-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E4YURr7CEb73tsb5vTiuaXAROBUGTz6faqi5l3sRUqUBXbM9BaZbI+FCPDMxrSZq GtFqiEzYpOTCCdeeQxpcXg== 0000909334-99-000101.txt : 19990825 0000909334-99-000101.hdr.sgml : 19990825 ACCESSION NUMBER: 0000909334-99-000101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990710 FILED AS OF DATE: 19990824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEMING COMPANIES INC /OK/ CENTRAL INDEX KEY: 0000352949 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 480222760 STATE OF INCORPORATION: OK FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08140 FILM NUMBER: 99698383 BUSINESS ADDRESS: STREET 1: 6301 WATERFORD BLVD STREET 2: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73126 BUSINESS PHONE: 4058407200 MAIL ADDRESS: STREET 1: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73216-0647 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 10, 1999 OR _ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8140 FLEMING COMPANIES, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 48-0222760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6301 Waterford Boulevard, Box 26647 Oklahoma City, Oklahoma 73126 (Address of principal executive offices) (Zip Code) (405) 840-7200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing require- ments for the past 90 days. Yes X No The number of shares outstanding of each of the issuer's classes of common stock, as of August 6, 1999 is as follows: Class Shares Outstanding Common stock, $2.50 par value 38,810,000 INDEX Page Number Part I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Condensed Statements of Operations - 12 Weeks Ended July 10, 1999, and July 11, 1998 Consolidated Condensed Statements of Operations - 28 Weeks Ended July 10, 1999, and July 11, 1998 Consolidated Condensed Balance Sheets - July 10, 1999, and December 26, 1998 Consolidated Condensed Statements of Cash Flows - 28 Weeks Ended July 10, 1999, and July 11, 1998 Notes to Consolidated Condensed Financial Statements Independent Accountants' Review Report Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk Part II. OTHER INFORMATION: Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K Signatures PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations For the 12 weeks ended July 10, 1999, and July 11, 1998 (In thousands, except per share amounts)
============================================================================ 1999 1998 - ---------------------------------------------------------------------------- Net sales $3,349,362 $3,505,943 Costs and expenses: Cost of sales 3,022,154 3,164,174 Selling and administrative 286,565 284,146 Interest expense 38,647 35,861 Interest income (6,894) (8,308) Equity investment results 2,415 3,248 Litigation charge - 2,216 Impairment/restructuring charge 6,169 916 - ---------------------------------------------------------------------------- Total costs and expenses 3,349,056 3,482,253 - ---------------------------------------------------------------------------- Earnings before taxes 306 23,690 Taxes on income 2,644 10,051 - ---------------------------------------------------------------------------- Net earnings (loss) $ (2,338) $ 13,639 - ---------------------------------------------------------------------------- Basic and diluted net earnings (loss) per share $(.06) $.36 Dividends paid per share $.02 $.02 Weighted average shares outstanding: Basic 38,204 37,859 Diluted 38,204 38,027 - ----------------------------------------------------------------------------
Fleming Companies, Inc. See notes to consolidated condensed financial statements and independent accountants' review report. Consolidated Condensed Statements of Operations For the 28 weeks ended July 10, 1999, and July 11, 1998 (In thousands, except per share amounts)
============================================================================ 1999 1998 - ---------------------------------------------------------------------------- Net sales $7,814,608 $8,073,069 Costs and expenses: Cost of sales 7,059,022 7,289,032 Selling and administrative 663,560 648,866 Interest expense 90,253 87,063 Interest income (16,244) (19,613) Equity investment results 5,971 6,837 Litigation charge - 5,170 Impairment/restructuring charge 43,205 649 - ---------------------------------------------------------------------------- Total costs and expenses 7,845,767 8,018,004 - ---------------------------------------------------------------------------- Earnings (loss) before taxes (31,159) 55,065 Taxes on income (loss) (4,580) 26,156 - ---------------------------------------------------------------------------- Net earnings (loss) $ (26,579) $ 28,909 ============================================================================ Basic and diluted net earnings (loss) per share $(.70) $.76 Dividends paid per share $.04 $.04 Weighted average shares outstanding: Basic 38,169 37,828 Diluted 38,169 37,996 ============================================================================
Fleming Companies, Inc. See notes to consolidated condensed financial statements and independent accountants' review report. Consolidated Condensed Balance Sheets (In thousands)
============================================================================ July 10, December 26, Assets 1999 1998 - ---------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 3,585 $ 5,967 Receivables 400,168 450,905 Inventories 852,486 984,287 Other current assets 174,196 146,757 - ---------------------------------------------------------------------------- Total current assets 1,430,435 1,587,916 Investments and notes receivable 118,829 119,468 Investment in direct financing leases 133,841 177,783 Property and equipment 1,652,512 1,554,884 Less accumulated depreciation and amortization (779,597) (734,819) - ---------------------------------------------------------------------------- Net property and equipment 872,915 820,065 Deferred income taxes 33,148 51,497 Other assets 184,679 154,524 Goodwill 593,323 579,579 - ---------------------------------------------------------------------------- Total assets $3,367,170 $3,490,832 ============================================================================ Liabilities and Shareholders' Equity - ---------------------------------------------------------------------------- Current liabilities: Accounts payable $ 876,603 $ 945,475 Current maturities of long-term debt 40,368 41,368 Current obligations under capital leases 22,567 21,668 Other current liabilities 251,255 272,573 - ---------------------------------------------------------------------------- Total current liabilities 1,190,793 1,281,084 Long-term debt 1,139,439 1,143,900 Long-term obligations under capital leases 363,690 359,462 Other liabilities 126,294 136,455 Commitments and contingencies Shareholders' equity: Common stock, $2.50 par value per share 97,092 96,356 Capital in excess of par value 512,633 509,602 Reinvested earnings (deficit) (4,941) 23,155 Accumulated other comprehensive income: Additional minimum pension liability (57,133) (57,133) - ---------------------------------------------------------------------------- Accumulated other comprehensive income (57,133) (57,133) Less ESOP note (697) (2,049) - ---------------------------------------------------------------------------- Total shareholders' equity 546,954 569,931 - ---------------------------------------------------------------------------- Total liabilities and shareholders' equity $3,367,170 $3,490,832 ============================================================================
Fleming Companies, Inc. See notes to consolidated condensed financial statements and independent accountants' review report. Consolidated Condensed Statements of Cash Flows For the 28 weeks ended July 10, 1999, and July 11, 1998 (In thousands)
============================================================================ 1999 1998 - ---------------------------------------------------------------------------- Cash flows from operating activities: Net earnings (loss) $(26,579) $ 28,909 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 83,876 98,226 Credit losses 12,558 7,914 Deferred income taxes 5,427 11,331 Equity investment results 5,882 6,837 Impairment/restructuring and related charges 61,420 934 Cash payments on impairment/restructuring and related charges (34,104) (1,347) Change in assets and liabilities, excluding effect of acquisitions: Receivables 45,847 (92,934) Inventories 128,881 34,022 Accounts payable (68,872) 28,846 Other assets and liabilities (44,503) (22,147) Other adjustments, net (1,126) (5,233) - ---------------------------------------------------------------------------- Net cash provided by operating activities 168,707 95,358 - ---------------------------------------------------------------------------- Cash flows from investing activities: Collections on notes receivable 19,764 25,845 Notes receivable funded (23,445) (15,280) Purchase of property and equipment (82,504) (84,474) Proceeds from sale of property and equipment 6,089 14,055 Investments in customers (8,037) (1,009) Proceeds from sale of investment 2,203 3,483 Businesses acquired (78,075) - Proceeds from sale of businesses 7,496 - Other investing activities 2,441 4,430 - ---------------------------------------------------------------------------- Net cash used in investing activities (154,068) (52,950) - ---------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term borrowings 101,000 35,000 Principal payments on long-term debt (106,461) (76,028) Principal payments on capital lease obligations (13,107) (11,929) Sale of common stock under incentive stock and stock ownership plans 3,130 4,196 Dividends paid (1,552) (1,541) Other financing activities (31) (448) - ---------------------------------------------------------------------------- Net cash used in financing activities (17,021) (50,750) - ---------------------------------------------------------------------------- Net decrease in cash and cash equivalents (2,382) (8,342) Cash and cash equivalents, beginning of period 5,967 30,316 - ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 3,585 $ 21,974 ============================================================================ Supplemental information: Cash paid for interest $ 89,572 $ 97,633 Cash paid for taxes $8,730 $11,021 ============================================================================
Fleming Companies, Inc. See notes to consolidated condensed financial statements and independent accountants' review report. Notes to Consolidated Condensed Financial Statements (See independent accountants' review report) 1. The consolidated condensed balance sheet as of July 10, 1999, and the consolidated condensed statements of operations and cash flows for the 12-week and 28-week periods ended July 10, 1999, and for the 12-week and 28-week periods ended July 11, 1998, have been prepared by the company, without audit. In the opinion of management, all adjustments necessary to present fairly the company's financial position at July 10, 1999, and the results of operations and cash flows for the periods presented have been made. All such adjustments are of a normal, recurring nature except as disclosed. Both basic and diluted earnings or loss per share are computed based on net earnings or loss divided by weighted average shares as appropriate for each calculation subject to antidilution limitations. The preparation of the consolidated condensed financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior year amounts to conform to current year classifications. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company's 1998 annual report on Form 10-K. 3. The LIFO method of inventory valuation is used for determining the cost of most grocery and certain perishable inventories. The excess of current cost of LIFO inventories over their stated value was $50 million at July 10, 1999, and $44 million at December 26, 1998. 4. Sales and operating earnings for the company's food distribution and retail food segments are presented below.
============================================================================ For the 12 weeks ended July 10, July 11, ($ in millions) 1999 1998 - ---------------------------------------------------------------------------- Sales: Food distribution $2,983 $3,139 Intersegment elimination (507) (451) - ---------------------------------------------------------------------------- Net food distribution 2,476 2,688 Retail food 874 818 - ---------------------------------------------------------------------------- Total sales $3,350 $3,506 ============================================================================ Operating earnings: Food distribution $62 $62 Retail food 4 21 Corporate (25) (25) - ---------------------------------------------------------------------------- Total operating earnings 41 58 Interest expense (39) (36) Interest income 6 8 Equity investment results (2) (3) Litigation charge - (2) Impairment/restructuring charge (6) (1) - ---------------------------------------------------------------------------- Earnings (loss) before taxes $ - $24 ============================================================================
============================================================================ For the 28 weeks ended July 10, July 11, ($ in millions) 1999 1998 - ---------------------------------------------------------------------------- Sales: Food distribution $6,985 $7,235 Intersegment elimination (1,182) (1,061) - ---------------------------------------------------------------------------- Net food distribution 5,803 6,174 Retail food 2,012 1,899 - ---------------------------------------------------------------------------- Total sales $7,815 $8,073 ============================================================================ Operating earnings: Food distribution $145 $154 Retail food 17 40 Corporate (70) (58) - ---------------------------------------------------------------------------- Total operating earnings 92 136 Interest expense (90) (87) Interest income 16 19 Equity investment results (6) (7) Litigation charge - (5) Impairment/restructuring charge (43) (1) - ---------------------------------------------------------------------------- Earnings (loss) before taxes $(31) $ 55 ============================================================================
General corporate expenses are not allocated to food distribution and retail food segments. The transfer pricing between segments is at cost. 5. The company's comprehensive loss for the 12 weeks ended July 10, 1999 totaled $2.3 million compared to comprehensive income for the 12 weeks ended July 11, 1998 which totaled $13.6 million. The company's comprehensive loss for the 28 weeks ended July 10, 1999 totaled $26.6 million compared to comprehensive income for the 28 weeks ended July 11, 1998 which totaled $33.8 million. The comprehensive amounts for both periods in 1999 and the 12 week period in 1998 were comprised only of the reported net loss, whereas the comprehensive income for the 28 week period in 1998 was comprised of the reported net income plus changes in foreign currency translation adjustments. 6. In accordance with applicable accounting standards, the company records a charge reflecting contingent liabilities (including those associated with litigation matters) when management determines that a material loss is "probable" and either "quantifiable" or "reasonably estimable." Additionally, the company discloses material loss contingencies when the likelihood of a material loss is deemed to be greater than "remote" but less than "probable." Set forth below is information regarding certain material loss contingencies: Class Action Suits. In 1996, certain stockholders and one noteholder filed purported class action suits against the company and certain of its present and former officers and directors, each in the U.S. District Court for the Western District of Oklahoma. In 1997, the court consolidated the stockholder cases as City of Philadelphia, et al. v. Fleming Companies, Inc., et al. The noteholder case was also consolidated, but only for pre-trial purposes. During 1998, the noteholder case was dismissed and during the first quarter of 1999, the consolidated case was also dismissed, each without prejudice. The court gave the plaintiffs the opportunity to restate their claims without prejudice and amended complaints were filed in both cases during the first quarter of 1999. In May 1999, the company filed motions to dismiss in both cases, and in July 1999, the plaintiffs responded. The court has not yet ruled on the motions. Tru Discount Foods. Fleming brought suit in 1994 on a note and an open account against its former customer, Tru Discount Foods. The case was initially referred to arbitration but later restored to the trial court; Fleming appealed. In 1997, the defendant amended its counter claim against the company alleging fraud, overcharges for products and violations of the Oklahoma Deceptive Trade Practices Act. In 1998, the appellate court reversed the trial court and directed that the matter be sent again to arbitration. The arbitration hearing resumed and was concluded in July, 1999. During this hearing, the respondents, Tru Discount and its former operators, claimed that they were entitled to recover damages of approximately $13 million on their counterclaims. The arbitration panel is expected to rule by late September 1999. Management is unable to predict the ultimate outcome of this matter. However, an unfavorable outcome could have a material adverse effect on the company. Don's United Super (and related cases). In 1998, the company and two retired executives were named in a suit filed by approximately 20 current and former customers of the company (Don's United Super, et al. v. Fleming, et al.). Plaintiffs operate retail grocery stores in the St. Joseph and Kansas City metropolitan areas. Six plaintiffs who were parties to supply contracts containing arbitration clauses were permitted to withdraw from the case. Previously, two cases had been filed in the same court (R&D Foods, Inc. et al. v. Fleming, et al. and Robandee United Super, Inc. et al. v. Fleming, et al.) by 10 customers, some of whom are plaintiffs in the Don's case. The earlier two cases, which principally seek an accounting of the company's expenditure of certain joint advertising funds, have been consolidated. All causes of action in these cases have been stayed pending the arbitration of the causes of action relating to supply contracts containing arbitration clauses. The Don's suit alleges product overcharges, breach of contract, breach of fiduciary duty, misrepresentation, fraud, and RICO violations and seeks recovery of actual, punitive and treble damages and a declaration that certain contracts are voidable at the option of the plaintiffs. Damages have not been quantified. However, with respect to some plaintiffs, the time period during which the alleged overcharges took place exceeds 25 years and the company anticipates that the plaintiffs will allege substantial monetary damages. In October 1998, a group of 14 retailers (ten of whom had been or are currently plaintiffs in the Don's case and/or the Robandee case whose claims were sent to arbitration or stayed pending arbitration) filed a new action against the company and two former officers, one of whom was a director (Coddington Enterprises, Inc., et al. v. Dean Werries, et al.). The plaintiffs assert claims virtually identical to those set forth in the Don's complaint and have not quantified damages in their pleadings. Plaintiffs have made a settlement demand in the Don's case for $42 million and in the Coddington case for $44 million. In July 1999, the court in the Coddington case (i) granted the company's motion to compel arbitration as to two of the plaintiffs and denied it as to the other plaintiffs, (ii) denied the company's motion to consolidate the Coddington and Robandee cases and (iii) denied the company's motion for summary judgment as to one of the plaintiffs. The company has appealed the ruling. Although management is currently unable to predict the ultimate outcome of this litigation, based upon the plaintiffs' allegations, an unfavorable outcome could have a material adverse effect on the company. Storehouse Markets. In 1998, the company and one of its associates were named in a suit filed in the United States District Court for the District of Utah by three current and former customers of the company (Storehouse Markets, Inc., et al. v. Fleming Companies, Inc., et al.). The plaintiffs allege product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations and seek declaration of class action status and recovery of actual, punitive and treble damages. Damages have not been quantified. However, the company anticipates that the plaintiffs will seek substantial monetary damages. The company intends to vigorously defend its interests in this case but is currently unable to predict the ultimate outcome. Based upon the plaintiffs' allegations, an unfavorable outcome could have a material adverse effect on the company. Y2K. The company utilizes numerous computer systems which were developed employing six digit date structures (i.e., two digits each for the month, day and year). Where date logic requires the year 2000 or beyond, such date structures may produce inaccurate results. Management has implemented a program to comply with year-2000 requirements on a system-by-system basis. Fleming's plan includes extensive systems testing and is expected to be substantially completed by the third quarter of 1999. Although the company is developing greater levels of confidence regarding its internal systems, failure to ensure that the company's computer systems are year-2000 compliant could have a material adverse effect on the company's operations. In addition, failure of the company's customers or vendors to become year-2000 compliant could also have a material adverse effect on the company's operations. Program costs to comply with year-2000 requirements are being expensed as incurred. Through the end of the second quarter of 1999, total expenditures to third parties were approximately $8 million since the beginning of 1997. Other. The company's facilities and operations are subject to various laws, regulations and judicial and administrative orders concerning protection of the environment and human health, including provisions regarding the transportation, storage, distribution, disposal or discharge of certain materials. In conformity with these provisions, the company has a comprehensive program for testing, removal, replacement or repair of its underground fuel storage tanks and for site remediation where necessary. The company has established reserves that it believes will be sufficient to satisfy the anticipated costs of all known remediation requirements. The company and others have been designated by the U.S. Environmental Protection Agency ("EPA") and by similar state agencies as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state laws, as applicable, with respect to EPA-designated Superfund sites. While liability under CERCLA for remediation at such sites is generally joint and several with other responsible parties, the company believes that, to the extent it is ultimately determined to be liable for the expense of remediation at any site, such liability will not result in a material adverse effect on its consolidated financial position or results of operations. The company is committed to maintaining the environment and protecting natural resources and human health and to achieving full compliance with all applicable laws, regulations and orders. The company is a party to various other litigation and contingent loss situations arising in the ordinary course of its business including: disputes with customers and former customers; disputes with owners and former owners of financially troubled or failed customers; disputes with employees and former employees regarding labor conditions, wages, workers' compensation matters and alleged discriminatory practices; disputes with insurance carriers; tax assessments and other matters, some of which are for substantial amounts. However, the company does not believe any such action will result in a material adverse effect on the company. 