonuses will be paid under the Aim High
Plus Incentive Plan for fiscal 2002. The number of
43
shares will fluctuate based on the company's stock price. As of March 21, 2002
the company's stock price used in calculating the number of shares under the Aim
High Plus Incentive Plan was $22.675.
---------------------------------------------------------------------
NAME AND POSITION DOLLAR VALUE NUMBER OF SHARES
---------------------------------------------------------------------
Mark S. Hansen $102,000 4,498
---------------------------------------------------------------------
Thomas G. Dahlen 37,500 1,654
---------------------------------------------------------------------
E. Stephen Davis 37,500 1,654
---------------------------------------------------------------------
William H. Marquard 31,875 1,406
---------------------------------------------------------------------
Neal J. Rider 37,500 1,654
---------------------------------------------------------------------
All other executives as a group 288,880 12,740
---------------------------------------------------------------------
Non-Executive Director Group -- --
---------------------------------------------------------------------
Non-Executive Officer Employee
Group -- --
---------------------------------------------------------------------
EFFECTIVE DATE
The effective date of the Aim High Plus Incentive Plan is February 27,
2002, upon approval of the shareholders at this annual meeting.
AMENDMENTS
Aim High Plus may be amended, suspended or terminated at any time at the
sole discretion of the Committee. The Committee may revise the various rates and
percentages as provided in Aim High Plus from time to time with respect to any
future year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE FLEMING
COMPANIES, INC. 2002 AIM HIGH PLUS INCENTIVE PLAN.
44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have a loan program which provides full recourse loans to executive
officers in order to assist them in meeting their required stock ownership
levels. The loans bear interest at an annual rate of 7%, but such accrued
interest is forgiven so long as the executive remains employed by us. None of
the named executive officers participated in our loan program during 2001.
However, Mr. Rider participated in the loan program in 2000, obtaining a loan of
$150,153.94 from us to purchase shares of our common stock on March 3, 2000. As
of March 21, 2002, the entire amount of this loan remained outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors and executive officers, and persons who own more than ten percent of
Fleming's common stock, to file with the Securities and Exchange Commission and
the New York Stock Exchange initial reports of beneficial ownership and reports
of changes in beneficial ownership of common stock of the company. Such persons
are also required by applicable regulations to furnish the company with copies
of all Section 16(a) forms they file. To the company's knowledge, based solely
on a review of the copies of such reports furnished to the company and written
representations that no other reports were required to be filed, during 2001,
all Section 16(a) filing requirements were met, except that one Form 4 for U.S.
Transportation L.L.C. was not filed timely.
OTHER BUSINESS
The board of directors knows of no other business which will be presented
for action at the meeting other than as described in the notice of annual
meeting. If other matters come before the meeting, the proxies will be voted in
accordance with the judgment of the persons named on the proxy card.
By Order of the Board of Directors
Carlos M. Hernandez
Senior Vice President,
General Counsel and Secretary
45
EXHIBIT A
FLEMING COMPANIES, INC.
2002 STOCK INCENTIVE PLAN
FLEMING COMPANIES, INC.
2002 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I PURPOSE........................................................... A-1
Section 1.1 Purpose..................................................... A-1
Section 1.2 Establishment............................................... A-1
Section 1.3 Shares Subject to the Plan.................................. A-1
ARTICLE II DEFINITIONS...................................................... A-1
Section 2.1 "Affiliated Entity"......................................... A-1
Section 2.2 "Award"..................................................... A-1
Section 2.3 "Award Agreement"........................................... A-1
Section 2.4 "Board"..................................................... A-1
Section 2.5 "Change of Control Event"................................... A-1
Section 2.6 "Code"...................................................... A-3
Section 2.7 "Committee"................................................. A-3
Section 2.8 "Common Stock".............................................. A-3
Section 2.9 "Company"................................................... A-3
Section 2.10 "Compensation Committee".................................... A-3
Section 2.11 "Date of Grant"............................................. A-3
Section 2.12 "Eligible Associate"........................................ A-3
Section 2.13 "Eligible Director"......................................... A-3
Section 2.14 "Exchange Act".............................................. A-3
Section 2.15 "Executive Officer Participants"............................ A-3
Section 2.16 "Fair Market Value"......................................... A-3
Section 2.17 "Incentive Stock Option".................................... A-3
Section 2.18 "Non-Executive Officer Participants"........................ A-3
Section 2.19 "Nonqualified Stock Option"................................. A-3
Section 2.20 "Option".................................................... A-3
Section 2.21 "Participant"............................................... A-4
Section 2.22 "Plan"...................................................... A-4
Section 2.23 "Regular Award Committee"................................... A-4
Section 2.24 "Restricted Stock Award".................................... A-4
Section 2.25 "Secretary"................................................. A-4
Section 2.26 "Subsidiary"................................................ A-4
ARTICLE III ADMINISTRATION.................................................. A-4
Section 3.1 Administration of the Plan; the Committee................... A-4
Section 3.2 Administration of Grants to Eligible Directors.............. A-5
Section 3.3 Committee to Make Rules and Interpret Plan.................. A-5
ARTICLE IV GRANT OF AWARDS.................................................. A-5
ARTICLE V ELIGIBILITY....................................................... A-6
ARTICLE VI STOCK OPTIONS.................................................... A-6
Section 6.1 Grant of Options............................................ A-6
Section 6.2 Conditions of Options....................................... A-6
(i)
PAGE
----
ARTICLE VII RESTRICTED STOCK AWARDS......................................... A-7
Section 7.1 Grant of Restricted Stock Awards............................ A-7
Section 7.2 Conditions of Restricted Stock Awards....................... A-7
ARTICLE VIII STOCK ADJUSTMENTS.............................................. A-8
ARTICLE IX GENERAL.......................................................... A-9
Section 9.1 Amendment or Termination of Plan............................ A-9
Section 9.2 Termination of Employment; Termination of Service........... A-9
Section 9.3 Limited Transferability -- Options.......................... A-9
Section 9.4 Withholding Taxes........................................... A-10
Section 9.5 Dividends and Dividend Equivalents -- Awards................ A-10
Section 9.6 Change of Control........................................... A-10
Section 9.7 Amendments to Awards........................................ A-10
Section 9.8 Regulatory Approval and Listings............................ A-10
Section 9.9 Right to Continued Employment............................... A-11
Section 9.10 Reliance on Reports......................................... A-11
Section 9.11 Construction................................................ A-11
Section 9.12 Governing Law............................................... A-11
(ii)
FLEMING COMPANIES, INC.
2002 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 Purpose. This 2002 Stock Incentive Plan (the "Plan") is established
by Fleming Companies, Inc. (the "Company") to emphasize the Company's pay for
performance philosophy by creating incentives which are designed to motivate
Participants to put forth maximum effort toward the success and growth of the
Company and to enable the Company to attract and retain experienced individuals
who by their position, ability and diligence are able to make important
contributions to the Company's success. Toward these objectives, the Plan
provides for the granting of Options and Restricted Stock Awards to Eligible
Associates and the granting of Nonqualified Stock Options to Eligible Directors
subject to the conditions set forth in the Plan.
1.2 Establishment. The Plan is effective as of February 27, 2002 and for
a period of ten years thereafter. The Plan shall continue in effect until all
matters relating to the payment of Awards and administration of the Plan have
been settled.
The Plan shall be approved by the holders of a majority of the outstanding
shares of Common Stock, present, or represented, and entitled to vote at a
meeting called for such purpose, which approval must occur within the period
ending twelve months after the date the Plan is adopted by the Board. Pending
such approval by the shareholders, Awards under the Plan may be granted, but no
such Awards may be exercised prior to receipt of shareholder approval. In the
event shareholder approval is not obtained within such twelve-month period, all
such Awards shall be void.
1.3 Shares Subject to the Plan. Subject to the limitations set forth in
the Plan, Awards may be made under this Plan for a total of 3,500,000 shares of
Common Stock. A maximum of 1,000,000 shares of the 3,500,000 shares of Common
Stock subject to the Plan may be granted as Restricted Stock Awards (the
"Restricted Stock Award Limit").
ARTICLE II
DEFINITIONS
2.1 "Affiliated Entity" means any partnership or limited liability company
in which a majority of the partnership or other similar interest thereof is
owned or controlled, directly or indirectly, by the Company or one or more of
its Subsidiaries or Affiliated Entities or a combination thereof. For purposes
hereof, the Company, a Subsidiary or an Affiliated Entity shall be deemed to
have a majority ownership interest in a partnership or limited liability company
if the Company, such Subsidiary or Affiliated Entity shall be allocated a
majority of partnership or limited liability company gains or losses or shall be
or control a managing director or a general partner of such partnership or
limited liability company.
2.2 "Award" means, individually or collectively, any Option or Restricted
Stock Award granted under the Plan to an Eligible Associate by the Committee or
any Nonqualified Stock Option granted under the Plan to an Eligible Director by
the Board pursuant to such terms, conditions, restrictions, and/or limitations,
if any, as the Committee may establish by the Award Agreement or otherwise.
2.3 "Award Agreement" means any written instrument that establishes the
terms, conditions, restrictions, and/or limitations applicable to an Award in
addition to those established by this Plan and by the Committee's exercise of
its administrative powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change of Control Event" means each of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or
A-1
more (the "Triggering Percentage") of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
in the event the "Incumbent Board" (as such term is hereinafter defined)
pursuant to authority granted in any rights agreement to which the Company
is a party (the "Rights Agreement") lowers the acquisition threshold
percentages set forth in such Rights Agreement, the Triggering Percentage
shall be automatically reduced to equal the threshold percentages set
pursuant to authority granted to the board in the Rights Agreement; and
provided, further, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (x), (y), and (z) of subsection (c) of this Section 2.5; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, appointment or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for purposes of this definition, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
share exchange, merger or consolidation or acquisition of assets of another
corporation (a "Business Combination"), in each case, unless, following
such Business Combination, (x) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination will beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction will own the Company
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (y) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) will beneficially own, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (z) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination will
have been members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company or, (y) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors will be beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
A-2
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.
2.6 "Code" means the Internal Revenue Code of 1986, as amended. References
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
2.7 "Committee" shall have the meaning set forth in Section 3.1.
2.8 "Common Stock" means the common stock, par value $2.50 per share, of
the Company, and after substitution, such other stock as shall be substituted
therefor as provided in Article VIII.
2.9 "Company" means Fleming Companies, Inc., an Oklahoma corporation.
2.10 "Compensation Committee" means the Compensation and Organization
Committee of the Board.
2.11 "Date of Grant" means the date on which the granting of an Award is
authorized by the Committee or the Board or such later date as may be specified
by the Committee or the Board in such authorization.
2.12 "Eligible Associate" means any key associate of the Company, a
Subsidiary, or an Affiliated Entity.
2.13 "Eligible Director" means any member of the Board who is also not an
associate of the Company.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.15 "Executive Officer Participants" means Participants who are subject
to the provisions of Section 16 of the Exchange Act.
2.16 "Fair Market Value" means (A) during such time as the Common Stock is
listed upon the New York Stock Exchange or other exchanges or the NASDAQ/
National Market System, the average of the highest and lowest sales prices of
the Common Stock as reported by such stock exchange or exchanges or the
NASDAQ/National Market System on the day for which such value is to be
determined, or if no sale of the Common Stock shall have been made on any such
stock exchange or the NASDAQ/National Market System that day, on the next
preceding day on which there was a sale of such Common Stock or (B) during any
such time as the Common Stock is not listed upon an established stock exchange
or the NASDAQ/ National Market System, the mean between dealer "bid" and "ask"
prices of the Common Stock in the over-the-counter market on the day for which
such value is to be determined, as reported by the National Association of
Securities Dealers, Inc.
2.17 "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
2.18 "Non-Executive Officer Participants" means Participants who are not
subject to the provisions of Section 16 of the Exchange Act.
2.19 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2.20 "Option" means an Award granted under Article VI of the Plan and
includes both Nonqualified Stock Options and Incentive Stock Options to purchase
shares of Common Stock.
A-3
2.21 "Participant" means an Eligible Associate of the Company, a
Subsidiary, or an Affiliated Entity to whom an Award has been granted by the
Committee or an Eligible Director to whom a Nonqualified Stock Option has been
granted by the Board under the Plan.
2.22 "Plan" means Fleming Companies, Inc. 2002 Stock Incentive Plan.
2.23 "Regular Award Committee" means a committee comprised of the
individual who is the Company's chief executive officer and such additional
members, if any, as shall be appointed by the Board.
2.24 "Restricted Stock Award" means an Award granted to an Eligible
Associate under Article VII of the Plan.
2.25 "Secretary" means the corporate secretary of the Company duly elected
by the Board.
2.26 "Subsidiary" shall have the same meaning set forth in Section 424 of
the Code.
ARTICLE III
ADMINISTRATION
3.1 Administration of the Plan; the Committee. For purposes of
administration, the Plan shall be deemed to consist of two separate stock
incentive plans, a "Non-Executive Officer Participant Plan" which is limited to
Non-Executive Officer Participants and an "Executive Officer Participant Plan"
which is limited to Executive Officer Participants. Except for administration
and the category of Eligible Associates eligible to receive Awards, the terms of
the Non-Executive Officer Participant Plan and the Executive Officer Participant
Plan are identical.
The Non-Executive Officer Participant Plan shall be administered by both
the Regular Award Committee and the Compensation Committee. The Regular Award
Committee may only act within guidelines established by the Compensation
Committee. The Executive Officer Participant Plan shall be administered by the
Compensation Committee. With respect to the Non-Executive Officer Participant
Plan and to decisions relating to Non-Executive Officer Participants, including
the grant of Awards, the term "Committee" shall mean both the Regular Award
Committee and the Compensation Committee; and with respect to the Executive
Officer Participant Plan and to decisions relating to the Executive Officer
Participants, including the granting of Awards, the term "Committee" shall mean
only the Compensation Committee.
Unless otherwise provided in the by-laws of the Company or the resolutions
adopted from time to time by the Board establishing the Committee, the Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board. The
Committee shall hold meetings at such times and places as it may determine. A
majority of the members of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is present
or acts reduced to or approved in writing by a majority of the members of the
Committee shall be the valid acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
(a) Select the Eligible Associates to participate in the Plan.
(b) Determine the time or times when Awards will be made.
(c) Determine the form of an Award, whether an Option or a Restricted
Stock Award, the number of shares of Common Stock subject to the Award, all
the terms, conditions (including performance requirements), restrictions
and/or limitations, if any, of an Award, including the time and conditions
of exercise or vesting, and the terms of any Award Agreement, which may
include the waiver or amendment of prior terms and conditions or
acceleration or early vesting or payment of an Award under certain
circumstances determined by the Committee.
(d) Determine whether Awards will be granted singly or in combination.
A-4
(e) Accelerate the vesting, exercise or payment of an Award or the
performance period of an Award.
(f) Take any and all other action it deems necessary or advisable for
the proper operation or administration of the Plan.
3.2 Administration of Grants to Eligible Directors. The Board shall have
the exclusive authority to select the Eligible Directors to participate in the
Plan and to determine the number of Nonqualified Stock Options awarded to
Eligible Directors selected for participation. The Compensation Committee shall
administer all other aspects of the Awards made to Eligible Directors.
3.3 Committee to Make Rules and Interpret Plan. The Committee in its sole
discretion shall have the authority, subject to the provisions of the Plan, to
establish, adopt, or revise such rules and regulations and to make all such
determinations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. The Committee's interpretation of the Plan or
any Awards and all decisions and determinations by the Committee with respect to
the Plan shall be final, binding, and conclusive on all parties.
ARTICLE IV
GRANT OF AWARDS
Awards granted under this Plan shall be subject to the following
conditions:
(a) Subject to Article VIII, the aggregate number of shares of Common
Stock made subject to the Award of Options to any Eligible Associate in any
calendar year may not exceed 300,000.
(b) Subject to Article VIII, in no event shall more than 300,000
shares of Common Stock subject to the Plan be awarded to any Eligible
Associate as Restricted Stock Awards for the duration of the Plan.
(c) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise or are exchanged in the
Committee's discretion for Awards not involving Common Stock, shall be
available again for grant under the Plan and shall not be counted against
the Restricted Stock Award Limit.
(d) Common Stock delivered by the Company in payment of any Award
under the Plan may be authorized and unissued Common Stock or Common Stock
held in the treasury of the Company.
(e) The Committee shall, in its sole discretion, determine the manner
in which fractional shares arising under this Plan shall be treated.
(f) The Compensation Committee shall from time to time establish
guidelines for the Regular Award Committee regarding the grant of Awards to
Eligible Associates.
(g) Separate certificates or a book-entry registration representing
Common Stock shall be delivered to a Participant upon the exercise of any
Option.
