DATE: Saturday, September 13, 1997          TAG: 9709130364

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: STAFF AND WIRE REPORT 

                                            LENGTH:   46 lines

FARM FRESH TOP DUO TO POCKET BIG BONUSES

Two top executives brought in to manage Farm Fresh after it was put up for sale stand to make bonuses worth hundreds of thousands of dollars based on the value of its sale, which was announced Tuesday, to Richfood Holdings Inc.

Chief executive Ron Johnson and chief financial officer Rick Coleman will make the bonuses even though they've been executives at Norfolk-based Farm Fresh Inc. only since February.

Richmond-based Richfood announced Tuesday that it would acquire most of Farm Fresh's assets through a prepackaged Chapter 11 bankruptcy filing of the troubled grocery chain. Farm Fresh has struggled to stay afloat under a mountain of debt, the result of a 1989 leveraged buyout by a unit of Citicorp.

Richfood will pay about $220 million cash, assume $30 million in Farm Fresh debt and issue 1.5 million warrants to buy Richfood stock at $25 a share to Farm Fresh debt holders. So the deal is worth at least $250 million plus the value of the warrants, which depends on Richfood's future stock price.

Johnson and Coleman were brought in to run cash-strapped Farm Fresh after former CEO Michael Julian left to take over the helm of a Mississippi chain.

Late last year, before Julian departed, Farm Fresh had hired an investment bank to help it explore its ``financial alternatives,'' including a sale.

The structure of the bonuses is laid out in employment contracts on file at the Securities and Exchange Commission.

Johnson, who makes $400,000 a year, could get a bonus of more than $1 million, depending on the final value of the Richfood buyout. The contract calls for Johnson to receive a bonus of $300,000 plus 1.8 percent of the purchase price for Farm Fresh above $225 million. The bonus is capped at $1.65 million.

Coleman also will receive $300,000 plus 0.4 percent of the price above $225 million, capped at a total bonus of $400,000. Coleman, who makes a salary of $200,000 a year, will likely receive a $400,000 bonus.

Like the proposed Richfood buyout itself, the bonuses could be challenged in federal bankruptcy court by the holders of Farm Fresh's debt. However, a challenge is not considered likely because Farm Fresh and Richfood sought informal approval from many debt holders before announcing the deal.

Such bonuses are typical for executives at companies that are about to be sold. MEMO: Knight-Ridder/Tribune News Service contributed to this story. KEYWORDS: EXECUTIVE COMPENSATION

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