7. Certain indebtedness is guaranteed by all direct and indirect subsidiaries of the company (except for certain inconsequential subsidiaries), all of which are wholly owned. The guarantees are joint and several, full, complete and unconditional. There are no restrictions on the ability of the subsidiary guarantors to transfer funds to the company in the form of cash dividends, loans or advances. Full financial statements for the subsidiary guarantors are not presented herein because management does not believe such information would be material. The following summarized financial information, which includes allocations of material corporate-related expenses, for the combined subsidiary guarantors may not necessarily be indicative of the results of operations or financial position had the subsidiary guarantors been operated as independent entities. July 10, July 11, (In millions) 1999 1998 Current assets $39 $29 Noncurrent assets $125 $70 Current liabilities $30 $15 Noncurrent liabilities $35 $7 28 weeks ended July 10, July 11, (In millions) 1999 1998 Net sales $253 $191 Costs and expenses $255 $195 Net loss $(1) $(3) 8. The accompanying operating statements include the following: 12 weeks ended (In thousands) July 10, July 11, 1999 1998 Depreciation and amortization (includes amortized costs in interest expense) $37,559 $41,847 Amortized costs in interest expense $1,125 $1,136 28 weeks ended (In thousands) July 10, July 11, 1999 1998 Depreciation and amortization (includes amortized costs in interest expense) $83,876 $98,226 Amortized costs in interest expense $2,623 $2,975 9. In December 1998, the company announced the implementation of a strategic plan designed to improve the competitiveness of the retailers the company serves and improve the company's performance by building stronger operations that can better support long-term growth. The four major initiatives of the strategic plan are to consolidate food distribution operations, grow food distribution sales, improve retail food performance, and reduce overhead and operating expenses. The total pre-tax charge of the strategic plan is presently estimated at $820 million. The pre-tax charge recorded to-date is $730 million ($16 million in the second quarter of 1999, $46 million in the first quarter of 1999 and $668 million recorded in 1998). After tax, the expense for the first two quarters of 1999 was $44 million or $1.15 per share ($12 million or $.31 per share for quarter two and $32 million or $.84 per share for quarter one). The $90 million of costs relating to the strategic plan not yet charged against income will be recorded throughout the rest of 1999 and 2000 at the time such costs are accruable. The $16 million charge in the second quarter of 1999 was included on several lines of the Consolidated Condensed Statements of Operations: $7 million was included in cost of sales and was primarily related to inventory valuation adjustments; $3 million was included in selling and administrative expense as disposition related costs recognized on a periodic basis; and the remaining $6 million was included in the impairment/restructuring charge line. The $16 million charge consisted of the following components: o Impairment of assets of $1 million. o Restructuring charges of $5 million. The restructuring charges consisted primarily of severance and lease liabilities. o Other disposition and related costs of $10 million. These costs consisted primarily of inventory valuation adjustments, disposition related costs recognized on a periodic basis and other costs. The $16 million charge relates to the company's segments as follows: $4 million relates to the food distribution segment and $7 million relates to the retail food segment with the balance relating to corporate overhead expenses. The $62 million year-to-date charge was included in the following lines of the Consolidated Condensed Statements of Operations: $13 million was included in cost of sales and was primarily related to inventory valuation adjustments; $6 million was included in selling and administrative expense as disposition related costs recognized on a periodic basis; and the remaining $43 million was included in the impairment/restructuring charge line. The $62 million charge consisted of the following components: o Impairment of assets of $25 million. The impairment components were $22 million for goodwill and $3 million for other long-lived assets. o Restructuring charges of $18 million. The restructuring charges consisted primarily of severance, lease liabilities and pension withdrawal liabilities. o Other disposition and related costs of $19 million. These costs consisted primarily of inventory valuation adjustments, disposition related costs recognized on a periodic basis and other costs. The $62 million year-to-date charge relates to the company's segments as follows: $36 million relates to the food distribution segment and $15 million relates to the retail food segment with the balance relating to corporate overhead expenses. The strategic plan includes workforce reductions which have been recorded to- date as follows: ($'s in thousands) Amount Headcount 1998 Activity: Charge $25,441 1,430 Terminations (3,458) (170) 1998 Ending Liability $21,983 1,260 1999 Quarter 1 Activity: Charge 8,565 910 Terminations (12,039) (970) Qtr 1 Ending Liability $18,509 1,200 1999 Quarter 2 Activity: Charge 1,912 170 Terminations (7,433) (910) Qtr 2 Ending Liability $12,988 460 Additionally, the strategic plan includes charges related to lease obligations which will be utilized as operating units or retail stores close, but ultimately reduced over the expected remaining lease terms. The charges and utilization have been recorded to-date as follows: ($'s in thousands) Amount 1998 Activity: Charge $28,101 Utilized (385) 1998 Ending Liability $27,716 1999 Quarter 1 Activity: Charge 2,337 Utilized (3,870) Qtr 1 Ending Liability $26,183 1999 Quarter 2 Activity: Charge 39 Utilized (7,323) Qtr 2 Ending Liability $18,899 Asset impairments were recognized in accordance with SFAS No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and such assets were written down to their estimated fair values based on estimated proceeds of operating units to be sold or discounted cash flow projections. The operating costs of operating units to be sold or closed are treated as normal operations during the period they remain in use. Salaries, wages and benefits of employees at these operating units are charged to operations during the time such employees are actively employed. Depreciation expense is continued for assets that the company is unable to remove from operations. Independent Accountants' Review Report TO THE BOARD OF DIRECTORS AND SHAREHOLDERS FLEMING COMPANIES, INC. We have reviewed the accompanying condensed consolidated balance sheet of Fleming Companies, Inc. and subsidiaries as of July 10, 1999, and the related condensed consolidated statements of income for the 12 and 28 weeks ended July 10, 1999 and July 11, 1998 and condensed consolidated statements of cash flows for the 28 weeks ended July 10, 1999 and July 11, 1998. These financial statements are the responsibility of the company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Fleming Companies Inc. and subsidiaries as of December 26, 1998, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 18, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 26, 1998 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Oklahoma City, Oklahoma July 29, 1999 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations General In early 1998 the Board of Directors and senior management began an extensive strategic planning process that evaluated all aspects of Fleming's business. With the help of a consulting firm, the evaluation and planning process was completed late in 1998. In December 1998, the strategic plan was approved and implementation efforts began. The strategic plan involves three key strategies to restore sales and earnings growth: focus resources to improve performance, build sales more aggressively in our wholesale business and company-owned retail stores, and reduce overhead and operating costs to improve profitability system-wide. The three strategies are further defined in the following four major initiatives: o Consolidate food distribution operations. The strategic plan initially included closing seven operating units - two in 1998 and five in 1999. Of the five in 1999, all but one have been completed. An additional closing has taken place in 1999 which was not originally part of the strategic plan, but was added to the plan when costs associated with continuing to service customers during a strike coupled with costs of reopening the operating unit made closing the operating unit an economically sound decision. Although there has been some loss in sales from all of these closings, many of the customers at these seven operating units were transferred and are being serviced by remaining operating units. Any capital returned from the sale of assets from the closed operating units has been reinvested in the business. o Grow food distribution sales. Higher volume, better-utilized food distribution operations and the dynamics of the market place represent an opportunity for sales growth. During the first two quarters of 1999, significant new customers were added in the food distribution segment. Just after the second quarter end, increased business with Kmart Corporation was announced which is expected to result in approximately $1 billion in annualized new sales. o Improve retail food performance. The strategic plan not only requires selling or closing under-performing company-owned retail chains or groups, but also calls for increased investments in market leading company-owned chains or groups. During the second quarter of 1999, the selling or closing of a third under-performing company- owned retail chain was announced. The selling or closing of the first two chains is almost finished and the third chain should be completed by the end of the fourth quarter. Also during the first two quarters of 1999, the company built or acquired more than 25 retail stores that are expected to fit in well strategically with its existing chains. A number of remodels of existing retail stores have also been completed during the quarter. o Reduce overhead and operating expenses. Overhead will be reduced at both the corporate and operating unit levels through organization and process changes. In addition, several initiatives are underway to reduce complexity in business systems and remove non-value-added costs from operations. During the first quarter of 1999, the company worked with specialists in supply chain management on plans to begin implementing cost reductions. In the second quarter of 1999, the company finalized some of those plans and began implementation. During the first two quarters of 1999, the company eliminated over 200 corporate positions. Implementation of the strategic plan is expected to continue through the year 2000. This time frame accommodates the company's limited resources and customers' seasonal marketing requirements. Additional expenses will continue for some time beyond the year 2000 because certain disposition related costs can only be expensed when incurred. The total pre-tax charge of the strategic plan is presently estimated at $820 million. The pre-tax charge recorded to-date is $730 million ($16 million in the second quarter of 1999, $46 million in the first quarter of 1999 and $668 million recorded in 1998). Of the $16 million charge in the second quarter of 1999, $10 million is expected to require cash expenditures. The remaining $6 million consisted of noncash items. The $16 million charge consisted of the following components: o Impairment of assets of $1 million. o Restructuring charges of $5 million. The restructuring charges consisted primarily of severance and lease liabilities. o Other disposition and related costs of $10 million. These costs consisted primarily of inventory valuation adjustments, disposition related costs recognized on a periodic basis and other costs. The company recorded a net loss of $2 million or $.06 per share for the second quarter of 1999. The after-tax effect of the strategic plan charge on the company's second quarter of 1999 was $12 million or $.31 per share. Excluding the strategic plan charge, the company would have recorded net income of $10 million or $.25 per share. EBITDA for the second quarter of 1999, excluding the strategic plan charge, was $96 million. EBITDA is earnings before extraordinary items, interest expense, income taxes, depreciation and amortization, equity investment results and LIFO provision. EBITDA should not be considered as an alternative measure of the company's net income, operating performance, cash flow or liquidity. It is provided as additional information related to the company's ability to service debt; however, conditions may require conservation of funds for other uses. Although the company believes EBITDA enhances a reader's understanding of the company's financial condition, this measure, when viewed individually, is not necessarily a better indicator of any trend as compared to conventionally computed measures (e.g., net sales, net earnings, net cash flows, etc.). Finally, amounts presented may not be comparable to similar measures disclosed by other companies. Additional pre-tax expense of approximately $90 million is expected throughout the rest of 1999 and 2000 relating to the continuing implementation of the strategic plan. Approximately $61 million of these future expenses are expected to require cash expenditures. The remaining $29 million of the future expense relates to noncash items. These future expenses will consist primarily of severance, real estate-related expenses, pension withdrawal liabilities and other costs expensed when incurred. Under the plan, the company has assessed the strategic significance of all operating units. The company anticipates the improved performance of several strategic operating units. However, in the event that performance is not improved, operating units could be sold or closed. Results of Operations Set forth in the following table is information regarding the company's net sales and certain components of earnings expressed as a percent of sales which are referred to in the accompanying discussion:
============================================================================= July 10, July 11, For the 12 weeks ended 1999 1998 - ----------------------------------------------------------------------------- Net sales 100.00 % 100.00 % Gross margin 9.77 9.75 Less: Selling and administrative 8.57 8.11 Interest expense 1.15 1.02 Interest income (.21) (.24) Equity investment results .07 .09 Litigation charge - .06 Impairment/restructuring charge .18 .03 - ----------------------------------------------------------------------------- Total expenses 9.76 9.07 - ----------------------------------------------------------------------------- Earnings before taxes .01 .68 Taxes on income .08 .29 - ----------------------------------------------------------------------------- Net income (loss) (.07)% .39 % ============================================================================= July 10, July 11, For the 28 weeks ended 1999 1998 - ----------------------------------------------------------------------------- Net sales 100.00 % 100.00 % Gross margin 9.67 9.71 Less: Selling and administrative 8.50 8.04 Interest expense 1.15 1.08 Interest income (.21) (.24) Equity investment results .08 .08 Litigation charge - .06 Impairment/restructuring charge .55 .01 - ----------------------------------------------------------------------------- Total expenses 10.07 9.03 - ----------------------------------------------------------------------------- Earnings (loss) before taxes (.40) .68 Taxes on income (loss) (.06) .32 - ----------------------------------------------------------------------------- Net income (loss) (.34)% .36 % =============================================================================
Net sales. Sales for the second quarter (12 weeks) of 1999 decreased by $157 million, or 5%, to $3.3 billion from the same period in 1998. Year to date, sales decreased by $258 million, or 3%, to $7.8 billion from the same period in 1998. Net sales for the food distribution segment were $2.5 billion for the second quarter of 1999 compared to $2.7 billion from the same period in 1998. Year to date, sales decreased to $5.8 billion in 1999 compared to $6.2 million in 1998. The sales decreases were primarily due to the previously announced loss of sales to Furr's and Randall's and the disposition of the Portland division. These sales losses plus the prospective loss of sales to United in 2000 will be partially offset by the increase in sales to Kmart Corporation. Retail food segment sales increased $56 million, or 7%, in the second quarter of 1999 to $874 million from the same period in 1998. Year to date, retail food segment sales increased $113 million, or 6%, to $2.0 billion from the same period in 1998. The increase in sales was due primarily to new stores added since early in 1998. This was offset partially by the closing of non- performing stores and a decrease in same-store sales of 2.9% and 1.5% for the second quarter and year-to-date periods in 1999 compared to the same periods in 1998. Fleming measures inflation using data derived from the average cost of a ton of product sold by the company. Food price inflation year-to-date was down slightly at 1.7% compared to 1.9% for the same period in 1998. Gross margin. Gross margin for the second quarter of 1999 decreased by $15 million, or 4%, to $327 million from $342 million for the same period in 1998, but increased as a percentage of net sales to 9.77% from 9.75% for the same period in 1998. Year to date, gross margin decreased by $28 million, or 4%, to $756 million in 1999 from $784 million in 1998, and decreased as a percentage of net sales to 9.67% from 9.71% for the same period in 1998. Gross margin in 1999 was adversely affected by costs relating to the strategic plan, primarily inventory valuation adjustments. Excluding strategic plan charges, the quarter and year-to-date comparisons to the prior year reflect a decrease in gross margin dollars and an increase in gross margin as a percentage of net sales. The decrease in dollars was due primarily to the overall sales decrease. The increase in percentage to net sales was due to the impact of the growing retail food segment compared to the food distribution segment. The retail food segment has the better margins of the two segments. This increase was partly offset by lower margins in the retail food segment due to competitive pricing at company-owned new stores. Selling and administrative expenses. Selling and administrative expenses for the second quarter of 1999 increased by approximately $3 million, or 1%, to $287 million from $284 million for the same period in 1998 and increased as a percentage of net sales to 8.57% for 1999 from 8.11% in 1998. Year to date, selling and administrative expenses increased $15 million, or 2%, to $664 million in 1999 from $649 million in 1998 and increased as a percentage of net sales to 8.50% for 1999 from 8.04% in 1998. The increase in dollars was partly due to costs relating to the strategic plan. The increase in percentage to net sales was due to the impact of the growing retail food segment compared to the food distribution segment. The retail food segment has higher operating expenses as a percent to sales compared to the food distribution segment. Credit loss expense is included in selling and administrative expenses and was flat for the second quarter of 1999 compared to the same period in 1998 at $5 million. Year to date, credit loss expense was $13 million in 1999 compared to $8 million in 1998. As more fully described in the 1998 Annual Report on Form 10-K, the company has a significant amount of credit extended to its customers through various methods. These methods include customary and extended credit terms for inventory purchases and equity investments in and secured and unsecured loans to certain customers. Secured loans generally have terms up to ten years. Operating earnings. Operating earnings for the food distribution segment were flat for the second quarter of 1999 compared to the same period of 1998 at $62 million. Year to date, operating earnings decreased for the food distribution segment by $9 million, or 6%, to $145 million in 1999 from $154 million in 1998. Excluding the costs relating to the strategic plan, operating earnings improved slightly in the second quarter of 1999 and were almost flat year-to-date compared to the same periods in 1998. Operating earnings for the retail food segment decreased by $17 million to $4 million for the second quarter of 1999 from $21 million for the same period of 1998. Year to date, operating earnings decreased for the retail food segment by $23 million to $17 million in 1999 from $40 million in 1998. Operating earnings were affected primarily by costs relating to the strategic plan and negative same-store sales. Start-up costs of new stores also had an effect on operating earnings. Corporate expenses were flat in the second quarter of 1999 compared to the same period of 1998 at $25 million. Year to date, corporate expenses were $12 million higher at $70 million in 1999 compared to $58 million in 1998. Closed store expense, the LIFO charge and incentive compensation expense were higher in 1999 than in 1998. Costs relating to the strategic plan had little effect on corporate expenses during these periods. Interest expense. Interest expense for the second quarter of 1999 was $3 million higher than 1998 due primarily to 1998's low interest expense as a consequence of a favorable settlement of tax assessments. The higher 1999 expense was also due to higher average debt balances. Year to date, interest expense was $3 million higher for the same reasons. The company's derivative agreements consist of simple "floating-to-fixed rate" interest rate swaps. For the second quarter of 1999, interest rate hedge agreements contributed $1.3 million of interest expense compared to the $0.9 million contribution made in the same period of 1998. Year to date, interest rate hedge agreements contributed $2.8 million to interest expense compared to $2.4 million in 1998. For a description of these derivatives, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk in the company's Annual Report on Form 10-K for the fiscal year ended December 26, 1998. Interest income. Interest income for the second quarter of 1999 was $1 million lower than 1998 due to lower average balances for the company's investment in direct financing leases. Year to date, interest income was $3 million lower for primarily the same reason. Equity investment results. The company's portion of operating losses from equity investments reflected a small improvement for both the second quarter and year-to-date periods in 1999 compared to the same periods in 1998. Litigation charge. In 1998, the $2 million charge in the second quarter and the $5 million year- to-date charge represented an $800,000 per month payment to Furr's as part of a settlement agreement. The payments ceased upon the closing of the sale of the El Paso product supply center to Furr's in October 1998. Impairment/restructuring charge. The pre-tax charge for the strategic plan recorded in the Consolidated Condensed Statements of Operations totaled $16 million for the second quarter of 1999 and $62 million for 1999 year-to-date. Of these totals, $6 million and $43 million were reflected in the Impairment/restructuring charge line for the second quarter and year-to-date periods, respectively, with the balance of the charges reflected in other financial statement lines. Amounts recorded for the first two quarters in 1998 for the strategic plan were insignificant. See "General" above and Note 9 in the notes to the consolidated condensed financial statements for further discussion regarding the strategic plan. Taxes on income. The effective tax rate used for the 28 weeks ended July 10, 1999 was 14.7%, representing a tax benefit. This is a blended rate taking into account operat and the timing of these transactions during the year. The effective tax rate for the 28 weeks ended July 11, 1998 was 47.5%, representing a tax expense. The tax amount for the second quarter of both years was derived using the 28 week tax amount with that year's estimated effective tax rate compared to the tax amount recorded for the first 16 weeks of the year. Other. Several factors negatively affecting earnings in the first 28 weeks of 1999 are likely to continue for the near term. Management believes that these factors include costs related to the strategic plan, lower same-store sales and operating losses in certain company-owned retail stores. Liquidity and Capital Resources Set forth below is certain information regarding the company's capital structure at the end of the second quarter of 1999 and at the end of fiscal 1998:
============================================================================ Capital Structure (In millions) July 10, 1999 December 26, 1998 - ---------------------------------------------------------------------------- Long-term debt $1,180 55.8% $1,185 55.5% Capital lease obligations 386 18.3 381 17.8 - ---------------------------------------------------------------------------- Total debt 1,566 74.1 1,566 73.3 Shareholders' equity 547 25.9 570 26.7 - ---------------------------------------------------------------------------- Total capital $2,113 100.0% $2,136 100.0% ============================================================================