(h) Restricted Stock Awards granted which vest based upon the
Participant's continued employment shall be limited in such a way that (i)
no portion of the Restricted Stock Award will vest until one year after the
Date of Grant, (ii) no more than one-third of the shares subject to the
Restricted Stock Award is eligible to vest until one year after Date of
Grant; (iii) no more than two-thirds of the shares subject to the
Restricted Stock Award is eligible to vest until at least two years after
Date of Grant and (iv) the entire Restricted Stock Award cannot vest until
at least three years after Date of Grant.
(i) Restricted Stock Awards granted which vest based upon performance
standards shall require the holder to remain in the employment of the
Company, a Subsidiary, or an Affiliated Entity for at least one year from
Date of Grant.
(j) Options granted to Eligible Associates pursuant to Article VI
which vest based upon either continued employment or performance standards
shall require the holder to remain in the employment of the Company, a
Subsidiary or an Affiliated Entity for at least one year from the Date of
Grant.
A-5
(k) The Committee shall be prohibited from canceling, reissuing or
modifying Awards if such action will have the effect of repricing the
Participant's Award.
(l) Eligible Directors may only be granted Nonqualified Stock Options
under this Plan by the Board.
ARTICLE V
ELIGIBILITY
Subject to the provisions of the Plan, the Committee shall, from time to
time, select from the Eligible Associates those to whom Awards shall be granted
and shall determine the type or types of Awards to be made and shall establish
in the related Award Agreements the terms, conditions, restrictions and/or
limitations, if any, applicable to the Awards in addition to those set forth in
the Plan and the administrative rules and regulations issued by the Committee.
Subject to the provisions of the Plan, the Board shall from time to time select
from the Eligible Directors, those to whom Nonqualified Stock Options shall be
granted and shall establish in the related Award Agreements, the terms,
conditions, restrictions, and/or limitations, if any, applicable to the Awards
in addition to those set forth in the Plan and the administrative rules and
regulations of the Committee.
ARTICLE VI
STOCK OPTIONS
6.1 Grant of Options. The Committee may, from time to time, subject to
the provisions of the Plan and such other terms and conditions as it may
determine, grant Options to Eligible Associates. These Options may be Incentive
Stock Options or Nonqualified Stock Options, or a combination of both. Each
grant of an Option shall be evidenced by an Award Agreement executed by the
Company and the Eligible Associate, and shall contain such terms and conditions
and be in such form as the Committee may from time to time approve, subject to
the requirements of Section 6.2. The Board may, from time to time, subject to
the provisions of the Plan and such other terms and conditions as it may
determine, grant Nonqualified Stock Options to Eligible Directors.
6.2 Conditions of Options. Each Option so granted shall be subject to the
following conditions:
(a) Exercise Price. As limited by Section 6.2(e) below, each Option
shall state the exercise price which shall be set by the Committee at the
Date of Grant; provided, however, no Option shall be granted at an exercise
price which is less than the Fair Market Value of the Common Stock on the
Date of Grant.
(b) Form of Payment. The exercise price of an Option may be paid (i)
in cash or by check, bank draft or money order payable to the order of the
Company; (ii) by delivering shares of Common Stock having a Fair Market
Value on the date of payment equal to the amount of the exercise price, but
only to the extent such exercise of an Option would not result in an
accounting compensation charge with respect to the shares used to pay the
exercise price unless otherwise determined by the Committee; or (iii) a
combination of the foregoing. In addition to the foregoing, any Option
granted under the Plan may be exercised by a broker-dealer acting on behalf
of a Participant if (A) the broker-dealer has received from the Participant
or the Company a notice evidencing the exercise of such Option and
instructions signed by the Participant requesting the Company to deliver
the shares of Common Stock subject to such Option to the broker-dealer on
behalf of the Participant and specifying the account into which such shares
should be deposited, (B) adequate provision has been made with respect to
the payment of any withholding taxes due upon such exercise or, in the case
of an Incentive Stock Option, upon the disposition of such shares and (C)
the broker-dealer and the Participant have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR, Part 220 and any successor rules and
regulations applicable to such exercise.
(c) Exercise of Options. Options granted under the Plan shall be
exercisable, in whole or in such installments and at such times, and shall
expire at such time, as shall be provided by the Committee in the Award
Agreement. Exercise of an Option shall be by written notice to the
Secretary at least two business days in advance of such exercise stating
the election to exercise in the form and manner
A-6
determined by the Committee. Every share of Common Stock acquired through
the exercise of an Option shall be deemed to be fully paid at the time of
exercise and payment of the exercise price.
(d) Other Terms and Conditions. Among other conditions that may be
imposed by the Committee, if deemed appropriate, are those relating to (i)
the period or periods and the conditions of exercisability of any Option;
(ii) the minimum periods during which Participants must be employed by the
Company, its Subsidiaries, or an Affiliated Entity, or must hold Options
before they may be exercised which shall in no event be less than one year;
(iii) the minimum periods during which shares acquired upon exercise must
be held before sale or transfer shall be permitted; (iv) conditions under
which such Options or shares may be subject to forfeiture; (v) the
frequency of exercise or the minimum or maximum number of shares that may
be acquired at any one time; (vi) the achievement by the Company of
specified performance criteria; and (vii) non-compete and protection of
business matters.
(e) Special Restrictions Relating to Incentive Stock Options. Options
issued in the form of Incentive Stock Options shall only be granted to
Eligible Associates of the Company or a Subsidiary, and not to Eligible
Associates of an Affiliated Entity. Furthermore, Incentive Stock Options
shall, in addition to being subject to all applicable terms, conditions,
restrictions and/or limitations established by the Committee, comply with
the requirements of Section 422 of the Code, including, without limitation,
the requirement that the exercise price of an Incentive Stock Option not be
less than 100% of the Fair Market Value of the Common Stock on the Date of
Grant, the requirement that each Incentive Stock Option, unless sooner
exercised, terminated or cancelled, expire no later than 10 years from its
Date of Grant, and the requirement that the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year (under this Plan or any other plan of the Company
or any Subsidiary) not exceed $100,000.
(f) Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
(g) Shareholder Rights. No Participant shall have a right as a
shareholder with respect to any share of Common Stock subject to an Option
prior to purchase of such shares of Common Stock by exercise of the Option.
ARTICLE VII
RESTRICTED STOCK AWARDS
7.1 Grant of Restricted Stock Awards. The Committee may, from time to
time, subject to the provisions of the Plan and such other terms and conditions
as it may determine, grant a Restricted Stock Award to any Eligible Associate.
Restricted Stock Awards shall be awarded in such number and at such times during
the term of the Plan as the Committee shall determine. Each Restricted Stock
Award may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, a book-entry registration or issuance of a stock
certificate or certificates, and by an Award Agreement setting forth the terms
of such Restricted Stock Award.
7.2 Conditions of Restricted Stock Awards. The grant of a Restricted
Stock Award shall be subject to the following:
(a) Restriction Period. In addition to any vesting conditions
determined by the Committee, including, but not by way of limitation, the
achievement by the Company of specified performance criteria may be based
upon the Company's achievement of earnings per share targets established by
the Committee, vesting of each Restricted Stock Award shall require the
holder to remain in the employment of the Company, a Subsidiary, or an
Affiliated Entity for a prescribed period (a "Restriction Period"). Subject
to Sections 4.1(h) and (i) the Committee shall determine the Restriction
Period or Periods which shall apply to the shares of Common Stock covered
by each Restricted Stock Award or portion thereof. At the end of the
Restriction Period, assuming the fulfillment of any other specified vesting
conditions, the restrictions imposed by the Committee shall lapse with
respect to the shares of Common
A-7
Stock covered by the Restricted Stock Award or portion thereof. In addition
to acceleration of vesting upon the occurrence of a Change of Control Event
as provided in Section 9.6, the Committee may, in its sole discretion,
modify or accelerate the vesting of a Restricted Stock Award (i) in the
case of the death or disability of the Participant, (ii) in the case the
Participant's employment is terminated by the Company without "cause" as
such term shall be defined by the Committee in the Award Agreement, or
(iii) in the case the Participant terminates his employment for "good
reason" as such term shall be defined by the Committee in the Award
Agreement. In addition, with respect to Restricted Stock Awards
representing an aggregate of 50,000 shares under the Plan (5% of the
Restricted Stock Award Limit) for all Eligible Associates during the
duration of the Plan, the Committee may in its sole discretion modify or
accelerate the vesting of such Restricted Stock Awards under such
circumstances as it deems appropriate.
(b) Restrictions. The holder of a Restricted Stock Award may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the
shares of Common Stock represented by the Restricted Stock Award during the
applicable Restriction Period. The Committee shall impose such other
restrictions and conditions on any shares of Common Stock covered by a
Restricted Stock Award as it may deem advisable including, without
limitation, restrictions under applicable Federal or state securities laws,
and may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions.
(c) Rights as Shareholders. During any Restriction Period, the
Committee may, in its discretion, grant to the holder of a Restricted Stock
Award all or any of the rights of a shareholder with respect to the shares,
including, but not by way of limitation, the right to vote such shares and
to receive dividends. If any dividends or other distributions are paid in
shares of Common Stock, all such shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with
respect to which they were paid.
ARTICLE VIII
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, stock
split, combination of shares or otherwise), or if the number of such shares of
Common Stock shall be increased through the payment of a stock dividend, or if
rights or warrants to purchase securities of the Company shall be issued to
holders of all outstanding Common Stock, then there shall be substituted for or
added to each share available under and subject to the Plan, and each share
theretofore appropriated under the Plan, the number and kind of shares of stock
or other securities into which each outstanding share of Common Stock shall be
so changed or for which each such share shall be exchanged or to which each such
share shall be entitled, as the case may be, on a fair and equivalent basis in
accordance with the applicable provisions of Section 424 of the Code; provided,
however, with respect to Options, in no such event will such adjustment result
in a modification of any Option as defined in Section 424(h) of the Code. In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock, or any stock or other securities into which the Common
Stock shall have been changed or for which it shall have been exchanged, then if
the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the shares available under and subject to
the Plan, or in any Award, theretofore granted, such adjustments shall be made
in accordance with such determination, except that no adjustment of the number
of shares of Common Stock available under the Plan or to which any Award relates
that would otherwise be required shall be made unless and until such adjustment
either by itself or with other adjustments not previously made would require an
increase or decrease of at least 1% in the number of shares of Common Stock
available under the Plan or to which any Award relates immediately prior to the
making of such adjustment (the "Minimum Adjustment"). Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment together with other adjustments required by
this Article VIII and not previously made would result in a Minimum Adjustment.
Notwithstanding the foregoing, any adjustment required by this Article VIII
which otherwise would not result
A-8
in a Minimum Adjustment shall be made with respect to shares of Common Stock
relating to any Award immediately prior to exercise, payment or settlement of
such Award.
No fractional shares of Common Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share.
ARTICLE IX
GENERAL
9.1 Amendment or Termination of Plan. The Board may alter, suspend or
terminate the Plan at any time. In addition, the Board may, from time to time,
amend the Plan in any manner, but may not without shareholder approval adopt any
amendment which would (i) increase the aggregate number of shares of Common
Stock available under the Plan (except by operation of Article VIII), (ii)
materially modify the requirements as to eligibility for participation in the
Plan, or (iii) materially increase the benefits to Participants provided by the
Plan.
9.2 Termination of Employment; Termination of Service. If an Eligible
Associate's employment with the Company, a Subsidiary, or an Affiliated Entity
terminates for a reason other than death, disability, retirement, or any
approved reason, all unexercised, unearned, and/or unpaid Awards, including, but
not by way of limitation, Awards earned, but not yet paid, all unpaid dividends
and dividend equivalents, and all interest, if any, accrued on the foregoing
shall be cancelled or forfeited, as the case may be, unless the Eligible
Associate's Award Agreement provides otherwise. The Committee shall (i)
determine what events constitute disability, retirement, or termination for an
approved reason for purposes of the Plan, and (ii) determine the treatment of a
Participant under the Plan in the event of his death, disability, retirement, or
termination for an approved reason. The Committee shall also determine the
method, if any, for accelerating the vesting or exercisability of any Options,
or providing for the exercise of any unexercised Options in the event of an
Eligible Associate's death, disability, retirement, or termination for an
approved reason. In the event an Eligible Associate's employment is terminated
due to retirement in accordance with the Company's regular retirement policies,
unless the Eligible Associate's Award Agreement provides otherwise, the Eligible
Associate shall have a period of three years following his date of retirement to
exercise any Nonqualified Stock Options which are otherwise exercisable on his
date of retirement.
In the event an Eligible Director terminates service as a director of the
Company, the unvested portion of any Award shall be forfeited unless otherwise
accelerated pursuant to the terms of the Eligible Director's Award Agreement or
by the Committee. The Eligible Director shall have a period of three years
following the date he ceases to be a director to exercise any Nonqualified Stock
Options which are otherwise exercisable on his date of termination of service.
9.3 Limited Transferability -- Options. The Committee may, in its
discretion, authorize all or a portion of the Nonqualified Stock Options to be
granted under this Plan to be on terms which permit transfer by the Participant
to (i) the ex-spouse of the Participant pursuant to the terms of a domestic
relations order, (ii) the spouse, children or grandchildren of the Participant
("Immediate Family Members"), (iii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iv) a partnership in which such Immediate
Family Members are the only partners. In addition (x) there may be no
consideration for any such transfer, (y) the Award Agreement pursuant to which
such Nonqualified Stock Options are granted must be approved by the Committee,
and must expressly provide for transferability in a manner consistent with this
paragraph, and (z) subsequent transfers of transferred Nonqualified Stock
Options shall be prohibited except as set forth below in this Section 9.3.
Following transfer, any such Nonqualified Stock Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Section 9.2 hereof the term
"Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Section 9.2 hereof shall continue to be applied
with respect to the original Participant, following which the Nonqualified Stock
Options shall be exercisable by the transferee only to the extent, and for the
periods specified in Section 9.2 hereof. No transfer pursuant to this Section
9.3 shall be effective to bind the Company unless the Company shall have been
furnished with written notice of such
A-9
transfer together with such other documents regarding the transfer as the
Committee shall request. In addition, subject to the foregoing provisions of
this Section 9.3, Awards shall be transferable only by will or the laws of
descent and distribution; however, no such transfer of an Award by the
Participant shall be effective to bind the Company unless the Company shall have
been furnished with written notice of such transfer and an authenticated copy of
the will and/or such other evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance by the transferee of
the terms and conditions of such Award.
9.4 Withholding Taxes. Unless otherwise paid by the Participant, the
Company shall be entitled to deduct from any payment under the Plan, regardless
of the form of such payment, the amount of all applicable income and employment
taxes required by law to be withheld with respect to such payment or may require
the Participant to pay to it such tax prior to and as a condition of the making
of such payment. In accordance with any applicable administrative guidelines it
establishes, the Committee may allow a Participant to pay the amount of taxes
required by law to be withheld from an Award by (i) directing the Company to
withhold from any payment of the Award a number of shares of Common Stock having
a Fair Market Value on the date of payment equal to the amount of the required
withholding taxes or (ii) delivering to the Company previously owned shares of
Common Stock having a Fair Market Value on the date of payment equal to the
amount of the required withholding taxes; provided, the foregoing
notwithstanding, any payment made by the Participant pursuant to either of the
foregoing clauses (i) or (ii) shall not be permitted if it would result in an
accounting charge with respect to such shares used to pay such taxes unless
otherwise approved by the Committee.
9.5 Dividends and Dividend Equivalents -- Awards. The Committee may
choose, at the time of the grant of any Award or any time thereafter up to the
time of payment of such Award, to include as part of such Award an entitlement
to receive dividends or dividend equivalents subject to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee may establish.
Dividends and dividend equivalents granted hereunder shall be paid in such form
and manner (i.e., lump sum or installments), and at such time as the Committee
shall determine. All dividends or dividend equivalents which are not paid
currently may, at the Committee's discretion, accrue interest.
9.6 Change of Control. Notwithstanding any other provision in this Plan
to the contrary, Awards granted under the Plan to any Eligible Associate or
Eligible Director may, in the discretion of the Committee, provide that such
Awards shall be immediately vested, fully earned and exercisable upon the
occurrence of a Change of Control Event.
9.7 Amendments to Awards. Subject to the limitations of Article IV, such
as the prohibition on repricing of Options, the Committee may at any time
unilaterally amend the terms of any Award Agreement, whether or not presently
exercisable or vested, to the extent it deems appropriate. However, amendments
which are adverse to the Participant shall require the Participant's consent.