Note: The above table includes current maturities of long-term debt and current obligations under capital leases. Long-term debt at the end of the second quarter of 1999 was the same as year- end 1998 as cash requirements for capital expenditures, acquisitions of retail stores and other investments, plus debt service requirements, were offset by net cash provided from operations, borrowings under the revolving credit facility, and sales of assets. Capital lease obligations were $5 million higher because leases added for new retail stores exceeded repayments. The debt-to-capital ratio at the end of the second quarter of 1999 was 74.1%, up from 73.3% at year-end 1998. Operating activities generated $169 million of net cash flows for the first two quarters of 1999 compared to $95 million for the same period in 1998. Working capital was $240 million at the end of the second quarter of 1999, a decrease from $307 million at year-end 1998. The current ratio decreased to 1.20 to 1, from 1.24 to 1 at year-end 1998. Capital expenditures were $83 million in the first two quarters of 1999 compared to $84 million for the same period in 1998. Total capital expenditures in 1999 are expected to be approximately $200 million. The company's strategic plan involves the divesting of a number of food distribution and retail food facilities and other assets, and focusing resources on the remaining food distribution and retail food operations. The company intends to increase its retail operations by making investments in its existing stores and by adding approximately 20 stores per year for the foreseeable future. Acquisitions of supermarket chains or groups or other food distribution operations will be made only on a selective basis. The company has recently purchased an eight-store Food 4 Less group in northern California. Expenditures for this and other acquisitions totalled $78 million for the first two quarters of 1999 compared to no such expenditures for the same period in 1998. Proceeds from the sale of retail stores and other investments totaled $16 million for the first two quarters of 1999 compared to $18 million for the same period in 1998. Cash requirements related to the implementation and completion of the strategic plan (on a pre-tax basis) were $34 million in the first two quarters of 1999, and are estimated to be a total of $51 million in 1999, $57 million in 2000, and $63 million thereafter. Management believes working capital reductions, proceeds from the sale of assets, and increased earnings related to the successful implementation of the strategic plan are expected to provide adequate cash flow to cover these incremental costs. The company makes investments in and loans to certain retail customers. Net investments and loans increased $3 million in the first two quarters of 1999, from $137 million at year-end 1998 to $140 million, due primarily to an increased level of investment in loans to customers and stores acquired for resale. In the first two quarters of 1999, the company's primary sources of liquidity were cash flows from operating activities, borrowings under its credit facility, and the sale of certain assets and investments. The company's principal sources of capital, excluding shareholders' equity, are banks and other lenders and lessors. The company's credit facility consists of a $600 million revolver, with a final maturity of July 25, 2003, and a $250 million amortizing term loan, with a final maturity of July 25, 2004. Up to $300 million of the revolver may be used for issuing letters of credit, and borrowings and letters of credit issued under the credit facility may be used for general corporate purposes. Outstanding borrowings and letters of credit are secured by a first priority security interest in the accounts receivable and inventories of the company and its subsidiaries and in the capital stock of or other equity interests owned by the company in its subsidiaries. In addition, the credit facility is guaranteed by substantially all company subsidiaries. The stated interest rate on borrowings under the credit agreement is equal to one of a group of referenced index rates, normally the London interbank offered interest rate ("LIBOR"), plus a margin. The level of the margin is dependent on credit ratings on the company's senior secured bank debt. The credit facility and the indentures under which other company debt instruments were issued contain customary covenants associated with similar facilities. The credit facility currently contains the following more significant financial covenants: maintenance of a fixed charge coverage ratio of at least 1.7 to 1, based on adjusted earnings, as defined, before interest, taxes, depreciation and amortization, net rent expense and non-cash impairment and restructuring charges and their related costs; maintenance of a ratio of inventory-plus-accounts receivable to funded bank debt (including letters of credit) of at least 1.4 to 1; and a limitation on restricted payments, including dividends. Covenants contained in the company's indentures under which other company debt instruments were issued are generally less restrictive than those of the credit facility. The company is in compliance with all financial covenants under the credit facility and its indentures. The credit facility may be terminated in the event of a defined change in control. Under the company's indentures, noteholders may require the company to repurchase notes in the event a defined change of control coupled with a defined decline in credit ratings. At the end of the second quarter of 1999, borrowings under the credit facility totaled $204 million in term loans and $110 million of revolver borrowings, and $81 million of letters of credit had been issued. Letters of credit are needed primarily for insurance reserves associated with the company's normal risk management activities. To the extent that any of these letters of credit would be drawn, payments would be financed by borrowings under the revolver. At the end of the second quarter of 1999, the company would have been allowed to borrow an additional $409 million under the revolver based on actual borrowings and letters of credit outstanding. Under the company's most restrictive borrowing covenant, which is the fixed charge coverage ratio contained in the credit facility, $5 million of additional annualized fixed charges could have been incurred. On August 24, 1999, Moody's Investors Service revised its outlook on its ratings for the company to positive and confirmed its existing ratings. Standard & Poor's rating group is currently reviewing the company's ratings and is expected to make an announcement in the near future. Dividend payments in the first two quarters of 1999 were $0.02 per share per quarter, which was the same per share payout as in the first two quarters of 1998. The credit facility and the indentures for the $500 million of senior subordinated notes limit restricted payments, including dividends, to $70 million at the end of the first quarter of 1999, based on a formula tied to net earnings and equity issuances. For the foreseeable future, the company's principal sources of liquidity and capital are expected to be cash flows from operating activities, the company's ability to borrow under its credit facility and asset sale proceeds. In addition, lease financing may be employed for new retail stores and certain equipment. Management believes these sources will be adequate to meet working capital needs, capital expenditures (including expenditures for acquisitions, if any), strategic plan implementation costs and other capital needs for the next 12 months. Three of the company's largest customers (Furr's, Randall's and United) are moving or have moved to self-distribution, which together represent approximately 8% of the company's sales in 1998. This is expected to have no significant future impact on the company's liquidity due to the implementation of cost cutting measures and the new business gained so far this year, particularly from Kmart Corporation. Contingencies From time to time the company faces litigation or other contingent loss situations resulting from owning and operating its assets, conducting its business or complying (or allegedly failing to comply) with federal, state and local laws, rules and regulations which may subject the company to material contingent liabilities. In accordance with applicable accounting standards, the company records as a liability amounts reflecting such exposure when a material loss is deemed by management to be both "probable" and "quantifiable" or "reasonably estimable." Furthermore, the company discloses material loss contingencies in the notes to its financial statements when the likelihood of a material loss has been determined to be greater than "remote" but less than "probable." Such contingent matters are discussed in Note 6 in the notes to the consolidated condensed financial statements. An adverse outcome experienced in one or more of such matters, or an increase in the likelihood of such an outcome, could have a material adverse effect on the company. Also see Legal Proceedings. Fleming has numerous computer systems which were developed employing six digit date structures (i.e., two digits each for month, day and year). Where date logic requires the year 2000 or beyond, such date structures may produce inaccurate results. Management has implemented a program to comply with year-2000 requirements on a system-by-system basis including both information technology (IT) and non-IT systems (e.g., microcontrollers). Fleming's plan includes extensive systems testing and is expected to be substantially completed by the third quarter of 1999. Code for the company's largest and most comprehensive system, FOODS, has been completely remediated, reinstalled and tested. Based on these tests, the company believes FOODS and the related systems which run the company's distribution system will be year-2000 ready and in place at all food distribution operating units. At year-end 1998, the company was substantially complete with the replacement and upgrading necessary to make its nearly 5,000 PCs year-2000 ready. Although the company believes contingency plans for company systems will not be necessary based on progress to date, contingency plans for failures outside of the company have been or are being developed. A senior management task force is continually reviewing and expanding contingency plans for both internal and external failures that could disrupt the supply chain. These plans deal with such external variables as loss of power or water, unusual consumer buying patterns, availability of cash, and other infrastructure issues. The content of the contingency plans varies depending on the system and the assessed probability of failure and such plans are modified periodically. The alternatives include reallocating internal resources, obtaining additional outside resources, implementing temporary manual processes or temporarily rolling back internal clocks. Although the company is developing greater levels of confidence regarding its internal systems, failures in the company's systems or failures in the supply chain or infrastructure could have a material adverse effect on the company's operations. The company is also assessing the status of its vendors' and customers' year-2000 readiness through meetings, discussions, notices and questionnaires. Vendor and customer responses and feedback are varied and in some cases inconclusive. Accordingly, the company believes the most likely worst case scenario could be customers' failure to serve and retain consumers resulting in a negative impact on the company's sales. Failure of the company's suppliers or its customers to become year-2000 compliant might also have a material adverse impact on the company's operations. Program costs to comply with year-2000 requirements are being expensed as incurred. Total expenditures to third parties in 1997 through completion in 1999 are not expected to exceed $10 million, none of which is incremental. Through the end of the second quarter of 1999, these third party expenditures totaled approximately $8 million. To compensate for the dilutive effect on results of operations, the company has delayed other non-critical development and support initiatives. Accordingly, the company expects that annual information technology expenses will not differ significantly from prior years. Forward-Looking Information This report includes statements that (a) predict or forecast future events or results, (b) depend on future events for their accuracy, or (c) embody assumptions which may prove to have been inaccurate, including the company's ability to successfully achieve the goals of its strategic plan and reverse sales declines, cut costs and improve earnings; the company's assessment of the probability and materiality of losses associated with litigation and other contingent liabilities; the company's ability to develop and implement year-2000 systems solutions; the company's ability to expand portions of its business or enter new facets of its business; and the company's expectations regarding the adequacy of capital and liquidity. These forward-looking statements and the company's business and prospects are subject to a number of factors which could cause actual results to differ materially including the: risks associated with the successful execution of the company's strategic business plan; adverse effects of the changing industry environment and increased competition; continuing sales declines and loss of customers; exposure to litigation and other contingent losses; failure of the company to achieve necessary cost savings; failure of the company, its vendors or its customers to develop and implement year-2000 system solutions; and the negative effects of the company's substantial indebtedness and the limitations imposed by restrictive covenants contained in the company's debt instruments. These and other factors are described in the company's Annual Report on Form 10-K for the fiscal year ended December 26, 1998 and in other periodic reports available from the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures about Market Risk No material change has occurred since year-end 1998. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk in the company's Annual Report on Form 10-K for the fiscal year ended December 26, 1998. PART II. OTHER INFORMATION Item 1. Legal Proceedings Set forth below is information regarding litigation which became reportable or as to which a material development has occurred since the date of the company's Quarterly Report on Form 10-Q for the quarter ended April 17, 1999: (1) Class Action Suits. In 1996, certain stockholders and one noteholder filed purported class action suits against the company and certain of its present and former officers and directors, each in the U.S. District Court for the Western District of Oklahoma. In 1997, the court consolidated the stockholder cases as City of Philadelphia, et al. v. Fleming Companies, Inc., et al. The noteholder case was also consolidated, but only for pre-trial purposes. During 1998, the noteholder case was dismissed and during the first quarter of 1999, the consolidated case was also dismissed, each without prejudice. The court gave the plaintiffs the opportunity to restate their claims without prejudice and amended complaints were filed in both cases during the first quarter of 1999. In May 1999, the company filed motions to dismiss in both cases, and in July 1999, the plaintiffs responded. The court has not yet ruled on the motions. (2) Derivative Suits. In October 1996, certain of the company's present and former officers and directors were named as defendants in two purported shareholder derivative suits in the U.S. District Court for the Western District of Oklahoma (Cauley, et al. v. Stauth, et al. and Rosenberg et al. v. Stauth, et al.). Plaintiffs' complaints contain allegations that, among other matters, the individual defendants breached their respective fiduciary duties to the company and seek damages from the individual defendants. Plaintiffs, the individual defendants and the company, have agreed to a Stipulation of Compromise and Dismissal that was filed with the court on May 24, 1999. The Stipulation recognizes that certain changes have been made at the company since the derivative cases were filed and provides for payment of plaintiffs' attorneys fees and expenses not exceeding $860,000. The Stipulation will not be effective unless it is approved by the court after notice to shareholders and a hearing. If approved by the court, the derivative cases will be dismissed as to all defendants. Notice was sent to shareholders in June 1999, and, at the hearing held August 24, 1999, the Stipulation was approved and the case was dismissed. (3) Tobacco Cases. With respect to notices of suit or intention to sue filed by 27 individuals in the Court of Common Pleas of Philadelphia County, complaints were filed during the first quarter of 1999 in two of the cases which were then removed to the United States District Court for the Eastern District of Pennsylvania. During the second quarter, these cases were remanded to the Court of Common Pleas of Philadelphia County. No trial date has been set. With respect to each case, the company is being indemnified and defended by a substantial third-party co-defendant. (4) Don's United Super (and related cases). In 1998, the company and two retired executives were named in a suit filed in the United States District Court for the Western District of Missouri by approximately 20 current and former customers of the company (Don's United Super, et al. v. Fleming, et al.). Previously, two cases had been filed in the same court (R&D Foods, Inc., et al. v. Fleming, et al. and Robandee United Super, Inc., et al. v. Fleming, et al.) by 10 customers, some of whom are plaintiffs in the Don's case. Also in 1998, a group of 14 retailers (ten of whom had been or are currently plaintiffs in the Don's case and/or the Robandee case whose claims were sent to arbitration or stayed pending arbitration) filed a new action against the company and two former officers, one of whom was a director, in the Western District of Missouri (Coddington Enterprises, Inc., et al. v. Dean Werries, et al.). The Don's suit alleges product overcharges, breach of contract, breach of fiduciary duty, misrepresentation, fraud, and RICO violations and seeks recovery of actual, punitive and treble damages and a declaration that certain contracts are voidable at the option of the plaintiffs. Damages have not been quantified. However, with respect to some plaintiffs, the time period during which the alleged overcharges took place exceeds 25 years and the company anticipates that the plaintiffs will allege substantial monetary damages. Plaintiffs in the Coddington case assert claims virtually identical to those set forth in the Don's complaint. Plaintiffs have made a settlement demand in the Don's case for $42 million and in the Coddington case for $44 million. In July 1999, the court in the Coddington case (i) granted the company's motion to compel arbitration as to two of the plaintiffs and denied it as to the other plaintiffs, (ii) denied the company's motion to consolidate the Coddington and Robandee cases and (iii) denied the company's motion for summary judgment as to one of the plaintiffs. The company has appealed the ruling. (5) Tru Discount Foods. Fleming brought suit in 1994 on a note and an open account against its former customer, Tru Discount Foods. The case was initially referred to arbitration but later restored to the trial court; Fleming appealed. In 1997, the defendant amended its counter claim against the company alleging fraud, overcharges for products and violations of the Oklahoma Deceptive Trade Practices Act. In 1998, the appellate court reversed the trial court and directed that the matter be sent again to arbitration. The arbitration hearing resumed and was concluded in July, 1999. During this hearing, the respondents, Tru Discount and its former operators, claimed that they were entitled to recover damages of approximately $13 million on their counterclaims. The arbitration panel is expected to rule by late September 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number Page Number 10.53* Severance Agreement with William J. Dowd effective as of June 17, 1999 10.54* Employment Agreement for William H. Marquard dated as of June 1, 1999 10.55* Restricted Stock Agreement for William H. Marquard dated as of June 1, 1999 10.56* Employment Agreement for Dennis C. Lucas dated as of July 28, 1999 10.57* Restricted Stock Agreement for Dennis C. Lucas dated as of July 28, 1999 10.58* Restricted Stock Agreement for E. Stephen Davis dated as of July 20, 1999 10.59* Form of Loan Agreement Pursuant to Executive Stock Ownership Program 12 Computation of Ratio of Earnings to Fixed Charges 15 Letter from Independent Accountants As to Unaudited Interim Financial Information 27 Financial Data Schedule * Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FLEMING COMPANIES, INC. (Registrant) Date: August 24, 1999 KEVIN TWOMEY Kevin Twomey Senior Vice President-Controller (Principal Accounting Officer) EXHIBIT INDEX
Exhibit No. Description Method of Filing - ------ ----------- ---------------- 10.53 Severance Agreement with William J. Filed herewith electronically Dowd effective as of June 17, 1999 10.54 Employment Agreement for William H. Filed herewith electronically Marquard dated as of June 1, 1999 10.55 Restricted Stock Agreement for Filed herewith electronically William H. Marquard dated as of June 1, 1999 10.56 Employment Agreement for Dennis C. Filed herewith electronically Lucas dated as of July 28, 1999 10.57 Restricted Stock Agreement for Filed herewith electronically Dennis C. Lucas dated as of July 28, 1999 10.58 Restricted Stock Agreement for E. Filed herewith electronically Stephen Davis dated as of July 20, 1999 10.59 Form of Loan Agreement Pursuant to Filed herewith electronically Executive Stock Ownership Program 12 Computation of Ratio of Earnings to Filed herewith electronically Fixed Charges 15 Letter from Independent Accountants Filed herewith electronically as to Unaudited Interim Financial Information 27 Financial Data Schedule Filed herewith electronically
EX-10 2 May 20, 1999 HAND DELIVERY William J. Dowd Dear Bill: As we have just discussed, we have decided, with the concurrence of the Board, to request your resignation as an associate and officer of the Company. We appreciate all your efforts since you came to Fleming, but simply believe a change needs to be made. Your separation will be effective as of the close of business today. This letter outlines the severance package Fleming is offering you and, along with the attached General Release, will also reflect our agreement if you decide to accept this package. This is, of course, an individualized severance package for you. We think it is appropriate and fair under all the circumstances. We hope you will agree. The terms of your severance package are as follows: 1. Salary Replacement. The Company will pay you salary replacement in the gross amount of two (2) years' base salary, payable in equal installments without regard to whether you have obtained new employment. The first installment will be paid on the Company's first regular payday after you return executed copies of this letter agreement and the General Release referenced hereafter or seven (7) days following that return date, whichever is later. The remaining installments will be paid throughout the two year period on the Company's regular paydays. 2. Bonus Potential. If the Company determines at the conclusion of 1999 that you would otherwise have been eligible for a 1999 bonus under the Fleming Companies, Inc. Corporate Officer Incentive Plan (the "Bonus Plan"), the Company will pay you a gross amount equal to the pro rated portion of the bonus you would have earned under the Bonus Plan between January 1, 1999 through May 20, 1999. This payment, if any, will be made in calendar year 2000 contemporaneously with the payment of bonuses under the Bonus Plan, if any, to other eligible Fleming corporate officers. 3. Accrued Vacation. The Company will pay you for 1999 vacation accrued as of January 1, 1999 and not used. You will receive this in a lump sum with the first installment of your salary replacement. 4. "COBRA Premium" Replacement. You have the right pursuant to COBRA to continued coverage under the Fleming Companies, Inc. Health Choice Plan (the "Medical Plan"). The Company will pay you a "COBRA premium" replacement in the amount of eighteen (18) times the monthly COBRA premium for your current level of coverage under the Medical Plan, plus a "gross up" to offset income taxes, FICA and any other payroll taxes. You will receive this payment in a lump sum with the first installment of your salary replacement. 5. Automobile. The Company will transfer title to you of the automobile which you have been driving in connection with Company business seven (7) days after you return executed copies of the letter agreement and General Release. 6. Reimbursement of Relocation Costs. The Company will reimburse you for costs you may incur in the twelve (12) months following your separation in connection with relocating your family members and personal possessions from your current residence to a residence outside a 75 mile radius of Oklahoma City, Oklahoma in order to accept new employment, provided that your next employer does not regularly pay for these types of relocation expenses for new executive-level employees and provided that such relocation costs are reasonable and would be reimbursed to Fleming associates under the Company's reimbursement practices regarding personal travel expenses to the new destination and household goods shipment expenses. This reimbursement will be paid within thirty (30) days after you submit vouchers representing the payment of these relocation costs to the Company. 7. Outplacement. The Company will provide you with a "Level One" executive outplacement package with James Farris & Associates. If you prefer to use a different outplacement firm, the Company will pay that firm a reasonable fee (up to 15% of your annual base salary) for whatever substitute outplacement package you may select. 8. Taxes. Unless otherwise noted, any payments and benefits which are subject to federal and state income tax withholding, FICA and other payroll taxes will be reduced by those amounts by the Company. 9. General Release. You will execute the General Release which is attached and return it, along with the executed copy of this letter agreement, within twenty-one (21) days of the date you receive this letter. You will also agree not to attempt to revoke or rescind the General Release at any time in the future or commence any action against Fleming in regard to your prior employment relationship. By signing this letter, you are representing to the Company that you fully understand the General Release and will have had an opportunity to seek legal advice regarding the General Release and the agreement proposed by this letter, if you desire to do so, before signing it. You are also representing to the Company that between the date of this letter and the date you sign the General Release, you have not commenced any charge, action or complaint with any court or with the Equal Employment Opportunity Commission, the United States or Oklahoma Departments of Labor or with any other judicial or administrative agency in regard to your employment relationship or any matters arising out of that relationship. Finally, you are representing to the Company that you fully understand that any such filing or commencement shall constitute a rejection by you of the Company's severance package offered in this letter. 