9.8 Regulatory Approval and Listings. The Company shall use its best
efforts to file with the Securities and Exchange Commission as soon as
practicable following approval by the shareholders of the Company of the Plan as
provided in Section 1.2 of the Plan, and keep continuously effectively, a
Registration Statement on Form S-8 with respect to shares of Common Stock
subject to Awards hereunder. Notwithstanding anything contained in this Plan to
the contrary, the Company shall have no obligation to issue shares of Common
Stock under this Plan prior to:
(a) the obtaining of any approval from, or satisfaction of any waiting
period or other condition imposed by, any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or
advisable;
(b) the admission of such shares to listing on the stock exchange on
which the Common Stock may be listed; and
(c) the completion of any registration or other qualification of such
shares under any state or Federal law or ruling of any governmental body
which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
A-10
9.9 Right to Continued Employment. Participation in the Plan shall not
give any Eligible Associate any right to remain in the employ of the Company,
any Subsidiary, or any Affiliated Entity. The Company or, in the case of
employment with a Subsidiary or an Affiliated Entity, the Subsidiary or
Affiliated Entity reserves the right to terminate any Eligible Associate at any
time. Further, the adoption of this Plan shall not be deemed to give any
Eligible Associate or any other individual any right to be selected as a
Participant or to be granted an Award.
9.10 Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself or herself. In no event shall
any person who is or shall have been a member of the Committee or of the Board
be liable for any determination made or other action taken or any omission to
act in reliance upon any such report or information or for any action taken,
including the furnishing of information, or failure to act, if in good faith.
9.11 Construction. Masculine pronouns and other words of masculine gender
shall refer to both men and women. The titles and headings of the sections in
the Plan are for the convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
9.12 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Texas except as superseded by
applicable Federal law.
A-11
EXHIBIT B
FLEMING COMPANIES, INC.
2002 ASSOCIATE STOCK PURCHASE PLAN
FLEMING COMPANIES, INC.
2002 ASSOCIATE STOCK PURCHASE PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I NAME AND PURPOSE OF PLAN.......................................... B-1
1.1 Name of Plan................................................ B-1
1.2 Purpose..................................................... B-1
ARTICLE II DEFINITIONS...................................................... B-1
2.1 Definitions................................................. B-1
2.2 Construction................................................ B-3
ARTICLE III FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS........................ B-3
3.1 Stock Purchase Accounts..................................... B-3
3.2 Participant's Contributions................................. B-3
3.3 Continued Participation; Voluntary Withdrawal from Plan..... B-4
3.4 Withdrawal by Terminating Participant....................... B-4
3.5 Reparticipation............................................. B-4
3.6 Interest Accrual............................................ B-4
ARTICLE IV EXERCISE OF STOCK OPTION......................................... B-4
4.1 Exercise.................................................... B-4
4.2 Amount of Shares of Stock................................... B-4
4.3 Distribution................................................ B-5
4.4 Issuance of Shares; Stock Certificates...................... B-5
ARTICLE V MAXIMUM SHARES OF STOCK AVAILABLE................................. B-5
5.1 Maximum Number of Shares Available to Participants.......... B-5
5.2 Maximum Authorized Shares................................... B-6
Termination of Offering for the Second and Subsequent
5.3 Purchase Periods............................................ B-6
ARTICLE VI ADMINISTRATION................................................... B-6
6.1 Appointment of Committee.................................... B-6
6.2 Committee Powers and Duties................................. B-6
6.3 Committee to Make Rules and Interpret Plan.................. B-6
ARTICLE VII AMENDMENT OF THE PLAN........................................... B-6
ARTICLE VIII RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS............ B-6
8.1 Stock Adjustments........................................... B-6
8.2 Effect of Certain Transactions.............................. B-7
8.3 Stockholder Approval........................................ B-7
8.4 Regulatory Approval and Listings............................ B-7
ARTICLE IX MISCELLANEOUS.................................................... B-8
9.1 Notices..................................................... B-8
9.2 Application of the Funds.................................... B-8
9.3 Repurchase of Stock......................................... B-8
9.4 Alternate Contribution Methods.............................. B-8
9.5 Nonassignability............................................ B-8
9.6 Non-Discrimination.......................................... B-8
9.7 Government Regulation....................................... B-8
9.8 Effective Date of Plan...................................... B-8
9.9 Termination of Plan......................................... B-8
(i)
PAGE
----
9.10 Right to Continued Employment............................... B-8
9.11 Reliance on Reports......................................... B-8
9.12 Applicable Law.............................................. B-9
9.13 Construction................................................ B-9
(ii)
FLEMING COMPANIES, INC.
2002 ASSOCIATE STOCK PURCHASE PLAN
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be known as: Fleming Companies, Inc.
2002 Associate Stock Purchase Plan.
1.2 Purpose. The Fleming Companies, Inc. 2002 Associate Stock Purchase
Plan, by offering Associates the opportunity to purchase the Company's Stock
through payroll deductions, is intended to encourage participation in the
ownership and economic progress of the Company. Only Associates may be granted
Stock Options to purchase Stock. Except as otherwise provided in the Plan, by
reason of their employment relationship with the Employer, all Associates of all
Employers will be eligible to participate in the Plan.
ARTICLE II
DEFINITIONS
2.1 Definitions. Where the following capitalized words and phrases appear
in either a singular or plural form in this instrument, they shall have the
respective meanings set forth below unless a different context is clearly
expressed herein.
(a) Account and Account Balance:
(i) The word "Account" shall mean the record established and
maintained to record the interest in the Plan of each Participant in
accordance with Article III.
(ii) The words "Account Balance" shall mean the credited balance
standing in a Participant's Account from time to time.
(b) Annual Compensation: The phrase "Annual Compensation" shall have
the meaning set forth in Section 3.2.
(c) Associate: The word "Associate" shall mean any person employed by
the Employer on the basis of an employer-employee relationship who receives
remuneration for personal services rendered to the Employer.
(d) Board: The word "Board" shall mean the Board of Directors of the
Company.
(e) Code: The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) Committee: The word "Committee" shall mean the Compensation and
Organization Committee of the Board referred to in Article VI.
(g) Company: The word "Company" shall mean Fleming Companies, Inc.,
an Oklahoma corporation.
(h) Employer: The word "Employer" shall mean the Company and any
Subsidiary of the Company.
(i) Exercise Date: The words "Exercise Date" shall mean June 30 of
any year during which the Plan is in existence, being June 30, 2003, 2004,
2005, 2006 and 2007.
(j) Fair Market Value: The words "Fair Market Value" shall mean (A)
during such time as the Stock is listed upon the New York Stock Exchange or
other exchanges or the NASDAQ/National Market System, the average of the
highest and lowest sales prices of the Stock as reported by such stock
exchange or exchanges or the NASDAQ/National Market System on the day for
which such value is to be determined, or if no sale of the Stock shall have
been made on any such stock exchange or the
B-1
NASDAQ/National Market System that day, on the next preceding day on which
there was a sale of such Stock or (B) during any such time as the Stock is
not listed upon an established stock exchange or the NASDAQ/National Market
System, the mean between dealer "bid" and "ask" prices of the Stock in the
over-the-counter market on the day for which such value is to be
determined, as reported by the National Association of Securities Dealers,
Inc.
(k) Granting Date: The words "Granting Date" shall mean the beginning
of each applicable Purchase Period, being July 1, 2002, 2003, 2004, 2005
and 2006.
(l) Option Agreement: The words "Option Agreement" shall mean an
agreement to be executed by the Participant and the Company, which shall
comply with the terms of the Plan and shall be in such form as the
Committee agrees upon from time to time.
(m) Option Price: The words "Option Price" shall mean the price which
shall be paid by the Participant from his Account for any Stock purchased
on an applicable Exercise Date pursuant to any Stock Option granted to such
Participant; provided, such option price shall be the lesser of:
(i) 85% of the per share Fair Market Value on the Granting Date of
the Purchase Period applicable to such Participant: or
(ii) 85% of the per share Fair Market Value on the Exercise Date of
the Purchase Period applicable to such Participant.
In no event shall the Option Price per share be less than the par value of
the Stock.
(n) Participant: The word "Participant" shall mean an Associate (i)
who executes with the Company an Option Agreement on or prior to a Granting
Date, (ii) who on such Granting Date is employed by the Employer, and (iii)
whose customary employment is more than 20 hours per week and more than
five months in any calendar year. The word "Participant" shall also include
the legal representative of a deceased Participant, and a Participant who,
within three months prior to the end of the applicable Purchase Period for
which he is a Participant, terminates his employment with the Employer.
"Disability" for purposes of this Subsection (n) shall mean a physical or
mental condition which, in the judgment of the Committee, totally and
permanently prevents a Participant from engaging in any substantial gainful
employment with the Employer. A determination that disability exists shall
be based upon independent medical evidence satisfactory to the Committee.
In the event that any Employer ceases to be a Subsidiary of the Company,
the Associates of such Employer will be deemed to have terminated
employment as of such date.
(o) Plan: The word "Plan" shall mean this Fleming Companies, Inc.
2002 Associate Stock Purchase Plan, and any amendments thereto.
(p) Purchase Period: The words "Purchase Period" shall mean any one
year period commencing on July 1 and ending on June 30 of each year during
which the Plan is in existence, as follows:
(i) "First Purchase Period" -- July 1, 2002 through June 30, 2003.
(ii) "Second Purchase Period" -- July 1, 2003 through June 30,
2004.
(iii) "Third Purchase Period" -- July 1, 2004 through June 30,
2005.
(iv) "Fourth Purchase Period" -- July 1, 2005 through June 30,
2006.
(v) "Fifth Purchase Period" -- July 1, 2006 through June 30, 2007.
(q) Stock: The word "Stock" shall mean the common stock of the
Company, par value $2.50 per share, authorized for issuance pursuant to the
terms of the Plan, subject to Article VIII of the Plan.
(r) Stock Option: The words "Stock Option" shall mean the right of a
Participant on an applicable Exercise Date to purchase the number of whole
shares of Stock as provided in Article IV.
B-2
(s) Subsidiary: The word "Subsidiary" shall mean any present or
future subsidiary corporation of the Company as defined in Section 424 of
the Code.
(t) Terminating Participant: The words "Terminating Participant"
shall mean a Participant whose employment terminates more than three months
prior to the end of the applicable Purchase Period.
2.2 Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. Any word appearing herein in the plural shall include
the singular, where appropriate, and likewise the singular shall include the
plural, unless the context clearly indicates to the contrary.
ARTICLE III
FUNDING AND EARLY WITHDRAWAL OF ACCOUNTS
3.1 Stock Purchase Accounts. As of the applicable Granting Date, there
shall be established and maintained under the Plan in the name of each
Participant (who is a Participant with respect to the Purchase Period pertaining
to such Granting Date) an Account which shall be debited and credited in
accordance with the following Sections of this Article III and the provisions of
Article IV.
3.2 Participant's Contributions. By becoming a Participant, authorization
shall be deemed to be automatically given by the Participant for his periodic
contributions which shall be credited to his Account calculated as follows:
FIRST: The Participant's basic compensation rate (excluding any form
of extraordinary compensation such as overtime, prizes, bonuses,
commissions, reimbursed relocation expenses and the like), as of the date
("Determination Date") which is one month prior to the applicable Granting
Date, shall be determined and annualized ("Annual Compensation"). Increases
in such basic compensation rate after such Determination Date shall be
disregarded for that Purchase Period. Provided, however, the Determination
Date for a Participant who has been employed less than one month prior to
the applicable Granting Date shall be the Participant's date of hire.
SECOND: Prior to the applicable Granting Date, the Participant shall
elect in his Option Agreement filed with the Committee a percentage of
either 1%, 2%, 3%, 4%, 5%, or 6% ("Contribution Rate"); provided, an
election, once made with respect to any Purchase Period cannot be changed
after commencement of the Purchase Period; and provided further, a
Participant may elect to change his Contribution Rate for succeeding
Purchase Periods by notifying the Committee within 10 days of any
succeeding Granting Date. If a Participant receives a "hardship withdrawal"
from a cash or deferred arrangement established by the Employer under
Section 401(k) of the Code, he shall be prohibited from making
contributions to his Account under this Plan for a period of 6 months after
receipt of such hardship distribution.
THIRD: The Participant's Annual Compensation for the applicable
Purchase Period shall be multiplied by his Contribution Rate, and the
product thereof shall equal his aggregate maximum contributions ("Aggregate
Contributions") to be made under the Plan for the applicable Purchase
Period.
FOURTH: On each payroll payment date falling within the applicable
Purchase Period, the maximum amount of contributions which may be withheld
by the Employer from the Participant's payroll payment (the "Maximum
Withholding") shall be calculated by multiplying the Contribution Rate
times the Participant's basic compensation (excluding any form of
extraordinary compensation as defined in paragraph FIRST above) for the
applicable payroll period.
FIFTH: On each payroll payment date falling within the applicable
Purchase Period, the amount of contributions which shall be withheld by the
Employer from the Participant's payroll payment by payroll deduction
("Actual Withholding") shall be the lesser of (i) the Maximum Withholding
for such payroll payment, or (ii) the amount of Aggregate Contributions for
the applicable Purchase Period
B-3
reduced by the aggregate amount of prior Actual Withholdings during the
applicable Purchase Period. Notwithstanding anything to the contrary
herein, in the event that a Participant incurs a decrease in his basic
compensation rate during any Purchase Period, and such Participant is not a
Terminating Participant or has not voluntarily withdrawn from the Plan,
then, in such event, and if requested by the Participant, the Committee
may, in its sole discretion, make appropriate adjustments to the
Participant's Contribution Rate in order to achieve the Participant's
intended aggregate Actual Withholdings for the Purchase Period.
3.3 Continued Participation; Voluntary Withdrawal from Plan. Once a
Participant elects to participate in the Plan, he shall thereafter remain as a
Participant until expiration or termination of the Plan, unless he otherwise
withdraws from, or otherwise becomes ineligible to participate in the Plan. A
legal representative of a deceased Participant and a Participant who terminates
employment for any reason within three months prior to the end of the applicable
Purchase Period will continue to be a Participant in the Plan until the next
succeeding Exercise Date unless such Participant or his representative (in the
event of the Participant's death) elects to withdraw from the Plan pursuant to
this Section 3.3. A Participant may withdraw from the Plan at any time by filing
a written notice of withdrawal with the Committee prior to the next applicable
Exercise Date. Upon a Participant's withdrawal, his entire Account Balance, if
any, on the date of withdrawal shall be refunded to him and all outstanding
Stock Options and rights to purchase Stock in his favor shall be terminated and
no longer exercisable.
3.4 Withdrawal by Terminating Participant. A Terminating Participant
shall be deemed to have made an election to withdraw from the Plan on the date
his employment terminates. Upon such withdrawal, his entire Account Balance, if
any, on the date of withdrawal, shall be refunded to him and all outstanding
Stock Options and rights to purchase Stock in his favor shall be terminated and
no longer exercisable.
3.5 Reparticipation. A Participant who withdraws under Section 3.3 within
any Purchase Period shall not be eligible to reenter the Plan with respect to
the same Purchase Period; provided, a Participant who withdraws from the Plan
under Section 3.3 prior to the end of any Purchase Period shall not be precluded
from becoming a Participant with respect to any succeeding Purchase Period if he
has satisfied the eligibility requirements of the Plan.
3.6 Interest Accrual. With respect to the refund or distribution of an
Account Balance under either of Sections 3.3 or 3.4, no interest shall be paid
or payable. If the Plan is terminated under either of Sections 8.2 or 9.9, the
refund of an Account Balance shall be with interest at a per annum rate of 5%
computed upon the average balance in such Participant's Account for the period
of time following the Granting Date applicable to such Participant and ending on
the day of the distribution.
ARTICLE IV
EXERCISE OF STOCK OPTION
4.1 Exercise. If a Participant has not made an earlier election to
withdraw pursuant to either of Sections 3.3 or 3.4, he shall be deemed to have
elected to exercise his Stock Option as of each Exercise Date with respect to
the applicable Purchase Period.
4.2 Amount of Shares of Stock.
(a) Subject to the Subsection (b) following, the whole number of
shares of Stock to which a Participant shall be entitled ("Total Stock
Entitlement") upon the applicable Exercise Date shall be determined under
the following formula:
Account Balance / Option Price = Total Stock Entitlement
Provided, the Account Balance for purposes of this Section 4.2 shall be
determined without crediting any interest thereon.
B-4
(b) The Total Stock Entitlement computed for each Participant shall be
reduced to the extent that any of the following Subsections shall apply:
(i) No Participant shall be entitled to participate in the Plan to
a greater extent than that permitted under Section 423(b)(3) of the
Code. Thus, no Associate may be granted a Stock Option if such
Associate, immediately after the Stock Option is granted, owns stock
possessing five percent or more of the total combined voting power or
value of all classes of stock of the Company or of its parent or any
Subsidiary (if applicable). For purposes of this Subsection, the rules
of Section 424(d) of the Code shall apply in determining the stock
ownership of an individual, and stock which the Associate may purchase
under all outstanding stock options shall be treated as stock owned by
the Associate.
(ii) No Participant shall be entitled to participate in the Plan to
a greater extent than that permitted under Section 423(b)(8) of the
Code. Thus, no Associate may be granted a Stock Option which permits his
rights to purchase stock under all such "employee stock ownership plans"
of the Company or any Subsidiary (if applicable) intended to qualify
under Section 423 of the Code to accrue at a rate which exceeds $25,000
of fair market value of such stock (determined at the time such Stock
Option is granted) for each calendar year in which such Stock Option is
outstanding at any time. For purposes of this Subsection, (1) the right
to purchase stock under an option accrues when the option (or any
portion thereof) first becomes exercisable during the calendar year; (2)
the right to purchase stock under an option accrues at the rate provided
in the option, but in no case may such rate exceed $25,000 of fair
market value of such stock (determined at the time such stock option is
granted) for any one calendar year; and (3) a right to purchase stock
which has accrued under one option granted pursuant to any such plan may
not be carried over to any other such stock option.
4.3 Distribution. A Participant's Total Stock Entitlement as determined
under Section 4.2 shall be distributed to him pursuant to Section 4.4(b)
together with any cash which is not applied toward the purchase of whole shares
of Stock. No interest shall be payable upon such refunded Account Balance. The
total amount applied toward the purchase of Stock and/or distributed to the
Participant shall be debited to the Participant's Account. If a Participant is
prohibited from exercising his/her Stock Option because of the limitations
contained in Subsection 4.2(b) of the Plan or in Section 423 of the Code, the
balance of such Participant's Account shall be refunded to him/her without
interest.
4.4 Issuance of Shares; Stock Certificates.
(a) The shares of Stock purchased by a Participant on the applicable
Exercise Date shall for all purposes, be deemed to have been issued and
sold at the close of business on such Exercise Date. Prior to that time,
none of the rights or privileges of a stockholder of the Company shall
exist with respect to such shares.
(b) As soon as practicable after each Exercise Date, the Company shall
evidence the shares of Stock purchased by either a book-entry registration
or issuing and delivering a certificate, registered in the Participant's
name, for the number of shares of Stock purchased.
ARTICLE V
MAXIMUM SHARES OF STOCK AVAILABLE
5.1 Maximum Number of Shares Available to Participants. If on the
Exercise Date of any Purchase Period the Total Stock Entitlement for all
Participants, determined under Section 4.2 hereof exceeds the number of shares
of Stock available for issuance under the Plan, there shall be a proportionate
reduction for the ensuing applicable Purchase Period of each Participant's Total
Stock Entitlement in order to eliminate such excess. Notwithstanding any
provision herein to the contrary, the maximum number of shares a Participant
will be allowed to purchase during any Purchase Period is 2,000 shares of Stock.
B-5
5.2 Maximum Authorized Shares. Subject to adjustment under Article VIII,
the maximum number of shares of Stock which may be issued under the Plan shall
not in the aggregate exceed 1,800,000 shares of Stock whether it be authorized
but unissued shares of Stock or treasury shares of Stock.
5.3 Termination of Offering for the Second and Subsequent Purchase
Periods. If in the opinion of the Committee, there is insufficient Stock
available for Stock Options at any Granting Date after the July 1, 2002 Granting
Date, the Committee may terminate the offering contemplated for any or all
succeeding Purchase Periods.
ARTICLE VI
ADMINISTRATION
6.1 Appointment of Committee. The Plan shall be administered by the
Committee. The members of the Committee shall serve at the pleasure of the Board
and shall be ineligible to participate under the Plan. Any member may serve
concurrently as a member of any other administrative committee of any other plan
of the Company or its affiliates entitling participants therein to acquire
stock, stock options or deferred compensation rights including stock
appreciation rights.
6.2 Committee Powers and Duties. The Committee shall have all the powers
and authorities which are reasonably appropriate and necessary to discharge its
duties under the Plan.
6.3 Committee to Make Rules and Interpret Plan. The Committee, in its
sole discretion, shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise rules and regulations with respect to the
administration of the Plan and to make all such determinations relating to the
Plan as it may deem necessary or advisable for the administration of the Plan.
The Committee's interpretation of the Plan and all decisions and determinations
by the Committee with respect to the Plan shall be final, binding, and
conclusive on all parties unless otherwise determined by the Board.
ARTICLE VII
AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect consistent with Sections 421 and 423 of the Code, except that, without
approval of the stockholders, no amendment shall (i) increase the maximum number
of shares reserved under the Plan other than as provided in Article VIII, (ii)
be made if not permitted by Sections 421 and 423 of the Code or (iii) make the
Plan available to any person who is not a Participant.
ARTICLE VIII
RECAPITALIZATION AND EFFECT OF CERTAIN TRANSACTIONS
8.1 Stock Adjustments. In the event that the shares of Stock, as
presently constituted, shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another
corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or otherwise), or if the
number of such shares of Stock shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share available
under and subject to the Plan as provided in Section 5.2 hereof, and each share
theretofore appropriated or thereafter subject or which may become subject to
Stock Options under the Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Stock shall be so changed or for
which each such share shall be exchanged or to which each such share shall be
entitled, as the case may be, on a fair and equivalent basis in accordance with
the applicable provisions of Section 424 of the Code; provided, in no such event
will such adjustment result in a modification of any Stock Option as defined in
Section 424(h) of the Code. In the event there shall be any other change in the
number or kind of the outstanding shares of Stock, or any stock or other
securities into which the Stock shall have been changed or for which it shall
have been exchanged, then, if the Committee shall, in its sole discretion,
determine that such change equitably requires
B-6
an adjustment in the shares available under and subject to the Plan, or in any
Stock Option theretofore granted or which may be granted under the Plan, such
adjustments shall be made in accordance with such determination, except that no
adjustment of the number of shares of Stock available under the Plan or to which
any Stock Option relates that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made would require an increase or decrease of at least 1% in the
number of shares of Stock available under the Plan or to which a Stock Option
relates immediately prior to the making of such adjustment (the "Minimum
Adjustment"). Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment together
with other adjustments required by this Section 8.1 and not previously made
would result in a Minimum Adjustment. Notwithstanding the foregoing, any
adjustment required by this Section 8.1 which otherwise would not result in a
Minimum Adjustment shall be made with respect to shares of Stock relating to any
Stock Option immediately prior to exercise of such Stock Option.
No fractional shares of Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to the nearest
whole share. Any adjustments under this Section 8.1 shall be made according to
the sole discretion of the Company, and its decision shall be binding and
conclusive.
8.2 Effect of Certain Transactions. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting corporation in
any merger or consolidation, any Stock Option hereunder shall pertain to and
apply to the shares of stock of the Company, but a dissolution or liquidation of
the Company or merger or consolidation in which the Company is not the surviving
or the resulting corporation shall cause the Plan and any Stock Option hereunder
to terminate upon the effective date of such dissolution, liquidation, merger or
consolidation, and the Account Balance of each Participant shall be refunded to
him and any outstanding Stock Option in his favor shall be terminated and no
longer exercisable. Provided, that for the purpose of this Section 8.2, if any
merger, consolidation or combination occurs in which the Company is not the
surviving corporation and is the result of a mere change in the identity, form
or place of organization of the Company accomplished in accordance with Section
368(a)(1)(F) of the Code, then, such event shall not cause a termination.
8.3 Stockholder Approval. The Plan shall be approved by the holders of a
majority of the outstanding shares of Stock, present, or represented, and
entitled to vote at a meeting called for such purposes, which approval must
occur within the period ending twelve (12) months after the date the Plan is
adopted by the Board. In the event stockholder approval is not obtained within
such twelve-month period, the Plan and all such Stock Options and such Stock
shall be void.
8.4 Regulatory Approval and Listings. The Company shall use its best
efforts to file with the Securities and Exchange Commission as soon as
practicable following stockholder approval pursuant to Section 8.3, and keep
continuously effectively and usable, a Registration Statement on Form S-8 with
respect to shares of Stock subject to Stock Options hereunder. Notwithstanding
anything contained in this Plan to the contrary, the Company shall have no
obligation to issue or deliver certificates representing shares of Stock
evidencing Stock Options prior to:
(a) the obtaining of any approval from, or satisfaction of any waiting
period or other condition imposed by, any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or
advisable;
(b) the admission of such shares to listing on the stock exchange on
which the Stock may be listed; and
(c) the completion of any registration or other qualification of such
shares under any state or federal law or ruling of any governmental body
which the Committee shall, in its sole discretion, determine to be
necessary or advisable.
B-7
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice which a Participant files pursuant to the Plan
shall be on the form prescribed by the Committee and shall be effective when
received by the Committee.
9.2 Application of the Funds. All funds received by the Company under the
Plan may be used for any corporate purpose.
9.3 Repurchase of Stock. The Company shall not be required to repurchase
from any Participant shares of Stock which he acquired under the Plan.
9.4 Alternate Contribution Methods. If authorized payroll deductions of a
Participant's periodic contributions under Section 3.2 are not permitted by
reason of the provisions of any law applicable to an Employer, the Committee
shall adopt an appropriate alternative method under which affected Participants
may make payment for shares of Stock purchased hereunder which would otherwise
have been made pursuant to Section 3.2.
9.5 Nonassignability. Stock Options are exercisable only by the
Participant during his lifetime, or by his estate or the person who acquires the
right to exercise such Stock Option upon his death by bequest or inheritance,
and are not transferable by him other than by will or the laws of descent and
distribution. No Stock Option shall be subject in any manner to alienation,
anticipation, sale, transfer, assignment, pledge, or encumbrance, except for
transfer by will or the laws of descent and distribution. Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any Stock Option contrary to the
provisions hereof, shall be void and ineffective, shall give no right to any
purported transferee, and may, at the sole discretion of the Committee, result
in forfeiture of the Stock Option involved in such attempt.
9.6 Non-Discrimination. All Associates shall have the same rights and
privileges except that the total number of shares of Stock which can be
purchased shall be calculated in accordance with Article III and Article IV and
shall be subject to the limitations and conditions stated herein.
9.7 Government Regulation. The Company's obligation to sell and deliver
the Stock under the Plan is at all times subject to any and all approvals, rules
and regulations of any governmental authority required in connection with the
authorization, issuance, sale or delivery of such Stock.
9.8 Effective Date of Plan. The Plan shall become effective on July 1,
2002, if prior to that date the Plan has been approved by the holders of a
majority of the common stock of the Company present, or represented, and
entitled to vote at a meeting called for such purposes.
9.9 Termination of Plan. The Plan shall continue in effect through June
30, 2007, unless terminated pursuant to Section 8.2 or by the Board, which shall
have the right to terminate the Plan at any time. Upon the termination of the
Plan pursuant to this Section 9.8 or Section 8.2, the Account Balance of each
Participant shall be refunded to the Participant and any outstanding Stock
Option in his favor shall be terminated and no longer exercisable.
9.10 Right to Continued Employment. Participation in the Plan shall not
give any Participant any right to remain in the employ of the Employer. The
Employer reserves the right to terminate any Participant at any time.
9.11 Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and upon any
other information furnished in connection with the Plan by any person or persons
other than himself. In no event shall any person who is or shall have been a
member of the Committee or of the Board be liable for any determination made or
other action taken or any omission to act in reliance upon any such report or
information or for any action taken, including the furnishing of information, or
failure to act, if in good faith.
B-8
9.12 Applicable Law. This Plan shall be governed by and interpreted in
accordance with the laws of the State of Texas.
9.13 Construction. It is intended that this Plan shall qualify in
accordance with Sections 421 and 423 of the Code, and the provisions of this
Plan shall be interpreted and applied in a manner consistent with such intent.
Pursuant to the terms of the Plan and the applicable provisions of the Code, all
Participants in the Plan will have the same rights and privileges and all such
Participants will be treated in an equal, uniform and nondiscriminatory manner.
B-9
FLEMING COMPANIES, INC.
OPTION AGREEMENT FOR 2002 ASSOCIATE STOCK PURCHASE PLAN
AGREEMENT
It is agreed by the undersigned and the Company as follows:
Having read the Prospectus and related materials describing the 2002
Associate Stock Purchase Plan, I understand the provisions of the Plan and
desire to enroll for the Purchase Period beginning July 1 of this year.
I understand that the options to which I will be entitled under the Plan
are non-transferable, except in accordance with the Plan, and that upon purchase
of Fleming common stock on the Exercise Date, as defined in the Plan, I will
receive a certificate representing the full number of shares of stock purchased.
The Plan which is attached to the Prospectus is incorporated herein by
reference and made a part of this Agreement.
I authorize the Company to withhold from each paycheck paid to me the
percentage indicated below of my Basic Compensation Rate, as defined in the
Plan:
(PLEASE CIRCLE ONE)
Percentage: 1% 2% 3% 4% 5% 6%
Annual Amount:
----------------------------------------------------------------------------------------------------------------------
PARTICIPANT INFORMATION
----------------------------------------------------------------------------------------------------------------------
NAME DATE OF HIRE LOCATION SOCIAL SECURITY NO.
----------------------------------------------------------------------------------------------------------------------
ADDRESS CITY/STATE ZIP CODE
----------------------------------------------------------------------------------------------------------------------
PARTICIPANT'S SIGNATURE COMPANY REPRESENTATIVE'S SIGNATURE
----------------------------------------------------------------------------------------------------------------------
DATE SIGNED DATE SIGNED
----------------------------------------------------------------------------------------------------------------------
NOTE: RETURN THIS AGREEMENT TO YOUR HUMAN RESOURCES REPRESENTATIVE, STORE
MANAGER OR DIVISION CONTROLLER BY JUNE 19 FOR PROCESSING. A COPY WILL BE
RETURNED TO YOU FOR YOUR RECORDS.
B-10
EXHIBIT C
FLEMING COMPANIES, INC.
2002 AIM HIGH INCENTIVE PLAN
FLEMING COMPANIES, INC.
2002 AIM HIGH INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I NAME AND PURPOSE OF PLAN.......................................... C-1
1.1 Name of Plan................................................ C-1
1.2 Purpose..................................................... C-1
1.3 Establishment............................................... C-1
ARTICLE II DEFINITIONS...................................................... C-1
2.1 Affiliated Entity........................................... C-1
2.2 Anniversary Date............................................ C-1
2.3 Award....................................................... C-1
2.4 Beneficiary................................................. C-1
2.5 Base Salary................................................. C-1
2.6 Board....................................................... C-1
2.7 Cause....................................................... C-2
2.8 Change of Control Event..................................... C-2
2.9 Code........................................................ C-3
2.10 Committee................................................... C-3
2.11 Common Stock................................................ C-3
2.12 Company..................................................... C-3
2.13 Disability.................................................. C-3
2.14 Earnings.................................................... C-3
2.15 Earnings Per Share.......................................... C-3
2.16 Effective Date.............................................. C-4
2.17 Employer.................................................... C-4
2.18 Extraordinary Charge Items.................................. C-4
2.19 Extraordinary Revenue Items................................. C-4
2.20 GAAP........................................................ C-4
2.21 Key Associate............................................... C-4
2.22 Participant................................................. C-4
2.23 Plan........................................................ C-4
2.24 Retirement.................................................. C-4
2.25 Sales....................................................... C-4
2.26 Subsidiary.................................................. C-4
2.27 Targets..................................................... C-4
2.28 Year........................................................ C-4
ARTICLE III PARTICIPATION................................................... C-4
3.1 Selection for Participation................................. C-4
3.2 Relationship to Change of Control Agreements................ C-5
ARTICLE IV DETERMINATION OF AWARDS.......................................... C-5
4.1 Determination............................................... C-5
4.2 Committee to Establish Targets.............................. C-5
4.3 Maximum Award Payment....................................... C-5
(i)
PAGE
----
ARTICLE V PAYMENT OF AWARDS................................................. C-5
5.1 Payment of Awards........................................... C-5
Termination of Employment Due to Death, Disability or
5.2 Retirement.................................................. C-5
5.3 Change of Control Event..................................... C-6
5.4 Forfeiture of Awards........................................ C-6
5.5 Reduction or Elimination of Awards.......................... C-6
5.6 Beneficiary Designation..................................... C-6
ARTICLE VI GENERAL BENEFIT PROVISIONS....................................... C-6
6.1 No Trust.................................................... C-6
6.2 Withholding for Income and Employment Taxes................. C-6
6.3 No Interest on Awards....................................... C-7
6.4 Payments by the Company, Subsidiary or Affiliated Entity.... C-7
6.5 No Transferability.......................................... C-7
6.6 Expenses.................................................... C-7
6.7 No Prior Right or Offer..................................... C-7
6.8 Right to Continued Employment............................... C-7
6.9 No Part of Other Benefits................................... C-7
ARTICLE VII PROVISIONS RELATING TO PARTICIPANTS............................. C-7
7.1 Information Required of Participants........................ C-7
7.2 Benefits Payable to Incompetents............................ C-7
ARTICLE VIII ADMINISTRATION................................................. C-7
8.1 The Committee Shall Administer the Plan..................... C-7
8.2 Records and Reports......................................... C-8
8.3 Rules and Decisions......................................... C-8
ARTICLE IX AMENDMENT AND TERMINATION........................................ C-8
ARTICLE X MISCELLANEOUS..................................................... C-8
10.1 Obligations Binding Upon Successors......................... C-8
10.2 Construction................................................ C-8
10.3 Governing Law; Severability................................. C-8
10.4 Consent to Plan Terms....................................... C-8
10.5 Other Restrictions.......................................... C-8
(ii)
FLEMING COMPANIES, INC.