10. Continued Litigation Assistance. You will continue to cooperate with and assist the Company and its representatives and attorneys as requested with respect to any litigation, arbitrations or other dispute resolutions by being available for interviews, depositions and/or testimony in regard to any matters in which you are or have been involved or with respect to which you have relevant information. The Company will reimburse you for reasonable expenses you may incur for travel in connection with this obligation. 11. Future Employment and Confidentiality of Information. Except with the prior written consent of the Company, during the period you are receiving salary replacement installments from the Company under paragraph 1, you will not be employed by or otherwise act on behalf of an entity which competes with the Company in the food distribution or marketing business. Except with the prior written consent of the Company, you will not at any time in the future be employed or otherwise act as an expert witness or consultant or in any similar capacity in any litigation, arbitration, regulatory or agency hearing or other adversarial or investigatory proceeding involving Fleming. Also, except with the prior written consent of the Company, you will not at any time hereafter make any independent use of or disclose to any other person or organization any of the Company's confidential, proprietary information or trade secrets. This shall apply to any information concerning Fleming which is of a special and unique value and includes, without limitation, both written and unwritten information relating to operations; business planning and strategies; litigation strategies; finance; accounting; sales; personnel, salaries and management; customer names, addresses and contracts; customer requirements; costs of providing products and service; operating and maintenance costs; and pricing matters. This shall also apply to any trade secrets of the Company the protection of which is of critical importance to Fleming and includes, without limitation, techniques, methods, processes, data and the like. This commitment of confidentiality shall also apply to the terms of this severance package, except for discussions with your spouse, your personal attorney and/or accountants, or as needed to enforce our agreement. Any disclosure by such individuals shall be deemed a disclosure by you and shall have the same consequences as a breach of our agreement directly by you. 12. Preserving Company Name. You will not at any time in the future defame, disparage or make statements which could embarrass or cause harm to the Company's name and reputation or the names and reputation of any of its officers, directors or representatives, to the Company's current, former or prospective vendors, customers, professional colleagues, industry organizations, associates or contractors, to any governmental or regulatory agency or to the press or media. 13. Forfeiture. The continued payment by the Company and retention by you of any payments to be made or benefits provided under this letter agreement shall be contingent not only on your execution of the General Release described in paragraph 9, but also on your on-going compliance with your other obligations under our agreement, including your commitments in paragraphs 10, 11 and 12. Breach of your obligations at any time in the future shall entitle the Company to cease all payments to be made or benefits provided under this letter agreement and shall entitle the Company to immediate reimbursement from you of any payments you have previously received. 14. Indemnification and Insurance. The Company shall hereafter indemnify you and hold you harmless in the same manner as it would any other key management associate of the Company with respect to acts or omissions occurring prior to your separation from employment. In addition, for a period of at least five years following your separation from employment, the Company shall cover you under any Directors and Officers liability insurance policy which may be in effect covering acts or omissions occurring prior to the termination of your employment to the same extent it provides such coverage for directors and officers of the Company at that time. 15. Arbitration. You and the Company agree that your employment and this severance package relate to interstate commerce, and that any disputes, claims or controversies between you and Fleming which may arise out of or relate to our prior employment relationship or this letter agreement shall be settled by arbitration. Our agreement to arbitrate shall survive the termination or rescission of this letter agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and shall be undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless we mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The arbitrator(s) may award costs and attorneys' fees in connection with the arbitration to the prevailing party; however, in the arbitrator's(s') discretion, each party may be ordered to bear its/his own costs and attorneys' fees. We agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s). Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any on-going breaches by you of your continuing obligations under paragraphs 9, 10, 11 or 12 of this letter agreement pending arbitration. The agreement of you and the Company, in the event you execute this letter, will be in consideration of the mutual promises described above. Also, this letter and the General Release will constitute the entire agreement between you and Fleming with respect to your separation from employment and your severance package. Please contact me if you have any questions about the severance package. I will need to know your decision no later than the close of business twenty-one (21) days from the date you receive this letter. Very truly yours, MARK S. HANSEN Mark S. Hansen Chairman and Chief Executive Officer DELIVERED BY: MARK S. HANSEN Mark S. Hansen Signature Date May 20, 1999 ACCEPTED AND AGREED TO BY: WILLIAM J. DOWD William J. Dowd Date June 17, 1999 NOTICE. Various state and federal laws, including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits or veteran status. These laws are enforced through the Equal Opportunity Employment Commission (EEOC), United States Department of Labor and various state or municipal fair employment boards, human rights commissions or similar agencies. This General Release is being provided to you in connection with the special, individualized severance package outlined in a proposed letter agreement dated May 20, 1999. The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive the May 20, 1999 letter and this General Release to make your decision. You may accept the special, individualized severance package at any time during that period. BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW IT AND THE PROPOSED LETTER AGREEMENT CAREFULLY AND CONSULT WITH YOUR ATTORNEY. You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release within twenty-one (21) days, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Fleming Companies, Inc., Attention: Dee Jerome, 6301 Waterford Blvd., Oklahoma City, OK 73126, within the seven-day period following your execution of this General Release. GENERAL RELEASE In consideration of the special, individualized severance package offered to me by Fleming Companies, Inc. and the separation benefits I will receive as reflected in a letter dated May 20, 1999 (the "Letter Agreement"), I release and discharge Fleming Companies, Inc. and its successors, affiliates, parent, subsidiaries, partners, employees, officers, directors and agents (hereinafter referred to collectively as the "Company") from all claims, liabilities, demands and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company, including any claims arising out of or relating to my past employment with the Company and the severance of that relationship, as well as my decision to accept the separation benefits described in the Letter Agreement, and do hereby covenant not to file a lawsuit or commence any other legal action to assert such claims. This includes but is not limited to claims arising under federal, state, or local laws prohibiting employment discrimination (including the Age Discrimination in Employment Act), relating to any prior written, oral or implied contracts pertaining to employment, severance or retirement or growing out of any legal or equitable restrictions on the Company's rights not to continue an employment relationship with its employees, but not to include any claims under the Employee Retirement Income Security Act with regard to vested rights in any of the Company's qualified retirement plans. I have carefully reviewed and fully understand all the provisions of the Letter Agreement, the foregoing Notice and this General Release, which set forth the entire agreement between me and the Company. I understand that my receipt of the separation benefits under the Letter Agreement is dependent on my execution of this General Release, upon my return to the Company of any Company property within my possession or control and upon my continued cooperation in providing information necessary for transition and maintenance of the Company's ongoing business. I also understand that my receipt and retention of the separation benefits are also contingent on my continued nondisclosure of the Company's confidential information, including the terms of my severance package, and that prohibited disclosure of information or any future defamation, disparaging remarks or statements by me to any third parties, other associates or the media which could embarrass or cause harm to the Company's name and reputation or to the name and reputation of its officers, directors or representatives shall entitle the Company to reimbursement or retention of any separation benefits I have received or may receive. I acknowledge that the Company has given me a 21-day period to consider this General Release and whether to accept the special, individualized severance package, and that the Company has advised me to seek independent legal advice as to these matters if I chose to do so. I further acknowledge that I have not relied upon any representation or statement, oral or written, by the Company not set forth in those materials and documents. DATED this 17th day of June, 1999. WILLIAM J. DOWD (Print Name) William J. Dowd (Print Name) Witness EX-10 3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made effective the 1st day of June, 1999 (the "Effective Date"), by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company") and William H. Marquard (the "Executive"). In consideration of their mutual obligations contained in this Agreement, the Company hereby employs the Executive and the Executive hereby accepts employment with the Company as of the Effective Date upon the following terms and conditions: 1. Term of Agreement and Employment. The term of this Agreement and of the Executive's employment (collectively, the "Employment Period") shall be for a period of sixty (60) months commencing on the Effective Date or for a shorter period if the Agreement and the Executive's employment are terminated earlier as provided in Section 9. 2. Position and Duties of Executive. During the Employment Period, the Executive shall devote his full professional and business-related time, skills and best efforts to the regular duties of the position of Executive Vice President, Business Development for the Company or to such other appropriate position and/or reasonable duties as may be assigned to him as a corporate officer of the Company from time to time by the Board of Directors (the "Board") and/or the Chairman and Chief Executive Officer of the Company. Unless otherwise agreed to in advance in writing by the Company, during the Employment Period, the Executive shall not be employed by others or be engaged in self-employment or in any professional or business-related activities which are or may be detrimental to or in conflict or competition with the business of the Company. 3. Annual Base Salary. During the Employment Period, the Company shall pay the Executive a base salary of $400,000 per each fiscal year, in installments consistent with the Company's regular payroll practices applicable to senior executive officers. The Company shall review such base salary annually and may in its discretion increase such base salary. 4. Annual Incentive Bonus. In addition to the base salary described in Section 3, the Executive will be eligible for a target annual incentive bonus of 65% of his annual base salary, with a potential maximum annual incentive bonus of 130% of his annual base salary. Any annual incentive bonus for fiscal 1999 or subsequent years shall be awarded in the discretion of the Compensation Committee using substantially the same performance goals as are applicable to other senior executive officers. 5. Company Common Stock Options. The Company shall grant the Executive a stock option to purchase 200,000 shares of Company Stock pursuant to the Fleming Companies, Inc. 1999 Stock Incentive Plan. The exercise dates and price and the other terms and conditions of the 200,000 stock options shall be as described in the Non-Qualified Stock Option Agreement under Fleming Companies, Inc. 1999 Stock Incentive Plan which is being executed contemporaneously with this Agreement. 6. Company Restricted Stock Award. The Company shall grant the Executive an award of 20,000 shares of restricted Company Stock pursuant to the Fleming Companies, Inc. 1990 Stock Incentive Plan. The terms and conditions of the stock award shall be as described in the Restricted Stock Award Agreement for the Fleming Companies, Inc. 1990 Stock Incentive Plan which is being executed contemporaneously with this Agreement. In connection with the grant of the Restricted Stock, the Executive shall make an election within thirty (30) days of the Effective Date to include in gross income the value of the Restricted Stock on the date of grant pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"). Upon notification from the Executive that he has made such election, the Company shall pay to the Executive an additional payment in an amount necessary to cause the net amount of such payment that is retained by the Executive after the calculation and deduction of any and all federal, state and local income taxes and employment taxes on such payment to be equal to the Executive's income taxes attributable to the Restricted Stock and the Executive's election under Section 83(b) of the Code in connection with the Restricted Stock. 7. Vacation and Other Paid Leave Programs and Welfare, Pension, Incentive and Other Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in and be covered by all vacation and other paid and unpaid leave programs and welfare, pension, incentive and other plans as may be adopted and maintained from time to time by the Company as applicable to its senior executive officers, including the Fleming Companies, Inc. 1999 Stock Incentive Plan, the Fleming Companies, Inc. 1990 Stock Incentive Plan and the Fleming Companies, Inc. Executive Deferred Compensation Plan. 8. Expenses. (a) Initial Relocation Expenses. In connection with the Executive's initial relocation to Oklahoma City, Oklahoma, or other corporate offices of the Company, the Company shall provide the Executive with the relocation package for new senior executive officers outlined in the Company's current relocation policy. In addition, the Company will pay the Executive (i) up to a maximum of $48,000, at the rate of up to $2,000 per month, for a period of up to two years from the date of this Agreement to enable Executive to secure a furnished apartment in or near the city in which the Company's corporate offices are located and (ii) a monthly transportation allowance (the "Transportation Allowance") of $700 per month for up to thirty-six months from the date of this Agreement. The Company will also pay all reasonable costs associated with the move of the Executive's personal belongings to a permanent residence in or near the city in which the Company's corporate offices are located. The Company will also make an additional payment to the Executive in an amount necessary to offset any and all federal, state and local income taxes and employment taxes which the Executive shall be required to pay in connection with the Transportation Allowance. (b) Ongoing Business Expenses. The Company shall reimburse the Executive for all reasonable and necessary business expenses incurred by the Executive relating to the conduct of business of the Company, including expenses incurred in connection with the Executive's travel to and from the Company's corporate offices, upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company's policies applicable to its senior executive officers. 9. Termination of Agreement and Employment. This Agreement and the Executive's employment may be terminated earlier than sixty (60) months following the Effective Date under the following circumstances: (a) Death or Disability. This Agreement and the Executive's employment shall terminate automatically upon the Executive's death. If, because of physical or mental illness, the Executive has been substantially unable to perform the essential duties of his position (with or without "reasonable accommodation," as defined under the Americans With Disabilities Act) for a period in excess of six (6) months ("Disability"), the Company may terminate this Agreement and the Executive's employment for Disability. (b) Cause. If the Executive (i) is convicted of a felony, (ii) engages in an act of personal dishonesty which is intended to result in personal enrichment of the Executive at the expense of the Company, or (iii) "willfully" fails to follow a direct, reasonable and lawful order of the Board and/or the Chairman and Chief Executive Officer, within the reasonable scope of the Executive's duties, and such failure, if curable, is not cured within thirty (30) days, the Company may terminate this Agreement and the Executive's employment for Cause. For purposes of this Section 9(b), no act, or failure to act, by the Executive shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Cause shall not exist under this Section 9(b) unless and until the Company has delivered to Executive a copy of a resolution duly adopted by not less than three-fourths (3/4ths) of the Board (excluding, if applicable, the Executive) at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth above and specifying the particulars of such conduct in detail. (c) Without Cause. The Company may terminate this Agreement and the Executive's employment at any time without Cause. (d) Good Reason. The Executive may terminate this Agreement and his employment for ?Good Reason? by providing a Notice of Termination (as defined in Section 9(f)) to the Company within one hundred and twenty (120) days after the Executive has actual knowledge of the occurrence, without the written consent of the Executive, of one of the events set forth below. The Executive?s Date of Termination shall be fifteen (15) days after the Notice of Termination, unless the basis for Good Reason has been cured by the Company prior to such date: (i) the assignment of the Executive to a position materially and adversely inconsistent with the Executive's then current position with the Company or a material and adverse alteration in the nature of the Executive's duties and/or responsibilities, reporting obligations, titles or authority; (ii) a reduction by the Company in the Executive's then current base salary described in Section 3; (iii) the Company's failure to provide any material employee benefits due to be provided to the Executive (other than any such failure which affects all senior executive officers); or (iv) the Company's requiring the Executive to close or relocate his secondary office outside the Chicago metropolitan area or relocate his permanent residence outside the Chicago metropolitan area; (v) the failure of any successor to the Company to assume this Agreement pursuant to Section 14(a). The Executive's right to terminate this Agreement and his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. Executive's continued employment during the one hundred and twenty (120) day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (e) Voluntary Termination. The Executive may terminate this Agreement and his employment at any time voluntarily (a "Voluntary Termination"). A Voluntary Termination is any termination of employment by the Executive other than termination due to death, Disability, with or without Cause or for Good Reason. (f) Notice of and Date of Termination. Any termination of this Agreement and the Executive's employment under Section 9 of this Agreement by the Company or the Executive, other than termination due to death, shall be communicated by a Notice of Termination to the other party in accordance with Section 18. For purposes of this Agreement, a "Notice of Termination" means a written notice which indicates the specific termination provision in Section 9 relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Agreement. The Executive's "Termination Date" shall be the date the Notice of Termination is deemed given pursuant to Section 18, except in the event of a termination due to the Executive's death, when the Termination Date shall be the date of death, or in the event of a termination by the Executive for Good Reason, when the Termination Date shall be as provided in Section 9(d). 10. Obligations of the Company Upon Termination. In the event this Agreement and the Executive's employment are terminated pursuant to Section 9, the Company shall provide the Executive with the payments and benefits set forth below. The Executive acknowledges and agrees that the payments set forth in this Section 10 and the other agreements and plans referenced in this Agreement, constitute the sole and liquidated damages for a termination of this Agreement and his employment under Section 9. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff or counterclaim which the Company may have against the Executive except that the Company shall have the right to deduct any amounts owed by the Executive to the Company due to the Executive's misappropriation of Company funds or property from the payments set forth in this Section 10. (a) Termination Because of Disability or for Cause by the Company or Due to Death or a Voluntary Termination by the Executive. If this Agreement and the Executive's employment are terminated because of Disability or for Cause by the Company or due to the death or through a Voluntary Termination by the Executive: (i) the Company shall pay the Executive (or his beneficiary or legal representative, if applicable) his then current base salary described in Section 3 and his accrued, unused vacation pay through the Termination Date, as soon as practicable following the Termination Date; (ii) the Company shall reimburse the Executive (or his beneficiary or legal representative, if applicable) for reasonable business expenses incurred, but not paid, prior to the Termination Date; and (iii) the Executive (or his beneficiary or legal representative, if applicable) shall receive any other rights, compensation and/or benefits as may be due to the Executive following such termination to which he is entitled in accordance with the terms and provisions of any agreements referenced herein or plans or programs of the Company. (b) Termination By the Company without Cause or by the Executive for Good Reason. If this Agreement and the Executive's employment are terminated by the Company without Cause or by the Executive for Good Reason: (i) the Company shall pay the Executive (A) his then current base salary described in Section 3 and accrued, unused vacation pay through the Termination Date, as soon as practicable following the Termination Date, and (B) continued then current monthly base salary described in Section 3 for a period of twenty-four (24) months following the Termination Date; (ii) the Company shall maintain in full force and effect for the continued benefit of the Executive, for a period of twenty-four (24) months following the Termination Date, the welfare programs in which the Executive, his spouse and his dependents were participating immediately prior to the Termination Date at the level in effect and upon substantially the same terms and conditions (including without limitation contributions required by the Executive for such benefits) as existed immediately prior to the Termination Date; provided, that if the Executive, his spouse or his dependents cannot continue to participate in the Company programs providing such benefits, the Company shall arrange to provide Executive, his spouse and his dependents with comparable benefits from a third party insurer; provided, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period. If, at the end of the 24 month period, the Executive is receiving medical and dental benefits from the Company and is not eligible to receive such benefits under another employer-provided plan, the Executive and/or the Executive's family shall be entitled to continued medical and dental benefits under the Company programs providing such benefits during the 24 month period at the Executive's own expense pursuant to Title I, Part 6 of the Employee Retirement Income Security Act of 1974, as amended ("COBRA"), and for such purpose, the end of such 24 month period shall be considered the date of the "qualifying event" as such term is defined by COBRA. (iii) the Company shall reimburse the Executive for reasonable business expenses incurred, but not paid, prior to the Termination Date; and (iv) the Executive shall receive any other rights, compensation and/or benefits as may be due to the Executive following such termination to which he is entitled in accordance with the terms and provisions of any other agreements, plans or programs of the Company. 