2002 AIM HIGH INCENTIVE PLAN
FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the Fleming
Companies, Inc. 2002 Aim High Incentive Plan upon the following terms and
conditions:
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be hereafter known as the FLEMING
COMPANIES, INC. 2002 AIM HIGH INCENTIVE PLAN.
1.2 Purpose. The purpose of the Plan is to motivate and financially
reward Key Associates selected to participate in the Plan by providing the
opportunity to earn a bonus if certain Targets are met. The primary goals of the
Plan include: (i) improving earnings, (ii) encouraging certain key executives to
remain with the Company, (iii) providing a concrete and understandable linkage
between performance, rewards and share value creation for the Company's
stockholders, and (iv) encouraging teamwork. The Company and the Committee
intend for the Plan and the payments thereunder to qualify for the exception
from Section 162(m) of the Code for "qualified performance-based compensation."
The Plan is an "unfunded plan" for incentive compensation.
1.3 Establishment. The Plan is established effective February 27, 2002
and shall terminate unless the Plan (including any amendments thereto) is
reapproved by the holders of a majority of the outstanding shares of common
stock of the Company, present, or represented and entitled to vote at a meeting
called for such purpose no later than the first shareholder meeting that occurs
in the fifth Year following the Year in which the shareholders previously
approved the Plan. The Plan shall be approved by the holders of a majority of
the outstanding shares of common stock of the Company, present, or represented,
and entitled to vote at a meeting called for such purpose, within twelve months
of the date the Board adopts the Plan. Pending approval by the shareholders,
Awards under the Plan may be granted to Key Associates, but no Awards may be
paid prior to and without receipt of shareholder approval. In the event
shareholder approval is not obtained within such twelve-month period, all such
Awards shall be void.
ARTICLE II
DEFINITIONS
2.1 Affiliated Entity: The words "Affiliated Entity" means any
partnership or limited liability company in which a majority of the partnership
or other similar interest thereof is owned or controlled, directly or
indirectly, by the Company or one or more of its Subsidiaries or Affiliated
Entities or a combination thereof. For purposes hereof, the Company, a
Subsidiary or an Affiliated Entity shall be deemed to have a majority ownership
interest in a partnership or limited liability company if the Company, such
Subsidiary or Affiliated Entity shall be allocated a majority of partnership or
limited liability company gains or losses or shall be or control a managing
director or a general partner of such partnership or limited liability company.
2.2 Anniversary Date: The words "Anniversary Date" shall mean the last
Saturday of December, which is end of each Year of the Company.
2.3 Award: The word "Award" shall mean, with respect to any Participant,
the amount of bonus calculated in accordance with Article IV hereof.
2.4 Beneficiary: The word "Beneficiary" shall mean that person designated
by the Participant pursuant to Section 5.6 hereof.
2.5 Base Salary: The words "Base Salary" shall mean the Participant's
annual base salary as determined by the Committee for each Year of the Plan with
no adjustment for salary merit increases or any salary decreases occurring
during such Year.
2.6 Board: The word "Board" shall mean the Board of Directors of the
Company.
C-1
2.7 Cause: The word "Cause" shall mean if the Participant (i) is
convicted of or pleads guilty to or enters a plea of nolo contendre to a felony,
(ii) engages in an act of personal dishonesty which is intended to result in
personal enrichment of the Participant at the expense of the Company, a
Subsidiary or Affiliated Entity, or (iii) "willfully" fails to follow a direct,
reasonable and lawful order of the Board and/or the Chairman and Chief Executive
Officer, within the reasonable scope of the Participant's duties, and such
failure, if curable, is not cured within 30 days. No act, or failure to act, by
the Participant shall be deemed "willful" unless done, or omitted to be done, by
the Participant not in good faith and without reasonable belief that the
Participant's action or omission was in the best interest of the Company, a
Subsidiary or Affiliated Entity. Cause shall not exist under this Section 2.7
unless and until the Company has delivered to Participant a copy of a resolution
duly adopted by not less than 3/4ths of the Board (excluding, if applicable, the
Participant) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Participant and an opportunity for the Participant,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, the Participant was guilty of the conduct set
forth above and specifying the particulars of such conduct in detail.
2.8 Change of Control Event: The words "Change of Control Event" shall
mean each of the following:
(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 2.8; 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
C-2
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
persons who 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
(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 persons who 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.
2.9 Code: The word "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
2.10 Committee: The word "Committee" shall mean the Compensation &
Organization Committee appointed by the Board which in accordance with Article
VIII herein will administer the Plan.
2.11 Common Stock. The words "Common Stock" shall mean the common stock,
par value $2.50 per share, of the Company.
2.12 Company: The word "Company" shall mean Fleming Companies, Inc., or
its successor.
2.13 Disability: The word "Disability" shall have the same meaning set
forth in the Company's Long Term Disability Plan.
2.14 Earnings: The word "Earnings" shall mean, for the Year of
determination of an Award, the consolidated gross revenues of the Company
(excluding Extraordinary Revenue Items) computed in accordance with GAAP,
consistently applied, from which shall be deducted an amount for such period
equal to the aggregate of all consolidated costs, expenses and other charges for
such period (excluding Extraordinary Charge Items) and income taxes for such
period computed in accordance with GAAP, consistently applied.
2.15 Earnings Per Share: The words "Earnings Per Share" shall mean, for
the applicable Year of determination of an Award, Earnings divided by the
weighted average shares outstanding for a fully diluted earnings per share
calculation as determined in accordance with GAAP consistently applied.
C-3
2.16 Effective Date: The words "Effective Date" shall mean February 27,
2002.
2.17 Employer: The word "Employer" shall mean the Company, any Subsidiary
or an Affiliated Entity.
2.18 Extraordinary Charge Items: The words "Extraordinary Charge Items"
shall mean for the Year of determination of an Award: (i) expense items and
other charges as determined extraordinary in accordance with GAAP, consistently
applied, as shall appear on the consolidated earnings statements of the Company
for such Year; and (ii) expense items and other charges that are unusual or
non-recurring and excluded from earnings reported by external public equity
analysts in First Call Research Network.
2.19 Extraordinary Revenue Items: The words "Extraordinary Revenue Items"
shall mean for the Year of determination of an Award: (i) revenue items
determined as extraordinary in accordance with GAAP, consistently applied, as
shall appear on the consolidated earnings statements of the Company for such
Year; and (ii) revenue items that are unusual or non-recurring and excluded from
earnings reported by external public equity analysts in First Call Research
Network.
2.20 GAAP: "GAAP" shall mean Generally Accepted Accounting Principles.
2.21 Key Associate: The words "Key Associate" shall mean any full time
employee of the Company, a Subsidiary or Affiliated Entity who holds the
position of Chairman, Chief Executive Officer, President, Executive Vice
President, Senior Vice President or Vice President or any other associate who is
an officer or key management associate of the Company, a Subsidiary or
Affiliated Entity.
2.22 Participant: The word "Participant" shall mean a Key Associate who
has been selected for participation in the Plan by the Committee.
2.23 Plan: The word "Plan" shall mean the "Fleming Companies, Inc. 2002
Aim High Incentive Plan" as set forth in this instrument, and as hereafter
amended from time to time.
2.24 Retirement: The word "Retirement" means the date that a Participant
terminates employment in accordance with the Company's retirement policy after
(i) attaining the age of at least 55 years and (ii) earning at least 10 years of
employment service. Years of employment service will be determined by the
Committee in their sole discretion on a reasonable and consistent basis for all
Participants.
2.25 Sales: The word "Sales" shall mean for the Year of determination of
an Award (i) minus (ii) where (i) is consolidated net sales of the Company as
determined in accordance with GAAP consistently applied and (ii) is the sum of
amounts included in (i) that represent bill-through sales, selected drop ship
sales, selected direct store delivery sales, fees charged customers,
transportation related fees and revenues, and miscellaneous revenues and income.
2.26 Subsidiary: The word "Subsidiary" shall mean any corporation
consolidated with Company under GAAP.
2.27 Targets: The word "Targets" shall mean those performance goals
established each Year by the Committee which require predetermined levels of
Earnings Per Share, Sales and Earnings be met before an Award will be earned and
payable. Targets for Sales and Earnings will consist of a threshold Target,
middle Target and maximum Target.
2.28 Year: The word "Year" shall mean the fiscal year of the Company.
ARTICLE III
PARTICIPATION
3.1 Selection for Participation. A Key Associate must be selected by the
Committee to be a Participant. Selection for participation will be based on
criteria determined by the Committee, which may include the Key Associate's
overall job level and ability to impact financial results of the Company, any
Subsidiary or Affiliated Entity. The Committee may add or remove Key Associates
from the group of Participants at any time during each Year in its sole
discretion. However, if a Change of Control Event occurs,
C-4
the Committee may not remove a Participant from the Plan prior to payment of the
Award for the Year in which the Change of Control Event occurs. Unless the
Committee determines to the contrary, or as otherwise provided in this Plan, any
Participant whose employment with the Company, a Subsidiary or an Affiliated
Entity is terminated for any reason other than death, Disability, or Retirement
shall not participate in the Plan for the Year of termination.
3.2 Relationship to Change of Control Agreements. If a Participant is a
party to an employment agreement with the Company which is effective upon a
"change of control" as such term is defined in the agreement (the "Change of
Control Agreement"), any provision of this Plan which would result in a loss or
reduction of an Award shall be subject to and superseded by the applicable
provisions of the Change of Control Agreement.
ARTICLE IV
DETERMINATION OF AWARDS
4.1 Determination.
(i) Award. For each Year, the Committee will determine the amount of
each Participant's Award and shall select a designated percentage of the
Participant's Base Salary which will be the middle Target level amount
which may be earned as an Award for such Year. The designated percentage of
Base Salary may vary among the Participants. Awards will be determined by
performance of the Company based on Earnings Per Share, Sales and Earnings.
The Committee shall select the applicable Targets for each Year. The
Targets established for a Year shall apply to all Participants.
(ii) Calculation of Award. For any Participant to be entitled to an
Award, the Target level of Earnings Per Share for the applicable Year first
must be attained or exceeded. Once the Target for Earnings Per Share for
such Year has been achieved, then the Award will be weighted based on Sales
and Earnings, as such weighting is determined each Year by the Committee.
4.2 Committee to Establish Targets. The Committee in its sole and
absolute discretion shall establish the Targets for each Year as well as any
threshold level, middle level and maximum level within each Target. If the
actual results for Sales or Earnings for a Year are between specified Target
levels, the Committee shall interpolate the value of any Award on an arithmetic
proportionate basis between such Targets. The determination of the Targets for
one Year may or may not be applicable for any following Year. Further, it is the
intent of the Company and the Committee that this Plan, the Awards and the
Targets satisfy the requirements of Section 162(m) of the Code. Accordingly, the
Committee will makes its determination as to the Targets and all other
applicable provisions of the Plan as are necessary in order to attempt to have
the Plan, the Awards and the Targets meet the requirements of Section 162(m) of
the Code.
4.3 Maximum Award Payment. Notwithstanding any other provision of the
Plan to the contrary, the maximum dollar amount of an Award which may be paid to
any Participant for any Year shall be $3,000,000.
ARTICLE V
PAYMENT OF AWARDS
5.1 Payment of Awards. Payment of Awards shall be made in cash as soon as
practicable after the Committee determines that the Award has been earned for
the Year unless payment of such Award is deferred pursuant to a non-qualified
deferred compensation plan adopted by the Company in which case payment will be
made as provided in such plan.
5.2 Termination of Employment Due to Death, Disability or Retirement. In
the event of the death, Disability or Retirement of a Participant prior to the
payment date of his Award, any Award which would otherwise have been paid for
such Year assuming the Participant continued in the employ of the Employer for
such Year, will be prorated based on the number of completed months of
employment during such Year of death, Disability or Retirement; and, payment
will be made in accordance with the terms of this Plan.
C-5
5.3 Change of Control Event. In the event of the occurrence of a Change
of Control Event and the Participant's employment is involuntarily terminated
without Cause prior to the payment date of his Award, the Participant shall be
entitled to payment of an Award for such Year. The Award will be calculated
based upon the assumption that (i) the middle level Target was achieved
(regardless of whether specified targets are met), and (ii) the Participant
continued in the employ of the Employer for such Year. The Award will be
prorated based upon the number of completed months of employment during such
Year. In addition, upon the occurrence of a Change of Control Event, this Plan
shall be continued for a period of 24 months following the date of such Change
of Control Event. During such continuation period, Award opportunities for
Participants in the Plan immediately prior to the date of the Change of Control
Event shall not be diminished and the Plan shall otherwise be operated in a
manner that is consistent with the manner in which the Plan has been operated
during the period immediately prior to the occurrence of a Change of Control
Event.
5.4 Forfeiture of Awards. Except as otherwise provided in Section 3.2 and
Section 5.3 or unless the Committee otherwise determines, if a Participant's
employment with the Company is terminated prior to the date of payment of his
Award for any reason other than death, Disability or Retirement, the
Participant, his Beneficiary and any other person will forfeit any interest
which the Participant had in the Award. However, transfers between the Company
and any Subsidiary or Affiliate shall not be deemed to be a termination of
employment which will result in forfeiture of an Award.
5.5 Reduction or Elimination of Awards. Prior to a Change of Control
Event, the Committee has the right, in its sole and absolute discretion, to
reduce or eliminate any Award to any Participant in the event the Committee
determines that amounts to be paid under the Award are excessive or are not
warranted. Until an Award is paid, no Participant, his Beneficiary or any other
person shall have any vested right or interest in such Award. While the
Committee has the right to eliminate or reduce any Award, the Committee does not
have the right to increase an Award or change the Targets which have been set
for a particular Year. Subsequent to a Change of Control Event, the Committee
cannot reduce or eliminate a Participant's Award for the Year in which the
Change of Control Event occurs.
5.6 Beneficiary Designation. In the event of the death of a Participant,
the Participant's Award, if earned as provided in Articles III and IV above,
shall be paid to the Beneficiary designated by the Participant on a form
provided by the Committee, who is (i) an individual or a trust established for
the benefit of an individual, and (ii) living on the date of the Participant's
death. If there is no Beneficiary then living, the benefit will be paid to the
estate of the Participant in the form of a single lump sum. While a Participant
is employed by the Employer, the Participant may change his Beneficiary by
delivering to the Committee a properly executed form designating a new
Beneficiary.
ARTICLE VI
GENERAL BENEFIT PROVISIONS
6.1 No Trust. No action under this Plan by the Company, its Board or the
Committee shall be construed as creating a trust, escrow or other secured or
segregated fund in favor of the Participant or any other persons otherwise
entitled to his Award. The status of the Participant and any other person
entitled to his Award with respect to any liabilities assumed by the Company,
any Subsidiary or Affiliated Entity hereunder shall be solely those of unsecured
creditors of the Company, Subsidiary or Affiliated Entity. Any asset acquired or
held by the Company, any Subsidiary or Affiliated Entity in connection with
liabilities assumed by it hereunder, shall not be deemed to be held under any
trust, escrow or other secured or segregated fund for the benefit of the
Participant or any other person entitled to his Award or to be security for the
performance of the obligations of the Company, any Subsidiary or Affiliated
Entity (who is the employer of the Participant), but shall be, and remain, a
general, unpledged, unrestricted asset of the Company, such Subsidiary or
Affiliated Entity (who is the employer of the Participant) at all times subject
to the claims of general creditors of the Company, and such Subsidiary or
Affiliated Entity.