11. Change of Control. Contemporaneously with this Agreement, the parties have entered into a "Change of Control Employment Agreement." 12. Confidential Information, Ownership of Documents and Other Property, and Non-Competition. (a) Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all trade secrets and confidential information, knowledge or data relating to the Company and its businesses and investments and its affiliates, which shall have been obtained by the Executive during Executive's employment by the Company and which is not generally available public knowledge (other than by acts by the Executive in violation of this Agreement). Except as may be required or appropriate in connection with his carrying out his duties under this Agreement, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against the Company (in which case Executive shall use his reasonable best efforts in cooperating with the Company in obtaining from a court of competent jurisdiction a protective order against disclosure) communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform his duties hereunder. (b) Ownership of Documents and Other Property. All documents (including databases, records, files, models, and the like) and all other property relating to the Company's business and its affiliates as to which the Executive has access or control shall be and remain the property of the Company and shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with the Executive's carrying out his duties under this Agreement. All such documents and other property shall be returned to the Company promptly after the Employment Period ends, or otherwise promptly after removal if such removal occurs following the Employment Period. (c) Non-Competition. For twenty-four (24) months following the termination of the Employment Period other than if such termination is by the Company without Cause, by the Executive for Good Reason or for Disability, the Executive will not (i) be a greater than 1% investor in an entity which competes with the Company or any of its subsidiaries or other affiliates (the "Designated Entities") in any of their business or (ii) be a consultant to, employed by or otherwise act on behalf of an entity which competes with the Company or any of the Designated Entities in any of their businesses, in either case, within the Standard Metropolitan Statistical Areas in which the Company or any of the Designated Entities conduct any of their business operations or are actively soliciting business as of the termination of the Employment Period. (d) Injunctive Relief. In the event of a breach or threatened breach of this Section 12, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to address any such breach or threatened breach pending arbitration under Section 13 of this Agreement. (e) Continuing Operation. The expiration or termination of this Agreement or of Executive's employment shall have no effect on the continuing operation of this Section 12. 13. Arbitration; Legal Fees and Expenses. The parties agree that Executive's employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to the Executive's employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and shall be undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s). Nothing in this agreement to arbitrate, however, shall preclude the Company or the Executive from obtaining injunctive relief from a court of competent jurisdiction prohibiting any on-going breaches by the Executive or the Company of this Agreement including, without limitation, violations of Section 12. If any contest or dispute shall arise between the Company and Executive regarding any provision of this Agreement, the Company shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute, but only if Executive is successful in respect of one or more of Executive's material claims or defenses brought, raised or pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute to the extent the Company receives reasonable written evidence of such fees and expenses. 14. Successors and Assignability. (a) The Company's Successors and Assignability. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b) The Executive's Successors and Assignability. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive's death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's beneficiary or legal representative, to the extent any such person succeeds to the Executive's interests under this Agreement. 15. Severability. In the event that any provision of this Agreement shall be deemed to be illegal or unenforceable for any reason, such provision shall be deemed modified or deleted in such a manner so as to make this Agreement as so modified legal and enforceable to the fullest extent permitted under applicable laws. 16. Entire Agreement; Amendment and Waiver. This Agreement and the other agreements referenced herein constitute the entire agreement between the parties hereto with regard to the subject matter hereof, and there are no agreements, understandings, specific restrictions, warranties or representations relating to said subject matter between the parties other than those set forth herein or herein provided for. Any provision of this Agreement may be amended or the observance thereof may be waived only by written consent signed by both parties. Such amendment or waiver shall be binding upon the Company and the Executive and their successors and assigns. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which will take effect as an original and all of which shall evidence one and the same Agreement. 18. Notices. All notices required under this Agreement shall be in writing and shall be deemed given when delivered personally to the other party, when delivered by facsimile transmission or when delivered by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: At his last known address evidenced on the Company's payroll records fax: 847-920-1749 If to the Company: Fleming Companies, Inc. 6301 Waterford Boulevard Oklahoma City, OK 73126-0647 fax: 405-841-8504 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to become effective as of the date first above written. FLEMING COMPANIES, INC. By: SCOTT M. NORTHCUTT Scott M. Northcutt, Senior Vice President - Human Resources WILLIAM H. MARQUARD William H. Marquard EX-10 4 RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") entered into as of the 1st day of June, 1999, by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and William H. Marquard (herein referred to as the "Participant"); W I T N E S S E T H: WHEREAS, the Participant has entered into an Employment Agreement with the Company of even date pursuant to which he will serve the Company as Executive Vice President, Business Development (the "Employment Agreement"); and WHEREAS, the Company has previously adopted the Fleming Companies, Inc. 1990 Stock Incentive Plan and certain amendments thereto (the "Plan"); and WHEREAS, pursuant to the Employment Agreement, the Company has awarded the Participant 20,000 shares of common stock under the Plan subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows (all capitalized terms used herein, unless otherwise defined, have the meaning ascribed to such terms as set forth in the Plan): 1. The Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). 2. Grant of Award. The Company hereby grants to the Participant an award (the "Award") of twenty thousand (20,000) shares of Company common stock, par value $2.50 (the "Stock"), on the terms and conditions set forth herein and in the Plan. 3. Terms of Award. (a) Escrow of Shares. A certificate representing the shares of Stock subject to the Award (the "Restricted Stock") shall be issued in the name of the Participant and shall be escrowed with the Secretary of the Company (the "Escrow Agent") subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. (b) Vesting. One-half of the shares of Restricted Stock will vest based on the Participant's continuous employment with the Company through June 1, 2000 and the remaining one-half of the shares of Restricted Stock will vest based on the Participant's continuous employment with the Company through June 1, 2001. In the event the Participant's employment with the Company is terminated by reason of (i) death, (ii) disability, (iii) without "Cause" (as such term is defined in the Employment Agreement), or (iv) by the Participant for "Good Reason" (as such term is defined in the Employment Agreement), then all remaining shares of Restricted Stock (including any "Accrued Dividends," as such term is hereafter defined) which have not yet been vested shall immediately vest. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed Vested Stock. (c) Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. Regular quarterly cash dividends declared and paid by the Company with respect to the shares of Restricted Stock shall be paid to the Participant. Any extraordinary dividends declared and paid by the Company with respect to shares of Restricted Stock ("Accrued Dividends") shall not be paid to the Participant until such Restricted Stock becomes Vested Stock. Such Accrued Dividends shall be held by the Company as a general obligation and paid to the Participant at the time the underlying Restricted Stock becomes Vested Stock. (d) Vested Stock - Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates representing such Stock and the Secretary of the Company shall deliver to the Participant certificates representing such Vested Stock free and clear of all restrictions together with a check in the amount of all Accrued Dividends attributed to such Vested Stock without interest thereon. (e) Forfeiture. In the event the Participant's employment with the Company is terminated for any reason other than (i) death, (ii) disability, (iii) without Cause, or (iv) by the Participant for Good Reason prior to all shares of Restricted Stock becoming Vested Stock, then, all remaining shares of Restricted Stock which have not yet been vested (including any Accrued Dividends) shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever. 4. Change of Control. (a) In the event of a Change of Control, all Restricted Stock shall become Vested Stock and the Company shall deliver to the Participant certificates representing the Vested Stock free and clear of all restrictions, together with any Accrued Dividends attributable to such Vested Stock without interest thereon. (b) The Company shall also pay to the Participant any Gross-Up Payment determined in accordance with Section 9.2 of the Plan. 5. Legends. The shares of Stock which are the subject of the Award shall be subject to the following legend: "THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN DATED THE 1ST DAY OF JUNE, 1999. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF FLEMING COMPANIES, INC." 6. Stock Powers and the Beneficiary. The Participant hereby agrees to execute and deliver to the Secretary of the Company a stock power (endorsed in blank) in the form of Exhibit B hereto covering his Award and authorizes the Secretary to deliver to the Company any and all shares of Restricted Stock that are forfeited under the provisions of this Agreement. The Participant further authorizes the Company to hold as a general obligation of the Company any Accrued Dividends and to pay such dividends to the Participant at the time the underlying Restricted Stock becomes Vested Stock. Pursuant to Section 6.2 of the Plan, the Participant designates his Eligible Spouse as the Beneficiary under this Agreement. 7. Nontransferability of Award. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any shares of Restricted Stock or any interest therein in any manner whatsoever. 8. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt, or if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at the address set forth in the Employment Agreement. 9. Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. 10. Withholding. The Company and the Participant shall comply with all federal and state laws and regulations respecting the withholding, deposit and payment of any income, employment or other taxes relating to the Award (including Accrued Dividends). 11. Award Subject to Claims or Creditors. The Participant shall not have any interest in any particular assets of the Company, its parent, if applicable, or any Subsidiary by reason of the right to earn an Award (including Accrued Dividends) under the Plan and this Agreement, and the Participant or any other person shall have only the rights of a general unsecured creditor of the Company, its parent, if applicable, or a Subsidiary with respect to any rights under the Plan or this Agreement. 12. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. 13. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. "COMPANY" FLEMING COMPANIES, INC., an Oklahoma corporation By SCOTT M. NORTHCUTT Scott M. Northcutt, Senior Vice President - Human Resources "PARTICIPANT" WILLIAM H. MARQUARD William H. Marquard, Participant Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, __________________, an individual, hereby irrevocably assigns and conveys to ________________________, ______________ AND NO/100 (_____) shares of the Common Capital Stock of Fleming Companies, Inc., an Oklahoma corporation, $2.50 par value. DATED: __________________ EX-10 5 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made effective the 28th day of July, 1999 (the "Effective Date"), by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company") and Dennis C. Lucas (the "Executive"). In consideration of their mutual obligations contained in this Agreement, the Company hereby employs the Executive and the Executive hereby accepts employment with the Company as of the Effective Date upon the following terms and conditions: 1. Term of Agreement and Employment. The term of this Agreement and of the Executive's employment (collectively, the "Employment Period") shall be for a period of sixty (60) months commencing on the Effective Date or for a shorter period if the Agreement and the Executive's employment are terminated earlier as provided in Section 9. 2. Position and Duties of Executive. During the Employment Period, the Executive shall devote his full professional and business-related time, skills and best efforts to the regular duties of the position of Executive Vice President and President-Retail or to such other appropriate position and/or reasonable duties as may be assigned to him as a corporate officer of the Company from time to time by the Board of Directors (the "Board") and/or the Chairman and Chief Executive Officer of the Company. Unless otherwise agreed to in advance in writing by the Company, during the Employment Period, the Executive shall not be employed by others or be engaged in self- employment or in any professional or business-related activities which are or may be detrimental to or in conflict or competition with the business of the Company. 3. Annual Base Salary. During the Employment Period, the Company shall pay the Executive a base salary of $400,000 per each fiscal year, in installments consistent with the Company's regular payroll practices applicable to senior executive officers. The Company shall review such base salary annually and may in its discretion increase such base salary. 4. Annual Incentive Bonus. In addition to the base salary described in Section 3, the Executive will be eligible for a target annual incentive bonus of 65% of his annual base salary, with a potential maximum annual incentive bonus of 130% of his annual base salary. Any annual incentive bonus for fiscal 1999 or subsequent years shall be awarded in the discretion of the Compensation Committee using substantially the same performance goals as are applicable to other senior executive officers. 5. Company Common Stock Options. The Company shall grant the Executive a stock option to purchase 300,000 shares of Company Stock pursuant to the Fleming Companies, Inc. 1999 Stock Incentive Plan. The exercise dates and price and the other terms and conditions of the 300,000 stock options shall be as described in the Non-Qualified Stock Option Agreement under Fleming Companies, Inc. 1999 Stock Incentive Plan which is being executed contemporaneously with this Agreement. 6. Company Restricted Stock Award. The Company shall grant the Executive an award of 20,000 shares of restricted Company Stock pursuant to the Fleming Companies, Inc. 1990 Stock Incentive Plan. The terms and conditions of the stock award shall be as described in the Restricted Stock Award Agreement for the Fleming Companies, Inc. 1990 Stock Incentive Plan which is being executed contemporaneously with this Agreement. In connection with the grant of the Restricted Stock, the Executive shall make an election within thirty (30) days of the Effective Date to include in gross income the value of the Restricted Stock on the date of grant pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"). Upon notification from the Executive that he has made such election, the Company shall pay to the Executive an additional payment in an amount necessary to cause the net amount of such payment that is retained by the Executive after the calculation and deduction of any and all federal, state and local income taxes and employment taxes on such payment to be equal to the Executive's income taxes attributable to the Restricted Stock and the Executive's election under Section 83(b) of the Code in connection with the Restricted Stock. 7. Vacation and Other Paid Leave Programs and Welfare, Pension, Incentive and Other Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in and be covered by all vacation and other paid and unpaid leave programs and welfare, pension, incentive and other plans as may be adopted and maintained from time to time by the Company as applicable to its senior executive officers. 8. Expenses. (a) Initial Relocation Expenses. In connection with the Executive's initial relocation to Oklahoma City, Oklahoma, or other corporate offices of the Company, the Company shall provide the Executive with the relocation package for new senior executive officers outlined in the Company's current relocation policy. The Company will also make an additional payment to the Executive in an amount necessary to offset any and all federal, state and local income taxes and employment taxes which the Executive shall be required to pay in connection with his initial relocation to Oklahoma City, Oklahoma. Also at the Executive's option, at any time during up to the first two (2) years of the Employment Period, the Company shall purchase the residence in Boise, Idaho currently owned by the Executive at a purchase price equal to the greater of its appraised value (as set by an appraiser designated by the Company) or the Executive's documented invested cost in that residence. (b) Ongoing Business Expenses. The Company shall reimburse the Executive for all reasonable and necessary business expenses incurred by the Executive relating to the conduct of business of the Company, including expenses incurred in connection with the Executive's travel to and from the Company's corporate offices, upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Company's policies applicable to its senior executive officers. 9. Termination of Agreement and Employment. This Agreement and the Executive's employment may be terminated earlier than sixty (60) months following the Effective Date under the following circumstances: (a) Death or Disability. This Agreement and the Executive's employment shall terminate automatically upon the Executive's death. If, because of physical or mental illness, the Executive has been substantially unable to perform the essential duties of his position (with or without "reasonable accommodation," as defined under the Americans With Disabilities Act) for a period in excess of six (6) months ("Disability"), the Company may terminate this Agreement and the Executive's employment for Disability. (b) Cause. If the Executive (i) is convicted of a felony, (ii) engages in an act of personal dishonesty which is intended to result in personal enrichment of the Executive at the expense of the Company, or (iii) "willfully" fails to follow a direct, reasonable and lawful order of the Board and/or the Chairman and Chief Executive Officer, within the reasonable scope of the Executive's duties, and such failure, if curable, is not cured within thirty (30) days, the Company may terminate this Agreement and the Executive's employment for Cause. For purposes of this Section 9(b), no act, or failure to act, by the Executive shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Cause shall not exist under this Section 9(b) unless and until the Company has delivered to Executive a copy of a resolution duly adopted by not less than three-fourths (3/4ths) of the Board (excluding, if applicable, the Executive) at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth above and specifying the particulars of such conduct in detail. (c) Without Cause. The Company may terminate this Agreement and the Executive's employment at any time without Cause. (d) Good Reason. The Executive may terminate this Agreement and his employment for "Good Reason" by providing a Notice of Termination (as defined in Section 9(f)) to the Company within one hundred and twenty (120) days after the Executive has actual knowledge of the occurrence, without the written consent of the Executive, of one of the events set forth below. The Executive's Date of Termination shall be fifteen (15) days after the Notice of Termination, unless the basis for Good Reason has been cured by the Company prior to such date: (i) the assignment of the Executive to a position materially and adversely inconsistent with the Executive's then current position with the Company or a material and adverse alteration in the nature of the Executive's duties and/or responsibilities, reporting obligations, titles or authority; (ii) a reduction by the Company in the Executive's then current base salary described in Section 3; (iii) the Company's failure to provide any material employee benefits due to be provided to the Executive (other than any such failure which affects all senior executive officers); or (iv) the failure of any successor to the Company to assume this Agreement pursuant to Section 14(a). The Executive's right to terminate this Agreement and his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. Executive's continued employment during the one hundred and twenty (120) day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (e) Voluntary Termination. The Executive may terminate this Agreement and his employment at any time voluntarily (a "Voluntary Termination"). A Voluntary Termination is any termination of employment by the Executive other than termination due to death, Disability, with or without Cause or for Good Reason. (f) Notice of and Date of Termination. Any termination of this Agreement and the Executive's employment under Section 9 of this Agreement by the Company or the Executive, other than termination due to death, shall be communicated by a Notice of Termination to the other party in accordance with Section 18. For purposes of this Agreement, a "Notice of Termination" means a written notice which indicates the specific termination provision in Section 9 relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Agreement. The Executive's "Termination Date" shall be the date the Notice of Termination is deemed given pursuant to Section 18, except in the event of a termination due to the Executive's death, when the Termination Date shall be the date of death, or in the event of a termination by the Executive for Good Reason, when the Termination Date shall be as provided in Section 9(d). 10. Obligations of the Company Upon Termination. In the event this Agreement and the Executive's employment are terminated pursuant to Section 9, the Company shall provide the Executive with the payments and benefits set forth below. The Executive acknowledges and agrees that the payments set forth in this Section 10 and the other agreements and plans referenced in this Agreement, constitute the sole and liquidated damages for a termination of this Agreement and his employment under Section 9. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff or counterclaim which the Company may have against the Executive except that the Company shall have the right to deduct any amounts owed by the Executive to the Company due to the Executive's misappropriation of Company funds or property from the payments set forth in this Section 10. (a) Termination Because of Disability or for Cause by the Company or Due to Death or a Voluntary Termination by the Executive. If this Agreement and the Executive's employment are terminated because of Disability or for Cause by the Company or due to the death or through a Voluntary Termination by the Executive: (i) the Company shall pay the Executive (or his beneficiary or legal representative, if applicable) his then current base salary described in Section 3 and his accrued, unused vacation pay through the Termination Date, as soon as practicable following the Termination Date; (ii) the Company shall reimburse the Executive (or his beneficiary or legal representative, if applicable) for reasonable business expenses incurred, but not paid, prior to the Termination Date; and (iii) the Executive (or his beneficiary or legal representative, if applicable) shall receive any other rights, compensation and/or benefits as may be due to the Executive following such termination to which he is entitled in accordance with the terms and provisions of any agreements referenced herein or plans or programs of the Company. (b) Termination By the Company without Cause or by the Executive for Good Reason. If this Agreement and the Executive's employment are terminated by the Company without Cause or by the Executive for Good Reason: (i) the Company shall pay the Executive (A) his then current base salary described in Section 3 and accrued, unused vacation pay through the Termination Date, as soon as practicable following the Termination Date, and (B) continued then current monthly base salary described in Section 3 for a period of twenty-four (24) months following the Termination Date; (ii) the Company shall maintain in full force and effect for the continued benefit of the Executive, for a period of twenty-four (24) months following the Termination Date, the welfare programs in which the Executive, his spouse and his dependents were participating immediately prior to the Termination Date at the level in effect and upon substantially the same terms and conditions (including without limitation contributions required by the Executive for such benefits) as existed immediately prior to the Termination Date; provided, that if the Executive, his spouse or his dependents cannot continue to participate in the Company programs providing such benefits, the Company shall arrange to provide Executive, his spouse and his dependents with the economic equivalent of such benefits which they otherwise would have been entitled to receive under such plans and programs; provided, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period. (iii) the Company shall reimburse the Executive for reasonable business expenses incurred, but not paid, prior to the Termination Date; and (iv) the Executive shall receive any other rights, compensation and/or benefits as may be due to the Executive following such termination to which he is entitled in accordance with the terms and provisions of any other agreements, plans or programs of the Company. 11. Change of Control. Contemporaneously with this Agreement, the parties have entered into a "Change of Control Employment Agreement." 12. Confidential Information, Ownership of Documents and Other Property, and Non-Competition. (a) Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all trade secrets and confidential information, knowledge or data relating to the Company and its businesses and investments and its affiliates, which shall have been obtained by the Executive during Executive's employment by the Company and which is not generally available public knowledge (other than by acts by the Executive in violation of this Agreement). Except as may be required or appropriate in connection with his carrying out his duties under this Agreement, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against the Company (in which case Executive shall use his reasonable best efforts in cooperating with the Company in obtaining from a court of competent jurisdiction a protective order against disclosure) communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform his duties hereunder. (b) Ownership of Documents and Other Property. All documents (including databases, records, files, models, and the like) and all other property relating to the Company's business and its affiliates as to which the Executive has access or control shall be and remain the property of the Company and shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with the Executive's carrying out his duties under this Agreement. All such documents and other property shall be returned to the Company promptly after the Employment Period ends, or otherwise promptly after removal if such removal occurs following the Employment Period. (c) Non-Competition. For twenty-four (24) months following the termination of the Employment Period (other than if such termination is by the Company without Cause or by the Executive for Good Reason), the Executive will not, directly or indirectly, in association with or as a shareholder, principal, agent, partner, officer, director, employee or consultant of any retail chain or any subsidiary or affiliate of any retail chain, engage in the business of the retail sale of food and related products within the Standard Metropolitan Statistical Areas in which the Company or any of its subsidiaries was conducting business or was actively soliciting business as of the Executive's Termination Date; provided, however, this Section 12(c) shall not prohibit (i) the Executive's employment or other relationship with any national chain engaged in the retail sale of food and related products, regardless of location, such as Kroger, Albertson's or Safeway or (ii) the Executive from owning less than one percent (1%) of any such retail chain. If, at any time, the provisions of this Section 12(c) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this Section 12(c) shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Executive agrees that this Section 12(c) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein. The parties agree that the area, duration and scope of activity for which the covenant not to compete set forth in this Section 12(c) is to be effective are reasonable. (d) Injunctive Relief. In the event of a breach or threatened breach of this Section 12, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to address any such breach or threatened breach pending arbitration under Section 13 of this Agreement. (e) Continuing Operation. The expiration or termination of this Agreement or of Executive's employment shall have no effect on the continuing operation of this Section 12. 13. Arbitration; Legal Fees and Expenses. The parties agree that Executive's employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to the Executive's employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and shall be undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s). Nothing in this agreement to arbitrate, however, shall preclude the Company or the Executive from obtaining injunctive relief from a court of competent jurisdiction prohibiting any on-going breaches by the Executive or the Company of this Agreement including, without limitation, violations of Section 12. If any contest or dispute shall arise between the Company and Executive regarding any provision of this Agreement, the Company shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute, but only if Executive is successful in respect of one or more of Executive's material claims or defenses brought, raised or pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute to the extent the Company receives reasonable written evidence of such fees and expenses. 14. Successors and Assignability. (a) The Company's Successors and Assignability. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b) The Executive's Successors and Assignability. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Executive's death, this Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's beneficiary or legal representative, to the extent any such person succeeds to the Executive's interests under this Agreement. 15. Severability. In the event that any provision of this Agreement shall be deemed to be illegal or unenforceable for any reason, such provision shall be deemed modified or deleted in such a manner so as to make this Agreement as so modified legal and enforceable to the fullest extent permitted under applicable laws. 16. Entire Agreement; Amendment and Waiver. This Agreement and the other agreements referenced herein constitute the entire agreement between the parties hereto with regard to the subject matter hereof, and there are no agreements, understandings, specific restrictions, warranties or representations relating to said subject matter between the parties other than those set forth herein or herein provided for. Any provision of this Agreement may be amended or the observance thereof may be waived only by written consent signed by both parties. Such amendment or waiver shall be binding upon the Company and the Executive and their successors and assigns. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which will take effect as an original and all of which shall evidence one and the same Agreement. 18. Notices. All notices required under this Agreement shall be in writing and shall be deemed given when delivered personally to the other party, when delivered by facsimile transmission or when delivered by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: At his last known address evidenced on the Company's payroll records If to the Company: Fleming Companies, Inc. 6301 Waterford Boulevard Oklahoma City, OK 73126-0647 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to become effective as of the date first above written. FLEMING COMPANIES, INC. By: SCOTT M. NORTHCUTT Scott M. Northcutt, Senior Vice President - Human Resources DENNIS C. LUCAS Dennis C. Lucas EX-10 6 RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") entered into as of the 28th day of July, 1999, by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and Dennis C. Lucas (herein referred to as the "Participant"); W I T N E S S E T H: WHEREAS, the Participant has entered into an Employment Agreement with the Company of even date pursuant to which he will serve the Company as Executive Vice President, President - Retail (the "Employment Agreement"); and WHEREAS, the Company has previously adopted the Fleming Companies, Inc. 1990 Stock Incentive Plan and certain amendments thereto (the "Plan"); and WHEREAS, pursuant to the Employment Agreement, the Company has awarded the Participant 20,000 shares of common stock under the Plan subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows (all capitalized terms used herein, unless otherwise defined, have the meaning ascribed to such terms as set forth in the Plan): 1. The Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). 2. Grant of Award. The Company hereby grants to the Participant an award (the "Award") of twenty thousand (20,000) shares of Company common stock, par value $2.50 (the "Stock"), on the terms and conditions set forth herein and in the Plan. 3. Terms of Award. (a) Escrow of Shares. A certificate representing the shares of Stock subject to the Award (the "Restricted Stock") shall be issued in the name of the Participant and shall be escrowed with the Secretary of the Company (the "Escrow Agent") subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. (b) Vesting. One-half of the shares of Restricted Stock will vest based on the Participant's continuous employment with the Company through July 28, 2000 and the remaining one-half of the shares of Restricted Stock will vest based on the Participant's continuous employment with the Company through July 28, 2001. In the event the Participant's employment with the Company is terminated by reason of (i) death, (ii) disability, (iii) without "Cause" (as such term is defined in the Employment Agreement), or (iv) by the Participant for "Good Reason" (as such term is defined in the Employment Agreement), then all remaining shares of Restricted Stock (including any "Accrued Dividends," as such term is hereafter defined) which have not yet been vested shall immediately vest. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed Vested Stock. (c) Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. Regular quarterly cash dividends declared and paid by the Company with respect to the shares of Restricted Stock shall be paid to the Participant. Any extraordinary dividends declared and paid by the Company with respect to shares of Restricted Stock ("Accrued Dividends") shall not be paid to the Participant until such Restricted Stock becomes Vested Stock. Such Accrued Dividends shall be held by the Company as a general obligation and paid to the Participant at the time the underlying Restricted Stock becomes Vested Stock. (d) Vested Stock - Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates representing such Stock and the Secretary of the Company shall deliver to the Participant certificates representing such Vested Stock free and clear of all restrictions together with a check in the amount of all Accrued Dividends attributed to such Vested Stock without interest thereon. (e) Forfeiture. In the event the Participant's employment with the Company is terminated for any reason other than (i) death, (ii) disability, (iii) without Cause, or (iv) by the Participant for Good Reason prior to all shares of Restricted Stock becoming Vested Stock, then, all remaining shares of Restricted Stock which have not yet been vested (including any Accrued Dividends) shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever. 4. Change of Control. (a) In the event of a Change of Control, all Restricted Stock shall become Vested Stock and the Company shall deliver to the Participant certificates representing the Vested Stock free and clear of all restrictions, together with any Accrued Dividends attributable to such Vested Stock without interest thereon. (b) The Company shall also pay to the Participant any Gross-Up Payment determined in accordance with Section 9.2 of the Plan. 5. Legends. The shares of Stock which are the subject of the Award shall be subject to the following legend: "THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN DATED THE 28TH DAY OF JULY, 1999. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF FLEMING COMPANIES, INC." 6. Stock Powers and the Beneficiary. The Participant hereby agrees to execute and deliver to the Secretary of the Company a stock power (endorsed in blank) in the form of Exhibit B hereto covering his Award and authorizes the Secretary to deliver to the Company any and all shares of Restricted Stock that are forfeited under the provisions of this Agreement. The Participant further authorizes the Company to hold as a general obligation of the Company any Accrued Dividends and to pay such dividends to the Participant at the time the underlying Restricted Stock becomes Vested Stock. Pursuant to Section 6.2 of the Plan, the Participant designates his Eligible Spouse as the Beneficiary under this Agreement. 7. Nontransferability of Award. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any shares of Restricted Stock or any interest therein in any manner whatsoever. 8. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt, or if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at the address set forth in the Employment Agreement. 9. Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. 10. Withholding. The Company and the Participant shall comply with all federal and state laws and regulations respecting the withholding, deposit and payment of any income, employment or other taxes relating to the Award (including Accrued Dividends). 11. Award Subject to Claims or Creditors. The Participant shall not have any interest in any particular assets of the Company, its parent, if applicable, or any Subsidiary by reason of the right to earn an Award (including Accrued Dividends) under the Plan and this Agreement, and the Participant or any other person shall have only the rights of a general unsecured creditor of the Company, its parent, if applicable, or a Subsidiary with respect to any rights under the Plan or this Agreement. 12. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. 13. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. "COMPANY" FLEMING COMPANIES, INC., an Oklahoma corporation By SCOTT M. NORTHCUTT Scott M. Northcutt Senior Vice President - Human Resources "PARTICIPANT" DENNIS C. LUCAS Dennis C. Lucas, Participant EX-10 7 RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1996 STOCK INCENTIVE PLAN THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") entered into as of the 20th day of July, 1999, by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and E. Stephen Davis (herein referred to as the "Participant"); W I T N E S S E T H: WHEREAS, the Company has previously adopted the Fleming Companies, Inc. 1996 Stock Incentive Plan and certain amendments thereto (the "Plan"); and WHEREAS, in connection with his employment with the Company, the Company has awarded the Participant 60,000 shares of common stock under the Plan subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows (all capitalized terms used herein, unless otherwise defined, have the meaning ascribed to such terms as set forth in the Plan): 1. The Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). 2. Grant of Award. The Company hereby grants to the Participant an award (the "Award") of 60,000 shares of Company common stock, par value $2.50 (the "Stock"), on the terms and conditions set forth herein and in the Plan. 3. Terms of Award. (a) Escrow of Shares. A certificate representing the shares of Stock subject to the Award (the "Restricted Stock") shall be issued in the name of the Participant and shall be escrowed with the Secretary of the Company (the "Escrow Agent") subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. (b) Vesting. Vesting of all of the shares of Restricted Stock is subject to fulfillment of both of the following conditions: (i) continuous employment by the Participant with the Company through July 20, 2001 and (ii) achievement by the Company of the "Target" as such term is defined in that certain Letter Agreement effective as of June 1, 1999, between the Company and Ernst & Young LLP covering Phase II of the Low Cost Pursuit Program (the "Performance Vesting Objective"). Any questions regarding satisfaction of the Performance Vesting Objective shall be resolved by the Chairman and Chief Executive Officer of the Company in his sole and absolute discretion. In the event the Participant's employment with the Company is terminated by reason of (i) death, (ii) disability, (iii) without "Cause" (as such term is defined in Section 3(f)(i) of this Agreement), or (iv) by the Participant for "Good Reason" (as such term is defined in Section 3(f)(ii) of this Agreement), then all remaining shares of Restricted Stock (including any "Accrued Dividends," as such term is hereafter defined) which have not yet been vested shall immediately vest. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed "Vested Stock." (c) Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. Regular quarterly cash dividends declared and paid by the Company with respect to the shares of Restricted Stock shall be paid to the Participant. Any extraordinary dividends declared and paid by the Company with respect to shares of Restricted Stock ("Accrued Dividends") shall not be paid to the Participant until such Restricted Stock becomes Vested Stock. Such Accrued Dividends shall be held by the Company as a general obligation and paid to the Participant at the time the underlying Restricted Stock becomes Vested Stock. (d) Vested Stock - Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates representing such Stock and the Secretary of the Company shall deliver to the Participant certificates representing such Vested Stock free and clear of all restrictions, except for any applicable securities laws restrictions, together with a check in the amount of all Accrued Dividends attributed to such Vested Stock without interest thereon. (e) Forfeiture. Restricted Stock that does not become Vested Stock pursuant to the terms of this Agreement shall be absolutely forfeited and the Participant shall have no future interest therein of any kind whatsoever. In the event the Participant's employment with the Company is terminated for any reason other than (i) death, (ii) disability, (iii) without Cause, or (iv) by the Participant for Good Reason prior to all shares of Restricted Stock becoming Vested Stock, then, all remaining shares of Restricted Stock which have not yet been vested (including any Accrued Dividends) shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever. (f) Certain Definitions. (i) Cause. For purposes of this Agreement, termination of the employment by the Company for Cause shall mean termination for one of the following reasons: (A) the conviction of the Participant of a felony by a federal or state court of competent jurisdiction; (B) an act or acts of dishonesty taken by the Participant and intended to result in substantial personal enrichment of the Participant at the expense of the Company; or (C) the Participant's "willful" failure to follow a direct, reasonable and lawful written order from his supervisor, within the reasonable scope of the Participant's duties, which failure is not cured within 30 days. Further, for purposes of this Section 3(f)(i): (1) No act, or failure to act, on the Participant's part shall be deemed "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant's action or omission was in the best interest of the Company. (2) The Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths (3/4ths) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Participant was guilty of conduct set forth in clauses (A), (B) or (C) above and specifying the particulars thereof in detail. (ii) Good Reason. For purposes of this Agreement, "Good Reason" means: (A) the assignment to the Participant of any duties inconsistent in any respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities or any other action by the Company which results in a diminishment in such position, compensation, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of written notice thereof given by the Participant, or (B) the Company's requiring the Participant to be based at any office or location more than 25 miles from where the Participant was employed immediately prior to a Change of Control, except for periodic travel reasonably required in the performance of the Participant's responsibilities. 4. Change of Control. (a) In the event of a Change of Control, all Restricted Stock shall become Vested Stock and the Company shall deliver to the Participant certificates representing the Vested Stock free and clear of all restrictions, together with any Accrued Dividends attributable to such Vested Stock without interest thereon. (b) The Company shall also pay to the Participant any Gross-Up Payment determined in accordance with Section 9.2 of the Plan. 5. Legends. The shares of Stock which are the subject of the Award shall be subject to the following legend: "THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ARE TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT FOR THE FLEMING COMPANIES, INC. 1996 STOCK INCENTIVE PLAN DATED THE 2OTH DAY OF JUNE, 1999. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF FLEMING COMPANIES, INC." 6. Stock Powers and the Beneficiary. The Participant hereby agrees to execute and deliver to the Secretary of the Company a stock power (endorsed in blank) in the form of Exhibit B hereto covering his Award and authorizes the Secretary to deliver to the Company any and all shares of Restricted Stock that are forfeited under the provisions of this Agreement. The Participant further authorizes the Company to hold as a general obligation of the Company any Accrued Dividends and to pay such dividends to the Participant at the time the underlying Restricted Stock becomes Vested Stock. Pursuant to Section 6.2 of the Plan, the Participant designates his Eligible Spouse as the Beneficiary under this Agreement. 7. Nontransferability of Award. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any shares of Restricted Stock or any interest therein in any manner whatsoever. 8. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt, or if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at his last known address evidenced on the payroll records of the Company. 9. Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of Oklahoma. 10. Withholding. The Company and the Participant shall comply with all federal and state laws and regulations respecting the withholding, deposit and payment of any income, employment or other taxes relating to the Award (including Accrued Dividends). 11. Award Subject to Claims or Creditors. The Participant shall not have any interest in any particular assets of the Company, its parent, if applicable, or any Subsidiary by reason of the right to earn an Award (including Accrued Dividends) under the Plan and this Agreement, and the Participant or any other person shall have only the rights of a general unsecured creditor of the Company, its parent, if applicable, or a Subsidiary with respect to any rights under the Plan or this Agreement. 12. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. 13. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. 