6.2 Withholding for Income and Employment Taxes. Since all amounts to be
paid under the Plan to a Participant are to be considered as compensation paid
for services rendered by the Participant, the Company shall comply with all
federal and state laws and regulations respecting the withholding, deposit and
payment of
C-6
any income, employment or other taxes relating to the Award and any payments
made under this Plan, and all Awards shall be subject to and reduced by the
amount of such taxes.
6.3 No Interest on Awards. Awards to be paid hereunder will be paid
without interest or investment earnings of any kind whatsoever.
6.4 Payments by the Company, Subsidiary or Affiliated Entity. The
payments required to fund the cost of the Awards provided by the Plan shall be
made solely by the Company, any Subsidiary or Affiliated Entity whose Key
Associates are participating in the Plan from its general assets.
6.5 No Transferability. No right or benefit under this Plan shall be
subject in any manner to garnishment, attachment, anticipation, alienation,
sale, transfer, assignment, gift, pledge, encumbrance, or disposition,
hypothecation, levy, execution or the claim to creditors, either voluntarily or
involuntarily of the Participant, and any attempt to so garnish, attach,
anticipate, alienate, sell, transfer, assign, gift, pledge, encumber, dispose,
hypothecate, levy or execute on the same shall be null and void, and neither
shall such benefits or beneficial interest be liable or subject to the debts,
contracts, liabilities, engagements or torts of any person to whom such funds
are payable.
6.6 Expenses. All expenses and costs in connection with adoption and
administration of the Plan shall be borne by the Company.
6.7 No Prior Right or Offer. No Key Associate shall have any contractual
or other right to participate in the Plan until he is selected for participation
by the Committee. No Award to any Participant in any Year shall be deemed to
create a right to receive any Award or to participate in the Plan in any
subsequent Year.
6.8 Right to Continued Employment. Participation in the Plan shall not
give any Key Associate any right to remain in the employ of the Company, any
Subsidiary, or any Affiliated Entity. The Company or, in the case of employment
with a Subsidiary or an Affiliated Entity, the Subsidiary or Affiliated Entity
reserves the right to terminate any Key Associate at any time. Further, the
adoption of this Plan shall not be deemed to give any Key Associate or any other
individual any right to be selected as a Participant or to be granted an Award.
6.9 No Part of Other Benefits. The benefits provided in this Plan shall
not be deemed a part of or considered in calculating any other benefit provided
by the Company, any Subsidiary or Affiliated Entity to its Key Associates except
to the extent a Participant has elected to defer the receipt of his Award under
a non-qualified deferred compensation plan sponsored by the Company, a
Subsidiary or an Affiliated Entity. The Company assumes and shall have no
obligation to Participants except as expressly provided in the Plan. This Plan
is a complete statement of the terms and conditions of the Plan.
ARTICLE VII
PROVISIONS RELATING TO PARTICIPANTS
7.1 Information Required of Participants. Payment of Awards shall be made
as provided in this Plan and no formal claim shall be required therefor.
7.2 Benefits Payable to Incompetents. Any benefits payable hereunder to a
minor or other person under legal disability may be made, at the discretion of
the Committee, (i) directly to such person, or (ii) to a parent, spouse,
relative by blood or marriage, or the legal representative of such person. The
Committee shall not be required to see to the application of any such payment,
and the payee's receipt shall be a full and final discharge of the Committee's
responsibility hereunder.
ARTICLE VIII
ADMINISTRATION
8.1 The Committee Shall Administer the Plan. A member of the Committee
may not be eligible to become a Participant in the Plan. Subject to the
applicable provisions of the Plan, the Committee shall have the power where
consistent with the general purpose and intent of the Plan to (i) establish
Targets,
C-7
(ii) modify the requirements of the Plan to conform with the law or to meet
special circumstances not anticipated or covered in the Plan, (iii) suspend or
discontinue the Plan, (iv) establish policies, (v) prepare agreements evidencing
the grant and conditions of the Award and (vi) adopt rules and regulations and
prescribe forms for carrying out the purposes and provisions of the Plan. The
Committee shall have the authority to interpret and construe the Plan, and
determine all questions arising under the Plan in its sole discretion. Any
interpretation, decision or determination made by the Committee shall be final,
binding and conclusive. A majority of the Committee shall constitute a quorum,
and an act of the majority of the members present at any meeting at which a
quorum is present shall be the act of the Committee.
8.2 Records and Reports. The Committee shall exercise such authority and
responsibility as it deems appropriate in order to comply with governmental laws
and regulations.
8.3 Rules and Decisions. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. When making a determination or
calculation, the Committee shall be entitled to rely upon information furnished
by a Participant, the Employer, the accountants of the Company or the legal
counsel of the Company.
ARTICLE IX
AMENDMENT AND TERMINATION
Except as herein provided, the Committee may alter, suspend or terminate
the Plan at any time. Any such alteration, amendment, suspension or termination
of the Plan shall be prospective only. Provided, the foregoing notwithstanding,
the Committee may make any amendment necessary in order for the Plan to meet the
requirements of Section 162(m) of the Code for qualified performance-based
compensation. Provided further, this Plan may not be amended or terminated
within 24 months of a Change of Control Event without the consent of the
Participants in the Plan.
ARTICLE X
MISCELLANEOUS
10.1 Obligations Binding Upon Successors. The obligations of the Company
under this Plan shall be binding upon successors of the Company, its assigns and
transferees. 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 the obligations under this Plan in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. As used in this Plan, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Plan by operation of law, or otherwise.
10.2 Construction. Masculine pronouns and other words of masculine gender
shall refer to both men and women. The titles and headings of the Sections in
the Plan are for the convenience of reference only, and in the event of any
conflict, the text of the Plan rather than such title or heading shall control.
10.3 Governing Law; Severability. The validity of the Plan or any of its
provisions shall be construed, administered and governed in all respects under
the laws of the State of Texas. If any provisions of this instrument shall be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions shall continue to be fully effective.
10.4 Consent to Plan Terms. By electing to participate in this Plan, a
Participant shall be deemed conclusively to accept and consent to all the terms
of this Plan and to all actions and decisions of the Company, the Board and/or
Committee. Such terms and consent shall apply to and be binding upon each
Participant's Beneficiary or Beneficiaries, personal representative's and other
successors in interest.
10.5 Other Restrictions. The Committee shall be entitled to place such
other restrictions on a Participant's Award as it deems necessary and in the
best interests of the Company. Such restrictions may, by way of example but not
limitation, include noncompete, nonsolicitation and confidentiality provisions.
C-8
EXHIBIT D
FLEMING COMPANIES, INC.
2002 AIM HIGH PLUS INCENTIVE PLAN
FLEMING COMPANIES, INC.
2002 AIM HIGH PLUS INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I NAME AND PURPOSE OF PLAN.......................................... D-1
1.1 Name of Plan................................................ D-1
1.2 Purpose..................................................... D-1
1.3 Establishment............................................... D-1
1.4 Shares Subject to the Plan.................................. D-1
ARTICLE II DEFINITIONS...................................................... D-1
2.1 Affiliated Entity........................................... D-1
2.2 Anniversary Date............................................ D-1
2.3 Award....................................................... D-1
2.4 Beneficiary................................................. D-1
2.5 Base Salary................................................. D-1
2.6 Board....................................................... D-2
2.7 Cause....................................................... D-2
2.8 Change of Control Event..................................... D-2
2.9 Code........................................................ D-3
2.10 Committee................................................... D-3
2.11 Common Stock................................................ D-3
2.12 Company..................................................... D-3
2.13 Disability.................................................. D-3
2.14 Earnings.................................................... D-3
2.15 Earnings Per Share.......................................... D-3
2.16 Effective Date.............................................. D-3
2.17 Employer.................................................... D-4
2.18 Extraordinary Charge Items.................................. D-4
2.19 Extraordinary Revenue Items................................. D-4
2.20 Fair Market Value........................................... D-4
2.21 GAAP........................................................ D-4
2.22 Key Associate............................................... D-4
2.23 Participant................................................. D-4
2.24 Plan........................................................ D-4
2.25 Retirement.................................................. D-4
2.26 Sales....................................................... D-4
2.27 Subsidiary.................................................. D-4
2.28 Targets..................................................... D-4
2.29 Year........................................................ D-4
ARTICLE III PARTICIPATION................................................... D-5
3.1 Selection for Participation................................. D-5
3.2 Relationship to Change of Control Agreements................ D-5
ARTICLE IV DETERMINATION OF AWARDS.......................................... D-5
4.1 Determination............................................... D-5
4.2 Committee to Establish Targets.............................. D-5
4.3 Maximum Award Payment....................................... D-5
(i)
PAGE
----
ARTICLE V PAYMENT OF AWARDS................................................. D-6
5.1 Date of Payment of Awards................................... D-6
5.2 Form of Payment of Award.................................... D-6
Termination of Employment Due to Death, Disability or
5.3 Retirement.................................................. D-6
5.4 Change of Control Event..................................... D-6
5.5 Forfeiture of Awards........................................ D-6
5.6 Reduction or Elimination of Awards.......................... D-6
5.7 Beneficiary Designation..................................... D-6
ARTICLE VI GENERAL BENEFIT PROVISIONS....................................... D-7
6.1 No Trust.................................................... D-7
6.2 Withholding for Income and Employment Taxes................. D-7
6.3 No Interest on Awards....................................... D-7
6.4 Payments by the Company, Subsidiary or Affiliated Entity.... D-7
6.5 No Transferability.......................................... D-7
6.6 Expenses.................................................... D-7
6.7 No Prior Right or Offer..................................... D-7
6.8 Right to Continued Employment............................... D-7
6.9 No Part of Other Benefits................................... D-7
ARTICLE VII PROVISIONS RELATING TO PARTICIPANTS............................. D-8
7.1 Information Required of Participants........................ D-8
7.2 Benefits Payable to Incompetents............................ D-8
ARTICLE VIII ADMINISTRATION................................................. D-8
8.1 The Committee Shall Administer the Plan..................... D-8
8.2 Records and Reports......................................... D-8
8.3 Rules and Decisions......................................... D-8
ARTICLE IX AMENDMENT AND TERMINATION........................................ D-8
ARTICLE X MISCELLANEOUS..................................................... D-9
10.1 Obligations Binding Upon Successors......................... D-9
10.2 Construction................................................ D-9
10.3 Governing Law; Severability................................. D-9
10.4 Consent to Plan Terms....................................... D-9
10.5 Other Restrictions.......................................... D-9
(ii)
FLEMING COMPANIES, INC.
2002 AIM HIGH PLUS INCENTIVE PLAN
FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the Fleming
Companies, Inc. 2002 Aim High Plus Incentive Plan upon the following terms and
conditions:
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be hereafter known as the FLEMING
COMPANIES, INC. 2002 AIM HIGH PLUS INCENTIVE PLAN.
1.2 Purpose. The purpose of the Plan is to motivate and financially
reward Key Associates selected to participate in the Plan by providing the
opportunity to earn a bonus if certain Targets are met. The primary goals of the
Plan include: (i) improving earnings, (ii) encouraging certain key executives to
remain with the Company, (iii) providing a concrete and understandable linkage
between performance, rewards and share value creation for the Company's
stockholders, and (iv) encouraging teamwork. The Company and the Committee
intend for the Plan and the payments thereunder to qualify for the exception
from Section 162(m) of the Code for "qualified performance-based compensation."
The Plan is an "unfunded plan" for incentive compensation.
1.3 Establishment. The Plan is established effective February 27, 2002
and shall terminate unless the Plan (including any amendments thereto) is
reapproved by the holders of a majority of the outstanding shares of common
stock of the Company, present, or represented and entitled to vote at a meeting
called for such purpose no later than the first shareholder meeting that occurs
in the fifth Year following the Year in which the shareholders previously
approved the Plan. The Plan shall be approved by the holders of a majority of
the outstanding shares of common stock of the Company, present, or represented,
and entitled to vote at a meeting called for such purpose, within twelve months
of the date the Board adopts the Plan. Pending approval by the shareholders,
Awards under the Plan may be granted to Key Associates, but no Awards may be
paid prior to and without receipt of shareholder approval. In the event
shareholder approval is not obtained within such twelve-month period, all such
Awards shall be void.
1.4 Shares Subject to the Plan. The maximum number of shares of Common
Stock that may be paid under the Plan for all Years shall be 750,000 shares of
Common Stock.
ARTICLE II
DEFINITIONS
2.1 Affiliated Entity: The words "Affiliated Entity" means any
partnership or limited liability company in which a majority of the partnership
or other similar interest thereof is owned or controlled, directly or
indirectly, by the Company or one or more of its Subsidiaries or Affiliated
Entities or a combination thereof. For purposes hereof, the Company, a
Subsidiary or an Affiliated Entity shall be deemed to have a majority ownership
interest in a partnership or limited liability company if the Company, such
Subsidiary or Affiliated Entity shall be allocated a majority of partnership or
limited liability company gains or losses or shall be or control a managing
director or a general partner of such partnership or limited liability company.
2.2 Anniversary Date: The words "Anniversary Date" shall mean the last
Saturday of December, which is end of each Year of the Company.
2.3 Award: The word "Award" shall mean, with respect to any Participant,
the amount of bonus calculated in accordance with Article IV hereof.
2.4 Beneficiary: The word "Beneficiary" shall mean that person designated
by the Participant pursuant to Section 5.7 hereof.
2.5 Base Salary: The words "Base Salary" shall mean the Participant's
annual base salary as determined by the Committee for each Year of the Plan with
no adjustment for salary merit increases or any salary decreases occurring
during such Year.
D-1
2.6 Board: The word "Board" shall mean the Board of Directors of the
Company.
2.7 Cause: The word "Cause" shall mean if the Participant (i) is
convicted of or pleads guilty to or enters a plea of nolo contendre to a felony,
(ii) engages in an act of personal dishonesty which is intended to result in
personal enrichment of the Participant at the expense of the Company, a
Subsidiary or Affiliated Entity, or (iii) "willfully" fails to follow a direct,
reasonable and lawful order of the Board and/or the Chairman and Chief Executive
Officer, within the reasonable scope of the Participant's duties, and such
failure, if curable, is not cured within 30 days. No act, or failure to act, by
the Participant shall be deemed "willful" unless done, or omitted to be done, by
the Participant not in good faith and without reasonable belief that the
Participant's action or omission was in the best interest of the Company, a
Subsidiary or Affiliated Entity. Cause shall not exist under this Section 2.7
unless and until the Company has delivered to Participant a copy of a resolution
duly adopted by not less than 3/4ths of the Board (excluding, if applicable, the
Participant) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Participant and an opportunity for the Participant,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, the Participant was guilty of the conduct set
forth above and specifying the particulars of such conduct in detail.
2.8 Change of Control Event: The words "Change of Control Event" shall
mean each of the following:
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 2.8; or
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
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
D-2
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 persons who 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
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
persons who 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.
2.9 Code: The word "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
2.10 Committee: The word "Committee" shall mean the Compensation &
Organization Committee appointed by the Board which in accordance with Article
VIII herein will administer the Plan.
2.11 Common Stock: The words "Common Stock" shall mean the common stock,
par value $2.50 per share, of the Company.
2.12 Company: The word "Company" shall mean Fleming Companies, Inc., or
its successor.
2.13 Disability: The word "Disability" shall have the same meaning set
forth in the Company's Long Term Disability Plan.
2.14 Earnings: The word "Earnings" shall mean, for the Year of
determination of an Award, the consolidated gross revenues of the Company
(excluding Extraordinary Revenue Items) computed in accordance with GAAP,
consistently applied, from which shall be deducted an amount for such period
equal to the aggregate of all consolidated costs, expenses and other charges for
such period (excluding Extraordinary Charge Items) and income taxes for such
period computed in accordance with GAAP, consistently applied.
2.15 Earnings Per Share: The words "Earnings Per Share" shall mean, for
the applicable Year of determination of an Award, Earnings divided by the
weighted average shares outstanding for a fully diluted earnings per share
calculation as determined in accordance with GAAP consistently applied.
2.16 Effective Date: The words "Effective Date" shall mean February 27,
2002.
D-3
2.17 Employer: The word "Employer" shall mean the Company, any Subsidiary
or an Affiliated Entity.
2.18 Extraordinary Charge Items: The words "Extraordinary Charge Items"
shall mean for the Year of determination of an Award: (i) expense items and
other charges as determined extraordinary in accordance with GAAP, consistently
applied, as shall appear on the consolidated earnings statements of the Company
for such Year; and (ii) expense items and other charges that are unusual or
non-recurring and excluded from earnings reported by external public equity
analysts in First Call Research Network.