14. Protection of Business as Consideration. As specific consideration to the Company for the Restricted Stock Award: (a) Limitations on Competition. Subject to subsection (d), the Participant will not, during his employment with the Company and until the first anniversary of his date of termination/separation from employment with the Company, without the Company's written consent, directly or indirectly, be a shareholder, principal, agent, partner, officer, director, employee or consultant of SUPERVALU, Inc., Nash Finch Company, Associated Wholesale Grocers, Inc., Richfood Holdings, Inc. or any other direct competitor of the Company, excluding national retail chains, or any of their respective subsidiaries, affiliates or successors (the "Competitors"). (b) Confidential Information. The Participant acknowledges that during the course of his employment, he will have access to and gain knowledge of highly confidential and proprietary information and trade secrets. He further acknowledges that the misuse, misappropriation or disclosure of this information could cause irreparable harm to the Company, both during and after the term of his employment. Therefore, he agrees that during his employment and at all times thereafter he will hold in a fiduciary capacity for the benefit of the Company and will not divulge or disclose, directly or indirectly, to any other person, firm or business, all confidential or proprietary information, knowledge and data (including, but not limited to, processes, programs, trade "know how," ideas, details of contracts, marketing plans, strategies, business development techniques, business acquisition plans, personnel plans, pricing practices and business methods and practices) relating in any way to the business of the Company, customers, joint ventures, licensors, licensees, distributors and other persons and entities with whom the Company does business ("Confidential Data"), except upon the Company's written consent or as required by the Participant's duties with the Company, for so long as such Confidential Data remains confidential and all such Confidential Data, together with all copies thereof and notes and other references thereto, shall remain the sole property of the Company. (c) Consequences of Breach of Limitations. Subject to subsection (d), if at any time within (i) the term of this Agreement or (ii) within one (1) year following the Participant's date of termination/separation, but only if such termination/separation occurs on a date prior to July 20, 2001, or (iii) within one (1) year after vesting any portion of the Restricted Stock, whichever is latest, the Participant, without the Company's written consent, directly or indirectly, is a shareholder, principal, agent, partner, officer, director, employee or consultant of any of the Competitors or breaches the provisions of subsection (b) regarding Confidential Information, then (iv) with respect to any shares of Restricted Stock, effective the date the Participant enters into such activity all such Restricted Stock shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever (unless forfeited sooner by operation of another term or condition of this Agreement or the Plan), and (v) with respect to any shares of Vested Stock, the Participant shall be required to return to the Company all of the actual shares of Vested Stock, or other equivalent shares of Company common stock, within thirty (30) days after the date of written notice from the Company that pursuant to the provisions of this subsection delivery of such shares is due and the Participant shall forfeit all rights to such shares of Vested Stock. The Participant acknowledges that damages which may arise from a breach of this Section 14 may be impossible to ascertain or prove with certainty. In addition to the other legal or equitable remedies which may be available, the parties agree to specific performance of the provisions of this subsection (c), and the Company shall be entitled to an immediate injunction from a court of competent jurisdiction to end such breach, without further proof of damages. (d) Permitted Ownership. Nothing in this Section 14 shall prohibit the Participant from owning less than one percent (1%) of any company whose securities are publicly traded on a national securities exchange. (e) Severability and Reasonableness. If, at any time, the provisions of this Section 14 shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to duration or scope of activity, this Section 14 shall be considered divisible and shall become and be immediately amended to only such duration and scope of activity as shall be determined to be reasonable and enforceable by a court or other body having jurisdiction over the matter; and the Participant agrees that this Section 14 as so amended shall be valid and binding as though any invalid or unenforceable portion had not been included herein. The parties agree that the duration and scope of the limitations on competition and disclosure of information described in subsections (a) and (b) are reasonable. 15. Arbitration of Disputes. Any disputes, claims or controversies between the Participant and the Company which may arise out of or relate to this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and shall be undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The arbitrator(s) may, but will not be required, to award such damages or other monetary relief as either party might be entitled to receive from a court of competent jurisdiction. Nothing in this agreement to arbitrate shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any on-going breaches of the Agreement by the Participant pending arbitration. The arbitrator(s) may also award costs and attorneys' fees in connection with the arbitration to the prevailing party; however, in the arbitrator's(s') discretion, each party may be ordered to bear its/his/her own costs and attorneys' fees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. "COMPANY" FLEMING COMPANIES, INC., an Oklahoma corporation By SCOTT M. NORTHCUTT Scott M. Northcutt, Senior Vice President - Human Resources "PARTICIPANT" E. STEPHEN DAVIS E. Stephen Davis Exhibit A [Copy of 1999 Stock Incentive Plan] Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, __________________, an individual, hereby irrevocably assigns and conveys to ________________________, ______________ AND NO/100 (_____) shares of the Common Capital Stock of Fleming Companies, Inc., an Oklahoma corporation, $2.50 par value. DATED: EX-10 8 Attachment 1 LOAN AGREEMENT between FLEMING COMPANIES, INC. and ___________________________ ___________, 1999 TABLE OF CONTENTS Page 1. Loan Amount and Purpose . . . . . . . . . . . . . . . . . . . .1 2. Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2.1 Interest . . . . . . . . . . . . . . . . . . . . . . .1 2.2 Interest Moratorium. . . . . . . . . . . . . . . . . .1 2.3 Payments . . . . . . . . . . . . . . . . . . . . . . .1 3. Collateral and Security Agreement . . . . . . . . . . . . . . .1 4. Conditions of Lending . . . . . . . . . . . . . . . . . . . . .2 4.1 Loan Documents . . . . . . . . . . . . . . . . . . . .2 4.2 No Violation . . . . . . . . . . . . . . . . . . . . .2 4.3 No Default . . . . . . . . . . . . . . . . . . . . . .2 5. Representations and Warranties . . . . . . . . . . . . . . . . .2 5.1 Capacity and Power . . . . . . . . . . . . . . . . . .2 5.2 No Conflict. . . . . . . . . . . . . . . . . . . . . .2 6. Covenants of the Borrower . . . . . . . . . . . . . . . . . . .2 6.1 Mandatory Prepayments. . . . . . . . . . . . . . . . .2 6.2 Pledged Shares . . . . . . . . . . . . . . . . . . . .2 7. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7.1 Nonpayment of Note . . . . . . . . . . . . . . . . . .3 7.2 Breach of Agreement. . . . . . . . . . . . . . . . . .3 7.3 Representations and Warranties . . . . . . . . . . . .3 7.4 Insolvency . . . . . . . . . . . . . . . . . . . . . .3 7.5 Receivership . . . . . . . . . . . . . . . . . . . . .3 7.6 Judgment . . . . . . . . . . . . . . . . . . . . . . .3 7.7 Termination for Cause. . . . . . . . . . . . . . . . .3 8. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 8.1 Termination. . . . . . . . . . . . . . . . . . . . . .4 8.2 Acceleration of Note . . . . . . . . . . . . . . . . .4 8.3 Selective Enforcement. . . . . . . . . . . . . . . . .4 8.4 Waiver of Default. . . . . . . . . . . . . . . . . . .4 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .4 9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . .4 9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . .5 9.3 Severability . . . . . . . . . . . . . . . . . . . . .5 9.4 Construction and Venue . . . . . . . . . . . . . . . .5 9.5 No Waiver. . . . . . . . . . . . . . . . . . . . . . .5 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . .6 Exhibit "A" - Promissory Note Exhibit "B" - Security Agreement Exhibit "C" - Form of UCC-1 Financing Statement Exhibit "D" - Form of Stock Power Separate from Certificate Exhibit "E" - Form of Notice to Transfer Agent LOAN AGREEMENT THIS AGREEMENT is entered into effective this ____ day of ___________, 1999, between _____________________, an individual (the "Borrower"), and Fleming Companies, Inc., an Oklahoma corporation (the "Lender"). W I T N E S S E T H: 1. Loan Amount and Purpose. Subject to the terms and conditions of this Agreement, the Lender agrees to lend to the Borrower such amounts as the Borrower may from time to time request prior to April 1, 2004, but not to exceed principal advances in the aggregate amount of _________________ Dollars ($____________). The loan proceeds will be used solely to purchase shares of Lender's common stock, par value $2.50 per share (the "Shares"). 2. Note. The loans to be made hereunder will be evidenced by the Promissory Note (the "Note") in the form of Exhibit "A" attached hereto as a part hereof and payable on the following terms: 2.1 Interest. Except as otherwise provided in Section 2.2 hereof and in the Note, the unpaid principal balance of the Note will bear interest at the rate of seven percent (7%) per annum. Interest will be payable quarterly throughout the loan term commencing on _____________, 1999, and on the last day of each successive December, March, June and September thereafter until the Note is paid in full. All interest will be computed at a per diem charge for the actual number of days elapsed on the basis of a year consisting of three hundred sixty-five (365) days. 2.2 Interest Moratorium. Interest shall neither accrue nor be payable so long as Borrower is the full time employee of Lender. Interest shall accrue and be payable as set forth in Section 2.1 from and after the first day following Borrower's termination as a full time employee of Lender. 2.3 Payments. Each payment on the Note will be applied first to accrued and unpaid interest, if any, and the remainder to the principal balance of the Note. The entire unpaid principal balance of the Note, together with all accrued and unpaid interest thereon, if any, will be due and payable upon acceleration as provided in the Note or, if not accelerated, on April 1, 2005. 3. Collateral and Security Agreement. Payment of the Note will be secured by a first lien on and security interest in the Collateral (as defined in the Security Agreement in the form of Exhibit "B" attached hereto as a part hereof; the "Security Agreement"). All existing and future Collateral will be subject to the Security Agreement. 4. Conditions of Lending. The obligation of the Lender to perform this Agreement and to make the initial or any subsequent advance under the Note is subject to the following conditions precedent: 4.1 Loan Documents. This Agreement, the Note, the Security Agreement, UCC-1 Financing Statements, Stock Powers, the Notice to Transfer Agent, and any related documents and all extensions, amendments and modifications thereof (collectively the "Loan Documents") will have been duly executed, acknowledged (where appropriate) by all parties thereto and delivered to the Lender, all in form and substance satisfactory to the Lender. Borrower's spouse and any other joint owner of the Collateral must execute and deliver a Security Agreement, UCC-1 Financing Statement, Stock Power and Notice to Transfer Agent to the Lender prior to any advance being made hereunder. 4.2 No Violation. The advance shall not cause the Lender to be in violation of any law, rule, regulation or covenant applicable to the Lender. 4.3 No Default. There will have occurred and be continuing no event of default as of the date of this Agreement or the date of any advances under the Note. 5. Representations and Warranties. In order to induce the Lender to enter into and perform the Loan Documents, the Borrower represents and warrants to the Lender as follows: 5.1 Capacity and Power. The Borrower has adequate capacity, power and legal right to enter into, execute, deliver and perform the terms of the Loan Documents, to borrow money, to give security for borrowings (either alone or together with any additional Pledgor who has executed the Security Agreement) and to consummate the transactions contemplated by the Loan Documents. 5.2 No Conflict. The execution, delivery and performance of the Loan Documents by the Borrower will not violate any law, regulation, rule or any other agreement or instrument binding on the Borrower or the Collateral. 6. Covenants of the Borrower. Until the expiration of the Lender's obligation to advance funds under this Agreement and payment in full of the Note: 6.1 Mandatory Prepayments. The Borrower will promptly apply at least one-half of any cash proceeds and one hundred percent (100%) of all distributions (other than scheduled dividends) received in respect of the Collateral as prepayments of principal amounts owing under the Note. In the event of a voluntary sale, shares cannot be released if such release would cause the Lender to fail to satisfy Regulation U. 6.2 Pledged Shares. All Shares acquired by Borrower with the proceeds of the Note and all Shares acquired by Borrower relating to the Shares pledged as Collateral, whether by dividend, stock split or otherwise, shall be pledged to the Lender hereunder and shall immediately be subject to the security interest created by the Security Agreement. All certificates representing such Shares shall be issued in the individual name of the Borrower; provided that certificates evidencing Shares may be registered jointly in the name of the Borrower and any joint owner if such joint owner shall have executed and delivered a Security Agreement, UCC-1 Financing Statement, Stock Powers and a Notice to Transfer Agent. Borrower shall direct the transfer agent or the issuer, as applicable, to deliver certificates representing the Shares directly to the office of Lender's Corporate Secretary. 7. Default. The Lender may terminate all of the Lender's obligations under the Loan Documents and may declare the Note and all other indebtedness and obligations of the Borrower owing to the Lender to be due and payable if any of the following events of default occur and have not been cured or waived by the Lender: 7.1 Nonpayment of Note. Default in payment when due of any interest on or principal of the Note; or 7.2 Breach of Agreement. Default in the performance or observance of any covenant contained in the Loan Documents or under the terms of any other instrument delivered to the Lender in connection with this Agreement; or 7.3 Representations and Warranties. Any representation or statement made or furnished to the Lender by or on behalf of the Borrower proves to be false or erroneous in any material respect or any warranty ceases to be complied with in any material respect; or 7.4 Insolvency. The Borrower admits the inability to pay the Borrower's debts as such debts mature; or any bankruptcy, reorganization, readjustment of debt, liquidation or receivership proceedings by or against the Borrower is commenced under the Bankruptcy Code, as amended, or any part thereof, or under any other laws, for the relief of debtors, whether state or federal, now or hereafter existing; or 7.5 Receivership. The appointment of a receiver or trustee for the Borrower or for any substantial part of the Collateral; or 7.6 Judgment. Entry by any court of a final judgment against the Borrower attaching any part of the Collateral by any means, including, without limitation, levy, distraint, replevin or self-help, which is not discharged or stayed within ten (10) days thereof; or 7.7 Termination for Cause. Borrower is terminated as an employee of Lender for Cause as defined herein. For purposes of this Agreement, "Cause" shall be deemed to exist when Borrower shall have committed any intentional act which involves moral turpitude and which causes a significant adverse effect on Borrower, its business, properties or prospects. 8. Remedies. On the occurrence of an event of default the Lender may, at the Lender's option: 8.1 Termination. Terminate the Lender's obligations hereunder, including the obligation to make any advances under the Note. 8.2 Acceleration of Note. Declare the Note and all sums due pursuant to the Loan Documents to be immediately due and payable, whereupon the same will become forthwith due and payable, and the Lender will be entitled to proceed to selectively and successively enforce the Lender's rights under the Loan Documents or any other instruments delivered to the Lender in connection with the Loan Documents; provided that if any event of default specified in Sections 7.4, 7.5 or 7.6 shall occur, all amounts owing under the Loan Documents, including the Note, shall thereafter become due and payable concurrently therewith, and the Lender's obligations hereunder shall automatically terminate, without presentment, demand, protest, notice of default, notice of acceleration or intention to accelerate or other notice of any kind, all of which the Borrower hereby expressly waives; and further provided that if any event of default specified in Section 7.7 shall occur, all amounts owing under the Loan Documents, including the Note, shall become due and payable on the ninetieth (90th) day following such termination without presentment, demand, protest, notice of default, notice of acceleration or intention to accelerate or other notice of any kind, all of which the Borrower hereby expressly waives. 8.3 Selective Enforcement. In the event the Lender elects to selectively and successively enforce the Lender's rights under any one or more of the instruments securing payment of the indebtedness evidenced by the Note, such action will not be deemed a waiver or discharge of any other lien or encumbrance securing payment of any of the indebtedness evidenced by the Note until such time as the Lender has been paid in full all sums advanced by the Lender plus all accrued interest thereon. 8.4 Waiver of Default. The Lender may, by an instrument or instruments in writing, signed by the Lender, waive any default which has occurred and any of the consequences of such default, and, in such event, the Lender and the Borrower will be restored to their respective former positions, rights and obligations hereunder. Any default so waived will, for all purposes of this Agreement, be deemed to have been cured and not to be continuing, but no such waiver will extend to any subsequent or other default or impair any consequence of such subsequent or other default. 9. Miscellaneous. It is further agreed as follows: 9.1 Expenses. All reasonable out-of-pocket expenses incurred by the Lender in connection with the enforcement of the Loan Documents including, without limitation, reasonable attorneys' fees, will be paid by the Borrower. 9.2 Notices. All notices, requests and demands will be served by hand delivery, telefacsimile or by registered or certified mail, with return receipt requested, as follows: To the Borrower: _________________________ _________________________ _________________________ Fax No. ( ) _____________ To the Lender: Fleming Companies, Inc. P.O. Box 26647 Oklahoma City, Oklahoma 73126-0647 Fax No. (405) 841-8504 Attention: Treasury Department/Margin Loans or at such other address as either party designates for such purpose in a written notice to the other party. Notice will be deemed to have been given on the date actually received in the event of personal or telefacsimile delivery or on the date two (2) days after notice is deposited in the mail, properly addressed, postage prepaid. 9.3 Severability. In the event any one or more of the provisions contained in any of the Loan Documents is determined to be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions will not in any way be affected or impaired thereby in any other jurisdiction nor will the validity, legality and enforceability of the remaining provisions contained in the Loan Documents in any way be affected or impaired thereby. 9.4 Construction and Venue. This Agreement and the documents issued hereunder are executed and delivered as an incident to a lending transaction negotiated and to be performed in Oklahoma City, Oklahoma. The Loan Documents are intended to constitute a contract made under the laws of the State of Oklahoma and to be construed in accordance with the internal laws of the State of Oklahoma. The descriptive headings of the paragraphs of this Agreement are for convenience only and are not to be used in the construction of the content of this Agreement. All actions relating to or arising under the Loan Documents will be instituted in the courts of the State of Oklahoma sitting in Oklahoma County, Oklahoma, or the United States District Court for the Western District of Oklahoma, and the Borrower irrevocably and unconditionally waives any objection to the venue in such court and any claim that any action has been brought in an inconvenient forum. 9.5 No Waiver. No advance of loan proceeds under the Loan Documents will constitute a waiver of any of the Borrower's representations, warranties, conditions or covenants under the Loan Documents. 9.6 Counterparts. This Agreement may be executed via telefacsimile in two or more counterparts and it will not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof. Each counterpart will be deemed an original, but all counterparts together will constitute one and the same instrument. IN WITNESS WHEREOF, the Borrower and the Lender have executed this Agreement effective on the date first above written. ______________________________ __________________, individually (the "Borrower") FLEMING COMPANIES, INC., an Oklahoma corporation By:_______________________________ _______________________________ (the "Lender") Attachment 2 EXHIBIT A PROMISSORY NOTE FOR VALUE RECEIVED, the undersigned, ______________________, an individual (the "Borrower"), promises to pay to the order of Fleming Companies, Inc., an Oklahoma corporation (the "Lender"), at P.O. Box 26647, Oklahoma City, Oklahoma 73126-0647, or at such other place as may be designated in writing by the holder of this Note, the principal sum as set forth on Schedule 1 attached hereto and made a part hereof as follows: Prior to default, the unpaid principal balance of this Note will bear interest at seven percent (7%) per annum, payable quarterly throughout the loan term commencing on the date first indicated on Schedule 1, and on the last day of each successive December, March, June and September thereafter until this Note is paid in full. All interest will be computed at a per diem charge for the actual number of days elapsed on the basis of a year consisting of three hundred sixty five (365) days; provided, however, that interest shall neither accrue nor be payable so long as Borrower remains the full-time employee of Lender. All payments will be applied first to any accrued and unpaid interest on this Note and the remainder to the principal balance of this Note. The entire unpaid principal balance of this Note, together with all accrued and unpaid interest thereon, if any, will be due and payable upon acceleration hereunder or, if not accelerated, on April 1, 2005. The Borrower will promptly apply not less than 50% of any cash proceeds and 100% of any distributions (other than scheduled dividend payments) received in respect of the Collateral as prepayments of the principal amount owing under the Note. Except as otherwise defined herein all terms defined in the Loan Agreement of even date herewith between the Borrower and the Lender (the "Loan Agreement") will have the same meanings herein as therein. Any sum not paid when due will bear interest at nine percent (9%) per annum and will be paid at the time of and as a condition precedent to the curing of any default under the Loan Documents. During the existence of any such default, the holder of this Note may apply payments received on any amount due hereunder as the holder may determine. The Borrower will have the right to prepay this Note in whole or in part at any time without penalty. Advances and payments hereunder shall be recorded on Schedule 1 to this Note and initialed by Borrower. Schedule 1 shall be prima facie evidence of all advances and payments made under the Note and of the unpaid balance of this Note. All advances hereunder shall be made by the Lender in accordance with the terms of the Loan Agreement. All Shares acquired by Borrower with the proceeds of this Note and all Shares acquired by Borrower relating to the Shares pledged as Collateral hereunder, whether by dividend, stock split, or otherwise, shall be pledged to the Lender hereunder and shall immediately be subject to the security interest created by the Security Agreement entered into in connection herewith. All certificates representing such Shares shall be registered in Borrower's individual name; provided that certificates evidencing Shares may be registered jointly in the name of any joint owner if such joint owner shall have executed and delivered to the Lender a Security Agreement, UCC-1 Financing Statement, Stock Powers and a Notice to Transfer Agent with respect to such Shares. Borrower shall direct the transfer agent or the issuer of the Shares, as applicable, to deliver certificates representing the Shares directly to the office of Lender's Corporate Secretary. The Borrower agrees that if, and as often as, this Note is placed in the hands of an attorney for collection or to defend or enforce any of the holder's rights hereunder or under any instrument securing payment of the same, the Borrower will pay to such holder its reasonable attorneys' fees and all reasonable expenses incurred in connection therewith, whether or not an action shall be instituted to enforce this Note. This Note is given by the Borrower and accepted by the holder hereof pursuant to a lending transaction contracted, consummated and to be performed in Oklahoma City, Oklahoma, and this Note is to be construed according to the laws of the State of Oklahoma. This Note is issued subject to the terms of the Loan Agreement and is secured by the Loan Documents. On the breach of any provision of this Note, or any provision of the Loan Documents at the option of the holder, the entire unpaid indebtedness evidenced by this Note will become due, payable and collectible then or thereafter as the holder may elect, regardless of the date of maturity of this Note. Notice of the exercise of such option is hereby expressly waived. Failure by the holder to exercise such option will not constitute a waiver of the right to exercise the same in the event of any subsequent default. The failure of the Lender to exercise any of the remedies or options set forth in this Note, or in any instrument securing payment hereof, upon the occurrence of one or more events of default, shall not constitute a waiver of the right to exercise the same or any other remedy at any subsequent time in respect to the same or any other event of default. The acceptance by the Lender of any payment which is less than the total of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or any subsequent time, or nullify any prior exercise of such remedy or option, without the express consent of the Lender. Time is of the essence of each obligation of the Borrower hereunder. For the purposes of computing interest under this Note, payments of all or any portion of the principal sum owing under this Note will not be deemed to have been made until such principal payments are received by the Lender in collected funds. The makers, endorsers, sureties, guarantors and all other persons who may become liable for all or any part of this obligation severally waive presentment for payment, protest, demand and notice of nonpayment. Said parties consent to any extension of time (whether one or more) of payment hereof, the modification (whether one or more) of payment hereof, release or substitution of all or part of the security for the payment hereof or release of any party liable for payment of this obligation. Any such extension or release may be made without notice to any such party and without discharging such party's liability hereunder. IN WITNESS WHEREOF, the Borrower has executed this instrument effective the date first above written. ___________________________________ ___________________,individually (the "Borrower") Attachment 3 EXHIBIT B SECURITY AGREEMENT THIS SECURITY AGREEMENT is executed effective the ____ day of ____________, 1999, between _____________________, an individual (the "Debtor" and a "Pledgor" hereunder), and _____________________, an individual (one of the "Pledgors" hereunder; collectively, the "Pledgors"), each having a notice address of ____________________________, and Fleming Companies, Inc., an Oklahoma corporation having a notice address at P.O. Box 26647, Oklahoma City, Oklahoma 73126-0647 (the "Secured Party"). W I T N E S S E T H : WHEREAS, the Debtor is liable to the Secured Party under that certain Promissory Note of even date herewith (the "Note") in connection with that certain Loan Agreement (the "Loan Agreement") of even date herewith between the Debtor and the Secured Party; and WHEREAS, as a material condition precedent to the Secured Party's entering into the Loan Agreement, the Pledgors have agreed to secure payment of the Note by granting the Secured Party a lien, security interest and pledge covering certain assets of the Pledgors; and WHEREAS, each Pledgor wishes to grant to each other Pledgor, severally, an irrevocable power of attorney to amend and modify the list of assets covered by this Security Agreement attached hereto as Schedule I. NOW, THEREFORE, (i) in order to comply with the terms and conditions of the Loan Agreement; (ii) for and in consideration of the premises and the agreements herein contained; and (iii) for other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, the Pledgors hereby agree with the Secured Party as follows: 1. Definitions. Unless otherwise defined herein, all terms which are defined in the Loan Agreement will have the same meanings herein as therein unless the context otherwise requires, and all terms used herein which are defined in the Oklahoma Uniform Commercial Code ("UCC") will have the same meanings herein unless the context otherwise requires. 2. Security Interest. As collateral security for the Secured Indebtedness, the Pledgors hereby grant to the Secured Party a security interest in, an assignment of, and a general lien upon the following described property (the "Collateral"): 2.1 all of the Pledgors' right, title and interest in and to the shares of common stock of Fleming Companies, Inc., par value $2.50 per share, described at Schedule I attached hereto (as such schedule may be amended from time to time by the Secured Party or by one or more of the Pledgors), and all certificates representing such property, and all tangible and intangible rights in connection therewith and all accounts, contract rights and general intangibles relating thereto (the "Shares"); 2.2 any additional Shares from time to time delivered to or deposited with the Secured Party as security for the obligations of the Debtor to the Secured Party or otherwise pursuant to the terms of this Agreement, including all Shares purchased with the proceeds of the Note and any additional Shares pledged by Pledgors pursuant to the Loan Agreement or otherwise; and 2.3 all cash, securities, dividends (whether cash, property or stock), preferential, conversion or other rights attaching to the Shares, all distributions or payments in partial or complete liquidation or redemption or as a result of reclassifications, readjustments, reorganizations or changes in the capital structure of the issuer of the Shares and all rights and privileges pertaining thereto and all subscriptions, warrants, options and any other rights issued by the issuer of the Shares or any other person upon or in connection with the Shares and all other proceeds, products, additions to, replacements of, substitutions for and accessions of any and all Collateral described in this Section 2. 3. Upon the prepayment of all or any portion of the principal amount of the Secured Indebtedness, Borrower shall be entitled to receive, free and clear of the security interest created by the Loan Documents, certificates representing that number of Shares equal to the product of (x) the number of Shares subject to the Security Agreement immediately prior to the prepayment multiplied by (y) a fraction, the numerator of which shall be the dollar amount of the principal prepayment and the denominator of which shall be the principal amount of the Secured Indebtedness immediately prior to the prepayment; provided, however, that no collateral shall be released if the Secured Party would not be in compliance with Reg. U immediately following such proposed release. Certificates shall be delivered to Borrower as soon as practicable after release hereunder. 4. Secured Indebtedness. The security interest granted hereby in the Collateral is given to secure the Debtor's payment of: (a) the Note together with interest thereon, if any; (b) all extensions, renewals, amendments, modifications, substitutions and changes in form to the Note; (c) all costs and expenses incurred in connection with the collection of the Note and enforcement of the Loan Documents and the Secured Party's rights under this Agreement and all other Loan Documents, including attorneys' fees and expenses; (d) all advances made by the Secured Party to protect the security hereof, including advances made for or on account of levies, insurance, repairs, taxes and for maintenance or recovery of the Collateral, together with interest thereon at the rate specified in the Note; and (e) performance of the agreements herein set forth (the foregoing items (a) through (e) are collectively referred to herein as the "Secured Indebtedness"). 5. Debtors' Representations and Covenants. The Pledgors hereby warrant, represent and agree as follows: 5.1 Principal Place of Business. The Debtor's principal place of business is P.O. Box 26647, Oklahoma City, Oklahoma 73126-0647. 5.2 Title. The Pledgors have absolute title to the Collateral free and clear of all liens, encumbrances, negative pledges and security interests except the security interest hereby granted to the Secured Party, and the Pledgors warrant and will defend the same unto the Secured Party against the claims and demands of all other persons and parties whomsoever. 5.3 Transfers. Without the prior written consent of the Secured Party, the Pledgors agree that the Pledgors will not sell, exchange or in any manner dispose of any of the Collateral or any interest therein nor permit any other lien, encumbrance or security interest to attach thereto except those contemplated herein. 5.4 Secured Party's Security Interest. This Agreement creates a valid and binding security interest in the Collateral securing the Secured Indebtedness. There are no consents required in connection with the grant by the Pledgors of the security interests in the Collateral. The Pledgors have good, right and lawful authority to pledge the Collateral in the manner hereby done or contemplated. All filings and other actions necessary or appropriate to perfect or protect such security interest will be or have been duly taken. 5.5 Further Assurances. The Pledgors will from time to time sign, execute, deliver and file, alone or with the Secured Party, any financing statements, stock powers, notices to issuers of securities constituting collateral security, security agreements or other documents; procure any instruments or documents as may be reasonably requested by the Secured Party; and take all further action that may be necessary or desirable, or that the Secured Party may reasonably request, to confirm, perfect, preserve and protect the security interests intended to be granted hereby, and in addition, the Pledgors hereby authorize the Secured Party to execute and deliver on behalf of the Pledgors and file such financing statements, stock powers, security agreements and other documents without the signature of the Pledgors either in the Secured Party's name or in the name of the Pledgors and as agent and attorney-in-fact for the Pledgors. The Pledgors shall do all such additional and further acts or things, give such assurances and execute such documents or instruments as the Secured Party requires to vest more completely in and assure to the Secured Party its rights under the Loan Documents. 5.6 Filing Reproductions. At the option of the Secured Party, a carbon, photographic or other reproduction of this Agreement or of a financing statement covering the Collateral shall be sufficient as a financing statement and may be filed as a financing statement. 5.7 Possession. Physical possession of the certificates representing or evidencing the Shares, together with duly executed stock powers, shall be delivered to and held by Secured Party. 6. Secured Party's Expenditures. If the Pledgors fail to make any expenditure or pay any sum necessary to discharge any lien, encumbrance, levy, security interest or other charge on the Collateral as required hereby, the Secured Party may but shall not be required to make any expenditure for such purpose or purposes and all sums so expended shall be payable on demand, shall bear interest at the rate specified in the Note and all such sums and interest will additionally be secured hereby. The Pledgors will pay all costs of filing any financing, continuation or termination statements with respect to the security interest granted hereby in the Collateral. 7. Powers of Attorney. The Pledgors hereby grant the following irrevocable powers of attorney: 7.1 Secured Party. The Secured Party is hereby fully authorized and empowered (without the necessity of any further consent or authorization from the Pledgors), and the Pledgors hereby constitute, appoint and make the Secured Party, the Pledgors' true and lawful attorney-in-fact and agent for the Pledgors and in the Pledgors' name, place and stead with full power of substitution, in the Secured Party's name or the Pledgors' name or otherwise, for Secured Party's sole use and benefit, but at the Pledgors' cost and expense, to exercise, without notice, all or any of the following powers at any time with respect to all or any of the Collateral after the occurrence of any default under this Agreement or any of the other Loan Documents which has not been timely cured: (a) all voting rights, all other corporate rights and all conversion, exchange, subscription or other rights pertaining to the Shares, whether or not the Shares have been registered in the Secured Party's name and this Agreement will constitute the Pledgors' proxy to the Secured Party for such purpose; (b) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due by virtue thereof and otherwise deal with proceeds; (c) to receive, take, endorse, assign and deliver any and all checks, notes, drafts, documents and other negotiable and non-negotiable instruments and chattel paper taken or received by the Secured Party in connection therewith; (d) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto; (e) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof as fully and effectively as if the Secured Party were the absolute owner thereof; and (f) to extend the time of payment of any or all thereof and to grant waivers and make any allowance or other adjustment with reference thereto; provided, however, the Secured Party shall be under no obligation or duty to exercise any of the powers hereby conferred upon it and shall be without liability for any act or failure to act in connection with the collection of, or the preservation of any rights under, any Collateral. 7.2 Other Pledgors. Each Pledgor is hereby fully authorized and empowered severally by each other Pledgor (without the necessity of any further consent or authorization from any Pledgor), and each Pledgor hereby severally constitutes, appoints and makes each other Pledgor, the granting Pledgor's true and lawful attorney-in-fact and agent to amend, modify or supplement the list of shares pledged hereunder from time to time on Schedule I attached hereto. This grant shall be irrevocable and shall be deemed to be coupled with an interest until all of the Secured Indebtedness is paid in full as the same becomes due and payable and until the Secured Party, upon request of the Pledgors, has executed a written termination statement pursuant to Section 10 hereof. 8. Default; Remedies. On the occurrence of any event of default under any of the Loan Documents or if the Pledgors fail to keep, observe, comply with and perform all of the material obligations and undertakings under this Agreement or any of the other Loan Documents or fail to pay any principal or interest on the Note when due, then, and in any such event, the Secured Party may, at its option and without notice to any party, declare all or any portion of the Secured Indebtedness to be due and payable and may proceed to enforce payment of the same, to exercise any or all rights and remedies provided herein, in the other Loan Documents, and by the UCC and otherwise available at law or in equity. All remedies hereunder are cumulative, and any indulgence or waiver by the Secured Party shall not be construed as an abandonment of any other right hereunder or of the power to enforce the same or another right at a later time. Whether the Secured Party elects to exercise any other rights or remedies under this Agreement or applicable law, the Secured Party will be entitled to have a receiver appointed to take possession of the Collateral without notice, which notice the Pledgors hereby waive, notwithstanding anything contained in this Agreement or any law heretofore or hereafter enacted. 9. Secured Party's Duties. The powers conferred upon the Secured Party by this Agreement are solely to protect its interest in the Collateral and will not impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be under no duty whatsoever to make or give any presentment, demand for performance, notice of nonperformance, protest, notice of protest, notice of dishonor, or other notice or demand in connection with any of the Collateral or the Secured Indebtedness, or to take any steps necessary to preserve any rights against prior parties. The Secured Party shall not be liable for failure to collect or realize upon any or all of the Secured Indebtedness or Collateral, or for any delay in so doing, nor shall the Secured Party be under any duty to take any action whatsoever with regard thereto. 10. Continuing Agreement. This is a continuing Agreement and the grant of a security interest hereunder shall remain in full force and effect and all the rights, powers and remedies of the Secured Party hereunder shall continue to exist until all of the Secured Indebtedness is paid in full as the same becomes due and payable and until the Secured Party, upon request of the Pledgors, has executed a written termination statement, reassigned to the Pledgor, without recourse, the Collateral and all rights conveyed hereby and returned possession of any Collateral in the Secured Party's possession to the Pledgors. 11. Preservation of Liability. Neither this Agreement nor the exercise by the Secured Party of (or the failure to so exercise) any right, power or remedy conferred herein or by law shall be construed as relieving any person liable on the Secured Indebtedness from liability on the Secured Indebtedness and for any deficiency thereon. 12. Waivers. It is the intention of the Pledgors and Secured Party that the validity of this Security Agreement shall not be impaired by any defenses given to sureties or guarantors at law or in equity. Nonexercise by the Secured Party of any right or remedy of the Secured Party provided in the Note, Loan Agreement or other Loan Documents shall in no manner affect the validity or enforceability of this Agreement or give any Pledgors any recourse against the Secured Party. 12.1 Certain Actions. Each Pledgor agrees that from time to time, without affecting the Pledgors' obligations hereunder or the Secured Party's rights in the Collateral, and without giving notice to or obtaining the consent of any Pledgor, and without liability on the Secured Party's part, the Secured Party may, at its option, (i) extend the time for payment of the Note or any interest thereon, (ii) release anyone liable under the Loan Agreement or Note; (iii) renew, rearrange, consolidate or modify the Note; (iv) take or release any security or additional security for the Note or Loan Agreement; (v) increase or decrease the rate of interest payable on the Note; or (vi) grant any other leniencies, indulgences, or compromises under the Loan Agreement or Note as the Secured Party may deem appropriate or desirable. 12.2 Certain Defenses. Each Pledgor hereby waives diligence, presentment, demand, notice of demand, notice of nonpayment or dishonor, protest, notice of protest and all other notices of any kind whatsoever as to the Note, or any renewal, extension, rearrangement, consolidation or modification thereof. Each Pledgor agrees that it shall not be necessary for the Secured Party, in order to enforce this Agreement, first, (i) to exhaust its remedies against the Debtor, any guarantor or others liable on the obligations evidenced by the Note or (ii) to enforce the Secured Party's rights in any other security given to secure the Note. Each Pledgor further waives, to the fullest extent permitted by law, (i) all defenses given to sureties or guarantors at law or in equity other than the actual payment of the sums evidenced by the Note and secured by this Agreement and the performance of the other covenants and agreements contained herein and (ii) any defense it may have to any liability hereunder based on any asserted lack of diligence, delay in prosecuting any action with regard to the Note, or any impairment of any other security for payment of the Note. 12.3 Additional Waivers. The validity of this Agreement as to the indebtedness secured by the Note shall not be affected in any manner whatsoever on account of any or all of the following: (i) incapacity, death, disability, dissolution or termination of any person or entity; (ii) the failure of the Secured Party to file or enforce a claim against the estate (either in administration, bankruptcy or other proceedings) of the Debtor, any Pledgor or any other person or entity; (iii) any defenses, setoffs or counterclaims which may be available to the Debtor or any other person or entity; (iv) any modifications, extensions, amendments, consents, releases or waivers with respect to the Note or any other instrument now or hereafter securing the payment of the Note, or any guaranty of the Note; (v) any failure of the Secured Party to give any notice to any Pledgor of any default under any other instrument securing payment of the Note; or (vi) any impairment, modification, change, release or limitation of the liability of, or stay of actions or lien enforcement proceedings against, the Debtor, its Collateral or its estate in bankruptcy resulting from the operation of any present or future federal or state statute relating to bankruptcy or insolvency or from the decision of any court relating thereto. The Secured Party shall not be required to pursue any other remedies before invoking the benefits of this Agreement and, specifically, it shall not be required to exhaust its remedies against the Debtor or any guarantor or surety or to proceed against any other security now or hereafter existing for the payment of any of the indebtedness evidenced by the Note. The Secured Party may exercise its rights hereunder without bringing a separate action against the Debtor. 13. Notices. Any notice or demand under this Agreement or in connection with this Agreement may be given at the addresses set forth in the initial paragraph of this Agreement or by telefacsimile, but actual notice, however given or received, will always be effective. 14. Successors and Assigns. The covenants and agreements herein contained by or on behalf of the Pledgors shall bind the Pledgors, and the Pledgors' legal representatives, successors and assigns and shall inure to the benefit of the Secured Party and the Secured Party's successors and assigns. 15. Invalidity. If any provision hereof shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof. 16. Construction. This Agreement will be governed by and construed in accordance with the laws of the State of Oklahoma applicable to contracts made and to be performed entirely within the State of Oklahoma. IN WITNESS WHEREOF, this Agreement is executed effective the date first above written. ___________________________________ ____________________, individually (the "Debtor" and a "Pledgor") ___________________________________ _____________________, individually (Additional "Pledgor") FLEMING COMPANIES, INC., an Oklahoma corporation By:________________________________ ________________________________ (the "Lender") EX-12 9 Exhibit 12 Fleming Companies, Inc. Computation of Ratio of Earnings to Fixed Charges 28 Weeks Ended July 10, July 11, (In thousands of dollars) 1999 1998 Earnings: Pretax income (loss) $(31,159) $ 55,065 Fixed charges, net 106,661 106,609 -------- -------- Total earnings $ 75,502 $161,674 Fixed charges: Interest expense $ 90,253 $ 87,063 Portion of rental charges deemed to be interest 16,163 19,316 Capitalized interest 178 - -------- -------- Total fixed charges $106,594 $106,379 -------- -------- Deficiency $31,092 ======== Ratio of earnings to fixed charges .71 1.52 ======== ======== "Earnings" consists of income before income taxes and fixed charges excluding capitalized interest. Capitalized interest amortized during the respective periods is added back to earnings. "Fixed charges, net" consists of interest expense, an estimated amount of rental expense which is deemed to be representative of the interest factor and amortization of capitalized interest. The pro forma ratio of earnings to fixed charges is omitted as it is not applicable. Under the company's long-term debt agreements, "earnings" and "fixed charges" are defined differently and amounts and ratios differ accordingly. EX-15 10 Exhibit 15 Fleming Companies, Inc. 6301 Waterford Boulevard, Box 26647 Oklahoma City, OK 73126 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Fleming Companies, Inc. and subsidiaries for the 12 and 28 weeks ended July 10, 1999 and July 11, 1998, as indicated in our report dated July 29, 1999; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the 12 and 28 weeks ended July 10, 1999, is incorporated by reference in the following: (i) Registration Statement No. 2-98602 (1985 Stock Option Plan) on Form S-8; (ii) Registration Statement No. 33-36586 (1990 Fleming Stock Option Plan) on Form S-8; (iii) Registration Statement No. 33-56241 (Dividend Reinvestment and Stock Purchase Plan) on Form S-3; (iv) Registration Statement No. 333-11317 (1996 Stock Incentive Plan) on Form S-8; (v) Registration Statement No. 333-35703 (Senior Subordinated Notes) on Form S-4; (vi) Registration Statement No. 333-28219 (Associate Stock Purchase Plan) on Form S-8; (vii) Registration Statement No. 333-80445 (1999 Stock Incentive Plan) on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. DELOITTE & TOUCHE LLP Oklahoma City, Oklahoma August 24, 1999 EX-27 11
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE TWO FISCAL QUARTERS ENDED JULY 10, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-25-1999 DEC-27-1998 JUL-10-1999 3,585 0 426,361 26,193 852,486 1,430,435 1,652,512 779,597 3,367,170 1,190,793 1,139,439 0 0 97,092 449,862 3,367,170 7,814,608 7,814,608 7,059,022 7,742,533 0 12,981 90,253 (31,159) (4,580) (26,579) 0 0 0 (26,579) (.70) (.70)
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