2.19 Extraordinary Revenue Items: The words "Extraordinary Revenue Items"
shall mean for the Year of determination of an Award: (i) revenue items
determined as extraordinary in accordance with GAAP, consistently applied, as
shall appear on the consolidated earnings statements of the Company for such
Year; and (ii) revenue items that are unusual or non-recurring and excluded from
earnings reported by external public equity analysts in First Call Research
Network.
2.20 Fair Market Value: The words "Fair Market Value" shall mean (A)
during such time as the Common Stock is listed upon the New York Stock Exchange
or other exchanges or the NASDAQ/ National Market System, the average of the
highest and lowest sales prices of the Common Stock as reported by such stock
exchange or exchanges or the NASDAQ/National Market System on the day for which
such value is to be determined, or if no sale of the Common Stock shall have
been made on any such stock exchange or the NASDAQ/National Market System that
day, on the next preceding day on which there was a sale of such Common Stock or
(B) during any such time as the Common Stock is not listed upon an established
stock exchange or the NASDAQ/ National Market System, the mean between dealer
"bid" and "ask" prices of the Common Stock in the over-the-counter market on the
day for which such value is to be determined, as reported by the National
Association of Securities Dealers, Inc.
2.21 GAAP: "GAAP" shall mean Generally Accepted Accounting Principles.
2.22 Key Associate: The words "Key Associate" shall mean any full time
employee of the Company, a Subsidiary or Affiliated Entity who holds the
position of Chairman, Chief Executive Officer, President, Executive Vice
President, Senior Vice President or Vice President or any other associate who is
an officer or key management associate of the Company, a Subsidiary or
Affiliated Entity.
2.23 Participant: The word "Participant" shall mean a Key Associate who
has been selected for participation in the Plan by the Committee.
2.24 Plan: The word "Plan" shall mean the "Fleming Companies, Inc. 2002
Aim High Plus Incentive Plan" as set forth in this instrument, and as hereafter
amended from time to time.
2.25 Retirement: The word "Retirement" means the date that a Participant
terminates employment in accordance with the Company's retirement policy after
(i) attaining the age of at least 55 years and (ii) earning at least 10 years of
employment service. Years of employment service will be determined by the
Committee in their sole discretion on a reasonable and consistent basis for all
Participants.
2.26 Sales: The word "Sales" shall mean for the Year of determination of
an Award (i) minus (ii) where (i) is consolidated net sales of the Company as
determined in accordance with GAAP consistently applied and (ii) is the sum of
amounts included in (i) that represent bill-through sales, selected drop ship
sales, selected direct store delivery sales, fees charged customers,
transportation related fees and revenues, and miscellaneous revenues and income.
2.27 Subsidiary: The word "Subsidiary" shall mean any corporation
consolidated with Company under GAAP.
2.28 Targets: The word "Targets" shall mean those performance goals
established each Year by the Committee which require predetermined levels of
Earnings Per Share, Sales and Earnings be met before an Award will be earned and
payable. Targets for Sales and Earnings will consist of a threshold Target,
middle Target and maximum Target.
2.29 Year: The word "Year" shall mean the fiscal year of the Company.
D-4
ARTICLE III
PARTICIPATION
3.1 Selection for Participation. A Key Associate must be selected by the
Committee to be a Participant. Selection for participation will be based on
criteria determined by the Committee, which may include the Key Associate's
overall job level and ability to impact financial results of the Company, any
Subsidiary or Affiliated Entity. The Committee may add or remove Key Associates
from the group of Participants at any time during each Year in its sole
discretion. However, if a Change of Control Event occurs, the Committee may not
remove a Participant from the Plan prior to payment of the Award for the Year in
which the Change of Control Event occurs. Unless the Committee determines to the
contrary, or as otherwise provided in this Plan, any Participant whose
employment with the Company, a Subsidiary or an Affiliated Entity is terminated
for any reason other than death, Disability, or Retirement shall not participate
in the Plan for the Year of termination.
3.2 Relationship to Change of Control Agreements. If a Participant is a
party to an employment agreement with the Company which is effective upon a
"change of control" as such term is defined in the agreement (the "Change of
Control Agreement"), any provision of this Plan which would result in a loss or
reduction of an Award shall be subject to and superseded by the applicable
provisions of the Change of Control Agreement.
ARTICLE IV
DETERMINATION OF AWARDS
4.1 Determination.
(i) Award. For each Year, the Committee will determine the amount of
each Participant's Award and shall select a designated percentage of the
Participant's Base Salary which will be the middle Target level amount
which may be earned as an Award for such Year. The designated percentage of
Base Salary may vary among the Participants. Awards will be determined by
performance of the Company based on Earnings Per Share, Sales and Earnings.
The Committee shall select the applicable Targets for each Year. The
Targets established for a Year shall apply to all Participants.
(ii) Calculation of Award. For any Participant to be entitled to an
Award, the Target level of Earnings Per Share for the applicable Year first
must be attained or exceeded. Once the Target for Earnings Per Share for
such Year has been achieved, then the Award will be weighted based on Sales
and Earnings, as such weighting is determined each Year by the Committee.
4.2 Committee to Establish Targets. The Committee in its sole and
absolute discretion shall establish the Targets for each Year as well as any
threshold level, middle level and maximum level within each Target. If the
actual results for Sales or Earnings for a Year are between specified Target
levels, the Committee shall interpolate the value of any Award on an arithmetic
proportionate basis between such Targets. The determination of the Targets for
one Year may or may not be applicable for any following Year. Further, it is the
intent of the Company and the Committee that this Plan, the Awards and the
Targets satisfy the requirements of Section 162(m) of the Code. Accordingly, the
Committee will makes its determination as to the Targets and all other
applicable provisions of the Plan as are necessary in order to attempt to have
the Plan, the Awards and the Targets meet the requirements of Section 162(m) of
the Code.
4.3 Maximum Award Payment. Notwithstanding any other provision of the
Plan to the contrary, the maximum dollar amount of an Award which may be paid to
any Participant under the Plan for any Year shall be $2,000,000.
D-5
ARTICLE V
PAYMENT OF AWARDS
5.1 Date of Payment of Awards. Payment of Awards shall be made as soon as
practicable after the Committee determines that the Award has been earned for
the Year unless payment of such Award is deferred to a non-qualified deferred
compensation plan adopted by the Company in which case payment will be made as
provided in such plan.
5.2 Form of Payment of Award. Payment of Awards shall be made in the form
of Common Stock issued in the name of the Participant, or his/her Beneficiary in
the case of death. The number of shares to be distributed under an Award shall
be determined by dividing the Award earned by the Fair Market Value of the
Common Stock on the date the Committee makes a final determination under Section
5.1 above, that the Award has been earned for the applicable Year. If payment is
deferred as provided in Section 5.1, then the same calculation will be made to
determine the number of shares of Common Stock which may be deferred under a
non-qualified deferred compensation plan sponsored by the Company, a Subsidiary
or an Affiliated Entity.
5.3 Termination of Employment Due to Death, Disability or Retirement. In
the event of the death, Disability or Retirement of a Participant prior to the
payment date of his Award, any Award which would otherwise have been paid for
such Year assuming the Participant continued in the employ of the Employer for
such Year, will be prorated based on the number of completed months of
employment during such Year of death, Disability or Retirement; and, payment
will be made in accordance with the terms of this Plan.
5.4 Change of Control Event. In the event of the occurrence of a Change
of Control Event and the Participant's employment is involuntarily terminated
without Cause prior to the payment date of his Award, the Participant shall be
entitled to payment of an Award for such Year. The Award will be calculated
based upon the assumption that (i) the middle level Target was achieved
(regardless of whether specified targets are met), and (ii) the Participant
continued in the employ of the Employer for such Year. The Award will be
prorated based upon the number of completed months of employment during such
Year. In addition, upon the occurrence of a Change of Control Event, this Plan
shall be continued for a period of 24 months following the date of such Change
of Control Event. During such continuation period, Award opportunities for
Participants in the Plan immediately prior to the date of the Change of Control
Event shall not be diminished and the Plan shall otherwise be operated in a
manner that is consistent with the manner in which the Plan has been operated
during the period immediately prior to the occurrence of a Change of Control
Event.
5.5 Forfeiture of Awards. Except as provided in Section 3.2 and Section
5.3 or unless the Committee otherwise determines, if a Participant's employment
with the Company is terminated prior to the date of payment of his Award for any
reason other than death, Disability or Retirement, the Participant, his
Beneficiary and any other person will forfeit any interest which the Participant
had in the Award. However, transfers between the Company and any Subsidiary or
Affiliate shall not be deemed to be a termination of employment which will
result in forfeiture of an Award.
5.6 Reduction or Elimination of Awards. Prior to a Change of Control
Event, the Committee has the right, in its sole and absolute discretion, to
reduce or eliminate any Award to any Participant in the event the Committee
determines that amounts to be paid under the Award are excessive or are not
warranted. Until an Award is paid, no Participant, his Beneficiary or any other
person shall have any vested right or interest in such Award. While the
Committee has the right to eliminate or reduce any Award, the Committee does not
have the right to increase an Award or change the Targets which have been set
for a particular Year. Subsequent to a Change of Control Event, the Committee
cannot reduce or eliminate a Participant's Award for the Year in which the
Change of Control Event occurs.
5.7 Beneficiary Designation. In the event of the death of a Participant,
the Participant's Award, if earned as provided in Articles III and IV above,
shall be paid to the Beneficiary designated by the Participant on a form
provided by the Committee, who is (i) an individual or a trust established for
the benefit of an individual, and (ii) living on the date of the Participant's
death. If there is no Beneficiary then living, the benefit will be paid to the
estate of the Participant in the form of a single lump sum. While a Participant
is
D-6
employed by the Employer, the Participant may change his Beneficiary by
delivering to the Committee a properly executed form designating a new
Beneficiary.
ARTICLE VI
GENERAL BENEFIT PROVISIONS
6.1 No Trust. No action under this Plan by the Company, its Board or the
Committee shall be construed as creating a trust, escrow or other secured or
segregated fund in favor of the Participant or any other persons otherwise
entitled to his Award. The status of the Participant and any other person
entitled to his Award with respect to any liabilities assumed by the Company,
any Subsidiary or Affiliated Entity hereunder shall be solely those of unsecured
creditors of the Company, Subsidiary or Affiliated Entity. Any asset acquired or
held by the Company, any Subsidiary or Affiliated Entity in connection with
liabilities assumed by it hereunder, shall not be deemed to be held under any
trust, escrow or other secured or segregated fund for the benefit of the
Participant or any other person entitled to his Award or to be security for the
performance of the obligations of the Company, any Subsidiary or Affiliated
Entity (who is the employer of the Participant), but shall be, and remain, a
general, unpledged, unrestricted asset of the Company, such Subsidiary or
Affiliated Entity (who is the employer of the Participant) at all times subject
to the claims of general creditors of the Company, and such Subsidiary or
Affiliated Entity.
6.2 Withholding for Income and Employment Taxes. Since all amounts to be
paid under the Plan to a Participant are to be considered as compensation paid
for services rendered by the Participant, the Company shall comply with all
federal and state laws and regulations respecting the withholding, deposit and
payment of any income, employment or other taxes relating to the Award and any
payments made under this Plan.
6.3 No Interest on Awards. Awards to be paid hereunder will be paid
without interest or investment earnings of any kind whatsoever.
6.4 Payments by the Company, Subsidiary or Affiliated Entity. The
payments required to fund the cost of the Awards provided by the Plan shall be
made solely by the Company, any Subsidiary or Affiliated Entity whose Key
Associates are participating in the Plan from its general assets.
6.5 No Transferability. No right or benefit under this Plan shall be
subject in any manner to garnishment, attachment, anticipation, alienation,
sale, transfer, assignment, gift, pledge, encumbrance, or disposition,
hypothecation, levy, execution or the claim to creditors, either voluntarily or
involuntarily of the Participant, and any attempt to so garnish, attach,
anticipate, alienate, sell, transfer, assign, gift, pledge, encumber, dispose,
hypothecate, levy or execute on the same shall be null and void, and neither
shall such benefits or beneficial interest be liable or subject to the debts,
contracts, liabilities, engagements or torts of any person to whom such funds
are payable.
6.6 Expenses. All expenses and costs in connection with adoption and
administration of the Plan shall be borne by the Company.
6.7 No Prior Right or Offer. No Key Associate shall have any contractual
or other right to participate in the Plan until he is selected for participation
by the Committee. No Award to any Participant in any Year shall be deemed to
create a right to receive any Award or to participate in the Plan in any
subsequent Year.
6.8 Right to Continued Employment. Participation in the Plan shall not
give any Key Associate any right to remain in the employ of the Company, any
Subsidiary, or any Affiliated Entity. The Company or, in the case of employment
with a Subsidiary or an Affiliated Entity, the Subsidiary or Affiliated Entity
reserves the right to terminate any Key Associate at any time. Further, the
adoption of this Plan shall not be deemed to give any Key Associate or any other
individual any right to be selected as a Participant or to be granted an Award.
6.9 No Part of Other Benefits. The benefits provided in this Plan shall
not be deemed a part of or considered in calculating any other benefit provided
by the Company, any Subsidiary or Affiliated Entity to its Key Associates except
to the extent a Participant has elected to defer the receipt of his Award under
a non-qualified deferred compensation plan sponsored by the Company, a
Subsidiary or an Affiliated Entity.
D-7
The Company assumes and shall have no obligation to Participants except as
expressly provided in the Plan. This Plan is a complete statement of the terms
and conditions of the Plan.
ARTICLE VII
PROVISIONS RELATING TO PARTICIPANTS
7.1 Information Required of Participants. Payment of Awards shall be made
as provided in this Plan and no formal claim shall be required therefor.
7.2 Benefits Payable to Incompetents. Any benefits payable hereunder to a
minor or other person under legal disability may be made, at the discretion of
the Committee, (i) directly to such person, or (ii) to a parent, spouse,
relative by blood or marriage, or the legal representative of such person. The
Committee shall not be required to see to the application of any such payment,
and the payee's receipt shall be a full and final discharge of the Committee's
responsibility hereunder.
ARTICLE VIII
ADMINISTRATION
8.1 The Committee Shall Administer the Plan. A member of the Committee
may not be eligible to become a Participant in the Plan. Subject to the
applicable provisions of the Plan, the Committee shall have the power where
consistent with the general purpose and intent of the Plan to (i) establish
Targets, (ii) modify the requirements of the Plan to conform with the law or to
meet special circumstances not anticipated or covered in the Plan, (iii) suspend
or discontinue the Plan, (iv) establish policies, (v) prepare agreements
evidencing the grant and conditions of the Award and (vi) adopt rules and
regulations and prescribe forms for carrying out the purposes and provisions of
the Plan. The Committee shall have the authority to interpret and construe the
Plan, and determine all questions arising under the Plan in its sole discretion.
Any interpretation, decision or determination made by the Committee shall be
final, binding and conclusive. A majority of the Committee shall constitute a
quorum, and an act of the majority of the members present at any meeting at
which a quorum is present shall be the act of the Committee.
8.2 Records and Reports. The Committee shall exercise such authority and
responsibility as it deems appropriate in order to comply with governmental laws
and regulations.
8.3 Rules and Decisions. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. When making a determination or
calculation, the Committee shall be entitled to rely upon information furnished
by a Participant, the Employer, the accountants of the Company or the legal
counsel of the Company.
ARTICLE IX
AMENDMENT AND TERMINATION
Except as herein provided, the Committee may alter, suspend or terminate
the Plan at any time. Any such alteration, amendment, suspension or termination
of the Plan shall be prospective only. Provided, the foregoing notwithstanding,
the Committee may make any amendment necessary in order for the Plan to meet the
requirements of Section 162(m) of the Code for qualified performance-based
compensation. Provided further, this Plan may not be amended or terminated
within 24 months of a Change of Control Event without the consent of the
Participants in the Plan.
D-8
ARTICLE X
MISCELLANEOUS
10.1 Obligations Binding Upon Successors. The obligations of the Company
under this Plan shall be binding upon successors of the Company, its assigns and
transferees. 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 the obligations under this Plan 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 Plan, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Plan by operation of law, or otherwise.
10.2 Construction. Masculine pronouns and other words of masculine gender
shall refer to both men and women. The titles and headings of the Sections in
the Plan are for the convenience of reference only, and in the event of any
conflict, the text of the Plan rather than such title or heading shall control.
10.3 Governing Law; Severability. The validity of the Plan or any of its
provisions shall be construed, administered and governed in all respects under
the laws of the State of Texas. If any provisions of this instrument shall be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions shall continue to be fully effective.
10.4 Consent to Plan Terms. By electing to participate in this Plan, a
Participant shall be deemed conclusively to accept and consent to all the terms
of this Plan and to all actions and decisions of the Company, the Board and/or
Committee. Such terms and consent shall apply to and be binding upon each
Participant's Beneficiary or Beneficiaries, personal representative's and other
successors in interest.
10.5 Other Restrictions. The Committee shall be entitled to place such
other restrictions on a Participant's Award as it deems necessary and in the
best interests of the Company. Such restrictions may, by way of example but not
limitation, include noncompete, nonsolicitation and confidentiality provisions.
D-9
EXHIBIT E
AUDIT & COMPLIANCE COMMITTEE
MEMBERS
Alice M. Peterson, Chairperson
Carol B. Hallett
Edward C. Joullian III
CHARTER
The Audit and Compliance Committee is appointed by the Board to assist the
Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the compliance by the Company with legal and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors.
The members of the Committee shall meet the independence and experience
requirements of the New York Stock Exchange. The members of the Committee shall
be appointed by the Board on the recommendation of the Governance/Nominating
Committee.
The Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Committee may request any
officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Committee shall make regular reports to the Board.
The Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting principles and practices as
well as the adequacy of internal controls that could significantly
affect the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's
quarterly financial statements.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's accounting principles and
practices as suggested by the independent auditor, internal auditors or
management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if
so determined by the Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor
and approve all non-audit related services to be performed by the
Company's independent auditors.
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Committee, recommend that the
Board replace the independent auditor.
E-1
11. Review the significant reports to management prepared by the internal
auditing department and management's responses.
12. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
13. Discuss with the independent auditor the matters required to be
discussed by the applicable Statements on Auditing Standards.
14. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget, and
staffing.
15. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
16. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor, that the Company and its
subsidiaries are in conformity with the Company's Code of Conduct.
17. Advise the Board with respect to the Company's policies and procedures
regarding compliance with the Company's Code of Conduct.
18. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
19. Meet at least three times each year with the chief financial officer,
chief accounting officer, the senior internal auditing executive, and
the independent auditor in separate executive sessions.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
E-2
EXHIBIT F
FLEMING COMPANIES, INC.
FEBRUARY 2002
CORPORATE GOVERNANCE
THE PHILOSOPHY.
The Company will operate pursuant to the highest possible ethical standards
with integrity, propriety, and fairness, and in full compliance with the law.
Each director and management associate is expected to conduct himself or herself
at all times in accordance with these tenets. Every action by each director and
management associate will be taken with full consideration for the interests and
well-being, first, of all Company stockholders and, second, of all other Company
stakeholders. Equal opportunity without qualification is the Company's policy in
employment practices, in its daily management, and in its procurement and sale
of goods and services. Discrimination will not be permitted based on race,
color, religion, sex, age, disability status, national origin, citizenship, or
Vietnam veteran status.
THE STANDARDS.
The Corporate Governance/Nominating Committee (the "Governance Committee")
of the Board has adopted and will administer the following Corporate Governance
Standards for the guidance of the Company:
1. The Board will operate in accordance with a statement of Requirements of
Management and Directors attached hereto as Attachment I.
2. The Chairman of the Compensation and Organization Committee (the
"Compensation Committee") shall conduct a performance appraisal review
with the CEO at least annually. In connection with the annual review,
the Chairman shall seek consultation with, and request information from,
the other members of the Compensation Committee and other independent
directors.
3. The Board will annually review and approve a three-year strategic plan
and a one-year operating plan for the Company.
4. Beginning with the annual meeting of stockholders in 2002, all directors
will stand for election annually.
5. The Board believes that as a general rule, former Company associates
should not serve on the Board; provided, however, this standard shall
not apply to former Company associates five years after he/she has no
longer been an associate.
6. The Audit and Compliance Committee (the "Audit Committee") and the
Compensation Committee shall consist entirely of independent directors.
7. The Board will appoint all committee members of the designated standing
committees of the Board (Audit and Compliance, Compensation and
Organization, Finance, Governance/Nominating and an Executive Committee)
upon the recommendation of the Governance Committee. The intent will be
to rotate various members of the Board through various committees so
that each independent member of the Board has an opportunity to become
more experienced about the internal operations and affairs of the
Company. Effective with the annual meeting in 2000, the Board has the
following standing committees: Audit and Compliance, Compensation and
Organization, Corporate Governance/Nominating, Finance and an Executive
Committee.
F-1
8. The Governance Committee will annually assess Board and committee
effectiveness through the use of the "Board Evaluation" questionnaire
attached hereto as Attachment II. Each independent member of the Board
will be required to complete the questionnaire annually. The
questionnaires shall become a part of the permanent records of the
Company and maintained by the Company's corporate secretary.
9. Whenever feasible, directors will receive materials well in advance of
meetings for items to be acted upon. In addition, independent directors
shall meet outside of the presence of non-independent directors from
time to time as deemed appropriate.
10. Interlocking directorships will not be allowed; provided, however, that
this shall not preclude members of the Fleming Board of Directors from
serving together on boards of other public companies. (An interlocking
directorship would occur if a Fleming director or officer served on the
board of company X and a director or an officer of company X served on
the Fleming Board, or if a major supplier or customer served on
Fleming's Board.) Joint ventures will be permitted between the Company
and independent Board members subject to approval by the Board and
Securities and Exchange Commission disclosure rules.
11. Directors are required to own at least $100,000 of Fleming common stock
within four years of election (by the Board or the Stockholders). A
substantial portion of each independent director's annual compensation
shall be paid in Fleming common stock or its equivalent.
12. Each director will retire upon the earlier of 30 days upon his/her 15th
anniversary as a director; provided, however, the 15 year limitation
shall not apply to directors holding office at the time these standards
were first adopted by the Board in 1997.
13. Succession planning and management development will be reported
annually to the independent directors by the CEO.
14. All corporate officers are required to own Fleming common stock, with a
value equal to a specified multiple of their base salary with the
ownership requirements to be met over a five-year period. The
Compensation Committee will be responsible for setting the multiples on
which the ownership requirements will be based.
15. Generally, management's incentive compensation will be linked directly
and objectively to measured financial goals set in advance by the
Compensation Committee; however, the Board recognizes that flexibility
is important in determining compensation and that all management
compensation may not be so linked.
16. Stock options will not be repriced (the exercise price for options will
not be lowered even if the current market price of the stock is below
the exercise price) and all stock option plans will be subject to
stockholder approval.
17. All stockholders have equal voting rights except as may be provided by
law, the Restated Certificate of Incorporation or, if applicable, under
a share rights plan adopted by the Company.
18. These Corporate Governance standards have been developed and approved
by the Board and will be reviewed by the Board and published at least
annually and revised where appropriate.
F-2
ATTACHMENT I
REQUIREMENTS OF MANAGEMENT AND DIRECTORS
The Governance Committee shall direct the operation of the Company through
management in accordance with the following Requirements of Management and
Directors in order to enhance Board effectiveness:
BOARD REQUIREMENTS FLEMING REQUIREMENTS
OF MANAGEMENT OF DIRECTORS
----------------------------------------- -----------------------------------------
- Strong principled and ethical - Represent and act in the best interests
leadership. of the stockholders.
- Develop strategies to deliver strong - Critique and approve strategic and
market franchises and build stockholder operating plans.
wealth over the long term.
- Recommend appropriate strategic and - Select, motivate, evaluate, and
operating plans. compensate the CEO and all senior
officers.
- Maintain effective control of - Good understanding of strategies and
operations. the business.
- Measure performance against peers. - Review succession planning and
management development. (For
independent directors only).
- Assure sound succession planning and - Advise and consult on key
management development. organizational changes.
- Sound organizational structure. - Careful study of Board materials and
issues.
- Inform the Board regularly regarding - Active, objective and constructive
the status of key initiatives. participation at meetings of Board and
Committees.
- No surprises. - Assistance in representing Fleming to
the outside world.
- Board meetings which are well planned, - Counsel on corporate issues.
allow meaningful participation, and
provide for timely resolution of
issues.
- Advance Board materials which contain - Good understanding of general economic
the right amount of information and are trends and corporate governance.
received sufficiently in advance of
meetings.
F-3
ATTACHMENT II
BOARD EVALUATION QUESTIONNAIRE
This questionnaire shall be provided to each independent director on or
about January 1 of each year and such directors shall complete the questionnaire
by entering a number grade from 1 to 5 (where 1 is considered "poor" and 5 is
considered "excellent") and written comments, where appropriate, as to each of
the following 14 standards. IF YOU GRADE ONE OR MORE QUESTIONS WITH A 2 OR
LOWER, PLEASE PROVIDE COMMENTS IN THE SPACE PROVIDED BELOW.
QUESTION POINTS
------------------------------------------------------------ -----
1. The Board knows and understands the Company's vision,
strategic precepts, strategic plan and operating plan.
-----
2. The Board reflects its understanding of the Company's
vision, strategic precepts, strategic plan, and
operating plan in its discussions and actions on key
issues throughout the year.
-----
3. Board meetings are conducted in a manner which ensures
open communication, meaningful participation, and
timely resolution of issues.
-----
4. Board materials contain the right amount of
information, and Board members receive their materials
sufficiently in advance of meetings.
-----
5. Board members are diligent in preparing for meetings.
-----
6. The Board reviews and adopts an annual operating budget
and regularly monitors performance against it
throughout the year.
-----
7. The Board monitors the Company's income statement,
balance sheet, and cash flow.
-----
8. The Board reviews and adopts an annual capital budget
and receives regular written or oral reports of
performance against it throughout the year.
-----
9. In tracking Company performance, the Board regularly
considers the performance of peer companies.
-----
10. The Board reviews on at least an annual basis the
performance of the CEO through the Compensation
Committee.
-----
11. On an annual basis, the Board and/or the Compensation
Committee will review the performance and ethics of the
senior officers.
-----
12. The correlation between executive pay and Company
performance will be reviewed on an annual basis by the
Board and/or the Compensation Committee.
-----
13. On an annual basis, the independent directors shall
review the succession plans for the CEO and key senior
management.
-----
14. No less frequently than prior to his/her nomination
every third year, each individual director standing for
re-election will receive a performance review prior to
his/her nomination from the Governance Committee. This
assures that each director receives feedback from his
fellow directors on his/her performance as a director.
-----
COMMENTS:
The Governance Committee will analyze the numerical ratings and comments in
detail and develop recommendations to enhance Board effectiveness. The Chairman
of the Governance Committee shall present the assessments and recommendations to
the full Board annually at its meeting immediately prior to the mailing of the
proxy materials. The Governance Committee will oversee the process of
implementing recommendations.
F-4
EXHIBIT G-1
GUIDELINES FOR BOARD COMPOSITION
Size: Between 3 and 20 members (as set by Restated
Certificate of Incorporation). Board chooses within
those parameters.
Election: Board of directors to be elected annually.
Mix: Maximum of 3 inside directors; must always be a
majority of independent directors.
Independent Director: Must offer to stand down at end of term following
change in occupation or profession that would
diminish director's ability to contribute as a
board member.
Inside Director:
(Non-CEO) Must offer to resign from board upon the earlier of
either reaching age 65 or retirement, resignation,
other termination from company, or downward
revision status in company.
Disability: Must stand down if suffering from disability or ill
health sufficiently serious to prevent active
participation in board affairs over a sustained
period.
Attendance: If cumulative attendance at board and committee
meetings over two successive years falls below 60%,
director must offer to stand down.
G-1
EXHIBIT G-2
GUIDELINES FOR BOARD CANDIDATES
1. A director should have the ability to apply good independent judgment to
a business situation and should be able to represent broadly the
interests of all the company's shareholders and constituencies. Board
members should be recommended primarily on the basis of their
qualification to meet these fundamental criteria.
2. A director must be free of any conflicts of interest which would
interfere with his or her loyalty to the company and its shareholders.
Those who have positions with or significant interests in competitors of
the company may not be considered. To avoid even the appearance of a
conflict of interest, members of legal firms which provide legal counsel
to the company and representatives of investment banking houses,
commercial banks or management consulting firms which have or are
anticipated to have business relations with the company should not be
considered.
3. In addition, the following criteria should be considered in recommending
candidates for board membership, although these should not be applied
rigidly:
a. Maturity and Experience
A director should be mature and have practical or academic
experience in business, economics, government or the sciences.
Ideally, a director would have 15 or more years of experience
including management responsibilities.
b. Geography
Since the company's operations are primarily mainland United
States in scope, it is desirable to have a balanced geographic
representation with major geographic areas of the company's
business being reflected on the board to the extent practicable.
c. Past Experience in Order of Preference
(1) Chief executive officer, chief operating officer or senior
executive officer of a public or substantial private company,
preferably of an industrial, distribution or retailing company,
with sales in excess of $500,000,000.
(2) An educator from fields of business, economics or the sciences
with management experience.
d. Women, Minorities and Special Interests
Since a director represents broadly the interests of all the
company's shareholders and constituencies, he or she should be
chosen for his or her individual abilities and not be recommended
based upon gender, minority group status or as a representative of
any special interest group. However, it is desirable to have a
cross section of backgrounds, and candidates otherwise qualified
may be recommended with due consideration given to their gender,
minority status or special interests.
G-2
PROXY
FLEMING COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 2002 AT 10:00 A.M. AT OUR CUSTOMER
SUPPORT CENTER, 1945 LAKEPOINTE DRIVE, LEWISVILLE, TEXAS.
Mark S. Hansen, Neal J. Rider, or Carlos M. Hernandez is hereby constituted the
proxy of the undersigned with full power of subsitution to represent and to
vote, as specified, all shares of common stock which the Shareholder(s) named on
the reverse side is entitled to vote at the above Annual Meeting or at any
adjournment thereof, and to vote in their discretion on all matters as may
properly be brought before the Meeting.
EquiServe Trust Company, N.A., as Custodian under the Dividend Reinvestment and
Stock Purchase Plan, is hereby authorized to execute a proxy with identical
instructions for any shares of common stock held for the benefit of the
Shareholder(s) named on the reverse side.
Nominees for election to the Board of Directors for a one-year term expiring in
2003 are:
O1. Herbert M. Baum, 02. Kenneth M. Duberstein, 03. Archie R. Dykes, 04. Carol
B. Hallett, 05. Robert S. Hamada, 06. Mark S. Hansen and 07. Alice M. Peterson.
Please sign and date on the reverse side and mail promptly in the enclosed
postage-paid envelope or otherwise to vote by telephone or Internet, please see
the reverse of this card.
================================================================================
Comments:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
---------------
SEE REVERSE
SIDE
---------------
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE ONLY IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL o
FLEMING COMPANIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 2002
10:00 A.M.
LEWISVILLE, TEXAS
YOUR VOTE IS IMPORTANT
THANK YOU FOR VOTING.
A GREAT PLACE TO WORK
A GREAT PLACE TO TRADE
A GREAT PLACE TO INVEST
PLEASE MARK YOUR 4867
[X] VOTES AS IN THIS
EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO
DIRECTION IS INDICATED, THEY WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTORS
NOMINATED BY THE BOARD AND "FOR" PROPOSALS 2, 3, 4, 5, AND 6. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 2, 3, 4, 5, AND 6.
The Board of Directors Recommends a vote FOR Proposals 2, 3, 4, 5, and 6.
FOR WITHHELD
1. Election of Directors (see reverse) [ ] [ ]
For, except vote from the following nominee(s):
------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of Deloitte & Touche LLP as [ ] [ ] [ ]
Independent Auditors for 2002
3. Approval of the 2002 Stock Incentive [ ] [ ] [ ]
Plan
4. Approval of the 2002 Associate Stock [ ] [ ] [ ]
Purchase Plan
5. Approval of the 2002 Aim High Incentive [ ] [ ] [ ]
Plan
6. Approval of the 2002 Aim High Plus [ ] [ ] [ ]
Incentive Plan
--------------------------------------------------------------------------------
I have included comments or change of address. [ ]
I do not wish to receive future annual reports [ ]
for this account at this address.
I agree to accept future proxy statements and [ ]
annual reports electronically.
I plan to attend the annual meeting. [ ]
SIGNATURE(S) DATE
--------------------------------------------- ------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
THE PROXY WILL VOTE IN HIS/HER DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. I RESERVE THE RIGHT TO
REVOKE THIS PROXY AT ANY TIME BEFORE THE EXERCISE THEREOF.
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE ONLY IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL o
FLEMING COMPANIES, INC.
Dear Shareholder:
Fleming encourages you to take advantage of new and convenient ways by which you
can vote your shares. You can vote your shares electronically through the
Internet or the telephone. This eleminates the need to return the proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above is your personal code to access the system.
1. To vote over the Internet:
o Log on to the Internet and go to the web site
http://www.eproxyvote.com/flm.
2. To vote over the telephone:
o On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683) 24 hours
a day, 7 days a week from the U.S. and Canada to vote your proxy.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, do not mail back your proxy
card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.